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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(d)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
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BUCYRUS INTERNATIONAL, INC.
(Name of Subject Company)
BUCYRUS INTERNATIONAL, INC.
(Name of Person Filing Statement)
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COMMON STOCK, PAR VALUE $0.01 PER SHARE
(Title of Class of Securities)
118902 10 5
(CUSIP Number of Class of Securities)
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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
(Name, address and telephone number of person authorized to
receive notices and communications on behalf of the person(s) filing statement)
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With a Copy to:
ANDREW J. GUZIKOWSKI, ESQ.
WHYTE HIRSCHBOECK DUDEK S.C.
111 EAST WISCONSIN AVENUE
SUITE 2100
MILWAUKEE, WISCONSIN 53202
(414) 273-2100
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ITEM 1. SECURITY AND SUBJECT COMPANY
The name of the subject company is Bucyrus International, Inc., a Delaware
corporation (the "Company"). The address of the principal executive offices of
the Company is P.O. Box 500, 1100 Milwaukee Avenue, South Milwaukee, WI
53172-0500. The title of the class of equity securities to which this Statement
relates is the Common Stock, par value $0.01 per share (the "Common Stock"), of
the Company. References herein to the "Shares" mean shares of the Common Stock.
ITEM 2. TENDER OFFER OF THE BIDDER
This Statement relates to the tender offer made by Bucyrus Acquisition
Corp., a Delaware corporation (the "Purchaser") and wholly-owned subsidiary of
American Industrial Partners Acquisition Company, LLC, a Delaware limited
liability company (the "Parent"), as disclosed in a Tender Offer Statement on
Schedule 14D-1, dated August 26, 1997 (the "Schedule 14D-1"), to purchase all
outstanding Shares at a price of $18.00 per Share, net to the seller in cash,
without interest thereon (the "Offer Price"), upon the terms and subject to the
conditions set forth in the Offer to Purchase, dated August 26, 1997 (the "Offer
to Purchase"), and the related Letter of Transmittal (which together constitute
the "Offer"). As disclosed in the Schedule 14D-1, each of the Parent and the
Purchaser has been newly formed at the direction of American Industrial Partners
Capital Fund II, L.P., a Delaware limited partnership ("AIP Capital Fund"), for
the purpose of effecting the Offer and the Merger. The Parent owns all of the
outstanding capital stock of the Purchaser. AIP Capital Fund, as the sole
general partner of the Parent, has sole voting and investment power over the
Parent. The sole general partner of AIP Capital Fund is American Industrial
Partners II, L.P., a Delaware limited partnership ("AIP II LP"). The sole
general partner of AIP II LP is American Industrial Partners Corporation, a
Delaware corporation ("AIP Corp.") AIP Capital Fund, AIP II LP and AIP Corp. are
collectively referred to herein as the "AIP Entities." AIP Capital Fund is a
party to the Guarantee (as hereinafter defined); it is not a party to either the
Merger Agreement or the Stockholder Agreement (as such terms are hereinafter
defined). None of the other AIP Entities is a party to either the Merger
Agreement, the Stockholder Agreement or the Guarantee.
The Offer is being made pursuant to an Agreement and Plan of Merger dated
as of August 21, 1997 (the "Merger Agreement"), among the Purchaser, the Parent
and the Company. The Merger Agreement provides, among other things, that as soon
as practicable after the satisfaction or waiver of the conditions set forth in
the Merger Agreement, the Purchaser will be merged with and into the Company
(the "Merger"), and the Company will continue as the surviving corporation (the
"Surviving Corporation"). A copy of the Merger Agreement is attached hereto as
Exhibit 1 and incorporated herein by reference.
As set forth in the Schedule 14D-1, the principal executive offices of the
Purchaser, the Parent and each of the AIP entities are located at One Maritime
Plaza, Suite 2525, San Francisco, CA 94111.
ITEM 3. IDENTITY AND BACKGROUND
(a) The name and business address of the Company, which is the person
filing this Statement, are set forth in Item 1 above.
(b) Each material contract, agreement, arrangement and understanding and
actual or potential conflict of interest between the Company or its affiliates
and: (i) its executive officers, directors or affiliates or (ii) the Purchaser,
its executive officers, directors or affiliates, is described in the attached
Schedule 14F-1 (which information is incorporated herein by reference) or in
pages 4 through 17 of the Company's Proxy Statement dated as of March 26, 1997,
attached hereto as Exhibit 4 and incorporated herein by reference, or is set
forth below.
ARRANGEMENTS WITH THE PARENT, THE PURCHASER OR THEIR AFFILIATES
THE MERGER AGREEMENT
As of August 21, 1997, the Parent, the Purchaser and the Company entered
into the Merger Agreement, pursuant to which the Purchaser agreed to make the
Offer. The following description of the Merger Agreement does not purport to be
complete and is qualified by reference to the text of the Merger Agreement,
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a copy of which is filed as Exhibit 1 hereto and incorporated herein by
reference. Capitalized terms not otherwise defined herein have the meanings set
forth in the Merger Agreement.
The Offer. The Merger Agreement provides for the making of the Offer by the
Purchaser. The obligation of the Purchaser to accept for payment and pay for
Shares tendered is subject to there being tendered, and not withdrawn prior to
the expiration of the Offer, that number of Shares which represents at least 51%
of the Shares then outstanding on a fully diluted basis (after giving effect to
the conversion or exercise of all outstanding options, warrants and other rights
and securities exercisable or convertible in Shares) (the "Minimum Condition"),
and to the satisfaction of the other conditions described in Annex I to the
Merger Agreement. The Merger Agreement provides that the Purchaser may not amend
or waive the Minimum Condition, decrease the Offer Price or decrease the number
of Shares sought or otherwise amend any other condition of the Offer in any
manner adverse to the holders of the Shares without the prior written consent of
the Company; provided, that the Purchaser may, in its sole discretion, extend
the expiration date of the Offer.
Designation of Directors. The Merger Agreement provides that, promptly
after the purchase of Shares pursuant to the Offer, the Parent shall be entitled
to designate directors on the Board of Directors of the Company (the "Company
Board") as will give the Parent representation proportionate to its ownership
interest. To this end, the Company has agreed to expand the size of the Company
Board or to seek the resignation of one or more of the current directors, as
requested by the Parent. However, in the event that the Parent's designees are
elected to the Company Board, the Company Board must include at least one
director who is a director as of the date of execution of the Merger Agreement
and who is neither an officer of the Company nor a designee, stockholder,
affiliate or associate of the Parent (one or more of such directors being the
"Independent Directors"). If no Independent Directors remain, the other
directors will designate one person, to fill a vacancy created by resignation of
one or more directors, who is neither an officer of the Company nor a designee,
stockholder, affiliate or associate of the Purchaser, such person so designated
being deemed an Independent Director. The Company's obligation to appoint the
Parent's designees to the Company Board is subject to compliance with Section
14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder. Following the
election of the Parent's designees, any action to amend or terminate the Merger
Agreement on behalf of the Company, to exercise or waive any of the Company's
rights, benefits or remedies thereunder, to extend the time for the performance
of the Purchaser's obligations thereunder or to take other action by the Company
under the Merger Agreement shall be effected only by the action of a majority of
the directors of the Company then in office who are Independent Directors.
The Merger. The Merger Agreement provides that, at the Effective Time (as
hereinafter defined), the Purchaser will be merged with and into the Company,
and the Company will continue as the Surviving Corporation. The Merger will
become effective at the time of filing with the Secretary of State of the State
of Delaware of a Certificate of Merger, or at such later time as may be
specified in the Certificate of Merger (the "Effective Time"). The parties
expect to file the Certificate of Merger as soon as practicable following the
closing of the Merger, which will take place on the second business day after
the conditions to the parties' obligation to effect the Merger have been
satisfied or waived, unless another date is otherwise agreed.
Each Share issued and outstanding immediately prior to the Effective Time
(other than Shares with respect to which appraisal rights have been properly
exercised, and Canceled Shares (as defined below)) shall be converted into the
right to receive $18.00 in cash, or any higher price paid per Share in the Offer
(the "Merger Consideration"), without interest. Each Share issued and
outstanding immediately prior to the Effective Time owned by the Parent or the
Purchaser, or any subsidiary of the Company, the Parent or the Purchaser, and
each Share held in the treasury of the Company (collectively, the "Canceled
Shares") immediately prior to the Effective Time will be canceled and cease to
exist. Each share of Common Stock of the Purchaser issued and outstanding
immediately prior to the Effective Time will automatically be converted into one
share of Common Stock of the Surviving Corporation.
The Merger Agreement provides that the Certificate of Incorporation and
By-Laws of the Purchaser shall be the Certificate of Incorporation and By-Laws
of the Surviving Corporation unless otherwise determined by the Purchaser prior
to the Effective Time. The Merger Agreement also provides that the directors of
the
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Purchaser at the Effective Time will be the directors of the Surviving
Corporation and that the officers of the Company at the Effective Time will be
the officers of the Surviving Corporation.
Recommendation. The Company represents in the Merger Agreement that the
Company Board has (i) determined that each of the Merger and the Offer is fair
to the stockholders of the Company, and (ii) resolved to recommend acceptance of
the Offer and approval and adoption of the Merger Agreement by the Company's
stockholders. The recommendation of the Company Board may be withdrawn, modified
or amended if the Company Board determines in good faith, after receipt of a
written opinion of outside legal counsel to the Company, that the exercise of
the directors' fiduciary duties requires such withdrawal, amendment or
modification. The Company has agreed to use its best efforts to file a
Solicitation/Recommendation Statement on Schedule 14D-9 containing such
recommendations with the United States Securities and Exchange Commission
("Commission") and to mail such Schedule 14D-9 to the stockholders of the
Company contemporaneous with the commencement of the Offer.
Stock Options and Stock Appreciation Rights. At or immediately prior to the
Effective Time, each outstanding option to purchase Shares (the "Options") and
each outstanding Stock Appreciation Right (the "SARs") granted under the
Company's Non-Employee Directors' Stock Option Plan and the 1996 Employees'
Stock Incentive Plan (collectively, the "Stock Plans") shall be canceled and, in
consideration of such cancellation, the holder of such Options and SARs shall
receive for each Share subject to such Option or SAR an amount (subject to
withholding taxes) equal to the product of (i) the excess, if any, of the
Offering Price over the exercise price of such Option or the per Share base
price of such SAR, as applicable, and (ii) the number of Shares subject to such
Option or SAR.
Interim Agreements of the Parent, the Purchaser and the Company. Pursuant
to the Merger Agreement, the Company has agreed that except (i) as expressly
contemplated by the Merger Agreement, (ii) as set forth in Section 5.2 of the
Company Disclosure Schedule, (iii) as set forth in the term sheet describing the
terms of the Bridge Loan (as hereinafter defined) by and between the Company and
PPM Fund (as hereinafter defined), (iv) for the consummation of the Marion
Acquisition (as hereinafter defined) pursuant to and in accordance with the
terms of the Marion Agreement or (v) as agreed in writing by Parent, after the
date of the Merger Agreement, and prior to the time the designees of Parent have
been elected to, and shall constitute a majority of, the Company Board pursuant
to Section 1.3 of the Merger Agreement: (a) the business of the Company and its
Subsidiaries shall be conducted only in the ordinary and usual course and, to
the extent consistent therewith, each of the Company and its Subsidiaries shall
use its best efforts to preserve its business organization intact and maintain
its existing relations with customers, suppliers, employees, creditors and
business partners; (b) the Company will not, directly or indirectly, (i) except
upon exercise of the Options or SARs or other rights to purchase Shares pursuant
to the Stock Plans outstanding on the date of the Merger Agreement, issue, sell,
transfer or pledge or agree to sell, transfer or pledge any treasury stock of
the Company or any capital stock of any of its Subsidiaries beneficially owned
by it, (ii) amend its Certificate of Incorporation or By-laws or similar
organizational documents; or (iii) split, combine or reclassify the outstanding
Shares or any outstanding capital stock of any of the Subsidiaries of the
Company; (c) neither the Company nor any of its Subsidiaries shall: (i) declare,
set aside or pay any dividend or other distribution payable in cash, stock or
property with respect to its capital stock; (ii) issue, sell, pledge, dispose of
or encumber any additional shares of, or securities convertible into or
exchangeable for, or options, warrants, calls, commitments or rights of any kind
to acquire (or stock appreciate rights with respect to), any shares of capital
stock of any class of the Company or its Subsidiaries, other than Shares
reserved for issuance on the date of the Merger Agreement pursuant to the
exercise of Options or with respect to SARs outstanding on the date of the
Merger Agreement; (iii) transfer, lease, license, sell, mortgage, pledge,
dispose of, or encumber any assets, other than in the ordinary and usual course
of business and consistent with past practice, or incur or modify any
indebtedness or other liability, other than in the ordinary and usual course of
business and consistent with past practice; or (iv) redeem, purchase or
otherwise acquire, directly or indirectly, any of its capital stock; (d) the
Company shall not make any change in the compensation payable or to become
payable to any of its officers, directors, employees, agents or consultants
(other than general increases in wages to employees who are not officers or
directors or affiliates in the ordinary course consistent with past practice),
or to Persons providing management services, enter into or amend any employment,
severance, consulting,
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termination or other agreement or employee benefit plan or make any loans to any
of its officers, directors, employees, affiliates, agents or consultants or make
any change in its existing borrowing or lending arrangements for or on behalf of
any of such Persons pursuant to an employee benefit plan or otherwise; (e) the
Company shall not pay or make any accrual or arrangement for payment of any
pension, retirement allowance or other employee benefit pursuant to any existing
plan, agreement or arrangement to any officer, director, employee or affiliate
or pay or agree to pay or make any accrual or arrangement for payment to any
officers, directors, employees or affiliates of the Company of any amount
relating to unused vacation days, except payments and accruals made in the
ordinary course consistent with past practice or as required under the terms of
the Plans; adopt or pay, grant, issue, accelerate or accrue salary or other
payments or benefits pursuant to any pension, profit-sharing, bonus, extra
compensation, incentive, deferred compensation, stock purchase, stock option,
stock appreciation right or other stock based incentive, group insurance,
severance pay, retirement or other employee benefit plan, agreement or
arrangement, or any employment or consulting agreement with or for the benefit
of any director, officer, employee, agent or consultant, whether past or present
or as required under the terms of the Plans; or amend in any material respect
any such existing plan, agreement or arrangement in a manner inconsistent with
the foregoing; (f) the Company shall not modify, amend or terminate any of the
material Company Agreements or waive, release or assign any material rights on
claims, except in the ordinary course of business and consistent with past
practice or as required under the terms of the Plans; (g) neither the Company
nor any of its Subsidiaries shall permit any insurance policy naming it as a
beneficiary or a loss payable payee to be canceled or terminated without notice
to Parent except in the ordinary course of business and consistent with past
practice; (h) neither the Company nor any of its Subsidiaries shall (i) incur or
assume any long-term debt, or except in the ordinary course of business, incur
or assume any short-term indebtedness in amounts not consistent with past
practice; (ii) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the obligations of
any other person, except in the ordinary course of business and consistent with
past practice; (iii) make any loans, advances or capital contributions to, or
investments in, any other person except in the ordinary course of business and
consistent with past practice; or (iv) enter into any material commitment or
transaction (including, but not limited to, any borrowing, capital expenditure
or purchase, sale or lease of assets or real estate) except in the ordinary
course of business and consistent with past practice; (i) neither the Company
nor any of its Subsidiaries shall (i) change any of the accounting methods used
by it unless required by GAAP or (ii) make any material Tax election, change any
material Tax election already made, adopt any material Tax accounting method or
change any material Tax accounting method unless required by applicable law,
enter into any material closing agreement, settle any material Tax claim or
assessment or consent to any material Tax claim or assessment or any waiver of
the statute of limitations for any such claim or assessment; (j) neither the
Company nor any of its Subsidiaries shall pay, discharge or satisfy any claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or satisfaction of
any such claims, liabilities or obligations, in the ordinary course of business
and consistent with past practice, of claims, liabilities or obligations
reflected or reserved against in, or contemplated by, the consolidated financial
statements (or the notes thereto) of the Company; (k) neither the Company nor
any of its Subsidiaries shall adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or other
reorganization of the Company or any of its Subsidiaries (other than the
Merger); (l) neither the Company nor any of its Subsidiaries shall take, or
agree to commit to take, any action that would or is reasonably likely to result
in any of the conditions to the Merger set forth in Article VII of the Merger
Agreement or any of the conditions to the Offer set forth in Annex I of the
Merger Agreement not being satisfied, or would make many representation or
warranty of the Company contained therein inaccurate in any respect at, or as of
any time prior to, the Effective Time, or that would materially impair the
ability of the Company to consummate the Merger in accordance with the terms of
the Merger Agreement or materially delay such consummation; and (m) the Company
shall not enter into an agreement, contract, commitment or arrangement to do any
of the foregoing, or to authorize, recommend, propose or announce an intention
to do any of the foregoing.
Other Agreements of the Parent, the Purchaser and the Company. In the
Merger Agreement, the Company has agreed to notify the Purchaser immediately if
any proposals are received by, any information is requested from, or any
negotiations or discussions are sought to be initiated or continued with the
Company or
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its officers, directors, employees, investment bankers, attorneys, accountants
or other agents, in each case in connection with any Takeover Proposal (as
defined below) or the possibility or consideration of making a Takeover Proposal
("Takeover Proposal Interest") indicating, in connection with such notice, the
name of the Person indicating such Takeover Proposal Interest and the terms and
conditions of any proposals or offers. The Company has agreed that it will
immediately cease and cause to be terminated any existing activities,
discussions or negotiations, if any, with any parties conducted heretofore with
respect to any Takeover Proposal Interest. The Company has agreed that it shall
keep the Parent informed, on a current basis, of the status and terms of any
Takeover Proposal Interest. As used in the Merger Agreement, "Takeover Proposal"
means any tender or exchange offer involving the Company, any proposal for a
merger, consolidation or other business combination involving the Company, any
proposal or offer to acquire in any manner a substantial equity interest in, or
a substantial portion of the business or assets of, the Company (other than
immaterial or insubstantial assets or inventory in the ordinary course of
business or assets held for sale), any proposal or offer with respect to any
recapitalization or restructuring with respect to the Company or any proposal or
offer with respect to any other transaction similar to any of the foregoing with
respect to the Company other than the Marion Acquisition or pursuant to the
transactions to be effected pursuant to the Merger Agreement.
In the Merger Agreement the Company agrees that it will not, and that it
will use its best efforts to ensure that its officers, directors, employees,
investment bankers, attorneys, accountants and other agents do not, directly or
indirectly: (i) initiate, solicit or encourage, or take any action to facilitate
the making of, any offer or proposal which constitutes or is reasonably likely
to lead to any Takeover Proposal, (ii) enter into any agreement with respect to
any Takeover Proposal, or (iii) in the event of an unsolicited written Takeover
Proposal for the Company, engage in negotiations or discussions with, or provide
any information or data to, any Person (other than the Parent, any of its
affiliates or representatives and except for information which has been
previously publicly disseminated by the Company) relating to any Takeover
Proposal; provided however, that nothing contained in the Merger Agreement shall
prohibit the Company or the Company Board from (i) taking and disclosing to the
Company's stockholders a position with respect to a tender or exchange offer by
a third party pursuant to Rules 14d-9 and 14e-2 promulgated under the Exchange
Act or (ii) making such disclosure to the Company's stockholders as the Board
may determine in good faith is required under applicable law after receipt of a
written opinion from outside legal counsel to the Company that such disclosure
is required under applicable law and that the failure to make such disclosure
would likely cause the Company Board to violate its fiduciary duties to the
Company's stockholders under applicable law. Notwithstanding the foregoing,
prior to the acceptance of Shares pursuant to the Offer, the Company may furnish
information concerning its business, properties or assets to any Person pursuant
to terms substantially similar to those contained in the Confidentiality
Agreement, dated July 1, 1997, entered into between AIP and the Company (the
"Confidentiality Agreement") and may negotiate and participate in discussions
and negotiations with such Person concerning a Takeover Proposal if (x) such
entity or group has on an unsolicited basis submitted a bona fide written
proposal to the Company relating to any such transaction which the Company Board
determines in good faith, after receiving advice from Jefferies & Company, Inc.
("Jefferies") or another nationally recognized investment banking firm,
represents a superior transaction to the Offer and the Merger and (y) in the
opinion of the Company Board, only after receipt of a written opinion from
outside legal counsel to the Company to such effect, the failure to provide such
information or access or to engage in such discussions or negotiations would
likely cause the Company Board to violate its fiduciary duties to the Company's
stockholders under applicable law (a Takeover Proposal which satisfies clauses
(x) and (y) being referred to herein as a "Superior Proposal"). The Company
shall promptly and in any event within one business day following any
determination by the Board of Directors that a Takeover Proposal is a Superior
Proposal, notify the Parent of such determination of the same and prior to
providing any such party with any material non-public information. The Company
shall promptly provide to the Parent any material non-public information
regarding the Company provided to any other party which was not previously
provided to the Parent. At any time after two business days following
notification to the Parent of the Company's intent to do so (which notification
shall include the identity of the bidder and the material terms and conditions
of the proposal) and if the Company has otherwise complied with the terms
referred to in the Merger Agreement, the Company Board may terminate the Merger
Agreement and enter into an agreement with respect to a Superior Proposal,
provided that the Company shall, concurrently with entering into such
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agreement, pay or cause to be paid to the Parent the Termination Fee (as
hereinafter defined), plus any amount payable at the time for reimbursement of
expenses. Except as set forth above, neither the Company Board nor any committee
thereof shall (i) withdraw or modify, or propose to withdraw or modify, in a
manner adverse to the Parent or the Purchaser, the approval or recommendation by
such Company Board or any such committee of the Offer, the Merger Agreement or
the Merger, (ii) approve or recommend or propose to approve or recommend, any
Takeover Proposal or (iii) enter into any agreement with respect to any Takeover
Proposal.
Pursuant to the Merger Agreement, the Company has agreed to give the Parent
reasonable access to its facilities, books and records, to permit the Parent to
make such inspections as it may reasonably require and to cause its officers to
furnish the Parent with such information as the Parent may from time to time
reasonably request.
Each of the Company, the Parent and the Purchaser has agreed in the Merger
Agreement to use its best efforts to take, or cause to be taken, all things
necessary, proper or advisable to consummate the transactions contemplated by
the Merger Agreement. Each such party also has agreed to cooperate and use its
best efforts to make all filings and obtain all licenses, permits, consents,
approvals and other authorizations of third parties, including governmental
authorities, necessary to consummate such transactions, including the filings
required of the Parent or the Purchaser or any of their affiliates under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act").
Pursuant to the Merger Agreement, each of the Company, the Parent and the
Purchaser has agreed not to make any public statement with respect to the Merger
Agreement or the transactions contemplated thereby without the prior consent of
the other parties. The parties thereto have also agreed that the provisions of
the Confidentiality Agreement would remain binding and in full force and effect.
Company Stockholder Meeting. If required by applicable law, the Company has
agreed to: (i) hold a special meeting of its stockholders (the "Special
Meeting") as soon as practicable following acceptance for payment of Shares
pursuant to the Offer for the purpose of taking action upon the Merger
Agreement; (ii) prepare and file with the Commission a preliminary proxy
statement or information statement relating to the Merger Agreement and use its
best efforts to (a) cause a definitive proxy statement (the "Proxy Statement")
to be mailed to its stockholders following acceptance for payment of Shares
pursuant to the Offer and (b) obtain the necessary approvals of the Merger
Agreement by its stockholders. The Parent and the Purchaser have agreed to vote
all Shares owned by them in favor of approval of the Merger Agreement at any
such meeting. However, in the event that the Parent or the Purchaser shall
acquire at least 90% of the outstanding Shares, the parties will, at the request
of the Parent, take action to cause the Merger to become effective as soon as
practicable after such acquisition without any action or vote on the part of the
Company Board or the stockholders of the Company (a "short-form merger") as
permitted under the Delaware General Corporation Law ("DGCL"). The Parent has
informed the Company that, in the event the Parent and the Purchaser do not own
at least 90% of the outstanding Shares following consummation of the Offer, the
Parent and the Purchaser may seek to purchase additional Shares in the open
market or otherwise in order to reach the 90% threshold and employ a short-form
merger. The Parent has informed the Company that the per Share consideration
paid for any Shares so acquired may be greater or less than that paid in the
Offer. The Parent has indicated to the Company that it presently intends to
effect a short-form merger if permitted to do so under the DGCL.
Indemnification of Company Officers and Directors; Liability Insurance. In
the event of any threatened or actual claim, action, suit, proceeding or
investigation, whether civil, criminal or administrative, including, without
limitation, any such claim, action, suit, proceeding or investigation by or in
the right of the Company or any of its Subsidiaries, in which any of the present
or former officers or directors (the "Indemnified Parties") of the Company or
any of its Subsidiaries is, or is threatened to be, made a party by reason of
the fact that he or she is or was, prior to the Effective Time, a director or
officer of the Company or any of its Subsidiaries or is or was, prior to the
Effective Time, serving as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprises at the
request of the Company or any of its Subsidiaries, whether such claim arises
before or after the Effective Time, the Company shall indemnify
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and hold harmless, and after the Effective Time, the Surviving Corporation shall
indemnify and hold harmless, as and to the full extent permitted by applicable
law, each such Indemnified Party against any losses, claims, damages,
liabilities, costs, expenses (including reasonable attorneys' fees and
expenses), judgments, fines and amounts paid in settlement in connection with
any such claim, action, suit, proceeding or investigation. In the event of any
such claim, action, suit, proceeding or investigation (whether arising before or
after the Effective Time), (i) the Indemnified Parties may retain counsel
satisfactory to them (which counsel shall be reasonably satisfactory to the
Company or the Surviving Corporation), and the Company, or the Surviving
Corporation after the Effective Time, shall pay all reasonable fees and expenses
of such counsel for the Indemnified Parties promptly as statements therefor are
received and (ii) the Company and the Surviving Corporation will use their
respective reasonable efforts to assist in the vigorous defense of any such
matter, provided, that neither the Company nor the Surviving Corporation shall
be liable for any settlement effected without its prior written consent (which
consent shall not be unreasonably withheld); and provided further that the
Surviving Corporation shall have no obligation thereunder to any Indemnified
Party when and if a court of competent jurisdiction shall ultimately determine,
and such determination shall have become final and non-appealable, that
indemnification of such Indemnified Party in the manner contemplated thereby is
prohibited by applicable law. The Indemnified Parties as a group may retain only
one law firm to represent them with respect to each such matter unless there is,
under applicable standards of professional conduct, a conflict of interest on
any significant issue between the positions of any two or more Indemnified
Parties, or any similar impediment to the joint representation of multiple
Indemnified Parties by a single law firm.
The Merger Agreement provides that until the Effective Time the Company
shall keep in effect Section 7.7 of its By-Laws, and thereafter, for a period of
six years, the Surviving Corporation shall keep in effect in its By-Laws a
provision which provides for indemnification of the Indemnified Parties to the
extent permitted by the DGCL.
The Merger Agreement also provides that the Parent or the Surviving
Corporation shall maintain the Company's existing officers' and directors'
liability insurance ("D&O Insurance") for a period of not less than six years
after the Effective Time; provided, that the Parent may substitute therefor
policies of substantially equivalent coverage and amounts containing terms no
less favorable to such former directors or officers; provided, further, if the
existing D&O Insurance expires, is terminated or canceled during such period,
the Parent or the Surviving Corporation will use all reasonable efforts to
obtain substantially similar D&O Insurance; provided, further, however, that in
no event shall the Parent be required to pay aggregate premiums for insurance in
excess of 150% of the average of the aggregate premiums paid by the Company in
1995, 1996 and 1997 (through the date of the Merger Agreement) on an annualized
basis for such purpose (the "Average Premium"); and provided, further, that if
the Parent or the Surviving Corporation is unable to obtain the amount of
insurance required by the Merger Agreement for such aggregate premium, the
Parent or the Surviving Corporation shall obtain as much insurance as can be
obtained for an annual premium not in excess of 150% of the Average Premium.
Representations and Warranties. The Merger Agreement contains various
representations and warranties of the parties thereto, including representations
by the Company as to, among other things, corporate existence and good standing,
capitalization, corporate authorization, consents and approvals, reports,
undisclosed liabilities, certain changes or events concerning its businesses,
compliance with applicable law, employee benefit plans, litigation, real
property, intellectual property, computer software, material contracts, taxes,
environmental matters and brokers. In addition, the Parent and the Purchaser
represented as to, among other things, corporate existence and good standing,
corporate authorization, consents and approvals, and the financing commitments
referred to in Section 4.5 of the Merger Agreement.
Conditions to the Merger. The obligations of each of the Parent, the
Purchaser and the Company to effect the Merger are subject to the satisfaction
or waiver of certain conditions, including (i) if required by the DGCL, the
Merger Agreement and the Merger shall have been approved by the stockholders of
the Company, (ii) no statute, rule, regulation, order, decree, or injunction
shall have been promulgated by any governmental entity which prohibits the
consummation of the Merger, (iii) the Offer shall not have expired or been
terminated prior to the purchase of any Shares, and (iv) any waiting period
under the HSR Act applicable to the purchase of Shares pursuant to the Offer
shall have expired or been terminated. Further, the obligations of the Parent
and the Purchaser are subject to the satisfaction or waiver at or prior to the
Effective
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Time of certain additional conditions set forth in Annex I to the Merger
Agreement, including (i) the representations and warranties of the Company being
true as of the Effective Time, (ii) the Company having performed in all material
respects its obligations under the Merger Agreement, and (iii) receipt of a
certificate of an officer of the Company as to the satisfaction of certain of
such conditions.
Termination. The Merger Agreement may be terminated and the transactions
contemplated therein may be abandoned at any time before the Effective Time,
whether before or after stockholder approval: (i) by mutual written consent of
the Parent and the Company; (ii) by the Parent if the Offer shall have expired
or been terminated without any Shares being purchased thereunder by the
Purchaser as a result of the occurrence of any of the events set forth in Annex
I to the Merger Agreement; (iii) by either the Parent or the Company if a court
of competent jurisdiction or governmental, regulatory or administrative agency
or commission shall have issued an order, decree or ruling or taken any other
action (which order, decree or ruling the parties thereto shall use their best
efforts to lift), in each case permanently restraining, enjoining or otherwise
prohibiting the transactions contemplated by the Merger Agreement; (iv) by the
Parent if, without any material breach by the Parent or the Purchaser of its
obligations under the Merger Agreement, the purchase of Shares pursuant to the
Offer shall not have occurred on or before February 20, 1998; (v) by the Company
if, without any material breach by the Company of its obligations under the
Merger Agreement, the purchase of Shares pursuant to the Offer shall not have
occurred on or before February 20, 1998; (vi) by the Company (i) if there shall
be a material breach of any of the Parent's or the Purchaser's representations,
warranties or covenants thereunder, which breach cannot be or has not been cured
within thirty days of the receipt of written notice thereof or (ii) to allow the
Company to enter into an agreement in accordance with the Merger Agreement with
respect to a Superior Proposal which the Company Board has determined is more
favorable to the stockholders of the Company than the transactions contemplated
in the Merger Agreement; provided that it has complied with all provisions
thereof, including the notice provision therein, and that it makes simultaneous
payment of the Termination Fee, plus any amounts then due as a reimbursement of
expenses; (vii) by the Parent, if prior to the purchase of Shares pursuant to
the Offer, the Company shall have breached in any material respect (without
reference to any materiality qualification contained therein) any
representation, warranty or covenant or other agreement contained in the Merger
Agreement, which breach (i) would give rise to the failure of a condition set
forth in paragraph (e) or (f) of Annex I to the Merger Agreement and (ii) cannot
be or has not been cured within thirty days of the receipt of written notice
thereof; (viii) by the Parent, at any time prior to the purchase of the Shares
pursuant to the Offer, if (i) the Company Board shall withdraw, modify, or
change its recommendation or approval in respect of the Merger Agreement or the
Offer in a manner adverse to the Purchaser, (ii) the Company Board shall have
recommended any proposal other than by the Parent or the Purchaser in respect of
a Takeover Proposal, (iii) the Company shall have exercised a right with respect
to Takeover Proposal referenced under "Other Agreements of the Parent, the
Purchaser and the Company" herein and shall, directly or through its
representatives, continue discussions with any third party concerning a Takeover
Proposal for more than ten business days after the date of receipt of such
Takeover Proposal, (iv) a Takeover Proposal that is publicly disclosed shall
have been commenced, publicly proposed or communicated to the Company which
contains a proposal as to price (without regard to whether such proposal
specifies a specific price or a range of potential prices) and the Company shall
not have rejected such proposal within ten business days of its receipt or, if
sooner, the date its existence first becomes publicly disclosed, or (v) any
Person or group (as defined in Section 13(d)(3) of the Exchange Act) other than
the Parent or the Purchaser or any of their respective subsidiaries or
affiliates shall have become the beneficial owner of more than 15% of the
outstanding Shares (either on a primary or a fully diluted basis); provided,
however, that this provision shall not apply to any Person that owns more than
15% of the outstanding Shares on the date of the Merger Agreement; provided,
further, that such Person does not further increase its beneficial ownership
beyond the number of Shares such Person beneficially owns on the date of the
Merger Agreement.
Termination Fee and Expenses. In the event of termination of the Merger
Agreement as provided above, written notice thereof shall forthwith be given to
the other party or parties specifying the provision of the Merger Agreement
pursuant to which such termination is made, and the Merger Agreement shall
forthwith become null and void and there shall be no liability on the part of
the Parent, the Purchaser or the Company, except (i) as set forth in the Merger
Agreement and (ii) nothing in the Merger Agreement shall relieve any
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party from liability for any breach of the Merger Agreement; provided, however,
that, in the event that subsequent to the date of the Merger Agreement the
Company adopts a stockholders rights plan, its obligation to provide exceptions
therefrom with respect to Shares acquired pursuant to the exercise of the JNL
Option (as hereinafter defined) and the Subsequent Disposition thereof, to a
third party, shall survive the termination of the Merger Agreement for the first
Subsequent Disposition.
If (i) the Parent shall have terminated the Merger Agreement pursuant to
Section 8.1(h) of the Merger Agreement, (ii) the Parent shall have terminated
the Merger Agreement pursuant to Section 8.1(g) of the Merger Agreement and
following the date of the Merger Agreement but prior to such termination there
shall have been a Takeover Proposal Interest or (iii) the Company shall have
terminated the Merger Agreement pursuant to Section 8.1(f)(ii) of the Merger
Agreement, then in either such case the Company shall pay to the Parent
simultaneously with such termination, if pursuant to Section 8.1(f)(ii) of the
Merger Agreement, and promptly, but in no event later than two business days
after the date of such termination or event if pursuant to Section 8.1(h) or
8.1(g), a termination fee (the "Termination Fee") of $7 million plus an amount,
not in excess of $1.5 million, equal to the actual and reasonably documented
out-of-pocket expenses incurred by the Parent and the Purchaser in connection
with the Offer, the Merger, the Merger Agreement and the consummation of the
transactions contemplated thereby.
Fees and Expenses. Except as set forth above, the Merger Agreement provides
that all costs and expenses incurred in connection with the transactions
contemplated by the Merger Agreement shall be paid by the party incurring such
costs and expenses.
Amendments and Modifications. Subject to applicable law, the Merger
Agreement may be amended, modified or supplemented by a written agreement of the
Parent, the Purchaser and the Company, provided, that after the approval of the
Merger Agreement by the stockholders of the Company, no such amendment,
modification or supplement shall reduce or change the consideration to be
received by the Company's stockholders in the Merger.
GUARANTEE
As an inducement to the Company's entering into the Merger Agreement,
concurrently with the execution and delivery of the Merger Agreement, AIP
Capital Fund and the Company have entered into a Guarantee, dated as of August
21, 1997 (the "Guarantee"). The following description of the Guarantee does not
purport to be complete and is qualified by reference to the text of the
Guarantee, a copy of which is attached hereto as Exhibit 2 and incorporated
herein by reference. Pursuant to the Guarantee, among other things, AIP Capital
Fund has agreed unconditionally and irrevocably, for the benefit of the Company
to guarantee the performance of all obligations of the Parent and the Purchaser
pursuant to the Merger Agreement; provided that the aggregate liability to which
AIP Capital Fund may become subject pursuant to the Guarantee or otherwise in
connection with the transactions contemplated by the Merger Agreement will not
in any event exceed $7 million. The Guarantee terminates upon the earliest of
(i) the consummation of the Merger, (ii) October 7, 2004 or (iii) the
performance of all obligations of the Parent and the Purchaser pursuant to the
Merger Agreement.
STOCKHOLDER AGREEMENT
Approximately 40% of the Shares are owned by Jackson National Life
Insurance Company ("JNL"), an indirect, wholly-owned subsidiary of Prudential
Corporation plc, a corporation organized under the laws of the United Kingdom
("Prudential"). Three of the seven current members of the Company Board (Messrs.
Radecki, Stark and Swansen) were selected by JNL prior to December 14, 1994 to
serve as directors of the Company in connection with the Chapter 11
Reorganization (as hereinafter defined) and two of these individuals (Messrs.
Stark and Swansen) are employees of another subsidiary of Prudential. Mr.
Radecki is an employee of Jefferies, financial advisor to the Company.
In connection with the execution of the Merger Agreement, the Parent, the
Purchaser and JNL entered into a Stockholder Agreement, dated as of August 21,
1997, (the "Stockholder Agreement"), pursuant to which and subject to the terms
thereof, JNL agreed to tender, or cause to be tendered, all Shares owned by it
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into the Offer. In the Stockholder Agreement, JNL represented that it owns, in
the aggregate, 4,228,382 Shares and $63,963,000 in principal amount of the
Company's 10.5% Secured Notes due September 14, 1999 (the "Secured Notes"). JNL
has agreed that it will not withdraw any Shares tendered into the Offer.
The following description of the Stockholder Agreement does not purport to
be complete and is qualified by reference to the text of the Stockholder
Agreement, a copy of which is filed as Exhibit 3 hereto and incorporated herein
by reference. Capitalized terms not otherwise defined below have the meanings
set forth in the Stockholder Agreement.
In the Stockholder Agreement, JNL agrees that it will tender its Shares
promptly into the Offer and that it will not withdraw any Shares so tendered.
The Purchaser agrees to purchase all of the Shares so tendered at $18.00 per
Share, or such higher price per Share as may be offered by the Purchaser in the
Offer, provided that the Purchaser's obligation to accept for payment and pay
for the Shares in the Offer is subject to all the terms and conditions of the
Offer set forth in the Merger Agreement and Annex I thereto.
Pursuant to the Stockholder Agreement, JNL has granted to the Parent during
the term of the Merger Agreement an irrevocable proxy to vote its Shares, or
grant a consent or approval in respect of such Shares, in connection with any
meeting of the stockholders of the Company (i) in favor of the Merger and (ii)
against any action or agreement which would impede, interfere with or prevent
the Merger, including any other extraordinary corporate transaction such as a
merger, reorganization or liquidation involving the Company and a third party or
any other proposal by a third party to acquire the Company.
During the term of the Stockholder Agreement, JNL has agreed that it will
not (subject to certain exceptions) (i) transfer, or enter into any contract,
option, agreement or other understanding with respect to the transfer of, its
Shares or the Secured Notes held by it or any interest therein, (ii) except as
provided in the Stockholder Agreement, grant any proxy, power of attorney or
other authorization or consent in or with respect to its Shares or Secured
Notes, (iii) deposit its Shares or Secured Notes in any voting trust or enter
into any voting agreement or arrangement with respect to such Shares or Secured
Notes, or (iv) take any other action with respect to its Shares or Secured Notes
that would in any way restrict, limit or interfere with the performance of its
obligations pursuant to the Stockholder Agreement; provided, however, that JNL
may transfer all or a portion of its Shares or Secured Notes to a person or
entity who, by written instrument reasonably acceptable in form and substance to
the Parent, agrees to be bound by each of the terms of the Merger Agreement. In
addition, JNL, the Parent and the Purchaser have agreed that (i) JNL will notify
the Purchaser of any inquiry JNL receives which might lead to an acquisition of
the Company by a third party; and (ii) JNL will waive, if requested, the
provisions of the Indenture relating to the prior notice of redemption of the
Secured Notes, or will, immediately following consummation of the Senior Notes
Offering (as hereinafter defined) and subject to being indemnified by the Parent
and Purchaser, sell its Secured Notes to the Company at face value plus accrued
interest from June 30, 1997 through the date of purchase.
Termination of the Stockholder Agreement. The Stockholder Agreement shall
terminate upon the earlier of (a) the date (the "Termination Date") that is six
months following the date upon which the Merger Agreement is terminated in
accordance with its terms, or (b) the Effective Time, provided that certain
provisions specified in the Stockholder Agreement will survive such termination.
Neither party has any other unilateral right to terminate the Stockholder
Agreement.
Purchase Option. In the Stockholder Agreement, JNL grants to the Parent an
irrevocable option (the "Purchase Option") to purchase the Shares at a purchase
price of $18.00 per Share (the "Exercise Price"). At any time or from time to
time prior to the Termination Date, the Parent (or its designee) may exercise
the Purchase Option, in whole or in part, if on or after the date thereof any
Third Party (as defined therein) shall have taken certain defined steps that
could evidence, lead to or result in the acquisition of or exercise of control
over the Company. Notwithstanding any other provision of the Stockholder
Agreement, in the event that the Merger Agreement is terminated and at any time
prior to the Termination Date a person other than the Parent or any of its
affiliates acquires a majority of the outstanding Shares at a price higher than
the Exercise Price (an "Alternative Transaction"), then the Parent shall
promptly either reduce the number of Shares subject to the Purchase Option, pay
cash to JNL or do both such that the actual Total Profit realized
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<PAGE> 12
or to be realized by the Parent upon the consummation of an Alternative
Transaction does not exceed 50% of the Total Profit that the Parent would
otherwise realize had it not taken the foregoing actions; provided, that, in the
event that the Parent elects to reduce the number of Shares subject to the
Purchase Option, there shall be pending, at the time the Parent makes such
election, a transaction involving the Company that, if consummated, would allow
JNL to dispose of any remaining Shares that would not otherwise be purchased by
the Parent upon the exercise of the Purchase Option. As used in the Stockholder
Agreement, the term "Total Profit" shall mean the aggregate amount (before
taxes) of the net cash amounts and the fair market value (as reasonably
determined by the Parent) of all other forms of consideration received or to be
received by the Parent pursuant to the sale of the aggregate number of Shares
subject to the Purchase Option (or any other securities into which such Shares
are converted or exchanged) in any Alternative Transaction, less the aggregate
Exercise Price of all of such Shares. In the event that the Parent or the
Purchaser pays a price higher than $18.00 per Share for Shares tendered into the
Offer, the Exercise Price shall be increased to equal such higher price.
CONFIDENTIALITY AGREEMENT
The following is a summary of certain provisions of the Confidentiality
Agreement, dated July 1, 1997 between the Company and AIP Capital Fund. The
following summary of the Confidentiality Agreement does not purport to be
complete and is qualified by reference to the text of the Confidentiality
Agreement, a copy of which is filed as Exhibit 6 hereto and incorporated herein
by reference.
The Confidentiality Agreement contains customary provisions pursuant to
which, among other matters, AIP Capital Fund has agreed to keep confidential all
nonpublic, confidential or proprietary information furnished to it by the
Company relating to the Company, subject to certain exceptions (the
"Confidential Information"), and to use the Confidential Information solely in
connection with the certain future business agreements relating to the Company.
OWNERSHIP OF SHARES
Based solely on the information set forth in Section 9 ("Certain
Information Concerning American Industrial Partners, Parent and the Purchaser")
included in the Offer to Purchase, the Company understands that pursuant to the
Stockholder Agreement, the Parent may be deemed beneficially to own 4,228,382
Shares, constituting approximately 40.14% of the total currently outstanding
Shares. Each of the Purchaser, the Parent and the AIP Entities disclaims
beneficial ownership of such Shares. Except as set forth in the Offer to
Purchase, none of the Purchaser, the Parent or any of the AIP Entities, nor, to
the best knowledge of the Purchaser, the Parent or AIP Capital Fund, any of the
persons listed on Schedule I to the Offer to Purchase, nor any associate or
majority-owned subsidiary of any of the foregoing, beneficially owns or has a
right to acquire any Shares, and none of the Purchaser, the Parent or any of the
AIP Entities nor, to the best knowledge of the Purchaser, the Parent or AIP
Capital Fund, any of the persons or entities referred to above, nor any of the
respective executive officers, directors or subsidiaries of any of the
foregoing, has effected any transaction in Shares during the past 60 days.
PURCHASER OR PARENT AGREEMENTS WITH EXECUTIVE OFFICERS, DIRECTORS OR AFFILIATES
OF THE COMPANY
Upon consummation of the Merger, AIP Capital Fund will be paid a fee of $4
million and reimbursed for out-of-pocket expenses in connection with the
negotiation of the Merger Agreement and for providing certain investment banking
services to the Company including the arrangement and negotiation of the terms
of the Senior Notes and for other financial advisory and management consulting
services.
AIP Capital Fund expects to provide substantial ongoing financial and
management services to the Company utilizing the extensive operating and
financial experience of AIP Capital Fund's principals. AIP Capital Fund will
receive an annual fee of $1.45 million for providing general management,
financial and other corporate advisory services to the Company, payable
semiannually 45 days after the scheduled interest payment date for the Senior
Notes, and will be reimbursed for out-of-pocket expenses. The fees will be paid
to
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AIP Capital Fund pursuant to a management services agreement among AIP Capital
Fund, the Company and certain Company affiliates and will be subordinated in
right of payment to the Senior Notes.
AIP Capital Fund has discussed with the Company in broad terms AIP Capital
Fund's general policy that stock in the companies acquired by AIP Capital Fund,
or its affiliates, be made available to executive officers of such acquired
companies, typically in the form of stock options. However, there is currently
no agreement, arrangement or understanding specifically implementing this policy
in respect of the Company or management, nor is there expected to be any such
agreement, arrangement or understanding until following consummation of the
Merger. As disclosed in the Schedule 14D-1, following consummation of the
Merger, AIP Capital Fund expects to cause the Surviving Corporation to issue and
sell additional shares of its common stock to certain members of management and
to adopt a performance-based stock option plan for management which, in the
aggregate, would comprise approximately 10% of the common stock of the Surviving
Corporation.
ARRANGEMENTS WITH EXECUTIVE OFFICERS, DIRECTORS OR AFFILIATES OF THE COMPANY
STOCK OPTIONS
As of August 21, 1997, the current directors, executive officers and other
employees of the Company as a group held Options to acquire 576,000 Shares and
SARs for 50,000 Shares, exercisable at varying prices per Share. At or
immediately following the Effective Time, each outstanding Option and each
outstanding SAR shall be canceled and, in consideration of such cancellation,
the holder of such Options and SARs shall receive for each Share subject to such
Option or SAR an amount (subject to withholding taxes) equal to (i) the excess,
if any, of the Offer Price over the exercise price of such Option or the per
Share base price of such SAR, as applicable, multiplied by (ii) the number of
Shares subject to such Option or SAR.
EMPLOYMENT AGREEMENTS; CHANGE OF CONTROL
The Company has entered into employment agreements with all of its
executive officers. These agreements govern the compensation, benefits and
treatment upon termination under various circumstances, including voluntary
termination by either party, or termination by reason of retirement, death or
disability, or in the event of a change of control, as those terms are defined
in the agreements. Each employment agreement automatically renews for a one year
term upon the expiration of its initial term and any subsequent terms, unless
two months' written notice is given by either party of intent to terminate at
the end of that term. Each employment agreement may be terminated by either the
Company or the executive at any time by giving notice as required under the
agreement; provided, however, that if the named executive officer is terminated
by the Company without cause at any time, or if the executive terminates his
employment with good reason in connection with a change in control, as those
terms are defined in the agreement, then the executive will be entitled to
certain severance benefits as described in that executive's individual
agreement. Finally, each agreement imposes confidentiality restrictions on the
executive and places restrictions on the executive's involvement in activities
that may compete with the Company both during employment and following
termination. Violation of such confidentiality and non-competition provisions,
or other termination for cause, as defined in the agreements, may result in
forfeiture of severance and other benefits that may otherwise accrue. Individual
compensation, benefits and other salient features of each agreement are
described below. The consummation of the Merger and the transactions
contemplated under the Merger Agreement constitute a change in control for
purposes of these agreements.
Mr. Hildebrand serves as President and Chief Executive Officer under a
three-year employment agreement with the Company, dated March 11, 1996. Mr.
Hildebrand's base salary is $400,000 per year, subject to increase at the
discretion of the Company Board, and he is eligible to participate in the
Company's Management Incentive Plan ("Bonus Plan"), which, in Mr. Hildebrand's
case, provides for an annual cash incentive bonus equal to 50% of base salary in
the event of achievement of targeted performance and a maximum of 100% of base
salary in the event of exceptional performance, as determined in accordance with
the Bonus Plan. In addition, Mr. Hildebrand was granted 300,000 restricted
Shares ("Restricted Shares") and Options for 200,000 Shares at 55% of market
price per Share on the date of the grant. Mr. Hildebrand is
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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 Company Board,
and he is eligible to participate in the Bonus Plan, which, in Mr. Smoke's case,
provides for an annual cash incentive bonus equal to 35% of base salary in the
event of achievement of targeted performance and a maximum of 70% of base salary
in the event of exceptional performance, as determined in accordance with the
Bonus Plan. In addition, Mr. Smoke was granted options for 30,000 Shares, as
well as SARs to 50,000 Shares. Mr. Smoke is entitled to participate in the
Company's employee benefit plan for senior executives and provided other fringe
benefits, such as club membership, vacation and the use of a Company car.
Finally, Mr. Smoke's employment agreement provides for one-time payments to
reimburse him for costs associated with the relocation of his residence.
Messrs. Sullivan, Mackus, Phillips and Onsager each serve under similar
one-year employment agreements with the Company dated May 21, 1997. Each of
these agreements provides for the executive's position and base salary, which is
subject to merit increases in accordance with the Company's normal salary merit
increase review policy. In addition, the executive is entitled to participate in
such employee and fringe benefits plans as the Company provides to other
similarly situated management employees. Each of Messrs. Sullivan, Mackus,
Phillips and Onsager was granted Options to acquire 30,000 Shares under the
Stock Plans on February 5, 1997.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
MARION ACQUISITION
On July 21, 1997, the Company entered into a definitive agreement to
acquire (the "Marion Acquisition") 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 (such assets and liabilities collectively referred to herein as
"Marion"). The purchase price for Marion was approximately $40.1 million in
cash, subject to certain post-closing adjustments which are currently estimated
to be approximately $3.7 million. Like the Company, Marion manufactures large
surface mining excavation equipment, primarily draglines and electric mining
shovels, and has a significant aftermarket parts and services business.
Consummation of the Marion Acquisition occurred on August 26, 1997. Consummation
of the Offer and the Merger are subject to successful closing of the Marion
Acquisition. Certain financial and other information concerning Marion and the
Marion Acquisition, including certain financial statements and pro-forma
financial statements, will be included in the Marion Acquisition Form 8-K (as
hereinafter defined).
SENIOR NOTES OFFERING
In connection with the Marion Acquisition and the Merger, the Company is
preparing to issue $150 million of Senior Notes due 2007 (the "Senior Notes") in
a private placement transaction (the "Senior Notes Offering") pursuant to Rule
144A under the Securities Act of 1933, as amended (the "Securities Act"). The
Company presently expects the Senior Notes Offering to commence on August 29,
1997.
THE SENIOR NOTES DESCRIBED IN THIS SCHEDULE 14D-9 WILL NOT BE REGISTERED
UNDER THE SECURITIES ACT, OR ANY STATE SECURITIES LAWS, AND, UNLESS SO
REGISTERED, MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES EXCEPT PURSUANT TO
AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
THIS SCHEDULE 14D-9, AND ANY REFERENCE TO THE SENIOR NOTES HEREIN, SHALL NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY, NOR SHALL
THERE BE ANY SALE OF THE SENIOR NOTES IN ANY STATE OR JURISDICTION IN WHICH SUCH
OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE OR JURISDICTION.
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Promptly following consummation of the Marion Acquisition, the Company
expects to file with the Commission a Current Report on Form 8-K (the "Marion
Acquisition Form 8-K") that will provide certain information concerning the
Company and its business that has not otherwise been made public and that will
be provided to potential purchasers of the Senior Notes in connection with their
consideration of an investment in the Senior Notes. Such information may also be
material to a decision by a stockholder of the Company to tender, withdraw, sell
on the open market or hold Shares held by such stockholder.
The net proceeds to the Company from the Senior Notes Offering are
estimated to be approximately $145.5 million. Together with borrowings under the
Company's Revolving Credit Facility with its bank and available cash, the
proceeds of the Senior Notes Offering are expected to be used (i) to refinance
the Bridge Loan (as hereinafter defined); (ii) to pay fees and expenses incurred
in connection with the Senior Notes Offering; (iii) to refinance the Secured
Notes plus accrued interest from June 30, 1997, to the date of redemption; and
(iv) to fund, in part, the purchase of Shares in the Offer in the event that at
least 90% of the outstanding Shares are tendered in the Offer and not withdrawn
and the Merger becomes effective without a meeting of stockholders of the
Company in accordance with the DGCL. In the event that fewer than 90% percent of
the outstanding Shares are tendered in the Offer and not withdrawn, AIP Capital
Fund, or an affiliate, will loan the Purchaser an amount that, together with AIP
Capital Fund's equity contribution of $143 million, will be sufficient to
complete the acquisition of Shares in the Offer and Merger, such loan to be
repaid upon consummation of the Merger with a portion of the proceeds of the
Senior Notes Offering. Upon consummation of the Senior Notes Offering, the
portion of the proceeds being used to refinance the Secured Notes will be
applied to such purpose following satisfaction or waiver of certain notice and
other procedural requirements applicable to redemption of the Secured Notes. As
of August 21, 1997, approximately $64.0 million of the Secured Notes
(approximately 97%) were held by JNL. Consummation of the Offer and the Merger
are subject to successful consummation of the Senior Notes Offering.
Consummation of the Senior Notes Offering is subject to consummation of the
Offer.
TRANSACTIONS WITH MANAGEMENT
The Company entered into the Management Agreement with Miller Associates,
pursuant to which the Company engaged Miller Associates to provide certain
management services, including those of Mr. Miller as Interim President and
Chief Executive Officer and James D. Annand as Interim Chief Financial Officer.
Mr. Miller is the President of Miller Associates.
The Management Agreement provided that Messrs. Miller and Annand and
certain other employees of Miller Associates (the "Project Team") would provide
management services and expertise to the Company and manage the operations of
the Company commencing on August 2, 1995 until terminated by the Company as
described below. Pursuant to the Management Agreement, the Company agreed to pay
Miller Associates a monthly fee of $65,000 for each of August and September 1995
and $55,000 for each month thereafter until the Company hired a new chief
executive officer and such person commenced employment with the Company. The
Company also agreed to reimburse Miller Associates for all reasonable
out-of-pocket expenses incurred by Miller Associates in connection with the
Project Team's performance under the Management Agreement. The Management
Agreement further provided that neither Mr. Miller or Mr. Annand, nor any other
employee of Miller Associates, would be considered an employee of the Company
and that Miller Associates would be responsible for payment of compensation,
disability benefits and unemployment insurance, and for the payment and
withholding of payroll taxes. The Management Agreement was terminated with the
hiring of Mr. Hildebrand as President and Chief Executive Officer on March 11,
1996. As provided by the Management Agreement, following the termination
thereof, Mr. Annand remained as Interim Chief Financial Officer through August
1996. The total cost to the Company in 1996 for these services was approximately
$268,000.
FINANCIAL ADVISORY AGREEMENTS
The Company and Jefferies entered into a letter agreement dated March 7,
1997 (the "Letter Agreement") attached hereto as Exhibit 7 and incorporated
herein by reference pursuant to which Jefferies acted as the Company's exclusive
financial advisor in connection with the Marion Acquisition. In addition, the
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Company and Jefferies entered into a letter agreement dated July 30, 1997 (the
"Jefferies Engagement Letter") attached hereto as Exhibit 8 and incorporated
herein by reference pursuant to which Jefferies continues to act as the
Company's exclusive financial advisor with respect to the Merger and the
transactions contemplated thereby. The financial and other material terms of the
Letter Agreement and Jefferies Engagement Letter are described below under "ITEM
5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED." Mr. Radecki, a director of
the Company, is Executive Vice President of Jefferies.
BRIDGE LOAN
The Company financed the Marion Acquisition utilizing an unsecured bridge
loan (the "Bridge Loan") funded on August 26, 1997 and provided by PPM America
Special Investments Fund, L.P. (the "PPM Fund"), an affiliate of JNL, in the
approximate amount of $45 million. A portion of the proceeds of the Senior Notes
Offering are intended to be used to refinance the Bridge Loan.
The Company obtained a commitment dated April 14, 1997 from the PPM Fund to
provide the Bridge Loan ("Bridge Loan Commitment"). Upon execution of the Bridge
Loan Commitment, the Company paid a $550,000 Proposal and Commitment Fee to the
PPM Fund. The Bridge Loan Commitment provides for a fee of $450,000 (the
"Facility Fee") to be paid upon execution of the definitive purchase agreement
for the Marion Acquisition. The Bridge Loan Commitment provided for a closing
date of the Marion Acquisition of not later than July 15, 1997. On June 30,
1997, the Company and the PPM Fund agreed to extend the deadline for the closing
date until August 30, 1997 (the "Extension Agreement"). As a condition to the
Extension Agreement, however, the PPM Fund required the Company to pay a
$337,500 Extension Fee and to pay the $450,000 Facility Fee at the time the
Extension Agreement was signed.
The Bridge Loan matures on February 23, 1998 (180 days from funding) and
bears interest at 5% over the Adjusted Eurodollar Rate, as defined in the Bridge
Loan.
The Bridge Loan Commitment was amended as of August 20, 1997 (the "Amended
Commitment") to provide that upon consummation of the Marion Acquisition and the
funding of the Bridge Loan, the Company would pay an $800,000 Financing Fee to
the PPM Fund and a Bridge Loan Funding Fee $1.125 million, and additional
compensation as follows: (i) if the Bridge loan is outstanding 30 days after
funding, the Company will pay a "Maintenance Fee" of $800,000; (ii) if the
Bridge Loan is outstanding 90 days after funding, the Company will pay
$3,200,000; and (iii) if the Bridge Loan is outstanding at Maturity, the Company
will pay $3,200,000. The Company presently anticipates that the Senior Notes
Offering will be completed on or prior to September 25, 1997, and, accordingly,
that none of the Maintenance or other fees described in this paragraph will be
payable.
The definitive Bridge Loan Agreement dated August 26, 1997 is attached
hereto as Exhibit 5.4 and is incorporated herein by reference. The Bridge Loan
Commitment, the Extension Agreement, and the Amended Commitment are attached
hereto as Exhibits 5.1, 5.2 and 5.3, respectively, and are incorporated herein
by reference.
REGISTRATION RIGHTS AGREEMENT
Pursuant to the terms of the Second Amended Joint Plan of Reorganization
(the "Amended Plan"), under which the Company emerged from Bankruptcy on
December 14, 1994, the Company entered into a Registration Rights Agreement (the
"Registration Rights Agreement") which grants rights to each person entitled to
receive in the aggregate 1,000,000 or more Shares (a "Relevant Holder") pursuant
to the provisions of the Amended Plan. To the knowledge of the Company, JNL is
the only person or entity entitled to the benefits of the Registration Rights
Agreement. Pursuant to the Registration Rights Agreement, a Relevant Holder has
the right to (a) require the Company under certain circumstances to file a
registration statement under the Securities Act, to permit a public offering of
Shares owned by such Relevant Holders; and (b) participate in certain other
registrations of Shares under the Securities Act made on behalf of the Company
for other holders of Shares. Under the terms of the Registration Rights
Agreement, Relevant Holders holding 15% or more of the Shares then entitled to
the benefits of such agreement may request the Company to file one or more
registration statements under the Securities Act with respect to their Shares,
and
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the Company is required to use its best efforts to effect such registration
provided that the Company generally will not be required to effect more than
three such registrations. Relevant Holders also may participate in offerings
proposed by the Company. These rights are subject to certain conditions and
limitations, among them the right of the Company to postpone for a reasonable
period of time (but not exceeding 120 days) the requested filing of a
registration statement if the Company determines such registration would
interfere with a material corporate transaction, development or other specified
matters. Pursuant to the terms of the Registration Rights Agreement, the Company
must pay all expenses, other than fees and commissions of underwriters, incident
to the registration and sale of Shares held by Relevant Holders. The
registration rights, if not fully exercised, terminate on December 14, 1999.
OWNERSHIP OF SECURED NOTES
On December 14, 1994 pursuant to the Amended Plan, the Company issued an
aggregate principal amount of $52.1 million of the Secured Notes to South Street
Corporate Recovery Fund I, L.P., South Street Leveraged Corporate Recovery Fund,
L.P., and South Street Corporate Recovery Fund I (International), L.P.
(collectively, the "South Street Funds") in exchange for the Company's
outstanding Series A 10.65% Senior Secured Notes due July 1, 1995 and Series B
16.5% Senior Secured Notes due January 1, 1996, and the Company's obligations
under a sale and leaseback financing arrangement. In 1996, the South Street
Funds (other than South Street Corporate Recovery Fund I (International), L.P.)
sold approximately $56 million face amount (97%) of the Secured Notes to JNL.
The Secured Notes accrue interest semi-annually at a rate of 10.5% per
annum, if paid in cash, or 13.0% per annum if paid in kind. Interest on the
Secured Notes is payable in kind at the discretion of the Company. As of August
21, 1997, JNL held approximately $64.0 million of the Secured Notes, or
approximately 97% of the $65.8 million of Secured Notes outstanding. The Secured
Notes are secured by a security interest in substantially all of the Company's
property (other than land and buildings), the shares of the Company's United
States subsidiaries and 65% of the shares of certain non-United States
subsidiaries, subject, however, to a prior security interest in such assets
securing not more than $16.0 million of indebtedness. The Company intends to use
a portion of the proceeds of the Senior Notes Offering to redeem or repurchase
all Secured Notes outstanding, including approximately $64 million in Secured
Notes held by JNL. JNL has agreed to waive notice of redemption under the
Indenture or otherwise to permit purchase by the Company of JNL's Secured Notes
provided that JNL is indemnified by the Company in respect thereof.
JOINT PROSECUTION AGREEMENT
Contemporaneously with the execution of the Stockholder Agreement, the
Company and JNL entered into the Joint Prosecution Agreement (the "Joint
Prosecution Agreement") attached to this Schedule 14D-9 as Exhibit 9 and
incorporated herein by reference relating to various claims the Company and JNL
have or may have resulting from the Company's reorganization in 1994 under
Chapter 11 of the United States Bankruptcy Code (the "Chapter 11
Reorganization") against the law firm of Milbank, Tweed, Hadley & McCloy
("Milbank") for disgorgement of fees (the "Disgorgement Claim") and other claims
(collectively, the "Milbank Claims"). All proceeds of the Milbank Claims will be
allocated as follows: (i) first, to pay, or to reimburse the prior payment of,
all bona fide third-party costs, expenses and liabilities incurred on or after
September 1, 1997 in connection with prosecuting the Milbank Claims (the "Joint
Prosecution") including, without limitation, the reasonable fees and
disbursements of counsel and other professional advisors, which are to be
advanced by JNL; (ii) the next $8.675 million of proceeds from the Milbank
Claims, if any, will be paid to JNL, provided that the Company will retain ten
percent of the proceeds of the Disgorgement Claim, if any, and will direct
payment to JNL of the balance of such proceeds; and (iii) all additional
proceeds of the Milbank Claims will be divided equally between JNL and the
Company. Notwithstanding the foregoing, the Company shall also receive the
benefit of any reduction of any obligation it may have to pay Milbank's
outstanding fees if any. JNL will indemnify the Company in respect of any
liability resulting from the Joint Prosecution other than in respect of legal
fees and expenses incurred prior to September 1, 1997. The Joint Prosecution
Agreement will continue in force irrespective of whether the Merger is
consummated. The Joint Prosecution may involve lengthy and complex litigation
and there can be no assurance whether or when any
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recovery may be obtained or, if obtained, whether it will be in an amount
sufficient to result in the Company receiving any portion thereof under the
formula described above.
SETTLEMENT AGREEMENT
During the pendency of the Chapter 11 Reorganization, JNL filed a claim
(the "503(b) Claim") against the Company with the United States Bankruptcy
Court, Eastern District of Wisconsin ("Bankruptcy Court") for reimbursement of
approximately $3.3 million of professional fees and disbursements incurred in
connection with the Chapter 11 Reorganization pursuant to Section 503(b) of the
Bankruptcy Code. By order dated June 3, 1996, the Bankruptcy Court awarded JNL
the sum of $500. JNL appealed the decision to the United States District Court
for the Eastern District of Wisconsin. On June 26, 1997, the District Court
denied the appeal as moot but returned the matter to the Bankruptcy Court for
further proceedings with leave to appeal again after further determination of
the Bankruptcy Court. On July 11, 1997, JNL moved the Bankruptcy Court for
relief from the final judgment entered on the 503(b) Claim. Pursuant to a
Settlement Agreement between the Company and JNL dated as of August 21, 1997,
attached to this Schedule 14D-9 as Exhibit 10 and incorporated herein by
reference, subject to Bankruptcy Court approval, JNL will settle and release the
Company from the 503(b) Claim in consideration of the payment to JNL by the
Company of $200,000.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) Recommendation of the Company Board. The Company Board has unanimously
approved and adopted the Merger Agreement and the transactions contemplated
thereby, including the Offer and the Merger, and unanimously recommends that all
holders of Shares accept the Offer and tender their Shares.
(b) Background; Reasons for the Recommendation.
The following description was prepared by the Company and AIP Capital Fund.
Information about AIP Capital Fund was provided by AIP Capital Fund. The Company
takes no responsibility for the accuracy or completeness of any information
regarding meetings or discussions in which the Company or its representatives
did not participate.
AIP Capital Fund has been interested in acquiring the Company since before
the Chapter 11 Reorganization. Since the completion of the Chapter 11
Reorganization in December 1994, representatives of AIP Capital Fund have
remained in casual contact with the Company, principally through Joseph J.
Radecki, Jr., Executive Vice President of Jefferies, the Company's financial
advisor and a Director of the Company, and with JNL, principally through F. John
Stark, III, Senior Vice President, General Counsel and portfolio manager for the
Special Investments Portfolio of PPM America, Inc. ("PPM"), an affiliate of JNL,
and a Director of the Company. JNL has repeatedly advised the Company (as
reported in the Company's periodic reports and other filings with the
Commission) that JNL has from to time had discussions relating to disposition of
all or a substantial portion of its equity interest in the Company.
Early in April 1997, the Company announced it had reached an agreement in
principle to acquire Marion. On that date Mr. Lawrence W. Ward, Jr., a principal
of AIP Capital Fund, contacted Mr. Stark and requested the opportunity to speak
with management to obtain additional information concerning the Company and its
prospects in light of the Marion Acquisition. On July 1, 1997, Mr. Stark and Mr.
Willard R. Hildebrand, President, Chief Executive Officer and a Director of the
Company, met with Mr. Ward and Mr. Robert L. Purdum, a partner of AIP Capital
Fund. As a result of this meeting, the Company entered into the Confidentiality
Agreement with AIP Capital Fund (Exhibit 6 to this Schedule 14D-9). At this
meeting, Mr. Stark requested that further negotiations, if any, between AIP
Capital Fund and the Company be held through Mr. Radecki in his firm's role as
financial advisor to the Company.
On July 21, 1997, the Company entered into a definitive agreement with
Global to acquire Marion. At the time, the Company was planning to commence a
$100 million Senior Notes Offering which was to have been used in part to
finance the Marion Acquisition and in part to repurchase the Secured Notes held
by JNL.
At subsequent meetings between representatives of AIP Capital Fund and
Company executives, held on July 24 and 25, 1997 at the Company's offices, the
discussions chiefly involved due diligence matters under the
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Confidentiality Agreement. Additionally, Mr. Theodore C. Rogers, a partner of
AIP Capital Fund was involved in these discussions.
Between July 1, 1997 and July 25, 1997, Mr. Radecki held several
conversations with representatives of AIP Capital Fund, including Messrs. Ward,
Rogers and Purdum. Topics discussed included how the Company might respond
should AIP Capital Fund make an offer for a portion or all of the Shares, AIP
Capital Fund's history and manner of acting with respect to other transactions
it had completed, how a proposal from AIP Capital Fund to purchase a portion or
all of the Shares would affect the pending Marion Acquisition and contemplated
Senior Notes Offering, and other matters.
On July 24, 1997, Mr. Ward telephoned Mr. Radecki to sound him out
regarding a possible acquisition of JNL's interest in the Company for a price of
$15.00 per share. Mr. Radecki advised Mr. Ward that, although he did not speak
for JNL (being the Company's financial advisor), it was Mr. Radecki's
understanding that, in light of the Marion Acquisition and the contemplated
Senior Notes Offering, JNL would not be interested in selling its Shares for
less than $18.00 per Share and that, in any event, it was Mr. Radecki's further
understanding that JNL would only endorse an offer which provided that JNL would
receive the same consideration per Share as would all other holders of Shares.
On the morning of July 27, 1997, Mr. Ward contacted Mr. Radecki to indicate
that AIP Capital Fund was prepared to submit a non-binding expression of
interest to acquire the Company at a price equal to $17.00 per Share. Following
conversations between Mr. Hildebrand and various Company Board members,
including Messrs. Stark and Radecki, the Company instructed Mr. Radecki to
advise AIP Capital Fund that a proposed offer at $17.00 per Share would not be
acceptable either to the Company or to JNL.
On the afternoon of July 28, 1997, Mr. Ward telephoned Mr. Radecki and made
the following proposal (the "Initial AIP Proposal"): AIP Capital Fund was
prepared to submit a letter of intent to acquire the Company at a price equal to
$18.00 per Share subject to (i) the execution of an agreement by JNL pursuant to
which JNL would agree to tender all of its Shares to AIP Capital Fund for
purchase, (ii) consummation of the Marion Acquisition, including the use of the
Bridge Loan, (iii) the successful conclusion of a $150 million Senior Notes
Offering (representing a $50 million increase in the principal amount of the
then contemplated Senior Notes Offering), (iv) a termination fee in the amount
of $7 million plus out of pocket expenses in the event that the Company
terminated the proposed Merger, (v) JNL's agreement to share on an equal basis
the overage, if any, in the event that an entity other than AIP Capital Fund
acquired a majority of the outstanding Shares at a price higher than $18 per
Share, (vi) an agreement by the Company not to solicit offers from any other
interested party for a period of three weeks, and (vii) the completion within
two weeks of satisfactory legal, accounting and environmental due diligence. AIP
Capital Fund also indicated that it was prepared to commit at least $140 million
of its own equity capital to finance the transaction, including the purchase of
all outstanding equity interests in the Company and the repayment of certain
existing Company indebtedness.
On the evening of July 28, 1997, the Company convened a special telephonic
meeting of the Company Board to consider the Initial AIP Proposal. The Company
Board received a presentation from Jefferies regarding the proposed transaction,
including Jefferies' preliminary view that an offer at $18.00 per Share, which
represented a 53% premium over the closing price of the Shares on July 25, 1997,
and a 75% premium over the average closing price of the Shares for the previous
90-day period, appeared to be fair from a financial point of view. The Company
Board also received a presentation from management regarding the Company's
prospects and the potential impact of the Marion Acquisition upon the Company's
future earnings.
After substantial discussion, the Company Board tentatively approved the
proposed transaction with AIP Capital Fund and directed management to obtain the
Initial AIP Proposal in written form. In addition, the Company Board resolved to
engage Lord, Bissell & Brook ("Lord Bissell") as special independent counsel to
advise the Company Board with respect to the proposed transactions with AIP
Capital Fund. The Company Board also determined that, in light of the conditions
set forth in the Initial AIP Proposal, it would defer commencing the
contemplated Senior Notes Offering until it could consider a revised proposal in
written form. Finally, the Company Board instructed Jefferies to seek certain
additional favorable terms from AIP Capital Fund. The Company Board adjourned
the meeting with direction that it be reconvened by Mr. Hildebrand the next day.
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On the morning of July 29, 1997, Mr. Radecki communicated the Company's
position to Mr. Ward. As a result of this conversation, and although not all of
the Company's proposed terms were accepted, AIP Capital Fund did agree to
increase its equity investment in the Merger.
On the afternoon of July 29, 1997, the Company received a written proposal
from AIP Capital Fund with certain additional terms (the "Revised AIP
Proposal"), including, among others, a provision which automatically terminated
the Revised AIP Proposal if the Company disclosed the existence of the Revised
AIP Proposal or its contents. The Revised AIP Proposal also included certain
material terms of a proposed Stockholder Agreement between AIP Capital Fund and
JNL. The Company concluded that the confidentiality provision in the Revised AIP
Proposal was unacceptable. Mr. Radecki communicated this position to Mr. Ward.
Late in the afternoon of July 29, 1997, Mr. Ward contacted Mr. Radecki to
indicate that AIP Capital Fund was prepared to remove the confidentiality
provision from the Revised AIP Proposal. Mr. Stark advised Mr. Radecki that JNL
would agree generally to the proposed terms of the transaction, subject to
negotiation of an acceptable agreement with AIP Capital Fund.
On the evening of July 29, 1997, the Company Board reconvened to review a
further revision to the Revised AIP Proposal (the "Final AIP Proposal"). The
Company Board received a presentation regarding the results of the various
negotiations between AIP Capital Fund, the Company and JNL and the terms of the
Final AIP Proposal. After discussion of the Final AIP Proposal, the Company
Board determined to accept it and directed Company counsel Whyte Hirschboeck
Dudek S.C. to formalize the Company's acceptance of the Final AIP Proposal
though execution of a letter of intent (the "Letter of Intent"). Finally, the
Company Board, with Mr. Radecki abstaining, formalized the arrangement that had
been ongoing since early July whereby Jefferies had been acting as the Company's
financial advisor with respect to the acquisition of the Company and the other
transactions contemplated by the Final AIP Proposal, and engaged Jefferies to
provide a fairness opinion to the Company in connection with the Merger.
Mr. Radecki communicated the Company Board's decision to Mr. Ward on July
30, 1997. Following additional negotiations throughout the day on July 30
between representatives of AIP Capital Fund, JNL and the Company to finalize the
Letter of Intent, attached to this Schedule 14D-9 as Exhibit 11 and incorporated
herein by reference, the Company issued a press release early on the morning of
July 31, 1997. A copy of the press release is attached to this Schedule 14D-9 as
Exhibit 12 and incorporated herein by reference. The Company filed the full text
of the Letter of Intent as an exhibit to the Company's filing with the
Commission on Form 8-K made on August 4, 1997.
Negotiations between principals of AIP Capital Fund, JNL and the Company,
and their respective counsel, regarding the terms of the Merger Agreement and
Stockholder Agreement and various other related transactions and agreements
described in this Schedule 14D-9, have continued since August 1, 1997. In
addition, representatives of AIP Capital Fund met with management over the
course of several days in August to continue their due diligence investigation.
The Company Board met on August 19, 1997, to receive the formal fairness
opinion of Jefferies, attached to this Schedule 14D-9 as Exhibit 14 and
incorporated herein by reference (the "Fairness Opinion"), and to consider the
Merger Agreement and all transactions described therein. Following extensive
discussion, the Company Board unanimously approved the Merger Agreement
substantially in the form presented to the meeting, and approved the other
transactions contemplated thereby, including the terms of the Stockholder
Agreement, and determined to recommend that the Company's stockholders accept
the Offer and tender their Shares to the Purchaser.
On August 21, 1997, the respective parties executed the Merger Agreement,
Guarantee, and Stockholder Agreement and issued their joint press release,
attached to this Schedule 14D-9 as Exhibit 13 and incorporated herein by
reference. On August 26, 1997, the Purchaser and the Parent commenced the Offer.
In approving the Merger Agreement and the transactions contemplated thereby
and recommending that all holders of Shares accept the Offer and tender their
Shares, the Company Board considered a number of factors after giving effect to
the Marion Acquisition and its impact upon the prospects of the Company,
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including the following: (i) the familiarity of the Company Board with the
business, results of operations, properties and financial condition of the
Company and the nature of the industry in which the Company operates, based, in
part, upon presentations by management, including its prospects if the Company
were to remain independent; (ii) the Company's competitive position and current
trends in its industry and the potential impact of the Marion Acquisition; (iii)
the terms of the Merger Agreement and Stockholder Agreement, including the
proposed structure of the Offer and Merger involving a cash tender offer for all
outstanding Shares to be followed by a merger for the same consideration,
thereby enabling all stockholders of the Company to obtain cash for their Shares
concurrently at the earliest possible time; (iv) the Offer Price of $18.00 per
Share was significantly in excess of the highest closing sales price for the
Shares as quoted on the Nasdaq National Market System over the preceding
fifty-two weeks; (v) the presentations by Jefferies at the July 28 and 29 and
August 19, 1997 meetings of the Company Board and the Fairness Opinion of
Jefferies to the effect that as of the date of the Fairness Opinion and subject
to the qualification stated therein, the $18.00 per Share cash consideration to
be received by the holders of the Shares pursuant to the Offer and the Merger is
fair from a financial point of view to such holders (a copy of the Fairness
Opinion, which sets forth the factors considered and the assumptions made by
Jefferies, is attached to this Schedule 14D-9 as Exhibit 14 and incorporated
herein by reference; stockholders are urged to read the opinion of Jefferies
carefully in its entirety); (vi) the fact that JNL, as holder of approximately
40% of the Shares, was prepared to endorse the terms of the Merger Agreement and
the Stockholder Agreement, which provide that JNL would receive the same
consideration per Share with the same timing of receipt as would all other
holders of Shares; (vii) the termination provisions of the Merger Agreement, the
incorporation of which was a condition of the Parent's proposal, providing that
the Parent could be entitled to a termination fee of $7 million plus fees and
expenses up to a maximum of $1.5 million upon the termination of the Merger
Agreement under certain circumstances, including as a result of the withdrawal
of the Company Board's recommendation with respect to the Offer and the Merger;
(viii) the fact that Merger Agreement permits the Company Board (a) to
participate in discussions or negotiations with or furnish information to any
third party in certain circumstances if the Company Board determines in good
faith, after receiving advice from Jefferies and a written legal opinion from
outside counsel to such effect, that the failure to participate in such
discussions or negotiations or to furnish such information would likely cause
the Company Board to violate its fiduciary duties to the Company's stockholders,
otherwise violate or subject the Company Board to liability, under applicable
law and (b) to terminate the Merger Agreement in certain circumstances in the
exercise of its fiduciary duties; (ix) the availability in the Merger of
appraisal rights under Section 262 of the DGCL for dissenting Shares; and (x)
the Company Board's belief, based in part on the factors referred to above, that
the $18.00 per Share price pursuant to the Offer reflects the current value
inherent in the Company and that the stockholders' interests would be best
served by accepting the Offer.
The foregoing discussion of the information and factors considered and
given weight by the Company Board is not intended to be exhaustive. In view of
the variety of factors considered in connection with its evaluation of the
Offer, the Company Board did not find it practicable to and did not quantify or
otherwise assign relative weights to the specific factors considered in reaching
its determinations and recommendation. In addition, individual members of the
Company Board may have given different weight to different factors. The Company
Board viewed its position and recommendation as being based on the totality of
the information presented to and considered by it under the circumstances.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The Company has retained Jefferies to act as its exclusive financial
advisor with respect to the Merger pursuant to the Jefferies Engagement Letter,
which provides for the payment to Jefferies by the Company of a retainer
advisory fee of $250,000 with respect to the Merger, payable upon execution, and
a "success fee" of $1,250,000 payable upon successful consummation of the Merger
and related transactions. The Company has also agreed to reimburse Jefferies for
Jefferies' out-of-pocket expenses, including fees and expenses of Jefferies'
legal counsel. In the event the Company terminates Jefferies' services and
completes a transaction similar to the Merger within one year of such
termination, the Company agrees to pay to Jefferies the "success fee" referred
to above upon consummation of the other transaction. Under the Jefferies
Engagement Letter, Jefferies has also been retained to render the Fairness
Opinion. Jefferies will receive $250,000 for issuing the
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Fairness Opinion. In addition, the Company has agreed to indemnify Jefferies
against certain liabilities, including liabilities arising under federal
securities laws. The Jefferies Engagement Letter is separate and distinct from
the Letter Agreement (described below).
During the pendency of the Chapter 11 Reorganization, Mr. Radecki was
acting as financial advisor to JNL, a principal creditor of the Company. Mr.
Radecki was ultimately selected by JNL to be appointed to the Company Board upon
conclusion of the Chapter 11 Reorganization, a position he still holds.
Jefferies currently acts as financial advisor to the Company, both in respect of
the Marion Acquisition and the Merger. In addition, Jefferies has provided and
is providing investment banking services to the Company, including with respect
to financing transactions in connection with the Merger and related
transactions. Jefferies also has, and has had, a continuing advisory
relationship with JNL with respect to several transactions unrelated to the
Merger with respect to which Jefferies has received or will receive customary
compensation. Mr. Radecki has abstained from voting on any matters pertaining to
the approval of the Merger and related transactions presented to the Company
Board, and intends to abstain from voting on such matters in the future.
As a result of the Chapter 11 Reorganization, JNL was granted the right to
designate three members of the Company Board on an ongoing basis. These were Mr.
Radecki and Messrs. Stark and Swanson, both of whom are employees of an
affiliate of JNL. Directors of the Company, other than full time employees,
currently receive $2,500 each month, regardless of whether meetings are held or
the number of meetings held. Messrs. Stark and Swansen have declined to accept
any fees. For the period January 1, 1996 to March 10, 1996, JNL directed that
Messrs. Swansen's and Stark's monthly fees be paid by the Company to Jefferies.
For the period March 11, 1996 to December 31, 1996, JNL directed that Messrs.
Swansen's and Stark's monthly fees be paid by the Company to Miller Associates,
of which Mr. Miller (a director of the Company) is President.
On March 7, 1997, the Company entered into the Letter Agreement with
Jefferies pursuant to which Jefferies has acted as the Company's exclusive
financial advisor in connection with the Marion Acquisition. The Company agreed
pursuant to the Letter Agreement to pay Jefferies a one-time retainer fee of
$100,000, and a fee of $150,000 for each fairness opinion that Jefferies issues
in connection with the Marion Acquisition. However, no fairness opinions were
issued in connection with the Marion Acquisition. The Company will, in addition,
pay Jefferies a success fee of $250,000 and all reasonable out-of-pocket
expenses incurred by Jefferies in connection with the Letter Agreement. The
Letter Agreement also contains standard indemnification provisions whereby the
Company will indemnify and hold harmless Jefferies and certain related parties
from liabilities arising out of the Letter Agreement.
JNL has informed the Company that Jefferies has advised JNL in connection
with discussions that JNL has had from time to time to dispose of all or a
substantial portion of its equity interest in the Company. In the ordinary
course of its business, Jefferies and its affiliates may actively trade the debt
and equity securities of the Company for their own accounts and for the accounts
of customers and, accordingly, may at any time hold a long or short position in
such securities. In addition, Joseph J. Radecki, Jr., Executive Vice President
of Jefferies, is a director of the Company and the holder of Options to acquire
6,000 Shares.
Except as set forth above, neither the Company nor any person acting on its
behalf has employed, retained or compensated any persons to make solicitations
or recommendations to shareholders with respect to the Offer.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) To the best knowledge of the Company, no transactions in the Shares
have been effected during the past 60 days by the Company or any executive
officer, director, affiliate or subsidiary of the Company other than the grant
of the Purchase Option under the Stockholder Agreement.
(b) To the best knowledge of the Company, its executive officers,
directors, affiliates and subsidiaries presently intend to accept the Offer and
tender all Shares which are held of record or are beneficially owned by such
persons.
21
<PAGE> 23
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Except as set forth in this Schedule 14D-9, the Company is not engaged
in any negotiation in response to the Offer which relates to or would result in
(i) an extraordinary transaction, such as a merger or reorganization, involving
the Company or any subsidiary of the Company; (ii) a purchase, sale or transfer
of a material amount of assets by the Company or any subsidiary of the Company;
(iii) a tender offer for or other acquisition of securities by or of the
Company; or (iv) any material change in the present capitalization or dividend
policy of the Company.
(b) There are no transactions, board resolutions, agreements in principle
or signed contracts, in response to the Offer that relate to or would result in
one or more of the events referred to in Item 7(a) above.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
(a) DGCL 203. Section 203 of the DGCL purports to regulate certain business
combinations of a corporation organized under Delaware law, such as the Company,
with a stockholder beneficially owning 15% or more of the outstanding voting
stock of such corporation (an "Interested Stockholder"). Section 203 provides,
in relevant part, that the corporation shall not engage in any business
combination for a period of three years following the date such stockholder
first becomes an Interested Stockholder unless (i) prior to the date the
stockholder first becomes an Interested Stockholder, the board of directors of
the corporation approved either the business combination or the transaction
which resulted in the stockholder becoming an Interested Stockholder, (ii) upon
becoming an Interested Stockholder, the Interested Stockholder owned at least
85% of the voting stock of the corporation outstanding at the time the
transaction commenced, or (iii) on or subsequent to the date the stockholder
becomes an Interested Stockholder, the business combination is approved by the
board of directors and authorized at an annual or special meeting of
stockholders by the affirmative vote of at least two-thirds of the outstanding
voting stock which is not owned by the Interested Stockholder. The Company Board
has approved the Merger Agreement and the Stockholder Agreement and the
transactions contemplated thereby, including the Offer and the Merger, for the
purposes of Section 203 of the DGCL.
(b) HSR Act. The Company expects to file a Notification and Report Form
with respect to the Offer under the HSR Act as soon as practicable upon receipt
of the Parent's Notification and Report Form with respect to the Offer. Under
the provisions of the HSR Act applicable to the Offer, the purchase of Shares
pursuant to the Offer may not be consummated until the expiration of a
15-calendar day waiting period following the Parent's filing under the HSR Act.
Accordingly, assuming the filing to be made by the Parent is not deficient, the
waiting period with respect to the Offer is expected to expire on or before
September 23, 1997, unless the Parent receives a request for additional
information or documentary material, in which case the waiting period may be
extended.
(c) Wisconsin Corporate Take-Over Law. Although the Company is organized
under the laws of the state of Delaware, the Wisconsin Corporate Take-Over Law,
Ch. 552 of the Wisconsin Statutes (the "Corporate Take-Over Law") may be
applicable to the Company if the Company satisfies all of the elements of the
definition of a "target company" thereunder and if the Offer constitutes a
"Take-Over Offer" within the meaning of the Corporate Take-Over Law. In the
Purchaser's Schedule 14D-1, the Purchaser has stated that it reserves the right
to challenge the applicability of any state law (including the Corporate
Take-Over Law) purportedly applicable to the Offer.
The provisions of the Corporate Take-Over Law which may be applicable to
the Offer include the following: (i) a requirement that the Purchaser file
solicitation materials with the Wisconsin Department of Financial Institutions
- -- Division of Securities (the "Division") at the same time they are first used
in the Offer; (ii) a prohibition against the dissemination of false and
misleading solicitation materials (with the Division having the authority to
prohibit the use of any such materials); (iii) a general prohibition against
fraudulent and deceptive practices in connection with the Offer; (iv) a
prohibition against the sale of the Shares to the Purchaser by a controlling
person of the Company for consideration higher than that paid to other offerees;
(v) a prohibition against the refusal by the Company to fail to cooperate with
the Purchaser in certain respects; and (vi) a prohibition against the
acquisition by a broker-dealer of any Shares on behalf of the Purchaser or the
Company unless certain prior filings are made with the Division.
22
<PAGE> 24
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
The following Exhibits are filed herewith:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
Exhibit 1 Agreement and Plan of Merger, dated as of August 21, 1997,
by and among American Industrial Partners Acquisition
Company, LLC, Bucyrus International, Inc., and Bucyrus
Acquisition Corp., including Annex I thereto
Exhibit 2 Guarantee, dated as of August 21, 1997, by American
Industrial Partners Capital Fund II, L.P. in favor of
Bucyrus International, Inc.
Exhibit 3 Stockholder Agreement, dated as of August 21, 1997 by and
among American Industrial Partners Acquisition Company, LLC,
Bucyrus Acquisition Corp. and Jackson National Life
Insurance Company
Exhibit 4 Pages 4 through 17 of Bucyrus International, Inc.'s Proxy
Statement dated March 26, 1997 relating to its Annual
Meeting of Stockholders
Exhibit 5 Bridge Loan Documentation, as follows:
Exhibit 5.1 Bridge Loan Commitment issued by PPM America Special
Investments Fund, L.P. as of April 14, 1997
Exhibit 5.2 Extension Agreement dated June 30, 1997 by and between PPM
America Special Investments Fund L.P. and Bucyrus
International, Inc.
Exhibit 5.3 Amendment to Bridge Loan Commitment dated as of August 20,
1997 by and between PPM America Special Investments Fund,
L.P. and Bucyrus International, Inc.
Exhibit 5.4 Bridge Loan Agreement dated as of August 26, 1997 by and
between PPM America Special Investments Fund, L.P., Bank of
Montreal, Bucyrus (Australia) Proprietary Ltd., Bucyrus
Canada Limited and Bucyrus International, Inc.
Exhibit 6 Confidentiality Agreement, dated July 1, 1997 by and between
American Industrial Partners Capital Fund II, L.P., and
Bucyrus International, Inc.
Exhibit 7 Letter Agreement dated as of March 7, 1997 by and between
Jefferies & Company, Inc. and Bucyrus International, Inc.
Exhibit 8 Letter Agreement dated as of July 30, 1997 by and between
Jefferies & Company, Inc. and Bucyrus International, Inc.
Exhibit 9 Joint Prosecution Agreement dated as of August 21, 1997 by
and between Jackson National Life Insurance Company and
Bucyrus International, Inc.
Exhibit 10 Settlement Agreement dated as of August 21, 1997 by and
between Jackson National Life Insurance Company and Bucyrus
International, Inc.
Exhibit 11 Letter of Intent, dated as of July 30, 1997 by and between
American Industrial Partners Capital Fund II, L.P. and
Bucyrus International, Inc.
Exhibit 12 Press Release issued by Bucyrus International Inc. dated
July 31, 1997
Exhibit 13 Joint Press Release issued by American Industrial Partners
Acquisition Company, LLC, and Bucyrus International, Inc. on
August 21, 1997
*Exhibit 14 Opinion of Jefferies & Company, Inc., dated August 19, 1997
</TABLE>
- ---------------
* Included in copies of the Schedule 14D-9 mailed to stockholders.
23
<PAGE> 25
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: August 26, 1997
By: /s/ W. R. HILDEBRAND
------------------------------------
W. R. Hildebrand
President and Chief Executive
Officer
24
<PAGE> 26
SCHEDULE 14F-1
INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULE 14F-1 THEREUNDER
This Information Statement is being mailed on or about August 26, 1997 as a
part of the Solicitation/Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9") of Bucyrus International, Inc. (the "Company") to the holders
of record of shares of Common Stock, par value $.01 per share, of the Company
(the "Shares"). You are receiving this Information Statement in connection with
the possible election of persons designated by the Parent (as defined below) to
a majority of the seats on the Board of Directors of the Company (the "Company
Board").
On August 21, 1997, the Company, Bucyrus Acquisition Corp., a Delaware
corporation (the "Purchaser"), and American Industrial Partners Acquisition
Company, LLC, a Delaware limited liability company and sole owner of the
Purchaser (the "Parent"), entered into an Agreement and Plan of Merger (the
"Merger Agreement") in accordance with the terms and subject to the conditions
of which (i) the Parent has caused the Purchaser to commence a tender offer (the
"Offer") for any and all outstanding Shares at a price of $18.00 per Share, net
to the seller in cash, without interest thereon (the "Offer Price"), and (ii)
upon consummation of the Offer, the Purchaser will be merged with and into the
Company (the "Merger"). As a result of the Offer and the Merger, the Company
will become a wholly owned subsidiary of the Parent. The Parent and the
Purchaser are affiliates of, and are directly or indirectly wholly-owned by,
American Industrial Partners Capital Fund II, L.P. ("AIP Capital Fund"),
American Industrial Partners II, L.P. ("AIP") and American Industrial Partners
Corporation ("AIP Corp."). AIP Capital Fund, AIP and AIP Corp. are referred to
as the "AIP Entities."
The Merger Agreement provides that, promptly after the purchase of a
majority of the outstanding Shares pursuant to the Offer, the Parent shall be
entitled to designate directors (the "Parent Designees") on the Company Board as
will give the Parent representation proportionate to its ownership interest. The
Merger Agreement requires the Company to take such action as the Parent may
request to cause the Parent Designees to be elected to the Company Board under
the circumstances described therein. This Information Statement is required by
Section 14(f) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") and Rule 14f-1 thereunder.
The following information is given as of the date of the Schedule 14D-9,
August 26, 1997, unless indicated otherwise. You are urged to read this
Information Statement carefully. You are not, however, required to take any
action. Capitalized terms used herein and not otherwise defined herein shall
have the meaning set forth in the Schedule 14D-9.
Pursuant to the Merger Agreement, the Purchaser commenced the Offer on
August 26, 1997. The Offer is scheduled to expire at 12:00 midnight, New York
City time, on Tuesday, September 23, 1997, unless extended.
The information contained in this Information Statement concerning the
Parent, the Purchaser, the AIP Entities and the individuals listed in Schedule I
to this Schedule 14F-1 has been furnished to the Company by the Parent, and the
Company assumes no responsibility for the accuracy or completeness of such
information.
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
GENERAL
The Shares are the only class of voting securities of the Company
outstanding. Each Share has one vote. As of August 21, 1997, there were
10,534,574 Shares outstanding. The Company Board currently consists of seven
members with no vacancies. Each director holds office until such director's
successor is elected and qualified or until such director's earlier resignation
or removal.
A-1
<PAGE> 27
RIGHT TO DESIGNATE DIRECTORS; THE PARENT DESIGNEES
The Merger Agreement provides that, promptly upon the purchase of any
Shares pursuant to the Offer, and from time to time as additional Shares are
purchased, the Parent shall be entitled to designate such number of Parent
Designees as will give the Parent representation on the Company Board, and on
each committee of the Company Board, proportionate to the Parent's ownership
interest in the Company. To this end, the Company has agreed to expand the size
of the Company Board or to seek the resignation of one or more of the current
directors, as requested by the Parent. However, in the event that the Parent's
designees are elected to the Company Board, the Company Board must include at
least one director who is a director as of the date of execution of the Merger
Agreement and who is neither an officer of the Company nor a designee,
stockholder, affiliate or associate of the Parent (one or more of such directors
being the "Independent Directors"). If no Independent Directors remain, the
other directors will designate one person, to fill a vacancy created by
resignation of one or more directors, who is neither an officer of the Company
nor a designee, stockholder, affiliate or associate of the Purchaser, such
person so designated being deemed an Independent Director. The Company's
obligation to appoint the Parent's designees to the Company Board is subject to
compliance with Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder. Following the election of the Parent Designees, any action to amend
or terminate the Merger Agreement on behalf of the Company, to exercise or waive
any of the Company's rights, benefits or remedies thereunder, to extend the time
for the performance of the Purchaser's or the Parent's obligations thereunder or
to take other action by the Company under the Merger Agreement shall be effected
only by the action of a majority of the directors of the Company then in office
who are Independent Directors.
The Parent has informed the Company that it will choose the initial Parent
Designees from among the persons listed in Annex A to this Schedule 14F-1, which
information has been provided to the Company by the Parent and for which the
Company takes no responsibility as to the accuracy or completeness. The Parent
has informed the Company that each of such individuals has consented to act as a
director, if so designated. The information with respect to such individuals on
such Annex A is incorporated herein by reference. If necessary, the Parent may
choose additional or other Parent Designees, subject to the requirements of Rule
14f-1.
Based solely on the information provided by the Parent, none of the Parent
Designees (i) is currently a director of, or holds any position with, the
Company, (ii) has a familial relationship with any directors or executive
officers of the Company or (iii) to the best knowledge of the Parent,
beneficially owns any securities (or rights to acquire such securities) of the
Company. The Company has been advised by the Parent that, to the best of the
Parent's knowledge, none of the Parent Designees has been involved in any
transactions with the Company or any of its directors, executive officers or
affiliates which are required to be disclosed pursuant to the rules and
regulations of the Commission, except as may be disclosed herein or in the
Schedule 14D-9.
It is expected that the Parent Designees may assume office at any time
following the purchase by the Purchaser of a majority of the outstanding Shares
pursuant to the Offer, which purchase cannot be earlier than September 24, 1997,
and that, upon assuming office, the Parent Designees will thereafter constitute
at least a majority of the Board of Directors.
BOARD OF DIRECTORS
Directors of the Company are elected annually and hold office until the
next annual meeting of stockholders and until their successors are duly elected
and qualified. The executive officers of the Company serve at the discretion of
the Company Board. The Board held six meetings in 1996. Each director attended
at least 75% of the aggregate of (a) the total number of meetings of the Board
and (b) the total number of meetings held by all committees of the Board on
which the director served during 1996.
The Board has a standing Audit Committee ("Audit Committee") and a standing
Compensation and Management Development Committee (the "Compensation
Committee"). In 1996, the Audit Committee consisted of Messrs. Poole, Radecki
and Stark. The principal functions performed by the Audit Committee, which met
once in 1996, are to meet with the Company's independent public accountants
before the annual audit to review procedures and the scope of the audit; to
review the results of the audit; to review the financial
A-2
<PAGE> 28
control mechanisms used by the Company and the adequacy of the Company's
accounting and financial controls; and to annually recommend to the Board a firm
of independent public accountants to serve as the Company's auditors. The
Compensation Committee in 1996 consisted of Messrs. Bartlett and Swansen. The
principal functions of the Compensation Committee, which met once in 1996, are
to review and make recommendations to the Board concerning (i) the compensation
and related benefits of elected officers; (ii) incentive and bonus plans that
include elected officers; and (iii) long-range planning for executive
development and succession. It also reviews Company policies regarding
compensation for senior management and other employees, and establishes and
periodically reviews Company policies on management perquisites. In addition, a
committee consisting of Messrs. Bartlett and Stark administers the 1996
Employees' Stock Incentive Plan and Non-Employee Directors' Stock Option Plan.
The Board has no standing nominating committee.
The following table sets forth, for each of the seven directors of the
Company, information as of the date of this Schedule regarding their names,
ages, principal occupations, and other directorships in certain companies held
by them, and their length of continuous service as a director of the Company.
Except as otherwise noted, each director has engaged in the principal occupation
or employment and has held the offices shown for more than the past five years.
Unless otherwise indicated, each director listed below is a citizen of the
United States and the address of such person is the Company's principal
executive offices. There are no family relationships among directors and
executive officers of the Company.
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE, PRINCIPAL OCCUPATION, AND DIRECTORSHIPS SINCE
---- -------------------------------------------- --------
<S> <C> <C>
Craig Scott Bartlett, Jr.......... Mr. Bartlett, age 63, has been a consultant on banking 1994
matters since 1990, and in conjunction with such
activities was Senior Vice President and Chief Credit
Officer of MTB Bank, a private banking firm, from 1992 to
1994. From 1984 to 1990, he was Executive Vice President,
Senior Lending Officer and Chairman, Credit Policy
Committee, of National Westminster Bank USA. Mr. Bartlett
is a director of MTB Bank, The Bibb Company, Harvard
Industries, Inc., Janus Industries, Inc., and NVR, Inc.
Willard R. Hildebrand............. Mr. Hildebrand, age 58, has been the President and Chief 1996
Executive Officer of the Company since March 11, 1996.
Mr. Hildebrand was President and Chief Executive Officer
of Great Dane Trailers, Inc. (a privately held
manufacturer of a variety of truck trailers) from 1991 to
1996. Prior to 1991, Mr. Hildebrand held a variety of
sales and marketing positions with Fiat-Allis North
America, Inc. and was President and Chief Operating
Officer from 1985 to 1991.
Frank W. Miller................... Mr. Miller, age 52, was the Interim President and Chief 1996
Executive Officer of the Company from August 1, 1995 to
March 11, 1996. Mr. Miller is President of Miller
Associates, Inc. ("Miller Associates"), a management
consulting and private investment corporation established
by Mr. Miller in January, 1995. From 1989 to 1994, Mr.
Miller was Vice Chairman and Chief Executive Officer of
Darling International, Inc. Mr. Miller is a director of
Sound Advice and M. F. Horan Company.
Joseph J. Radecki, Jr............. Since 1990, Mr. Radecki, age 39, has been an Executive 1994
Vice President of Jefferies & Company, Inc., an
investment banking and advisory firm. From 1983 to 1990,
Mr. Radecki was a First Vice President in the
International Capital Markets Group at Drexel Burnham
Lambert, Inc. where he specialized in financial
restructurings and recapitalizations. Mr. Radecki is a
director of Warehouse Entertainment, Inc.
</TABLE>
A-3
<PAGE> 29
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE, PRINCIPAL OCCUPATION, AND DIRECTORSHIPS SINCE
- --------------------------------- ----------------------------------------------------------------------- -----------
<S> <C> <C>
F. John Stark, III............... Since 1990, Mr. Stark, age 38, has been a Senior Vice President, 1994
General Counsel and portfolio manager of the Special Investments
Portfolio for PPM America, Inc., an investment management company. Mr.
Stark is also a Senior Managing Director of the PPM America Special
Investments Fund, L.P. From 1989 to 1990, Mr. Stark was employed by
Washington Square Capital. From 1986 to 1989 he was Chief Operating
Officer and General Counsel of Rubber Research Elastomerics, Inc. in
Minneapolis, Minnesota, and from 1984 to 1986 he was employed by the
law firm of Briggs and Morgan in Minneapolis, Minnesota. Mr. Stark is a
director of PPM America, Inc.
Russell W. Swansen............... Mr. Swansen, age 40, has been President of PPM America, Inc. since 1994
1990. From 1987 to 1990, Mr. Swansen was an Executive Vice President of
Washington Square Capital, a financial services subsidiary of NWNL Co.,
where he headed its investment advisory division and was a director of
Washington Square Mortgage Company, a residential mortgage banking
firm. Mr. Swansen is a director of PPM America, Inc.
Armour F. Swanson................ Mr. Swanson, age 65, currently serves as Acting President and Chief 1997
Executive Officer of Carolina Steel Corporation (on an interim basis)
and was previously President and Chief Executive Officer of Zenith
Sintered Products, Inc. (a privately held manufacturer of powder metal
components) from 1985 to 1995. From 1983 to 1985, Mr. Swanson was
President of Universal Instruments Division of Dover Corporation and
from 1980 to 1983 he was President of Waukesha Bearings Division of
Dover Corporation.
</TABLE>
Approximately 40% of the Shares are owned by Jackson National Life
Insurance Company ("JNL"), an indirect, wholly-owned subsidiary of Prudential
Corporation plc, a corporation organized under the laws of the United Kingdom
("Prudential"). Three of the seven current members of the Company Board (Messrs.
Radecki, Stark and Swansen) were selected by JNL prior to December 14, 1994 to
serve as directors of the Company in connection with the Company's 1994
reorganization under Chapter 11 of the United States Bankruptcy Code (the
"Chapter 11 Reorganization") and two of these individuals (Messrs. Stark and
Swansen) are employees of another subsidiary of Prudential. Mr. Radecki is an
employee of Jefferies & Company, Inc. ("Jefferies"), financial adviser to the
Company in connection with the Marion Acquisition (as hereinafter defined) and
the Merger.
The Merger Agreement contemplates that, following completion of the Offer,
the Company will take steps, consistent with applicable law, either to increase
the size of the Company Board, or encourage the resignation of existing
directors, thereby creating vacancies on the Company Board consistent with the
percentage of Shares then owned by the Parent (and increased thereafter if such
percentage should increase, in all cases rounded up to the next whole number)
and to cause nominees designated by the Parent to be considered to fill such
vacancies. Accordingly, following completion of the Offer, a majority of the
Company Board may be designees of the Parent.
EXECUTIVE OFFICERS
Set forth below are the names, ages and present occupation of all executive
officers of the Company. Executive officers named therein (the "named executive
officers") are elected annually and serve at the pleasure of the Company Board.
Mr. Hildebrand is employed under a three-year employment agreement, which
automatically renews for additional one-year terms subject to the provisions of
the agreement.
A-4
<PAGE> 30
Messrs. Mackus, Onsager, Phillips, Smoke, and Sullivan are each employed under
one-year employment agreements which automatically renew for additional one-year
terms subject to the provisions thereof.
<TABLE>
<CAPTION>
EMPLOYED BY
THE COMPANY
NAME AGE, POSITION, AND BACKGROUND SINCE
---- ----------------------------- -----------
<S> <C> <C>
Willard R. Hildebrand............. Mr. Hildebrand, age 58, has served as President and 1996
Chief Executive Officer since he joined the Company in
March 1996. Biographical information for Mr.
Hildebrand is set forth above under "Directors."
Craig R. Mackus................... Mr. Mackus, age 45, has served as Secretary since May 1974
1996 and as Controller since February 1988. Mr. Mackus
was Division Controller and Assistant Corporate
Controller from 1985 to 1988, Manager of Corporate
Accounting from 1981 to 1982 and 1984 to 1985, and
Assistant Corporate Controller of Western Gear
Corporation from 1982 to 1984.
Michael G. Onsager................ Mr. Onsager, age 43, has served as Vice President -- 1976
Engineering since September 1996. He was Chief
Engineer -- Advanced Technology Development from 1995
to September 1996, Assistant Chief Engineer from 1990
to 1993 and 1994 to 1995, and Parts Product Manager
from 1993 to 1994.
Thomas B. Phillips................ Mr. Phillips, age 51, has served as Vice President -- 1970
Materials since March 1996. He was Director of
Materials from 1986 to 1996, Manufacturing Manager
from June 1986 to October 1986, and Materials Manager
from 1983 to 1986.
Daniel J. Smoke................... Mr. Smoke, age 48, has served as Vice President and 1996
Chief Financial Officer since he joined the Company in
November 1996. Mr. Smoke was Vice President Finance
and Chief Financial Officer of Folger Adam Company
from 1995 to 1996. From 1986 to 1994, Mr. Smoke held a
variety of financial and operating positions with
Eagle Industries, Inc.
Timothy W. Sullivan............... Mr. Sullivan, age 44, has served as Vice President -- 1976
Marketing since April 1995. He was the Director of
Business Development in 1994, Director of Parts Sales
and Subsidiary Operations from 1990 to 1994, and
Product Manager of Electric Mining Shovels and
International Sales from 1986 to 1990.
</TABLE>
COMPENSATION OF DIRECTORS
Directors of the Company, other than full time employees, currently receive
$2,500 each month, regardless of whether meetings are held or the number of
meetings held. Messrs. Stark and Swansen have declined to accept any fees. For
the period January 1, 1996 to March 10, 1996, JNL directed that Messrs.
Swansen's and Stark's $2,000 monthly fees be paid by the Company to Jefferies,
of which Mr. Radecki is Executive Vice President. For the period March 11, 1996
to December 31, 1996, JNL directed that Messrs. Swansen's and Stark's $2,500
monthly fees be paid by the Company to Miller Associates, of which Mr. Miller is
President. No fees are paid for attendance at committee meetings, except for Mr.
Bartlett, who was paid $13,000 during 1996, at the rate of $1,000 per day for
the period January 1, 1996 to March 31, 1996, and $1,500 per day for the period
April 1, 1996 to December 31, 1996, for services performed as a member of
certain committees of the Board. Directors are also reimbursed for out-of-pocket
expenses.
In accordance with the terms of a non-employee directors' stock option plan
(the "Stock Option Plan"), each person who was a director on the effective date
of the Stock Option Plan automatically received an option (a "Stock Option" or
"Option") to acquire 2,000 Shares. The Stock Option Plan further provides that
A-5
<PAGE> 31
each person who was not a director on the effective date of the Stock Option
Plan automatically receives an Option for 2,000 Shares when first elected as a
non-employee director of the Company. In addition to the compensation described
above, each director who was not a full time employee of the Company
automatically received an Option for 2,000 Shares at an exercise price of $6.00
per Share on February 16, 1995, an Option for 2,000 Shares on February 8, 1996
at an exercise price of $9.25 per Share and an Option for 2,000 Shares on
February 5, 1997 at an exercise price of $7.50 per Share, Pursuant thereto, Mr.
Miller was granted an Option for 2,000 Shares on March 11, 1996 at an exercise
price of $9.00 per Share, and Mr. Swanson was granted an Option for 2,000 shares
on April 30, 1997 at an exercise price of $9.375 per Share. Subsequent to the
initial grant, each non-employee director (who continues to serve in such
capacity) automatically receives an Option to purchase an additional 2,000
Shares on the date of the first Board meeting of each calendar year for as long
as the plan remains in effect. Notwithstanding the above, Messrs. Stark and
Swansen have declined to accept any Options under the Stock Option Plan. The
exercise price for all Options granted under the Stock Option Plan is equal to
the last sale price of the Shares on The Nasdaq Stock Market on the date of
grant. Options granted to non-employee directors under the Stock Option Plan
terminate on the earlier of (a) ten years after the date of grant, (b) six
months after the non-employee director ceases to be a director by reason of
death, or (c) a time equal to the non-employee director's length of service on
the Board if the non-employee director ceases to be a director for any reason
other than death.
The Merger Agreement provides that all issued and outstanding Stock Options
and stock appreciation rights ("SARs") will be cancelled upon the effective date
of the Merger and, regardless of whether such Stock Options or SARs have then
vested in the holders thereof or are exercisable, the holders will receive cash
equal to the difference between the Stock Option exercise price or SAR per Share
base price, as the case may be, and the Offer Price multiplied by the number of
Options or SARs held.
PRINCIPAL STOCKHOLDERS
The table below sets forth the beneficial ownership as of June 30, 1997, of
the outstanding Common Stock by each director, each of the executive officers
named in the Summary Compensation Table, and by all directors and executive
officers of the Company as a group, and by each person who is known to the
Company to be the beneficial owner of five percent or more of the outstanding
Common Stock.
Following consummation of the Merger, the Company will have a single
stockholder, the Parent, whose business address is One Maritime Plaza, Suite
2525, San Francisco, CA 94111.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) CLASS(2)
---------------- ----------------------- ----------
<S> <C> <C>
Craig Scott Bartlett, Jr.(3)................................ 6,000 *
Willard R. Hildebrand(4).................................... 500,000 4.7%
Craig R. Mackus(5).......................................... 972 *
Frank W. Miller(3).......................................... 4,500 *
Michael G. Onsager(5)....................................... 0 --
Thomas B. Phillips(5)....................................... 0 --
Joseph J. Radecki, Jr.(3)................................... 6,000 *
Daniel J. Smoke(6).......................................... 30,000 *
F. John Stark, III(7)....................................... 0 --
Timothy W. Sullivan(5)...................................... 324 *
Russell W. Swansen(8)....................................... 0 --
Armour F. Swanson(3)........................................ 2,100 *
All directors and executive officers as a group (12
persons).................................................. 549,896 5.1%
Jackson National Life Insurance Company(9).................. 4,228,382 40.1%
SSP, Inc. and Greycliff Partners(10)........................ 1,160,979 11.0%
Franklin Resources, Inc.(11)................................ 774,899 7.4%
</TABLE>
A-6
<PAGE> 32
- ---------------
(1) Unless otherwise noted, amounts indicated reflect Shares as to which the
beneficial owner possesses sole voting and dispositive powers. Also included
are Shares subject to Stock Options if such Options are exercisable within
60 days of the date of this Schedule.
(2) Percentage of total number of Shares outstanding, plus, for each individual
owning Options and for the group, the assumed exercise of that number of
Options which are included in the total number of Shares beneficially owned
by them. Asterisk denotes less than 1%.
(3) Includes Options granted under the Non-Employee Directors' Stock Option Plan
as follows: for Messrs. Bartlett and Radecki -- 6,000 Options each; for Mr.
Miller -- 4,000 Options; for Mr. Swanson -- 2,000 Options.
(4) Includes 200,000 Shares subject to the exercise of Options under the Stock
Incentive Plan, as well as 266,667 Restricted Shares issued under the Stock
Incentive Plan over which Mr. Hildebrand holds sole voting power.
(5) For each of Messrs. Mackus, Onsager, Phillips and Sullivan, does not include
30,000 Options granted under the Stock Incentive Plan on February 5, 1997 at
an exercise price of $7.50 per Share. These Options are not currently
exercisable, but will be purchased upon consummation of the Merger for cash
at the difference between the Offer Price of $18.00 per Share and the
exercise price, multiplied by the number of Options held.
(6) Includes 30,000 Options granted under the Stock Incentive Plan on November
7, 1996 at an exercise price of $8.75 per Share. These Options are not
currently exercisable, but will become fully exercisable upon a
change-in-control transaction (including the Merger). These options will be
purchased upon consummation of the Merger for cash at the difference between
the Offer Price of $18.00 per Share and the exercise price, multiplied by
the number of Options held.
(7) Mr. Stark is a director and an officer of PPM America, Inc., which is deemed
to be the beneficial owner of 4,228,382 Shares. Mr. Stark disclaims
beneficial ownership of all such Shares.
(8) Mr. Swansen is a director and an officer of PPM America, Inc., which is
deemed to be the beneficial owner of 4,228,382 Shares. Mr. Swansen disclaims
beneficial ownership of all such Shares.
(9) JNL's address is 5901 Executive Drive, Lansing, MI 48911-5333. According to
a Schedule 13D ("13D") statement dated December 23, 1994, as amended by
Amendments No. 1 and No. 2 and No. 3 thereto, dated April 4, 1995, March 11,
1996 and August 5, 1997, respectively, (i) JNL shares voting power and
dispositive power with PPM America, Inc. over all such Shares; (ii) PPM
America, Inc. serves as the investment advisor to JNL pursuant to a
Discretionary Investment Management Agreement between JNL and PPM America,
Inc. dated as of April 14, 1993; and (iii) JNL and PPM America, Inc. are
both indirect, wholly-owned subsidiaries of Prudential Corporation plc, a
corporation organized under the laws of the United Kingdom. JNL has granted
the Purchase Option to the Parent as provided in the Merger Agreement and
Stockholder Agreement.
(10) SSP, Inc.'s address is 3801 Kennett Pike, Wilmington, DE 19807 and
Greycliff Partners' address is 89 Headquarters Plaza, Morristown, NJ 07960.
According to a 13D dated June 16, 1995, Greycliff Partners shares voting
and dispositive power over 1,160,979 Shares with Mikael Salovaara and
Alfred C. Eckert, III, its general partners. The 13D also states that
Greycliff Partners is the investment advisor for and shares voting and
dispositive power with the South Street Corporate Recovery Fund I, L.P.,
the South Street Leveraged Corporate Recovery Fund, L.P. and the South
Street Corporate Recovery Fund I (International), L.P. (collectively the
"South Street Funds"), except that such powers held by Greycliff Partners
are subject to the supervision and control of the South Street Funds'
respective general partners. Such funds share voting and dispositive power
over 914,908 Shares, 223,297 Shares and 22,774 Shares, respectively. The
13D also states that SSP, Inc., the ultimate general partner for both the
South Street Corporate Recovery Fund I, L.P. and the South Street Leveraged
Corporate Recovery Fund, L.P., shares voting and dispositive power over
1,138,205 Shares, and that SSP International, Inc., the ultimate general
partner for the South Street Corporate Recovery Fund I
A-7
<PAGE> 33
(International), L.P., shares voting and dispositive power over 22,774
Shares. Notwithstanding the above reference to Greycliff Partners, it is
the Company's understanding that since the filing of the 13D, SSP, Inc. has
assumed direct responsibility for exercising the voting and dispositive
power over the South Street Corporate Recovery Fund I, L.P. and the South
Street Leveraged Corporate Recovery Fund, L.P. All such Shares over which
Greycliff Partners and the other parties described herein share beneficial
ownership were acquired upon the conversion of certain debt securities of
the Company during the pendency of the Chapter 11 Reorganization. JNL has
objected to the proofs of claim filed with the Bankruptcy Court by the
indenture trustees for the debt securities to the extent that such proofs
of claim related to debt securities beneficially owned by the South Street
Funds. As a result of such objection, the Company believes that the Shares
beneficially owned by the South Street Funds are being held in escrow
pursuant to an agreement between JNL and the South Street Funds pending
further order of the Bankruptcy Court with respect to JNL's objection.
(11) Franklin Resources, Inc.'s address is 777 Mariners Island Blvd., San Mateo,
CA 94404. Includes 741,331 Shares beneficially owned by Age High Income
Fund. Age High Income Fund, a Colorado organization, is a subsidiary of
Franklin Resources, Inc., a Delaware corporation. According to the Schedule
13G statement dated February 12, 1996 filed with the Commission by Franklin
Resources, Inc. and Age High Income Fund (i) Franklin Resources, Inc. has
shared dispositive power over and sole voting power over 774,899 Shares;
and (ii) Age High Income Fund has sole voting power over, shared
dispositive power over, the right to receive dividends from and the right
to receive proceeds from the sale of 741,331 Shares.
A-8
<PAGE> 34
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information for each of the last
three fiscal years concerning compensation awarded to, earned by or paid to each
person who served as the Company's Chief Executive Officer during fiscal 1996
and each of the four most highly compensated executive officers other than the
Chief Executive Officer who were in office on December 31, 1996. The persons
named in the table are sometimes referred to herein as the "named executive
officers."
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
AWARDS
-----------------------
RESTRICTED
ANNUAL COMPENSATION(1) STOCK SECURITIES ALL OTHER
NAME AND PRINCIPAL ----------------------- AWARDS UNDERLYING COMPENSATION
POSITION YEAR SALARY BONUS (2) OPTIONS(#) (3)
------------------ ---- ------ ----- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
WILLARD R. HILDEBRAND......... 1996 $323,816 $200,000 $2,700,000 200,000 $265,931
President and Chief
Executive Officer
FRANK W. MILLER............... 1996 (4) -- -- -- --
Interim President and 1995 (4) -- -- -- --
Chief Executive Officer(4)
CRAIG R. MACKUS............... 1996 $123,000 $ 26,975 -- -- $ 4,090
Secretary and Controller 1995 114,900 10,000 -- -- 3,732
1994 105,030 -- -- -- 3,447
MICHAEL G. ONSAGER............ 1996 $101,672 $ 22,666 -- -- $ 3,336
Vice President Engineering 1995 80,361 -- -- -- 2,617
1994 70,255 -- -- -- 2,291
THOMAS B. PHILLIPS............ 1996 $119,168 $ 26,976 -- -- $ 4,299
Vice President Materials 1995 104,202 10,000 -- -- 3,833
1994 97,096 -- -- -- 3,397
TIMOTHY W. SULLIVAN........... 1996 $128,004 $ 34,644 -- -- $ 4,260
Vice President Marketing 1995 114,932 10,000 -- -- 4,124
1994 102,507 -- -- -- 3,362
</TABLE>
- ---------------
(1) Certain personal benefits provided by the Company to the named executive
officers are not included in the table. The aggregate amount of such
personal benefits for each named executive officer in each year reflected in
the table did not exceed the lesser of $50,000 or 10% of the sum of such
officer's salary and bonus in each respective year.
(2) Represents the market value on the date of grant of restricted Shares
("Restricted Shares") granted under the 1996 Employees' Stock Incentive Plan
(the "Stock Incentive Plan"). At the end of the last fiscal year, the number
and value (based on the fiscal year-end closing price of $8.75 per Share) of
the aggregate holdings of Restricted Shares of the named individual were
300,000 and $2,625,000, respectively. Of the 300,000 Restricted Shares,
33,333 vested on March 11, 1997, 33,333 will vest on March 11, 1998, and
33,334 will vest on March 11, 1999. The remaining 200,000 Restricted Shares
vest under a Time Accelerated Restricted Stock Agreement, which provides for
vesting in eight years (assuming continued employment, with certain
exceptions) and provides for earlier release in the third, fourth, and fifth
years if certain earnings targets are reached by the Company. Dividends are
payable on the Restricted Shares at the same rate as on Shares that are not
Restricted Shares. The Merger Agreement provides that all issued and
outstanding Stock Options and SARs will be cancelled upon the effective date
of the Merger and, regardless of whether such Stock Options or SARs have
then vested in the holders thereof or are exercisable, the holders will
receive cash equal to the difference between the Stock Option exercise price
or SAR per Share base price, as the case may be, and the Offer Price. The
A-9
<PAGE> 35
Restricted Shares are considered issued and outstanding and, pursuant to the
Merger Agreement, will be purchased in the Offer at the Offer Price whether
or not vested.
(3) "All Other Compensation" includes the employer match under the Company's
401(k) savings plan for 1996, 1995, and 1994, respectively: Mr. Hildebrand
($4,750), Mr. Mackus ($3,690, $3,403, $3,151), Mr. Onsager ($3,050, $2,411,
$2,108), Mr. Phillips ($3,262, $2,961, $2,913), and Mr. Sullivan ($3,840,
$3,798, $3,075); life insurance premium payments for 1996, 1995 and 1994,
respectively: Mr. Hildebrand ($2,775), Mr. Mackus ($400, $329, $296), Mr.
Onsager ($286, $206, $183), Mr. Phillips ($1,037, $872, $484), and Mr.
Sullivan ($420, $326, $287); and payments made in 1996 in connection with
employment agreements to Mr. Hildebrand ($258,406 including a relocation
allowance of $187,021 and a pension benefit of $71,385).
(4) Mr. Miller became Interim President and Chief Executive Officer pursuant to
a Management Agreement (the "Management Agreement"), dated July 21, 1995, as
amended, between the Company and Miller Associates. Amounts paid by the
Company under the Management Agreement were paid to Miller Associates and
Mr. Miller was separately compensated by Miller Associates. Pursuant to the
Management Agreement, Mr. Miller served as Interim President and Chief
Executive Officer until March 11, 1996 when Mr. Hildebrand was appointed as
President and Chief Executive Officer by the Board.
OPTION GRANTS TABLE
The following table shows all individual grants of Stock Options and SARs
under the Stock Incentive Plan to the named executive officers during 1996:
<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE OR GRANT DATE
OPTIONS/SARS EMPLOYEES IN BASE PRICE PER EXPIRATION PRESENT
NAME GRANTED (#) 1996 SHARE ($/SH)(1) DATE VALUE ($)(2)
---- ------------- ------------ --------------- ---------- ------------
<S> <C> <C> <C> <C> <C>
W. R. Hildebrand................ 200,000(3) 71% $ 5.0875 3/10/2006 $1,310,000
</TABLE>
- ---------------
(1) The market price of the Shares on the date of grant, March 11, 1996, was
$9.00 per Share.
(2) Present value is determined as of the grant date, March 11, 1996, using the
Black-Scholes Model. This is a theoretical value for the Stock Options which
was constructed with the following underlying assumptions: a five year
expected period to time of exercise; a risk free rate of return of 6.34%; an
expected dividend yield of 0%; and a calculated volatility of 66.82%. The
amount realized from a Stock Option ultimately depends on the market value
of the stock at a future date. Pursuant to the Merger Agreement, all Options
will be canceled in exchange for a cash payment equal to the difference
between the Offer Price and the exercise price of such Options. In respect
of the Options held by Mr. Hildebrand, the amount to be received will be
$2,582,500 at the Offer Price of $18.00 per Share.
(3) Non-qualified Stock Options.
Executive officers of the Company are eligible to receive Stock Options,
SARs, Restricted Shares, and other awards under the Stock Incentive Plan. An
award of 30,000 Stock Options and 50,000 SARs was made to Mr. Daniel Smoke, the
Company's chief financial officer, upon his hiring in November, 1996, and on
February 5, 1997 the Board approved the award of Stock Options to various
employees, including the named executive officers (but not including Mr.
Hildebrand and Mr. Smoke). Pursuant to the Merger Agreement, all Options and
SARs will be canceled in exchange for a cash payment equal to the difference
between the Offer Price and the exercise price of such Options or per Share base
price of the SARs.
A-10
<PAGE> 36
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
The following table provides certain information about Stock Option
exercises and year-end values of Stock Options held by Mr. Hildebrand, who is
the only named executive officer who held Stock Options during the fiscal year
ended December 31, 1996.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS/SARS AT FISCAL OPTIONS/SARS AT
ACQUIRED VALUE YEAR END (#) FISCAL YEAR END(1) ($)
ON EXERCISE REALIZED --------------------------- ---------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Willard R. Hildebrand.......... 0 N/A 200,000 0 $732,500 N/A
</TABLE>
- ---------------
(1) Based on the $8.75 per Share market value of the Common Stock on December
31, 1996, determined with reference to the last sale price of the Common
Stock on that date as reported on The Nasdaq Stock Market. Options are
"in-the-money" if the fair market value of the stock on the date indicated
exceeds the exercise price.
PENSION PLAN TABLE
The following table sets forth the estimated annual benefits payable on a
straight life annuity basis (prior to offset of one-half of estimated Social
Security benefits) to participating employees, including officers, upon
retirement at normal retirement age for the years of service and the average
annual earnings indicated under the Company's defined benefit pension plan.
<TABLE>
<CAPTION>
YEARS OF SERVICE
----------------------------------------------------
RENUMERATION 35 30 25 20 15
------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$125,000................................. $ 76,563 $ 65,625 $ 54,688 $ 43,750 $ 32,813
150,000................................. 91,875 78,750 65,625 52,500 39,375
175,000................................. 107,188 91,875 76,563 61,250 45,938
200,000................................. 122,500 105,000 87,500 70,000 52,500
225,000................................. 137,813 118,125 98,438 78,750 59,063
250,000................................. 153,125 131,250 109,375 87,500 65,625
300,000................................. 183,750 157,500 131,250 105,000 78,750
400,000................................. 245,000 210,000 175,000 140,000 105,000
450,000................................. 275,625 236,250 196,875 157,500 118,125
500,000................................. 306,250 262,500 218,750 175,000 131,250
</TABLE>
Covered compensation for purposes of the Company's defined benefit pension
plan consists of the average of a participant's highest total salary and bonus
(excluding compensation deferred pursuant to any non-qualified plan) for a
consecutive five year period during the last ten calendar years of service prior
to retirement.
The years of credited service under the defined benefit pension plan for
each of the named executive officers are as follows: Mr. Hildebrand (0), Mr.
Mackus (17), Mr. Onsager (17), Mr. Phillips (20) and Mr. Sullivan (18).
Sections 401(a)(17) and 415 of the Internal Revenue Code of 1986, as
amended, limit the annual benefits which may be paid from a tax-qualified
retirement plan. As permitted by the Employee Retirement Income Security Act of
1974, the Company has supplemental plans which authorize the payment out of
general funds of the Company of any benefits calculated under provisions of the
applicable retirement plan which may be above the limits under these sections.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Company Board, subject to the approval of
the Company Board, is responsible for the compensation packages offered to the
Company's executive officers, including the Chief Executive Officer (the "CEO")
and the named executive officers. Prior to March 11, 1996, the Compensation
Committee consisted of Messrs. Bartlett and Stark; since March 11, 1996, the
Compensation Committee consists of Messrs. Bartlett and Swansen.
A-11
<PAGE> 37
EXECUTIVE COMPENSATION
The Compensation Committee, in consultation with the CEO, establishes base
salaries for the executive officers of the Company which the Company believes
are commensurate with their respective responsibilities, position, and
experience. Consideration is also given to the compensation levels of similarly
situated personnel of other companies in the industry where such information is
available. When making adjustments in base salaries, the Compensation Committee
generally considers the foregoing factors as well as corporate financial
performance and return to stockholders. In individual cases where appropriate,
the Compensation Committee also considers nonfinancial performance measures,
such as increases in market share, manufacturing efficiency gains, improvements
in product quality, and improvements in relations with customers, suppliers, and
employees. Executive officer base salaries are reviewed annually. The
Compensation Committee generally begins its review by analyzing the current base
salaries of the executive officers. Based on such review, the corporate
performance of the Company, the individual contributions of the executive
officers, and the factors discussed above, the Compensation Committee then
recommends approval of its determinations to the Company Board.
Executive officers and other Company employees participated in the 1996
Management Incentive Plan. Under the 1996 Management Incentive Plan, the
Compensation Committee established a management incentive budget based on
budgeted earnings before interest expense, taxes, depreciation and amortization
("EBITDA") and, in consultation with the CEO, established target incentive bonus
percentages of between 10% and 30% of base salary for executive officers (other
than the CEO, whose target incentive bonus percentage is established pursuant to
his employment agreement -- see "Chief Executive Officer Compensation," below)
and certain employees. These targeted percentages were adjustable pursuant to a
formula based on a range of values whereby the target incentive bonus percentage
would be zero (and no bonuses would be paid) if actual EBITDA was less than 90%
of budgeted EBITDA, and a maximum bonus of two times the target incentive bonus
percentage would be paid if actual EBITDA was 150% or more of budgeted EBITDA.
In 1996, the Company's actual EBITDA exceeded budgeted EBITDA, and the target
incentive bonus percentages were increased by approximately 9%. After target
bonus amounts were established, actual bonuses were further adjusted, again in
consultation with the CEO, based on the achievement of preestablished individual
performance objectives. Various employees, including the named executive
officers, received bonuses under the 1996 Management Incentive Plan.
CHIEF EXECUTIVE OFFICER COMPENSATION
The base salary and certain awards under the Stock Incentive Plan for Mr.
Hildebrand, the Company's CEO, were established by negotiation between the
Company and Mr. Hildebrand at the time he was hired in 1996 and are set forth in
an employment agreement between the Company and Mr. Hildebrand. The factors
recited in the first paragraph above under "Executive Compensation," were
considered by the Compensation Committee and the Company Board in these
negotiations.
Mr. Hildebrand also participated in the 1996 Management Incentive Plan on
the same basis as the other employees who participated. Mr. Hildebrand's target
incentive bonus percentage of 50% of base salary was established pursuant to his
employment agreement. No individual performance adjustment was made for Mr.
Hildebrand.
INTERNAL REVENUE CODE SECTION 162(M)
Under Section 162(m) of the Internal Revenue Code, the tax deduction by
certain corporate taxpayers, such as the Company, is limited with respect to
compensation paid to certain executive officers unless such compensation is
based on performance objectives meeting specific regulatory criteria or is
otherwise excluded from the limitation. The compensation package of Mr.
Hildebrand, the Company's CEO, does not so qualify, nor does the 1996 Management
Incentive Plan meet the regulatory criteria for exclusion from the limitation.
Where practical, the Compensation Committee intends to qualify compensation paid
to the Company's executive officers in order to preserve the full deductibility
thereof under Section 162(m), although the Compensation Committee reserves the
right in individual cases to cause the Company to enter into
A-12
<PAGE> 38
compensation arrangements which may result in some compensation being
nondeductible under Code Section 162(m).
BUCYRUS INTERNATIONAL, INC.
COMPENSATION COMMITTEE
C. Scott Bartlett, Jr.
F. John Stark, III (prior to March 11,
1996)
Russell W. Swansen (from March 11,
1996)
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
From July 25, 1995 to March 11, 1996, the Compensation Committee consisted
of Messrs. Bartlett and Stark. The Compensation Committee now consists of
Messrs. Bartlett and Swansen. Mr. Swansen is an Executive Officer of PPM
America, Inc., an affiliate of JNL, owner of approximately 40% of the
outstanding Shares. JNL is also a holder of approximately $63,963,000 face
amount of Secured Notes.
PERFORMANCE INFORMATION
The following graph compares the Company's cumulative total stockholder
return with the cumulative total return of the Standard & Poor's 500 Stock Index
and the Machinery (Diversified) Subgroup of the Standard & Poor's 500 Stock
Index. The graph assumes $100 was invested on December 31, 1994 and assumes the
reinvestment of dividends. The companies currently in the Machinery
(Diversified) Subgroup are Case Corp., Caterpillar, Inc., Cincinnati Milacron,
Cooper Industries, Deere & Co., Dover Corporation, Harnischfeger Industries,
Ingersoll-Rand, NACCO Industries and Timken Co. Data for only 1995 and 1996 is
presented since the Common Stock did not begin to publicly trade until December
22, 1994.
COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG BUCYRUS INTERNATIONAL, INC., STANDARD & POOR'S 500 STOCK INDEX
AND MACHINERY (DIVERSIFIED) SUBGROUP INDEX
LOGO
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
S&P 500 Stock Index......................................... $100 $137 $169
Machinery (Diversified) Subgroup Index...................... 100 124 154
Bucyrus International, Inc.................................. 100 116 125
</TABLE>
A-13
<PAGE> 39
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTIONS WITH MANAGEMENT
The Company entered into the Management Agreement with Miller Associates,
pursuant to which the Company engaged Miller Associates to provide certain
management services, including those of Mr. Miller as Interim President and
Chief Executive Officer and James D. Annand as Interim Chief Financial Officer.
Mr. Miller is the President of Miller Associates.
The Management Agreement provided that Messrs. Miller and Annand and
certain other employees of Miller Associates (the "Project Team") would provide
management services and expertise to the Company and manage the operations of
the Company commencing on August 2, 1995 until terminated by the Company as
described below. Pursuant to the Management Agreement, the Company agreed to pay
Miller Associates a monthly fee of $65,000 for each of August and September 1995
and $55,000 for each month thereafter until the Company hired a new chief
executive officer and such person commenced employment with the Company. The
Company also agreed to reimburse Miller Associates for all reasonable
out-of-pocket expenses incurred by Miller Associates in connection with the
Project Team's performance under the Management Agreement. The Management
Agreement further provided that neither Mr. Miller or Mr. Annand, nor any other
employee of Miller Associates, would be considered an employee of the Company
and that Miller Associates would be responsible for payment of compensation,
disability benefits and unemployment insurance, and for the payment and
withholding of payroll taxes. The Management Agreement was terminated with the
hiring of Mr. Hildebrand as President and Chief Executive Officer on March 11,
1996. As provided by the Management Agreement, following the termination
thereof, Mr. Annand remained as Interim Chief Financial Officer through August
1996. The total cost to the Company in 1996 for these services was approximately
$268,000.
EMPLOYMENT AGREEMENTS; CHANGE OF CONTROL
The Company has entered into employment agreements with all of the named
executive officers. These agreements govern the compensation, benefits and
treatment upon termination under various circumstances, including voluntary
termination by either party, or termination by reason of retirement, death or
disability, or in the event of a change of control, as those terms are defined
in the agreements. Each employment agreement automatically renews for a one year
term upon the expiration of its initial term and any subsequent terms, unless
two months' written notice is given by either party of intent to terminate at
the end of that term. Each employment agreement may be terminated by either the
Company or the executive at any time by giving notice as required under the
agreement; provided, however, that if the named executive officer is terminated
by the Company without cause at any time, or if the executive terminates his
employment with good reason in connection with a change in control, as those
terms are defined in the agreement, then the executive will be entitled to
certain severance benefits as described in that executive's individual
agreement. Finally, each agreement imposes confidentiality restrictions on the
executive and places restrictions on the executive's involvement in activities
that may compete with the Company both during employment and following
termination. Violation of such confidentiality and non-competition provisions,
or other termination for cause, as defined in the agreements, may result in
forfeiture of severance and other benefits that may otherwise accrue. Individual
compensation, benefits and other salient features of each agreement are
described below. The consummation of the Merger and the transactions
contemplated under the Merger Agreement constitute a change in control for
purposes of these agreements.
Mr. Hildebrand serves as President and Chief Executive Officer under a
three-year employment agreement with the Company, dated March 11, 1996. Mr.
Hildebrand's base salary is $400,000 per year, subject to increase at the
discretion of the Board, and he is eligible to participate in the Company's
Management Incentive Plan ("Bonus Plan"), which, in Mr. Hildebrand's case,
provides for an annual cash incentive bonus equal to 50% of base salary in the
event of achievement of targeted performance and a maximum of 100% of base
salary in the event of exceptional performance, as determined in accordance with
the Bonus Plan. In addition, Mr. Hildebrand was granted 300,000 Restricted
Shares and Options for 200,000 Shares exerciseable at 55% of the market price of
the Shares on the date of the grant. Mr. Hildebrand is
A-14
<PAGE> 40
entitled to participate in the Company's employee benefit plan for senior
executives and provided other fringe benefits, such as club membership, vacation
and the use of a Company car. Finally, Mr. Hildebrand's employment agreement
provided for one-time payments to compensate him for lost retirement benefits
and to reimburse him for costs associated with the relocation of his residence.
Mr. Smoke serves as Chief Financial Officer under a one-year employment
agreement with the Company, dated November 7, 1996. Mr. Smoke's base salary is
$175,000 per year, subject to increase at the discretion of the Board, and he is
eligible to participate in the Bonus Plan, which, in Mr. Smoke's case, provides
for an annual cash incentive bonus equal to 35% of base salary in the event of
achievement of targeted performance and a maximum of 70% of base salary in the
event of exceptional performance, as determined in accordance with the Bonus
Plan. In addition, Mr. Smoke was granted Options for 30,000 Shares, as well as
SARs to 50,000 Shares. Mr. Smoke is entitled to participate in the Company's
employee benefit plan for senior executives and provided other fringe benefits,
such as club membership, vacation and the use of a Company car. Finally, Mr.
Smoke's employment agreement provides for one-time payments to reimburse him for
costs associated with the relocation of his residence.
Messrs. Sullivan, Mackus, Phillips and Onsager each serve under similar
one-year employment agreements with the Company dated May 21, 1997. Each of
these agreements provides for the executive's position and base salary, which is
subject to merit increases in accordance with the Company's normal salary merit
increase review policy. In addition, the executive is entitled to participate in
such employee and fringe benefits plans as the Company provides to other
similarly situated management employees.
The Merger Agreement provides that all issued and outstanding Stock Options
and SARs will be cancelled upon the effective date of the Merger and, regardless
of whether such Stock Options or SARs have then vested in the holders thereof or
are exercisable, the holders will receive cash equal to the difference between
the Stock Option exercise price or SAR per Share base price, as the case may be,
and the Offer Price.
Consummation of the Offer and the Merger will constitute a change in
control under employment agreements with executive officers of the Company.
Under certain circumstances constituting an actual or constructive termination
of employment within 6 months before, or 24 months after, a change of control,
the Company is obligated to pay Mr. Hildebrand's base salary for the greater of
(i) the remainder of the employment term, or (ii) one (1) year. In addition, Mr.
Hildebrand is to receive the average of the bonus compensation paid to him in
the past two (2) years, or if bonus compensation has been paid for one (1) year
or less preceding the termination of employment, a fractional share of such
bonus. Under certain circumstances constituting an actual or constructive
termination of employment within 6 months after a change of control, the Company
is obligated to pay Mr. Smoke's base salary and insurance benefits for a period
of 18 months following the termination of employment. The agreements with each
of Messrs. Hildebrand and Smoke provide that if any compensation which would be
payable under the agreement contingent on a change in control would result in
the imposition of an excise tax on them pursuant to the Internal Revenue Code or
in the non-deductibility of such compensation by the Company for Federal income
tax purposes, then arrangements shall be made to pay them one dollar less than
the maximum which each of them would receive without becoming subject to the
excise tax or which the Company may pay without losing its deduction; provided,
however, such reduction will be made only if it results in them receiving a
greater net benefit than they would have received had a reduction not occurred
and an excise tax been paid.
FINANCIAL ADVISORY AGREEMENTS
The Company entered into a letter agreement (the "Letter Agreement") dated
March 7, 1997, with Jefferies pursuant to which Jefferies has acted as the
Company's exclusive financial advisor in connection with the acquisition of
certain assets and liabilities of The Marion Power Shovel Company, a subsidiary
of Global Industrial Technologies, Inc. ("Global"), and of certain subsidiaries
and divisions of Global that represent Global's surface mining equipment
business in Australia, Canada, and South Africa (the "Marion Acquisition"). The
Company agreed pursuant to the Letter Agreement to pay Jefferies a one-time
retainer fee of $100,000, and a fee of $150,000 for each fairness opinion that
Jefferies issues in connection with the Marion Acquisition. However, no fairness
opinions were issued in connection with the Marion Acquisition. The
A-15
<PAGE> 41
Company will, in addition, pay Jefferies a success fee of $250,000 and all
reasonable out-of-pocket expenses incurred by Jefferies in connection with the
Letter Agreement. The Letter Agreement also contains standard indemnification
provisions whereby the Company will indemnify and hold harmless Jefferies and
certain related parties from liabilities arising out of the Letter Agreement.
Consummation of the Marion Acquisition was expected to occur on or before August
26, 1997. Consummation of the Offer and the Merger are subject to successful
closing of the Marion Acquisition.
The Company has retained Jefferies to act as its exclusive financial
advisor with respect to the Merger pursuant to a letter agreement, dated July
30, 1997 (the "Jefferies Engagement Letter"), between Jefferies and the Company.
The Jefferies Engagement Letter provides for the payment to Jefferies by the
Company of a retainer advisory fee of $250,000 with respect to the Merger,
payable upon execution, and a "success fee" of $1,250,000 payable upon
successful consummation of the Merger and related transactions. The Company has
also agreed to reimburse Jefferies for Jefferies' out-of-pocket expenses,
including fees and expenses of Jefferies' legal counsel. In the event the
Company terminates Jefferies' services and completes a transaction similar to
the Merger within one year of such termination, the Company agrees to pay to
Jefferies the "success fee" referred to above upon consummation of the other
transaction. Under the Jefferies Engagement Letter, Jefferies has also been
retained to render its opinion as to the fairness of the Merger to the Company's
stockholders (the "Fairness Opinion"). Jefferies will receive $250,000 for
issuing the Fairness Opinion. In addition, the Company agreed to indemnify
Jefferies against certain liabilities, including liabilities arising under
federal securities laws. The Jefferies Engagement Letter is a separate and
distinct from the Letter Agreement.
Jefferies has provided financial advisory services to the Company and to
entities related to the Company and may in the future provide financial advisory
services to the Company or such other entities, for which it has received or
expects to receive customary fees. JNL has informed the Company that Jefferies
has advised JNL in connection with discussions that JNL has had from time to
time to dispose of all or a substantial portion of its equity interest in the
Company.
SENIOR NOTES OFFERING
In connection with the Marion Acquisition and the Merger, the Company is
preparing to issue $150 million Senior Notes due 2007 (the "Senior Notes") in a
private placement transaction (the "Senior Notes Offering") pursuant to Rule
144A under the Securities Act of 1933, as amended (the "Securities Act"). The
Company presently expects the Senior Notes Offering to commence on August 29,
1997.
THE SENIOR NOTES DESCRIBED IN THIS SCHEDULE WILL NOT BE REGISTERED UNDER
THE SECURITIES ACT, OR ANY STATE SECURITIES LAWS, AND, UNLESS SO REGISTERED, MAY
NOT BE OFFERED OR SOLD IN THE UNITED STATES EXCEPT PURSUANT TO AN EXEMPTION
FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS. THIS SCHEDULE 14F-1,
AND ANY REFERENCE TO THE SENIOR NOTES HEREIN, SHALL NOT CONSTITUTE AN OFFER TO
SELL OR THE SOLICITATION OF AN OFFER TO BUY, NOR SHALL THERE BE ANY SALE OF THE
SENIOR NOTES IN ANY STATE OR JURISDICTION WHERE SUCH OFFER, SOLICITATION OR SALE
WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES
LAWS OF ANY SUCH STATE OR JURISDICTION.
Promptly following consummation of the Marion Acquisition, the Company
expects to file with the Commission a Current Report on Form 8-K (the "Marion
Acquisition Form 8-K") that will provide certain information concerning the
Company and its business that has not otherwise been made public and that will
be provided to potential purchasers of the Senior Notes in connection with their
consideration of an investment in the Senior Notes. Such information may also be
material to a decision by a stockholder of the Company to tender, withdraw, sell
on the open market or hold Shares held by such stockholder.
The net proceeds to the Company from the Senior Notes Offering are
estimated to be approximately $145.5 million. Together with borrowings under the
Company's Revolving Credit Facility with its bank and available cash, the
proceeds of the Senior Notes Offering are expected to be used (i) to refinance
the Bridge Loan (as hereinafter defined); (ii) to pay fees and expenses incurred
in connection with the Senior Notes Offering; (iii) to refinance the Secured
Notes plus accrued interest from June 30, 1997, to the date of redemption; and
(iv) to fund, in part, the purchase of Shares in the Offer in the event that at
least 90% of the
A-16
<PAGE> 42
outstanding Shares are tendered in the Offer and not withdrawn and the Merger
becomes effective without a meeting of stockholders of the Company in accordance
with the DGCL. In the event that fewer than 90% percent of the outstanding
Shares are tendered in the Offer and not withdrawn, AIP Capital Fund, or an
affiliate, will loan the Purchaser an amount that, together with the AIP
Entities' equity contribution of $143 million, will be sufficient to complete
the acquisition of Shares in the Offer and Merger, such loan to be repaid upon
consummation of the Merger with a portion of the proceeds of the Senior Notes
Offering. Upon consummation of the Senior Notes Offering, the portion of the
proceeds being used to refinance the Secured Notes will be applied to such
purpose following satisfaction or waiver of certain notice and other procedural
requirements applicable to redemption of the Secured Notes. As of August 21,
1997, approximately $64.0 million of the Secured Notes (approximately 97%) were
held by JNL. Consummation of the Offer and the Merger are subject to successful
consummation of the Senior Notes Offering and consummation of the Senior Notes
Offering is subject to consummation of the Offer to Purchase.
BRIDGE LOAN
The Company financed the Marion Acquisition utilizing an unsecured bridge
loan (the "Bridge Loan") funded on August 26, 1997 and provided by PPM America
Special Investments Fund, L.P. (the "PPM Fund"), an affiliate of JNL, in the
approximate amount of $45 million. A portion of the proceeds of the Senior Notes
Offering are intended to be used to refinance the Bridge Loan.
The Company obtained a commitment dated April 14, 1997 from the PPM Fund to
provide the Bridge Loan ("Bridge Loan Commitment"). Upon execution of the Bridge
Loan Commitment, the Company paid a $550,000 Proposal and Commitment Fee to the
PPM Fund. The Bridge Loan Commitment provides for a fee of $450,000 (the
"Facility Fee") to be paid upon execution of the definitive purchase agreement
for the Marion Acquisition. The Bridge Loan Commitment provided for a closing
date of the Marion Acquisition of not later than July 15, 1997. On June 30,
1997, the Company and the PPM Fund agreed to extend the deadline for the closing
date until August 30, 1997 (the "Extension Agreement"). As a condition to the
Extension Agreement, however, the PPM Fund required the Company to pay a
$337,500 Extension Fee and to pay the $450,000 Facility Fee at the time the
Extension Agreement was signed.
The Bridge Loan matures on February 23, 1998 (180 days from funding) and
bears interest at 5% over the Adjusted Eurodollar Rate, as defined in the Bridge
Loan.
The Bridge Loan Commitment was amended as of August 20, 1997 to provide
that upon consummation of the Marion Acquisition and the funding of the Bridge
Loan, the Company would pay an $800,000 Financing Fee to the PPM Fund and a
Bridge Loan Funding Fee of $1.125 million, and additional compensation under the
Bridge Loan as follows: (i) if the Bridge loan is outstanding 30 days after
funding, the Company will pay a "Maintenance Fee" of $800,000; (ii) if the
Bridge Loan is outstanding 90 days after funding, the Company will pay
$3,200,000; and (iii) if the Bridge Loan is outstanding at Maturity, the Company
will pay $3,200,000. The Company presently anticipates that the Senior Notes
Offering will be completed on or prior to September 25, 1997, and, accordingly,
that none of the Maintenance or other fees described in this paragraph will be
payable.
REGISTRATION RIGHTS AGREEMENT
Pursuant to the terms of the Second Amended Joint Plan of Reorganization
(the "Amended Plan"), under which the Company emerged from Bankruptcy on
December 14, 1994, the Company entered into a Registration Rights Agreement (the
"Registration Rights Agreement") which grants rights to each person entitled to
receive in the aggregate 1,000,000 or more shares of Common Stock (a "Relevant
Holder") pursuant to the provisions of the Amended Plan. To the knowledge of the
Company, JNL is the only person or entity entitled to the benefits of the
Registration Rights Agreement. Pursuant to the Registration Rights Agreement, a
Relevant Holder has the right to (a) require the Company under certain
circumstances to file a registration statement under the Securities Act, to
permit a public offering of Common Stock owned by such Relevant Holders; and (b)
participate in certain other registrations of Common Stock under the Securities
Act made on behalf of the Company for other holders of Common Stock. Under the
terms of the Registration
A-17
<PAGE> 43
Rights Agreement, Relevant Holders holding 15% or more of the shares of Common
Stock then entitled to the benefits of such agreement may request the Company to
file one or more registration statements under the Securities Act with respect
to their shares of Common Stock, and the Company is required to use its best
efforts to effect such registration provided that the Company generally will not
be required to effect more than three such registrations. Relevant Holders also
may participate in offerings proposed by the Company. These rights are subject
to certain conditions and limitations, among them the right of the Company to
postpone for a reasonable period of time (but not exceeding 120 days) the
requested filing of a registration statement if the Company determines such
registration would interfere with a material corporate transaction, development
or other specified matters. Pursuant to the terms of the Registration Rights
Agreement, the Company must pay all expenses, other than fees and commissions of
underwriters, incident to the registration and sale of shares of Common Stock
held by Relevant Holders. The registration rights, if not fully exercised,
terminate on December 14, 1999.
OWNERSHIP OF SECURED NOTES
On December 14, 1994, pursuant to the Amended Plan, the Company issued an
aggregate principal amount of $52.1 million of 10.5% Secured Notes due December
14, 1999 (the "Secured Notes") to South Street Corporate Recovery Fund I, L.P.,
South Street Leveraged Corporate Recovery Fund, L.P., and South Street Corporate
Recovery Fund I (International), L.P. (collectively, the "South Street Funds")
in exchange for the Company's outstanding Series A 10.65% Senior Secured Notes
due July 1, 1995 and Series B 16.5% Senior Secured Notes due January 1, 1996 and
the Company's obligations under a sale and leaseback financing arrangement. In
1996, the South Street Funds (other than South Street Corporate Recovery Fund I
(International), L.P.) sold approximately $56 million face amount (97%) of the
Secured Notes to JNL.
The Secured Notes accrue interest semi-annually at a rate of 10.5% per
annum, if paid in cash, or 13.0% per annum if paid in kind. Interest on the
Secured Notes is payable in kind at the discretion of the Company. At June 30,
1997, JNL held approximately $64.0 million of the Secured Notes, or
approximately 97% of the $65.8 million of Secured Notes outstanding. The Secured
Notes are secured by a security interest on substantially all of the Company's
property (other than land and buildings), the Shares of the Company's United
States subsidiaries and 65% of the Shares of certain non-United States
subsidiaries, subject, however, to a prior security interest in such assets
securing not more than $16.0 million of indebtedness.
STOCKHOLDER AGREEMENT
In connection with the execution of the Merger Agreement, the Parent, the
Purchaser and JNL entered into a Stockholder Agreement, dated as of August 21,
1997, (the "Stockholder Agreement"), pursuant to which and subject to the terms
thereof, JNL agreed to tender, or cause to be tendered, all shares of the Common
Stock of the Company owned by it into the Offer. In the Stockholder Agreement,
JNL represented that it owns, in the aggregate, 4,228,382 Shares and $63,963,000
in principal amount of Secured Notes. JNL has agreed to tender all Shares owned
by it into the Offer and that it will not withdraw any Shares so tendered.
Pursuant to the Stockholder Agreement, JNL has granted to the Parent during
the term of the Merger Agreement an irrevocable proxy to vote its Shares, or
grant a consent or approval in respect of such Shares, in connection with any
meeting of the stockholders of the Company (i) in favor of the Merger and (ii)
against any action or agreement which would impede, interfere with or prevent
the Merger, including any other extraordinary corporate transaction such as a
merger, reorganization or liquidation involving the Company and a third party or
any other proposal by a third party to acquire the Company.
During the term of the Stockholder Agreement, JNL has agreed that it will
not (subject to certain exceptions) take certain actions with respect to JNL's
Shares or Secured Notes that would in any way restrict, limit or interfere with
the performance of its obligations pursuant to the Stockholder Agreement. In
addition, JNL has agreed to notify the Purchaser of any inquiry JNL receives
which might lead to an acquisition of the Company by a third party; and JNL will
waive, if requested, the provisions of the Indenture relating to the prior
notice of redemption of the Secured Notes, or will agree, immediately following
consummation of the Senior Notes Offering (as hereinafter defined) and subject
to being indemnified by the Parent and Purchaser,
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<PAGE> 44
to sell JNL's Secured Notes to the Company at face value plus accrued interest
from June 30, 1997 through the date of purchase.
The Stockholder Agreement terminates upon the earlier of (i) nine months
following the date upon which the Merger Agreement is terminated in accordance
with its terms, or (ii) the date that the Purchaser pays for JNL's Shares,
provided that certain provisions specified in the Stockholder Agreement will
survive such termination. Neither party has any other unilateral right to
terminate the Stockholder Agreement.
In the Stockholder Agreement, JNL grants to the Parent an irrevocable
option (the "Purchase Option") to purchase the Shares at a purchase price per
share of $18.00 per Share, or such higher price as is paid in the Offer (the
"Exercise Price"). At any time or from time to time prior to the termination of
the Purchase Option, the Parent (or its designee) may exercise the Purchase
Option, in whole or in part, if on or after the date thereof, any Third Party
(as defined therein) shall have taken certain defined steps that could lead to
acquisition of or exercise of control over the Company.
If, following exercise of the Purchase Option, a person other than the
Parent or any of its affiliates acquires a majority of the Shares at a price
higher than the Exercise Price (an "Alternative Transaction"), then JNL will be
entitled to receive 50% of the Total Profit (as defined) that would be realized
by the Parent through participation in the Alternative Transaction.
JOINT PROSECUTION AGREEMENT
Contemporaneously with the execution of the Stockholder Agreement, the
Company and JNL entered into the Joint Prosecution Agreement (the "Joint
Prosecution Agreement") relating to various claims the Company and JNL have or
may have resulting from the Company's reorganization in 1994 under Chapter 11 of
the United States Bankruptcy Code (the "Chapter 11 Reorganization") against the
law firm of Milbank, Tweed, Hadley & McCloy ("Milbank") for disgorgement of fees
(the "Disgorgement Claim") and other claims (collectively, the "Milbank
Claims"). All proceeds of the Milbank Claims will be allocated as follows: (i)
first, to pay, or to reimburse the prior payment of, all bona fide third-party
costs, expenses and liabilities incurred on or after September 1, 1997 in
connection with prosecuting the Milbank Claims (the "Joint Prosecution")
including, without limitation, the reasonable fees and disbursements of counsel
and other professional advisors, which are to be advanced by JNL; (ii) the next
$8.675 million of proceeds from the Milbank Claims, if any, will be paid to JNL,
provided that the Company will retain ten percent of the proceeds of the
Disgorgement Claim, if any, and will direct payment to JNL of the balance of
such proceeds; and (iii) all additional proceeds of the Milbank Claims will be
divided equally between JNL and the Company. Notwithstanding the foregoing, the
Company shall also receive the benefit of any reduction of any obligation it may
have to pay Milbank's outstanding fees if any. JNL will indemnify the Company in
respect of any liability resulting from the Joint Prosecution other than in
respect of legal fees and expenses incurred prior to September 1, 1997. The
Joint Prosecution Agreement will continue in force irrespective of whether the
Merger is consummated. The Joint Prosecution may involve lengthy and complex
litigation and there can be no assurance whether or when any recovery may be
obtained or, if obtained, whether it will be in an amount sufficient to result
in the Company receiving any portion thereof under the formula described above.
SETTLEMENT AGREEMENT
During the pendency of the Chapter 11 Reorganization, JNL filed a claim
(the "503(b) Claim") against the Company with the United States Bankruptcy
Court, Eastern District of Wisconsin ("Bankruptcy Court") for reimbursement of
approximately $3.3 million of professional fees and disbursements incurred in
connection with the Chapter 11 Reorganization pursuant to Section 503(b) of the
Bankruptcy Code. By order dated June 3, 1996, the Bankruptcy Court awarded JNL
the sum of $500. JNL appealed the decision to the United States District Court
for the Eastern District of Wisconsin. On June 26, 1997, the District Court
denied the appeal as moot but returned the matter to the Bankruptcy Court for
further proceedings with leave to appeal again after further determination of
the Bankruptcy Court. On July 11, 1997, JNL moved the Bankruptcy Court for
relief from the final judgment entered on the 503(b) Claim. Pursuant to a
Settlement Agreement between the Company and JNL dated as of August 21, 1997,
subject to Bankruptcy Court approval, JNL will
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<PAGE> 45
settle and release the Company from the 503(b) Claim in consideration of the
payment to JNL by the Company of $200,000.
TRANSACTIONS WITH THE AIP ENTITIES FOLLOWING CONSUMMATION OF THE MERGER
At the close of the Merger, AIP Capital Fund will be paid a fee of $4
million and reimbursed for out-of-pocket expenses in connection with the
negotiation of the Merger Agreement and for providing certain investment banking
services to the Company including the arrangement and negotiation of the terms
of the Senior Notes and for other financial advisory and management consulting
services.
AIP Capital Fund expects to provide substantial ongoing financial and
management services to the Company utilizing the extensive operating and
financial experience of AIP Capital Fund's principals. AIP Capital Fund will
receive an annual fee of $1 million for providing general management, financial
and other corporate advisory services to the Company, payable semiannually 45
days after the scheduled interest payment date for the Senior Notes, and will be
reimbursed for out-of-pocket expenses. The fees will be paid to AIP Capital Fund
pursuant to a management services agreement among AIP Capital Fund, the Company
and certain Company affiliates and will be subordinated in right of payment to
the Senior Notes.
AIP Capital Fund has discussed with the Company in broad terms AIP Capital
Fund's general policy that stock in the companies acquired by the AIP Entities,
or their affiliates, be made available to executive officers of such acquired
companies, typically in the form of stock options. However, there is currently
no agreement, arrangement or understanding specifically implementing this policy
in respect of the Company or management, nor is there expected to be any such
agreement, arrangement or understanding until following consummation of the
Merger. Following consummation of the Merger, AIP Capital Fund expects to cause
the Surviving Corporation to issue and sell additional Shares to certain members
of management and to adopt a performance-based stock option plan for management
which, in the aggregate, would comprise approximately 10% of the common stock of
the Surviving Corporation.
SECTION 16 BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than 10% of a
registered class of the Company's equity securities, to file with the Securities
and Exchange Commission ("SEC") and with The Nasdaq Stock Market reports of
ownership and changes in ownership of common stock and other equity securities
of the Company. Directors, executive officers and greater than 10% stockholders
are required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file.
Based solely on review of such reports furnished to the Company or written
representations that no other reports were required, the Company believes that,
during the 1996 fiscal year, all filing requirements applicable to its
directors, executive officers and greater than 10% beneficial owners were
complied with except two reports on Form 5, each covering one transaction, which
were filed late by Mr. Victor and Mr. Radecki, each a director of the Company.
In addition, the following individuals and entities failed to file a required
Form 3 to report their acquisition of securities arising out of the distribution
to them of Common Stock under the Amended Plan in December, 1994: Greycliff
Partners; Alfred C. Eckert, III; Mikael Salovaara; South Street Corporate
Recovery Fund I, L.P.; South Street Corporate Recovery Fund I (International),
L.P.; South Street Leveraged Corporate Recover Fund I, L.P.; SSP Advisers, L.P.;
SSP, Inc.; SSP International, Inc.; SSP International Partners, L.P., and SSP
Partners, L.P. These failures to file have been corrected by the filing of Form
5's by each of the above-named persons and entities in October, 1996.
Form 5 is not required to be filed if there are no previously unreported
transactions or holdings to report. Nevertheless, the Company is required to
disclose the names of directors, executive officers and greater than 10%
beneficial owners who did not file a Form 5, unless the Company has obtained a
written statement that no filing is required. At the date hereof, the Company
has received such written statements from all reporting persons who did not file
a Form 5.
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<PAGE> 46
ANNEX A
PARENT DESIGNEES
The Parent has informed the Company that it will choose the initial Parent
Designees from among the persons listed below, which information has been
provided to the Company by the Parent.
<TABLE>
<CAPTION>
NAME AGE PRINCIPAL OCCUPATION AND DIRECTORSHIPS
---- --- --------------------------------------
<S> <C> <C>
W. Richard Bingham................... 62 Mr. Bingham is a Director, the President, Treasurer, and
Assistant Secretary of American Industrial Partners
Corporation. He co-founded AIP Management Co. and has
been a director and officer of AIP Management Co. since
1989. Mr. Bingham is also a director of Sweetheart
Holdings, Inc. ("Sweetheart"), Day International Group,
Inc. and Easco Corporation ("Easco"). He formerly served
on the boards of Avis, Inc., ITT Life Insurance
Corporation and Valero Energy Corporation.
Kenneth J. Diekroeger................ 35 Mr. Diekroeger joined the San Francisco office of
American Industrial Partners in 1996 from The Shansby
Group, a private equity investment firm, where he had
been employed since before January 1, 1992, and where he
sourced, executed, and served as a director for several
middle-market investments and buyouts.
Robert J. Klein...................... 33 Mr. Klein has been an employee of American Industrial
Partners since 1992. From 1991 to 1992, he was an
associate at The First Boston Corporation and prior
thereto was an associate with Rosecliff, Inc., an
affiliate of Acadia Partners, L.P. Mr. Klein is a
director of Easco, RBX Corporation and SMI Holdings,
Inc.
Kim A. Marvin........................ 36 Mr. Marvin is a Director, the Secretary and a Vice
President of both Bucyrus Acquisition Corp. and American
Industrial Partners Acquisition Company, LLC. Mr. Marvin
joined the San Francisco office of American Industrial
Partners in 1997 from the Mergers & Acquisitions
Department of Goldman, Sachs & Co. where he was employed
since 1994.
Kenneth A. Pereira................... 36 Mr. Pereira is a Director and a Vice President of both
Bucyrus Acquisition Corp. and American Industrial
Partners Company, LLC. Mr. Pereira joined the San
Francisco office of American Industrial Partners in 1989
and specializes in the tax and accounting aspects of
acquisitions. He also serves as the Controller of
American Industrial Partners Corporation.
Robert L. Purdum..................... 62 Mr. Purdum is a Director and a Managing Director of
American Industrial Partners Corporation. The Parent
anticipates that Mr. Purdum will become the Chairman of
the Bucyrus Board following the Merger. Mr. Purdum
retired as Chairman of Armco Inc. ("Armco") in 1994.
From November 1990 to 1993, Mr. Purdum was Chairman and
Chief Executive Officer of Armco. Mr. Purdum has been a
director of AIP Management Co. since joining American
Industrial Partners in 1994. Mr. Purdum is also a
director of Holephane Corporation, Berlitz
International, Inc., AIP Management Co., Day
International Group, Inc. and GMI Engineering &
Management Institute, Inc.
</TABLE>
AA-1
<PAGE> 47
<TABLE>
<CAPTION>
NAME AGE PRINCIPAL OCCUPATION AND DIRECTORSHIPS
---- --- --------------------------------------
<S> <C> <C>
Theodore C. Rogers................... 63 Mr. Rogers is a Director, the Chairman of the Board and
the Secretary of American Industrial Partners
Corporation. He co-founded AIP Management Co. and has
been a director and officer of the firm since 1989. He
is currently a director of Easco, Sweetheart and Derby
International.
Lawrence W. Ward, Jr................. 45 Mr. Ward is a Director and the President of both Bucyrus
Acquisition Corp. and American Industrial Partners
Acquisition Company, LLC. Mr. Ward has been an employee
of American Industrial Partners, since 1992. From 1989
to 1992, he was Vice President and Chief Financial
Officer of Plantronics, Inc., a telecommunications
equipment company. Mr. Ward is currently a director of
Easco, Day International Group, Inc. and RBX
Corporation.
</TABLE>
AA-2
<PAGE> 1
EXHIBIT 1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
AMERICAN INDUSTRIAL PARTNERS
ACQUISITION COMPANY, LLC
BUCYRUS ACQUISITION CORP.
AND
BUCYRUS INTERNATIONAL, INC.
DATED AS OF
AUGUST 21, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I
THE OFFER AND MERGER........................................ 1
Section 1.1 The Offer................................................... 1
Section 1.2 Company Actions............................................. 3
Section 1.3 Directors................................................... 4
Section 1.4 The Merger.................................................. 4
Section 1.5 Effective Time.............................................. 4
Section 1.6 Closing..................................................... 5
Section 1.7 Directors and Officers of the Surviving Corporation......... 5
Section 1.8 Effect of the Merger........................................ 5
Section 1.9 Subsequent Actions.......................................... 5
Section 1.10 Certificate of Incorporation; By-Laws....................... 5
Section 1.11 Stockholders' Meeting....................................... 5
Section 1.12 Merger Without Meeting of Stockholders...................... 6
ARTICLE II
CONVERSION OF SECURITIES.................................... 6
Section 2.1 Conversion of Securities.................................... 6
Section 2.2 Dissenting Shares........................................... 6
Section 2.3 Surrender of Shares; Stock Transfer Books................... 7
Section 2.4 Stock Plans................................................. 8
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY............... 8
Section 3.1 Organization................................................ 8
Section 3.2 Capitalization.............................................. 9
Section 3.3 Authorization; Validity of Agreement; Company Action........ 10
Section 3.4 Consents and Approvals; No Violations....................... 10
Section 3.5 SEC Reports and Financial Statements........................ 10
Section 3.6 Absence of Certain Changes.................................. 11
Section 3.7 No Undisclosed Liabilities.................................. 11
Section 3.8 Litigation.................................................. 11
Section 3.9 Employee Benefits; ERISA.................................... 11
Section 3.10 Taxes....................................................... 14
Section 3.11 Contracts................................................... 16
Section 3.12 Real Property............................................... 16
Section 3.13 Intellectual Property....................................... 17
Section 3.14 Labor Matters............................................... 17
Section 3.15 Compliance with Laws........................................ 18
Section 3.16 Environmental Matters....................................... 18
Section 3.17 Product Liability........................................... 19
Section 3.18 Information in Disclosure Documents......................... 20
Section 3.19 Information in Proxy Statement.............................. 20
Section 3.20 Potential Conflict of Interest.............................. 20
Section 3.21 Opinion of Financial Advisor................................ 20
Section 3.22 Insurance................................................... 20
Section 3.23 Suppliers and Customers..................................... 21
Section 3.24 Accounts Receivable; Inventory.............................. 21
Section 3.25 Title and Condition of Properties........................... 21
Section 3.26 Marion Acquisition.......................................... 21
Section 3.27 Full Disclosure............................................. 21
</TABLE>
1
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<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND THE
PURCHASER................................................... 22
Section 4.1 Organization................................................ 22
Section 4.2 Authorization; Validity of Agreement; Necessary Action...... 22
Section 4.3 Consents and Approvals; No Violations....................... 22
Section 4.4 Information in Proxy Statement.............................. 22
Section 4.5 Financing................................................... 22
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER...................... 23
Section 5.1 Acquisition Proposals....................................... 23
Section 5.2 Interim Operations of the Company........................... 23
Section 5.3 No Solicitation............................................. 25
ARTICLE VI
ADDITIONAL AGREEMENTS....................................... 26
Section 6.1 Proxy Statement............................................. 26
Section 6.2 Meeting of Stockholders of the Company...................... 26
Section 6.3 Additional Agreements....................................... 26
Section 6.4 Notification of Certain Matters............................. 26
Section 6.5 Access; Confidentiality..................................... 27
Section 6.6 Consents and Approvals...................................... 27
Section 6.7 Company's Brokers or Finders................................ 27
Section 6.8 Purchaser's Brokers or Finders.............................. 28
Section 6.9 Publicity................................................... 28
Section 6.10 Directors' and Officers' Insurance and Indemnification...... 28
Section 6.11 Purchaser Compliance........................................ 29
Section 6.12 Reasonable Best Efforts..................................... 29
Section 6.13 Rights Plan................................................. 29
ARTICLE VII
CONDITIONS.................................................. 30
Conditions to Each Party's Obligation to Effect the
Section 7.1 Merger...................................................... 30
ARTICLE VIII
TERMINATION................................................. 30
Section 8.1 Termination................................................. 30
Section 8.2 Effect of Termination....................................... 31
ARTICLE IX
MISCELLANEOUS............................................... 32
Section 9.1 Amendment and Modification.................................. 32
Section 9.2 Non-survival of Representations and Warranties.............. 32
Section 9.3 Expenses.................................................... 32
Section 9.4 Notices..................................................... 32
Section 9.5 Interpretation.............................................. 33
Section 9.6 Counterparts................................................ 33
Section 9.7 Entire Agreement; No Third Party Beneficiaries.............. 33
Section 9.8 Severability................................................ 33
Section 9.9 Governing Law............................................... 33
Section 9.10 Assignment.................................................. 33
</TABLE>
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<PAGE> 4
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
DEFINED TERM SECTION NO.
------------ -----------
<S> <C>
</TABLE>
Appointment Date............................................ 5.2
Average Premium............................................. 6.9(b)
Board of Directors.......................................... Recitals
Certificates................................................ 2.3(b)
Closing..................................................... 1.6
Closing Date................................................ 1.6
Commitment Letters.......................................... 4.5
Common Stock................................................ 3.2(a)
Company..................................................... Recitals
Company Agreements.......................................... 3.4
Company Balance Sheet....................................... 3.24
Company Disclosure Schedule................................. 3.1(a)
Company Material Adverse Effect............................. 3.1(a)
Company SEC Documents....................................... 3.5
Computer Software........................................... 3.13(a)
Confidentiality Agreement................................... 5.3(b)
D&O Insurance............................................... 6.9(b)
Debt Financing.............................................. 4.5
Disclosure Documents........................................ 3.18
Dissenting Shares........................................... 2.2(a)
Effective Time.............................................. 1.5
Encumbrances................................................ 3.2(b)
Environmental Claim......................................... 3.16(c)
Environmental Laws.......................................... 3.16(a)
Equity Commitments.......................................... 4.5
ERISA Affiliate............................................. 3.9(a)
ERISA Plans................................................. 3.9(a)
Exchange Act................................................ 1.1(a)
Exchange Agent.............................................. 2.3(a)
Financial Statements........................................ 3.5
Foreign Plans............................................... 3.9(a)
GAAP........................................................ 3.5
Governmental Entity......................................... 3.4
HSR Act..................................................... 3.4
Indebtedness................................................ 3.2(c)
Indemnified Party........................................... 6.9(a)
Independent Directors....................................... 1.3(c)
Intellectual Property....................................... 3.13(d)
JNL Option.................................................. Recitals
Major Stockholders.......................................... Recitals
Marion Acquisition.......................................... 3.26
Marion Agreement............................................ 3.26
Marion Parent............................................... 3.26
Marion Sellers.............................................. 3.26
Materials of Environmental Concern.......................... 3.16(a)
Merger...................................................... 1.4
Merger Consideration........................................ 2.1(a)
Minimum Condition........................................... 1.1(a)
Notes....................................................... 4.5
Offer....................................................... Recitals
3
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<TABLE>
<CAPTION>
DEFINED TERM SECTION NO.
------------ -----------
<S> <C>
Offer Documents............................................. 1.1(b)
Offer Price................................................. Recitals
Offer to Purchase........................................... 1.1(a)
Options..................................................... 2.4(a)
Parent...................................................... Recitals
PBGC........................................................ 3.9(c)
Person...................................................... 9.5
Plans....................................................... 3.9(a)
Proxy Statement............................................. 1.11(a)(ii)
Purchaser................................................... Recitals
Real Property............................................... 3.12
SARs........................................................ 2.4(a)
Schedule 14D-9.............................................. 1.2(b)
Schedule 14D-l.............................................. 1.1(b)
SEC......................................................... 1.1(b)
Secured Notes............................................... 6.12(d)
Secured Notes Indenture..................................... 6.12(d)
Secured Notes Indenture Trustee............................. 6.12(d)
Securities Act.............................................. 3.5
Shares...................................................... Recitals
SPD......................................................... 3.9(b)(iv)
Special Meeting............................................. 1.11(a)(i)
Stock Plans................................................. 2.4(a)
Stockholder Agreement....................................... Recitals
Subsequent Disposition...................................... 6.13
Subsidiary.................................................. 3.1(a)
Superior Proposal........................................... 5.3(b)
Surviving Corporation....................................... 1.4
Takeover Proposal........................................... 5.1
Takeover Proposal Interest.................................. 5.1
Tax Return.................................................. 3.10(d)
Taxes....................................................... 3.10(d)
Termination Fee............................................. 8.2(b)
Transactions................................................ 1.2(a)
Treasury Regulations........................................ 3.10(b)
WARN Act.................................................... 3.14(b)
</TABLE>
4
<PAGE> 6
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (hereinafter referred to as this "Agreement"),
dated as of August 21, 1997, by and among American Industrial Partners
Acquisition Company, LLC, a Delaware limited liability company ("Parent"),
Bucyrus Acquisition Corp., a Delaware corporation and a wholly owned subsidiary
of Parent (the "Purchaser"), and Bucyrus International, Inc., a Delaware
corporation (the "Company").
WHEREAS, the Board of Directors of each of Parent, the Purchaser and the
Company has approved, and deems it advisable and in the best interests of its
respective shareholders to consummate, the acquisition of the Company by Parent
upon the terms and subject to the conditions set forth herein; and
WHEREAS, in furtherance thereof, it is proposed that the Purchaser will
make a cash tender offer (the "Offer") to acquire any and all shares (the
"Shares") of the issued and outstanding common stock, $.01 par value, of the
Company for $18 per share, net to the seller in cash (such price, or any such
higher price per Share as may be paid in the Offer, being referred to herein as
the "Offer Price"); and
WHEREAS, also in furtherance of such acquisition, the Boards of Directors
of the Company, Parent and the Purchaser have each approved the Merger (as
defined hereinafter) following the Offer in accordance with the General
Corporation Law of the State of Delaware ("Delaware Law") and upon the terms and
subject to the conditions set forth herein; and
WHEREAS, the Board of Directors of the Company (the "Board of Directors")
has determined that the consideration to be paid for each Share in the Offer and
the Merger is fair to the holders of such Shares and has resolved to recommend
that the holders of such Shares accept the Offer and approve this Agreement and
each of the transactions contemplated hereby upon the terms and subject to the
conditions set forth herein; and
WHEREAS, as a condition and inducement to Parent's and the Purchaser's
entering into this Agreement and incurring the obligations set forth herein,
Jackson National Life Insurance Company, a Michigan corporation the
"Stockholder"), which together with PPM America, Inc., a Delaware corporation
shares voting power and dispositive power with respect to 4,228,382 Shares,
concurrently herewith is entering into a Stockholder Agreement (the "Stockholder
Agreement"), dated as of the date hereof, with Parent and Purchaser, in the form
attached hereto as Exhibit A, pursuant to which the Major Stockholder has
agreed, among other things, to tender the Shares held by it in the Offer, and to
grant Parent a proxy with respect to the voting of such Shares in favor of the
Merger and to grant Parent an option (the "JNL Option") with respect to such
Shares upon the terms and subject to the conditions set forth therein; and
WHEREAS, the Company, Parent and the Purchaser desire to make certain
representations, warranties, covenants and agreements in connection with the
Offer and Merger.
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements set forth herein, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
THE OFFER AND MERGER
Section 1.1 The Offer.
(a) Provided that this Agreement shall not have been terminated in
accordance with Section 8.1 hereof and none of the events set forth in Annex I
shall have occurred and be existing, as promptly as practicable (but in no event
later than five business days after the public announcement of the execution of
this Agreement), the Purchaser shall commence (within the meaning of Rule 14d-2
under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) the
Offer at the Offer Price, subject to there being validly tendered and not
withdrawn prior to the expiration of the Offer, that number of Shares which
represents at least 51% of the Shares then outstanding on a fully diluted basis
(after giving effect to the
<PAGE> 7
conversion or exercise of all outstanding options, warrants and other rights and
securities exercisable or convertible into Shares) the "Minimum Condition" and
to the other conditions set forth in Annex I hereto, and shall consummate the
Offer in accordance with its terms. The obligations of the Purchaser to accept
for payment and to pay for any Shares validly tendered on or prior to the
expiration of the Offer and not withdrawn shall be subject only to the Minimum
Condition and the other conditions set forth in Annex I hereto. The Offer shall
be made by means of an offer to purchase (the "Offer to Purchase") containing
the terms set forth in this Agreement, the Minimum Condition and the other
conditions set forth in Annex I hereto. The Purchaser shall not amend or waive
the Minimum Condition and shall not decrease the Offer Price or decrease the
number of Shares sought, or amend any other condition of the Offer in any manner
adverse to the holders of the Shares without the written consent of the Company;
provided, however, that if on the initial scheduled expiration date of the
Offer, which shall be twenty (20) business days after the date the Offer is
commenced, all conditions to the Offer shall not have been satisfied or waived,
the Purchaser may, from time to time, in its sole discretion, extend the
expiration date. The Purchaser shall, on the terms and subject to the prior
satisfaction or waiver of the conditions of the Offer, accept for payment and
pay for Shares tendered as soon as it is legally permitted to do so under
applicable law; provided, however, that if, immediately prior to the initial
expiration date of the Offer (as it may be extended), the Shares tendered and
not withdrawn pursuant to the Offer equal less than 90% of the outstanding
Shares, the Purchaser may extend the Offer for a period not to exceed ten (10)
business days, notwithstanding that all conditions to the Offer are satisfied as
of such expiration date of the Offer.
(b) As soon as practicable on the date the Offer is commenced, Parent and
the Purchaser shall file with the United States Securities and Exchange
Commission (the "SEC") a Tender Offer Statement on Schedule 14D-1 with respect
to the Offer (together with all amendments and supplements thereto and including
the exhibits thereto, the "Schedule 14D-1"). The Schedule 14D-1 will include, as
exhibits, the Offer to Purchase and a form of letter of transmittal and summary
advertisement (which documents, together with any amendments and supplements
thereto, and any other SEC schedule or form which is filed in connection with
the Offer and related transactions, are referred to collectively herein as the
"Offer Documents"). The Offer Documents will comply in all material respects
with the provisions of applicable federal securities laws and Section 552.07 of
the Wisconsin Statutes, if applicable, and, on the date filed with the SEC and
on the date first published, mailed or given to the Company's stockholders,
shall not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading, except that no representation is made by the Parent or Purchaser
with respect to information furnished by the Company to the Parent or Purchaser,
in writing, expressly for inclusion in the Offer Documents. The information
supplied by the Company to the Parent or Purchaser, in writing, expressly for
inclusion in the Offer Documents and by the Parent or Purchaser to the Company,
in writing, expressly for inclusion in the Schedule 14D-9 (as hereinafter
defined) will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
(c) Parent and the Purchaser will take all steps necessary to cause the
Offer Documents to be filed with the SEC and to be disseminated to holders of
the Shares, in each case as and to the extent required by applicable federal
securities laws. Each of Parent and the Purchaser and the Company agrees to
promptly (i) correct any information provided by it for use in the Schedule
14D-1 or the Offer Documents if and to the extent that such information shall
have become false or misleading in any material respect and (ii) to supplement
the information provided by it specifically for use in the Schedule 14D-1 or the
Offer Documents to include any information that shall become necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading. Parent and the Purchaser further agree to take all
steps necessary to cause the Schedule 14D-1 as so corrected to be filed with the
SEC and to be disseminated to holders of the Shares, in each case as and to the
extent required by applicable federal securities laws. The Company and its
counsel shall be given the reasonable opportunity to review the Schedule 14D-1
before it is filed with the SEC. In addition, Parent and the Purchaser will
provide the Company and its counsel, in writing, with any comments, whether
written or oral, Parent, the Purchaser or their counsel may receive from
2
<PAGE> 8
time to time from the SEC or its staff with respect to the Offer Documents
promptly after the receipt of such comments.
Section 1.2 Company Actions.
(a) The Company hereby approves of and consents to the Offer and represents
and warrants that the Board of Directors, at a meeting duly called and held on
August 19, 1997 at which a majority of the Directors was present, by unanimous
action of the Board of Directors: (i) duly approved this Agreement, the
Stockholder Agreement and the transactions contemplated hereby and thereby,
including the Offer, the Merger, the JNL Option and the purchase of Shares by
the Purchaser or its designee pursuant to the exercise of the JNL Option
(collectively, the "Transactions"), (ii) resolved to recommend that the
stockholders of the Company accept the Offer, tender their Shares pursuant to
the Offer and approve this Agreement and the transactions contemplated hereby,
including the Merger; and (iii) determined that this Agreement and the
transactions contemplated hereby, including the Offer and the Merger, are fair
to and in the best interests of the stockholders of the Company.
(b) As soon as practicable on the date the Offer is commenced, the Company
shall file with the SEC a Solicitation/Recommendation Statement on Schedule
14D-9 (together with any and all amendments or supplements thereto and including
the exhibits thereto, the "Schedule 14D-9"). The Schedule 14D-9 will comply in
all material respects with the provisions of applicable federal securities laws
and, on the date filed with the SEC and on the date first published, mailed or
given to the Company's stockholders, shall not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, except that no
representation is made by the Company with respect to information furnished by
Parent or the Purchaser, in writing, expressly for inclusion in the Schedule
14D-9. The Company further agrees to take all steps necessary to cause the
Schedule 14D-9 to be filed with the SEC and to be disseminated to holders of the
Shares, in each case as and to the extent required by applicable federal
securities laws. The Company shall mail, or cause to be mailed, such Schedule
14D-9 to the stockholders of the Company at the same time the Offer Documents
are first mailed to the stockholders of the Company together with such Offer
Documents. The Schedule 14D-9 and the Offer Documents shall contain the
recommendations of the Board of Directors described in Section 1.2(a) hereof,
subject to the terms of this Agreement. The Company agrees promptly to correct
the Schedule 14D-9 if and to the extent that it shall have become false or
misleading in any material respect (and each of Parent and the Purchaser, with
respect to written information supplied by it specifically for use in the
Schedule 14D-9, shall promptly notify the Company of any required corrections of
such information and cooperate with the Company with respect to correcting such
information) and to supplement the information contained in the Schedule 14D-9
to include any information that shall become necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The Company further agrees to take all steps necessary to cause
the Schedule 14D-9 as so corrected to be filed with the SEC and to be
disseminated to holders of the Shares, in each case as and to the extent
required by applicable federal securities laws. The Purchaser and its counsel
shall be given the opportunity to review the Schedule 14D-9 before it is filed
with the SEC. In addition, the Company agrees to provide the Purchaser and its
counsel, in writing, with any comments, whether written or oral, that the
Company or its counsel may receive from time to time from the SEC or its staff
with respect to the Schedule 14D-9 promptly after the receipt of such comments
or other communications.
(c) In connection with the Offer, the Company will promptly furnish or
cause to be furnished to the Purchaser mailing labels containing the names and
addresses of all record holders of Shares and security position listings of
Shares held in stock depositories, each as of a recent date, and shall promptly
furnish the Purchaser with such additional information (including, but not
limited to, updated lists of stockholders and their addresses, mailing labels
and security position listing) and such other information and assistance as the
Purchaser or its agents may reasonably request in communicating the Offer to the
record and beneficial holders of the Shares.
3
<PAGE> 9
Section 1.3 Directors.
(a) Promptly upon the purchase of any Shares by the Purchaser pursuant to
the Offer, and from time to time thereafter as Shares are acquired by the
Purchaser, Parent shall be entitled to designate such number of directors,
rounded up to the next whole number, on the Board of Directors of the Company as
is equal to the product of the total number of directors on such Board (giving
effect to the directors designated by Parent pursuant to this sentence)
multiplied by the percentage that the number of Shares beneficially owned by the
Purchaser or any affiliate of the Purchaser bears to the total number of Shares
then outstanding. In furtherance thereof, the Board of Directors has resolved as
part of its approval of this Agreement to promptly increase the size of the
Board of Directors upon the request of Parent, and upon the request of Parent,
the Company shall promptly increase the size of the Board of Directors or use
its best efforts to secure the resignations of such number of its incumbent
directors as is necessary to enable Parent's designees to be elected to the
Board of Directors in accordance with the terms of this Section 1.3, and shall
take all actions available to the Company to cause Parent's designees to be so
elected. At such time, the Company shall, if requested by Parent, take all
actions available to it to cause persons designated by Parent to constitute at
least the same percentage (rounded up to the next whole number) as is on the
Board of Directors of (i) each committee of the Board of Directors, (ii) each
board of directors (or similar body) of each Subsidiary (as defined in Section
3.1 hereof) of the Company and (iii) each committee (or similar body) of each
such board.
(b) The Company shall promptly take all actions required pursuant to
Section 14(f) of the Exchange Act and Rule 14f-l promulgated thereunder in order
to fulfill its obligations under Section 1.3(a) hereof, and shall include in the
Schedule 14D-9 mailed to stockholders promptly after the commencement of the
Offer (or an amendment thereof or an information statement pursuant to Rule
14f-1 if the Purchaser has not theretofore designated directors) such
information with respect to the Company and its officers and directors as is
required under Section 14(f) and Rule 14f-1 in order to fulfill its obligations
under Section 1.3(a). Parent or the Purchaser shall supply the Company and be
solely responsible for any information with respect to either of them and their
nominees, officers, directors and affiliates required by such Section 14(f) and
Rule 14f-1. The provisions of this Section 1.3(b) are in addition to and shall
not limit any rights which the Purchaser, Parent or any of their affiliates may
have as a holder or beneficial owner of Shares as a matter of law with respect
to the election of directors or otherwise.
(c) In the event that Parent's designees are elected to the Board of
Directors, subject to the other terms of this Agreement, until the Effective
Time (as defined in Section 1.5 hereof), the Board of Directors shall have at
least one director who is a director on the date hereof and who is neither an
officer of the Company nor a designee, stockholder, affiliate or associate
(within the meaning of the federal securities laws) of Parent (one or more of
such directors, the "Independent Directors"), provided that, if no Independent
Directors remain, the other directors shall designate one person to fill one of
the vacancies who shall not be either an officer of the Company or a designee,
shareholder, affiliate or associate of the Purchaser and such person shall be
deemed to be an Independent Director for purposes of this Agreement.
Notwithstanding anything in this Agreement to the contrary, in the event that
Parent's designees are elected to the Company's Board of Directors, after the
acceptance for payment of Shares pursuant to the Offer and prior to the
Effective Time (as hereinafter defined), the affirmative vote of a majority of
the Independent Directors shall be required to (i) amend or terminate this
Agreement on behalf of the Company, (ii) exercise or waive any of the Company's
rights, benefits or remedies hereunder, (iii) extend the time for performance of
the Purchaser's obligations hereunder or (iv) take any other action by the
Company under or in connection with this Agreement required to be taken by the
Board of Directors.
Section 1.4 The Merger. Upon the terms and subject to the conditions of
this Agreement and Delaware Law, at the Effective Time, the Purchaser shall be
merged with and into the Company (the "Merger"), the separate corporate
existence of the Purchaser shall cease, and the Company shall continue as the
surviving corporation. The Company as the surviving corporation after the Merger
hereinafter sometimes is referred to as the"Surviving Corporation."
Section 1.5 Effective Time. The parties hereto shall cause a Certificate of
Merger to be executed and filed on the Closing Date (as defined in Section 1.6
hereof) (or on such other date as Parent and the Company
4
<PAGE> 10
may agree) with the Secretary of State of Delaware in such form as required by,
and executed in accordance with the relevant provisions of the Delaware Law. The
Merger shall become effective on the date on which the Certificate of Merger is
duly filed with the Secretary of State of the State of Delaware or such time as
is agreed upon by the parties and specified in the Certificate of Merger, and
such time is hereinafter referred to as the "Effective Time."
Section 1.6 Closing. The closing of the Merger (the "Closing") shall take
place at 10:00 a.m. on a date to be specified by the parties, which shall be no
later than the second business day after satisfaction or waiver of all of the
conditions set forth in Article VII hereof (the "Closing Date"), at the offices
of Skadden, Arps, Slate, Meagher & Flom LLP, Four Embarcadero Center, Suite
3800, San Francisco, California, unless another date or place is agreed to in
writing by the parties hereto.
Section 1.7 Directors and Officers of the Surviving Corporation. The
directors of the Purchaser immediately before the Effective Time shall, be the
initial directors of the Surviving Corporation, and the officers of the Company
immediately before the Effective Time will be the initial officers of the
Surviving Corporation in each case until their successors are duly elected or
appointed and qualified or until their earlier death, resignation or removal in
accordance with the Certificate of Incorporation and the By-laws of the
Surviving Corporation. If, at the Effective Time, a vacancy shall exist on the
Board of Directors or in any office of the Surviving Corporation, such vacancy
may thereafter be filled in the manner provided by law.
Section 1.8 Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in the applicable provisions of Delaware Law.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time all the property, rights, privileges, powers and franchises of
the Company and the Purchaser shall vest in the Surviving Corporation, and all
debts, liabilities and duties of the Company and the Purchaser shall become the
debts, liabilities and duties of the Surviving Corporation.
Section 1.9 Subsequent Actions. If, at any time after the Effective Time,
the Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in the Surviving
Corporation its right, title or interest in, to or under any of the rights,
properties or assets of either of the Company or the Purchaser acquired or to be
acquired by the Surviving Corporation as a result of, or in connection with, the
Merger or otherwise to carry out this Agreement, the officers and directors of
the Surviving Corporation shall be authorized to execute and deliver, in the
name and on behalf of either the Company or the Purchaser, all such deeds, bills
of sale, assignments and assurances and to take and do, in the name and on
behalf of each of such corporations or otherwise, all such other actions and
things as may be necessary or desirable to vest, perfect or confirm any and all
right, title and interest in, to and under such rights, properties or assets in
the Surviving Corporation or otherwise to carry out this Agreement.
Section 1.10 Certificate of Incorporation; By-Laws.
(a) Unless otherwise determined by the Purchaser before the Effective Time,
at the Effective Time the Certificate of Incorporation of the Purchaser, as in
effect immediately before the Effective Time, shall be the Certificate of
Incorporation of the Surviving Corporation until thereafter amended as provided
by law and such Certificate of Incorporation.
(b) The By-Laws of the Purchaser, as in effect immediately before the
Effective Time, shall be the By-Laws of the Surviving Corporation until
thereafter amended as provided by law, the Certificate of Incorporation of the
Surviving Corporation and such By-Laws.
Section 1.11 Stockholders' Meeting.
(a) If required by applicable law in order to consummate the Merger, the
Company, acting through its Board of Directors, shall, in accordance with
applicable law:
(i) duly call, give notice of, convene and hold a special meeting of
its stockholders (the "Special Meeting") as promptly as practicable
following the acceptance for payment and purchase of Shares by the
Purchaser pursuant to the Offer for the purpose of considering and taking
action upon the approval of the Merger and the adoption of this Agreement;
5
<PAGE> 11
(ii) prepare and file with the SEC a preliminary proxy or information
statement relating to the Merger and this Agreement and use its best
efforts, subject to the terms of this Agreement, including Section 5.3(b)
(x) to obtain and furnish the information required to be included by the
SEC in the Proxy Statement (as hereinafter defined) and, after consultation
with Parent, to respond promptly to any comments made by the SEC with
respect to the preliminary proxy or information statement and cause a
definitive proxy or information statement, including any amendment or
supplement thereto (the "Proxy Statement") to be mailed to its
stockholders, provided that no amendment or supplement to the Proxy
Statement will be made by the Company without consultation with Parent and
its counsel and (y) to obtain the necessary approvals of the Merger and
this Agreement by its stockholders; and
(iii) subject to the terms of this Agreement including Section 5.3(b),
include in the Proxy Statement the recommendation of the Board of Directors
that stockholders of the Company vote in favor of the approval of the
Merger and the adoption of this Agreement.
(b) Parent shall vote, or cause to be voted, all of the Shares then owned
by it, the Purchaser or any of its other Subsidiaries and affiliates in favor of
the approval of the Merger and the approval and adoption of this Agreement.
Section 1.12 Merger Without Meeting of Stockholders. Notwithstanding
Section 1.11 hereof, in the event that Parent, the Purchaser and any other
Subsidiaries of Parent shall acquire in the aggregate at least 90% of the
outstanding Shares, pursuant to the Offer or otherwise, the parties hereto
shall, at the request of Parent and subject to Article VII hereof, take all
necessary and appropriate action to cause the Merger to become effective as soon
as practicable after such acquisition, without a meeting of stockholders of the
Company, in accordance with Section 253 of Delaware Law.
ARTICLE II
CONVERSION OF SECURITIES
Section 2.1 Conversion of Securities. At the Effective Time, by virtue of
the Merger and without any action on the part of Parent, the Purchaser, the
Company or the holder of any of the following securities:
(a) Each Share issued and outstanding immediately before the Effective Time
(other than any Shares to be cancelled pursuant to Section 2.1(b) and any
Dissenting Shares (as defined in Section 2.2(a)) shall be cancelled and
extinguished and be converted into the right to receive the Offer Price in cash
payable to the holder thereof, without interest (the "Merger Consideration"),
upon surrender of the certificate formerly representing such Share in the manner
provided in Section 2.3 hereof. All such Shares, when so converted, shall no
longer be outstanding and shall automatically be cancelled and retired and shall
cease to exist, and each holder of a certificate representing any such Shares
shall cease to have any rights with respect thereto, except the right to receive
the Merger Consideration therefor upon the surrender of such certificate in
accordance with Section 2.3 hereof, without interest.
(b) Each Share held in the treasury of the Company and each Share owned by
the Purchaser or any direct or indirect wholly owned subsidiary of the Purchaser
immediately before the Effective Time shall be cancelled and extinguished and no
payment or other consideration shall be made with respect thereto.
(c) Each share of common stock, par value $.01 per share, of the Purchaser
issued and outstanding immediately before the Effective Time shall thereafter
represent one validly issued, fully paid and nonassessable share of common
stock, par value $.01 per share, of the Surviving Corporation.
Section 2.2 Dissenting Shares.
(a) Notwithstanding any provision of this Agreement to the contrary, any
Shares held by a holder who has demanded and perfected his demand for appraisal
of his Shares in accordance with Delaware Law (including but not limited to
Section 262 thereof) and as of the Effective Time has neither effectively
withdrawn nor lost his right to such appraisal ("Dissenting Shares"), shall not
be converted into or represent a
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right to receive cash pursuant to Section 2.1, but the holder thereof shall be
entitled to only such rights as are granted by Delaware Law.
(b) Notwithstanding the provisions of Section 2.2(a), if any holder of
Shares who demands appraisal of his Shares under Delaware Law shall effectively
withdraw or lose (through failure to perfect or otherwise) his right to
appraisal, then as of the Effective Time or the occurrence of such event,
whichever later occurs, such holder's Shares shall automatically be converted
into and represent only the right to receive the Merger Consideration as
provided in Section 2.1(a), without interest thereon, upon surrender of the
certificate or certificates representing such Shares pursuant to Section 2.3
hereof.
(c) The Company shall give the Purchaser (i) prompt notice of any written
demands for appraisal or payment of the fair value of any Shares, withdrawals of
such demands, and any other instruments served pursuant to Delaware Law received
by the Company and (ii) the opportunity to direct all negotiations and
proceedings with respect to demands for appraisal under Delaware Law. The
Company shall not voluntarily make any payment with respect to any demands for
appraisal and shall not, except with the prior written consent of the Purchaser,
settle or offer to settle any such demands.
Section 2.3 Surrender of Shares; Stock Transfer Books.
(a) Before the Effective Time, the Purchaser shall designate a bank or
trust company reasonably acceptable to the Company to act as agent for the
holders of Shares in connection with the Merger (the "Exchange Agent") to
receive the funds necessary to make the payments contemplated by Section 2.1(a).
At the Effective Time, the Purchaser shall deposit, or cause to be deposited, in
trust with the Exchange Agent for the benefit of holders of Shares the aggregate
consideration to which such holders shall be entitled at the Effective Time
pursuant to Section 2.1(a).
(b) Each holder of a certificate or certificates representing any Shares
cancelled upon the Merger, which immediately prior to the Effective Time
represented outstanding Shares (the "Certificates") whose Shares were converted
pursuant to Section 2.1(a) may thereafter surrender such Certificate or
Certificates to the Exchange Agent, as agent for such holder, to effect the
surrender of such Certificate or Certificates on such holder's behalf for a
period ending six months after the Effective Time. The Purchaser agrees that
promptly after the Effective Time it shall cause the distribution to holders of
record of Shares as of the Effective Time of appropriate materials to facilitate
such surrender. Upon the surrender of Certificates, the Purchaser shall cause
the Exchange Agent to pay the holder of such certificates in exchange therefor
cash in an amount equal to the Merger Consideration multiplied by the number of
Shares represented by such Certificate. Until so surrendered, each Certificate
(other than Certificates representing Dissenting Shares and Certificates
representing Shares held by the Purchaser or in the treasury of the Company)
shall represent solely the right to receive the aggregate Merger Consideration,
relating thereto.
(c) If payment of the Merger Consideration in respect of cancelled Shares
is to be made to a Person other than the Person in whose name a surrendered
Certificate or instrument is registered, it shall be a condition to such payment
that the Certificate or instrument so surrendered shall be properly endorsed or
shall be otherwise in proper form for transfer and that the Person requesting
such payment shall have paid any transfer and other taxes required by reason of
such payment in a name other than that of the registered holder of the
Certificate or instrument surrendered or shall have established to the
satisfaction of the Purchaser or the Exchange Agent that such tax either has
been paid or is not applicable.
(d) At the Effective Time, the stock transfer books of the Company shall be
closed and there shall not be any further registration of transfers of shares of
any shares of capital stock thereafter on the records of the Company. From and
after the Effective Time, the holders of certificates evidencing ownership of
the Shares outstanding immediately prior to the Effective Time shall cease to
have any rights with respect to such Shares, except as otherwise provided for
herein or by applicable law. If, after the Effective Time, Certificates are
presented to the Surviving Corporation, they shall be cancelled and exchanged
for cash as provided in this Article II. No interest shall accrue or be paid on
any cash payable upon the surrender of a Certificate or Certificates which
immediately before the Effective Time represented outstanding Shares.
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(e) Promptly following the date which is six months after the Effective
Time, the Surviving Corporation shall be entitled to require the Exchange Agent
to deliver to it any cash (including any interest received with respect
thereto), Certificates and other documents in its possession relating to the
transactions contemplated hereby, which had been made available to the Exchange
Agent and which have not been disbursed to holders of Certificates, and
thereafter such holders shall be entitled to look to the Surviving Corporation
(subject to abandoned property, escheat or similar laws) only as general
creditors thereof with respect to the Merger Consideration payable upon due
surrender of their Certificates, without any interest thereon. Notwithstanding
the foregoing neither the Surviving Corporation nor the Exchange Agent shall be
liable to any holder of a Certificate for Merger Consideration delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar law.
(f) The Merger Consideration paid in the Merger shall be net to the holder
of Shares in cash, subject to reduction only for any applicable federal back-up
withholding or, as set forth in Section 2.3(c), stock transfer taxes payable by
such holder.
Section 2.4 Stock Plans. (a) At or immediately prior to the Effective Time,
(i) each then outstanding option to purchase Shares (the "Options") and each
outstanding Stock Appreciation Right (the "SARs") granted under the Company's
Non-Employee Directors' Stock Option Plan, the 1996 Employees' Stock Incentive
Plan and any other stock-based incentive plan or arrangement of the Company
(collectively, the "Stock Plans"), whether or not then exercisable or vested,
shall be cancelled and (ii) in consideration of such cancellation, the holders
of such Options and SARs shall receive for each Share subject to such Option or
SAR an amount (subject to any applicable withholding tax) in cash equal to the
product of (A) the excess, if any, of the Offer Price over the per Share
exercise price of such Option or the per Share base price of such SAR, as
applicable, and (B) the number of Shares subject to such Option or SAR.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and the Purchaser as follows:
Section 3.1 Organization. (a) Each of the Company and its Subsidiaries (as
defined below) is a corporation, partnership or other entity duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation or organization and has all requisite corporate power or other and
authority and all necessary governmental approvals to own, lease and operate its
properties and to carry on its business as now being conducted, except where the
failure to be so organized, existing and in good standing or to have such power,
authority, and governmental approvals would not, individually or in the
aggregate, have a Company Material Adverse Effect (as defined below). As used in
this Agreement, the term "Subsidiary" shall mean, with respect to any party, any
foreign or domestic corporation or other organization, whether incorporated or
unincorporated, of which (i) such party or any other Subsidiary of such party is
a general partner (excluding such partnerships where such party or any
Subsidiary of such party do not have a majority of the voting interest in such
partnership) or (ii) at least a majority of the securities or other interests
having by their terms ordinary voting power to elect a majority of the Board of
Directors or others performing similar functions with respect to such
corporation or other organization is directly or indirectly owned or controlled
by such party or by any one or more of its Subsidiaries, or by such party and
one or more of its Subsidiaries. As used in this Agreement, "Company Material
Adverse Effect" means any change in or effect on the business of the Company or
its Subsidiaries, taken as a whole, that is or could reasonably be expected to
be materially adverse to (i) the business, operations, properties (including
intangible properties), condition (financial or otherwise), results of
operations, assets, liabilities or prospects of the Company or its subsidiaries,
taken as a whole, or (ii) the ability of the Company to consummate any of the
transactions or to perform its obligations under this Agreement. The Disclosure
Schedule delivered to Parent prior to the execution of this Agreement (the
"Company Disclosure Schedule"), sets forth a complete list of the Company's
domestic and foreign Subsidiaries.
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(b) The Company and each of its Subsidiaries is duly qualified or licensed
to do business and in good standing in each jurisdiction in which the property
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification or licensing necessary, except where the failure to be
so duly qualified or licensed and in good standing would not individually or in
the aggregate have a Company Material Adverse Effect. Except as disclosed in
Section 3.1 of the Company Disclosure Schedule, the Company does not own any
equity interest in any corporation or other entity.
Section 3.2 Capitalization. (a) The authorized capital stock of the Company
consists of 20,000,000 shares of common stock, par value $.01 per share (the
"Common Stock"). As of the date hereof, (i) 10,534,574 Shares are issued and
outstanding, (ii) no Shares are issued and held in the treasury of the Company,
and (iii) a total of 1,060,000 Shares are reserved under the Stock Plans in
respect of outstanding and future awards, of which (A) 34,000 Shares are
reserved for issuance pursuant to outstanding Options and 26,000 Shares are
reserved for issuance pursuant to future awards, in each case under the
Company's Non-Employee Directors' Stock Option Plan, and (B) 542,000 Shares are
reserved for issuance pursuant to outstanding Options, 300,000 Shares have been
issued as Restricted Stock (of which 266,667 such Shares are non-vested as of
the date hereof), 50,000 Shares are reserved in respect of outstanding SARs, no
Shares are reserved for issuance in respect of Performance Shares and 108,000
Shares are reserved for issuance in connection with future awards, in each case
under the Company's 1996 Employees' Stock Incentive Plan. Section 3.2(a) of the
Company Disclosure Schedule discloses the number of shares subject to each
outstanding Option and the exercise price thereof and (ii) the number of Shares
covered by each outstanding SAR and the base price thereof (iii) the number of
shares of non-vested restricted stock and (iv) the number of non-vested
Performance Shares. All the outstanding shares of the Company's capital stock
are, and all Shares which may be issued pursuant to the exercise of outstanding
Options will be, when issued in accordance with the terms thereof, duly
authorized, validly issued, fully paid and non-assessable. Except as disclosed
in this Section 3.2 or as set forth on Section 3.2(a) of the Company Disclosure
Schedule, (i) there are no shares of capital stock of the Company authorized,
issued or outstanding, (ii) there are no existing options, warrants, calls,
pre-emptive rights, subscriptions or other rights, agreements, arrangements or
commitments of any character, relating to the issued or unissued capital stock
of the Company or any of its Subsidiaries, obligating the Company or any of its
Subsidiaries to issue, transfer or sell or cause to be issued, transferred or
sold any shares of capital stock or other equity interest in, the Company or any
of its Subsidiaries or securities convertible into or exchangeable for such
shares or equity interests, or obligating the Company or any of its Subsidiaries
to grant, extend or enter into any such option, warrant, call, subscription or
other right, agreement, arrangement or commitment and (iii) except as disclosed
in Section 3.2(a) of the Company Disclosure Schedule, there are no outstanding
contractual obligations of the Company or any of its Subsidiaries to repurchase,
redeem or otherwise acquire any Shares, or the capital stock of the Company or
of any Subsidiary or affiliate of the Company or to provide funds to make any
investment (in the form of a loan, capital contribution or otherwise) in any
Subsidiary or any other entity.
(b) Except as disclosed in Section 3.2(b) of the Company Disclosure
Schedule, all of the outstanding shares of capital stock of each of the
Subsidiaries are beneficially owned by the Company, directly or indirectly, and
all such shares have been validly issued and are fully paid and nonassessable
and are owned by either the Company or one of its Subsidiaries free and clear of
all liens, charges, security interests, options, claims, mortgages, pledges, or
other encumbrances and restrictions of any nature whatsoever ("Encumbrances").
(c) Except as disclosed in Section 3.2(c) of the Company Disclosure
Schedule, there are no voting trusts or other agreements or understandings to
which the Company or any of its Subsidiaries is a party with respect to the
voting of the capital stock of the Company or any of the Subsidiaries.
(d) Other than as set forth on Section 3.2(d) of the Company Disclosure
Schedule, there is no outstanding Indebtedness (as hereinafter defined) of the
Company or any of its Subsidiaries. Except as identified in Section 3.2(d) of
the Company Disclosure Schedule, no Indebtedness of the Company or its
Subsidiaries contains any restriction upon (i) the prepayment of such
Indebtedness, (ii) the incurrence of Indebtedness by the Company or its
Subsidiaries, respectively, or (iii) the ability of the Company or its
Subsidiaries to grant any liens on its properties or assets. For purposes of
this Agreement, "Indebtedness" shall
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include (i) all indebtedness for borrowed money or for the deferred purchase
price of property or services (other than current trade liabilities incurred in
the ordinary course of business and payable in accordance with customary
practices), (ii) any other indebtedness which is evidenced by a note, bond,
debenture or similar instrument, (iii) all obligations under financing leases,
(iv) all obligations in respect of acceptances issued or created, (v) all
liabilities secured by any lien on any property, and (vi) all guarantee
obligations.
Section 3.3 Authorization; Validity of Agreement; Company Action. (a) The
Company has full corporate power and authority to execute and deliver this
Agreement and to consummate the Transactions. The execution, delivery and
performance by the Company of this Agreement, and the consummation by it of the
Transactions, have been duly and validly authorized by its Board of Directors
and no other corporate action on the part of the Company is necessary to
authorize the execution and delivery by the Company of this Agreement and the
consummation by it of the Transactions, except that consummation of the Merger
may require approval of the Company's stockholders as contemplated by Section
1.11 hereof. This Agreement has been duly executed and delivered by the Company
and, assuming due and valid authorization, execution and delivery hereof by
Parent and the Purchaser, is a valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except that (i)
such enforcement may be subject to applicable bankruptcy, insolvency or other
similar laws, now or hereafter in effect, affecting creditors' rights generally,
and (ii) the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought.
(b) The provisions of Section 203 of Delaware Law are not applicable to
this Agreement, the Stockholder Agreement or the other Transactions, including
the Merger and the purchase of Shares in the Offer or pursuant to the exercise
of the JNL Option. The affirmative vote of the holders of a majority of the
outstanding shares of Common Stock is the only vote of the holders of any class
or series of the Company's capital stock which may be necessary to approve this
Agreement and the other Transactions, including the Merger. As of the date of
this Agreement, the number of holders of record of Common Stock in the State of
Wisconsin is less than 20% of the total number of holders of Common Stock.
Section 3.4 Consents and Approvals; No Violations. Except as disclosed in
Section 3.4 of the Company Disclosure Schedule and for filings, permits,
authorizations, consents and approvals as may be required under, and other
applicable requirements of, the Exchange Act and the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), none of the execution,
delivery or performance of this Agreement by the Company, the consummation by
the Company of the Transactions or compliance by the Company with any of the
provisions hereof will (i) conflict with or result in any breach of any
provision of the Certificate of Incorporation, the By-laws or similar
organizational documents of the Company or any of its Subsidiaries, (ii) require
any filing with, or permit, authorization, consent or approval of, any court,
arbitral tribunal, administrative agency or commission or other governmental or
other regulatory authority or agency (a "Governmental Entity"), (iii) result in
a violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, amendment,
cancellation or acceleration) under, any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, lease, license, contract, agreement or
other instrument or obligation to which the Company or any of its Subsidiaries
is a party or by which any of them or any of their properties or assets may be
bound (the "Company Agreements") or (iv) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to the Company, any of its
Subsidiaries or any of their properties or assets, except in the case of clause
(ii), (iii) or (iv) where failure to obtain such permits, authorizations,
consents or approvals or to make such filings, or where such violations,
breaches or defaults which would not, individually or in the aggregate, have a
Company Material Adverse Effect.
Section 3.5 SEC Reports and Financial Statements. The Company has filed
with the SEC, and has heretofore made available to Parent, true and complete
copies of all forms, reports, schedules, statements and other documents required
to be filed by it since December 14, 1994 under the Exchange Act or the
Securities Act of 1933, as amended (the "Securities Act") (as such documents
have been amended since the time of their filing, collectively, the "Company SEC
Documents"). As of their respective dates, or if amended, as of the date of the
last such amendment, the Company SEC Documents, including, without limitation,
any
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financial statements or schedules included therein (a) did not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading and (b) except
as disclosed in Section 3.5 of the Company Disclosure Schedule complied in all
material respects with the applicable requirements of the Exchange Act and the
Securities Act, as the case may be, and the applicable rules and regulations of
the SEC thereunder. None of the Company's Subsidiaries is required to file any
forms, reports or other documents with the SEC. Each of the consolidated
financial statements included in the Company SEC Documents (the "Financial
Statements") (i) has been prepared from, and is in accordance with, the books
and records of the Company and its consolidated Subsidiaries, (ii) complies in
all material respects with applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto, (iii) has been
prepared in accordance with United States generally accepted accounting
principles ("GAAP") applied on a consistent basis during the periods involved
(except as may be indicated therein or in the notes thereto) and (iv) fairly
presents the consolidated financial position and the consolidated results of
operations and cash flows (and changes in financial position, if any) of the
Company and its consolidated Subsidiaries as of the times and for the periods
referred to therein.
Section 3.6 Absence of Certain Changes. Except to the extent disclosed in
Section 3.6 of the Company Disclosure Schedule or in the Company SEC Documents
filed prior to the date hereof, since December 31, 1996, the Company and its
Subsidiaries have conducted their respective businesses only in the ordinary and
usual course. From December 31, 1996 through the date of this Agreement there
has not occurred any event, change or effect (including the incurrence of any
liabilities of any nature, whether or not accrued, contingent or otherwise)
having, individually or in the aggregate, a Company Material Adverse Effect, any
declaration, setting aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to the equity interests of the
Company or any of its Subsidiaries or any change in accounting principles or
methods, except insofar as may be required by GAAP. Since December 31, 1996
neither the Company nor any of its Subsidiaries has taken any of the actions
prohibited by Section 5.2 hereof.
Section 3.7 No Undisclosed Liabilities. Except (a) as disclosed in the
Financial Statements and (b) for liabilities and obligations (i) incurred in the
ordinary course of business and consistent with past practice since December 31,
1996, (ii) pursuant to the terms of this Agreement, (iii) as disclosed in
Section 3.7 of the Company Disclosure Schedule, or (iv) as disclosed in Section
3.8 of the Company Disclosure Schedule, neither the Company nor any of its
Subsidiaries has incurred any liabilities or obligations of any nature, whether
or not accrued, contingent or otherwise, that would have a Company Material
Adverse Effect or would be required to be reflected or reserved against on a
consolidated balance sheet of the Company and its Subsidiaries (including the
notes thereto) prepared in accordance with GAAP as applied in preparing the
consolidated balance sheet of the Company and its Subsidiaries as of December
31, 1996. Section 3.7 of the Company Disclosure Schedule sets forth the amount
of principal and unpaid interest outstanding as of July 31, 1997 under each
instrument evidencing indebtedness of the Company and its Subsidiaries which
will accelerate or become due or result in a right of redemption or repurchase
on the part of the holder of such indebtedness (with or without due notice or
lapse of time) as a result of this Agreement, the Merger or the other
transactions contemplated hereby or thereby.
Section 3.8 Litigation. Except as disclosed in Section 3.8 of the Company
Disclosure Schedule or in the Company SEC Documents, there is no suit, claim,
action, proceeding, including, without limitation, arbitration or grievance
proceeding or alternative dispute resolution proceeding, or investigation
pending or, to the knowledge of the Company, threatened against or affecting,
the Company or any of its Subsidiaries before any Governmental Entity that,
either individually or in the aggregate, would have a Company Material Adverse
Effect.
Section 3.9 Employee Benefits; ERISA.
(a) Except as disclosed in the Company SEC Documents, Schedule 3.9 contains
a true and complete list of each material employment, bonus, deferred
compensation, incentive compensation, stock purchase, stock option, stock
appreciation right or other stock-based incentive, severance, change-in-control,
termination or similar pay, hospitalization or other medical, disability, life
or other insurance, supplemental unemployment
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benefits, profit-sharing, pension, or retirement plan, program, agreement or
arrangement, and each other employee benefit plan, program, agreement or
arrangement, sponsored, maintained or contributed to or required to be
contributed to by the Company or any of its Subsidiaries, or by any trade or
business, whether or not incorporated (an "ERISA Affiliate"), that together with
the Company or any of its Subsidiaries would be deemed a "single employer"
within the meaning of Section 4001(b)(1) of ERISA, for the benefit of any
current or former employee or director of the Company, or any of its
Subsidiaries or any ERISA Affiliate (the "Plans"). Schedule 3.9(a) identifies
each of the Plans that is an "employee welfare benefit plan," or "employee
pension benefit plan" as such terms are defined in Sections 3(1) and 3(2) of
ERISA (such plans being hereinafter referred to collectively as the "ERISA
Plans"). Schedule 3.9 (a) also identifies each of the Plans that is maintained
outside the jurisdiction of the United States (such plans being hereinafter
referred to collectively as the "Foreign Plans"). None of the Company, any of
its Subsidiaries nor any ERISA Affiliate has any formal plan or commitment,
whether legally binding or not, to create any additional Plan or modify or
change any existing Plan that would affect any current or former employee or
director of the Company, any of its Subsidiaries or any ERISA Affiliate.
(b) With respect to each of the Plans, the Company has heretofore delivered
to the Purchaser true and complete copies of each of the following documents, as
applicable:
(i) a copy of the Plan documents (including all amendments thereto)
for each written Plan or a written description of any Plan that is not
otherwise in writing;
(ii) a copy of the annual report or Internal Revenue Service Form 5500
Series, if required under ERISA, with respect to each ERISA Plan for the
last three Plan years ending prior to the date of this Agreement for which
such a report was filed;
(iii) a copy of the actuarial report, if required under ERISA, with
respect to each ERISA Plan for the last three Plan years ending prior to
the date of this Agreement;
(iv) a copy of the most recent Summary Plan Description ("SPD"),
together with all Summaries of Material Modification issued with respect to
such SPD, if required under ERISA, with respect to each ERISA Plan, and all
other material employee communications relating to each ERISA Plan;
(v) if the Plan is funded through a trust or any other funding
vehicle, a copy of the trust or other funding agreement (including all
amendments thereto) and the latest financial statements thereof, if any;
(vi) all contracts relating to the Plans with respect to which the
Company, any of its Subsidiaries or any ERISA Affiliate may have any
material liability, including insurance contracts, investment management
agreements, subscription and participation agreements and record keeping
agreements; and
(vii) the most recent determination letter received from the IRS with
respect to each Plan that is intended to be qualified under Section 401(a)
of the Code.
(c) No liability under Title IV of ERISA has been incurred by the Company,
any of its Subsidiaries or any ERISA Affiliate since the Effective Date of ERISA
that has not been satisfied in full, and no condition exists that presents a
material risk to the Company, or any of its Subsidiaries or any ERISA Affiliate
of incurring any liability under such Title, other than liability for premiums
due the Pension Benefit Guaranty Corporation ("PBGC"), which payments have been
or will be made when due. To the extent this representation applies to Sections
4064, 4069 or 4204 of Title IV of ERISA, it is made not only with respect to the
ERISA Plans but also with respect to any employee benefit plan, program,
agreement or arrangement subject to Title IV of ERISA to which the Company, any
of its Subsidiaries or any ERISA Affiliate made, or was required to make,
contributions during the past six years.
(d) The PBGC has not instituted proceedings pursuant to Section 4042 of
ERISA to terminate any of the ERISA Plans subject to Title IV of ERISA, and no
condition exists that presents a material risk that such proceedings will be
instituted by the PBGC.
(e) With respect to each of the ERISA Plans that is subject to Title IV of
ERISA, the present value of accumulated benefit obligations under such Plan, as
determined by the Plan's actuary based upon the actuarial
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assumptions used for funding purposes in the most recent actuarial report
prepared by such Plan's actuary with respect to such Plan, did not, as of its
latest valuation date, exceed the then current value of the assets of such Plan
allocable to such accumulated benefit obligations.
(f) None of the Company, any of its Subsidiaries, any ERISA Affiliate, any
of the ERISA Plans, any trust created thereunder, nor to the Company's
knowledge, any trustee or administrator thereof has engaged in a transaction or
has taken or failed to take any action in connection with which the Company, any
of its Subsidiaries or any ERISA Affiliate could be subject to any material
liability for either a civil penalty assessed pursuant to Section 409 or 502(i)
of ERISA or a tax imposed pursuant to Section 4975(a) or (b), 4976 or 4980B of
the Code.
(g) All contributions and premiums which the Company, any of its
Subsidiaries or any ERISA Affiliate is required to pay under the terms of each
of the ERISA Plans and Section 412 of the Code, have, to the extent due, been
paid in full or properly recorded on the financial statements or records of the
Company or its Subsidiaries, and none of the ERISA Plans or any trust
established thereunder has incurred any "accumulated funding deficiency" (as
defined in Section 302 of ERISA and Section 412 of the Code), whether or not
waived, as of the last day of the most recent fiscal year of each of the ERISA
Plans ended prior to the date of this Agreement. No lien has been imposed under
Section 412(n) of the Code or Section 302(f) of ERISA on the assets of the
Company, any of its Subsidiaries or any ERISA Affiliate, and no event or
circumstance has occurred that is reasonably likely to result in the imposition
of any such lien on any such assets on account of any ERISA Plan.
(h) With respect to any ERISA Plan that is a "multi-employer plan," as such
term is defined in Section 3(37) of ERISA, (i) neither the Company, any of its
Subsidiaries nor any ERISA Affiliate has, since September 26, 1980, made or
suffered a "complete withdrawal" or a "partial withdrawal," as such terms are
respectively defined in Sections 4203 and 4205 of ERISA, (ii) no event has
occurred that presents a material risk of a complete or partial withdrawal,
(iii) neither the Company, each of its Subsidiaries nor any ERISA Affiliate has
any contingent liability under Section 4204 of ERISA, (iv) no circumstances
exist that present a material risk that any such multi-employer plan will go
into reorganization, and (v) the aggregate withdrawal liability of the Company,
each of its Subsidiaries and the ERISA Affiliates, computed as if a complete
withdrawal by the Company, each of its Subsidiaries and all of its ERISA
Affiliates had occurred under each such multi-employer plan on the date hereof,
would be zero.
(i) Each of the Plans has been operated and administered in all material
respects in accordance with applicable laws, including but not limited to ERISA
and the Code and, to the Company's knowledge, the laws of each jurisdiction in
which any of the Foreign Plans are maintained, to the extent such laws are
applicable to the Foreign Plans.
(j) Each of the ERISA Plans that is intended to be "qualified" within the
meaning of Section 401(a) of the Code is so qualified. The Company has applied
for and received a currently effective determination letter from the IRS stating
that it is so qualified, and no event has occurred which would affect such
qualified status.
(k) Any fund established under an ERISA Plan that is intended to satisfy
the requirements of Section 501(c)(9) of the Code has so satisfied such
requirements.
(l) To the Company's knowledge based on the advice of its independent
accountants, except as disclosed in Section 3.9(l) of the Company Disclosure
Schedule, no amounts payable under any of the Plans or any other contract,
agreement or arrangement with respect to which the Company or any of its
Subsidiaries may have any liability could fail to be deductible for federal
income tax purposes by virtue of Section 162(m) or Section 280G of the Code.
(m) Except as set forth in Section 3.9(m) of the Company Disclosure
Schedule, no Plan provides benefits, including without limitation death or
medical benefits (whether or not insured), with respect to current or former
employees of the Company, its Subsidiaries or any ERISA Affiliate after
retirement or other termination of service (other than (i) coverage mandated by
applicable laws, (ii) death benefits or retirement benefits under any "employee
pension plan," as that term is defined in Section 3(2) of ERISA, (iii) deferred
compensation benefits accrued as liabilities on the books of the Company, any of
its Subsidiaries or an ERISA
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<PAGE> 19
Affiliate, or (iv) benefits, the full direct cost of which is borne by the
current or former employee (or beneficiary thereof)).
(n) Except as set forth in Section 3.9(n) of the Company Disclosure
Schedule, the consummation of the transactions contemplated by this Agreement
will not (i) entitle any current or former employee, officer, director, agent or
consultant of the Company, any of its Subsidiaries or any ERISA Affiliate to
severance pay, unemployment compensation or any other similar termination
payment, or (ii) accelerate the time of payment or vesting, or increase the
amount of or otherwise enhance any benefit due any such employee, officer,
director agent or consultant.
(o) There are no pending or, to the Company's knowledge, threatened or
anticipated claims by or on behalf of any Plan by any employee or beneficiary
under any such Plan or otherwise involving any such Plan (other than routine
claims for benefits).
(p) With respect to the Foreign Plans to the Company's knowledge, except as
set forth in Schedule 3.9(p):
(i) All contributions to, and payments from, the Foreign Plans which
have been required to be made in accordance with the terms of any such
plan, and, where applicable, the law of the jurisdiction in which such plan
is maintained, have been timely made. All such contributions to the Foreign
Plans, and all payments under the Foreign Plans, for any period ending
before the Closing Date that have not been made as of the date hereof are
properly accrued and reflected on the financial statements of the
Subsidiary maintaining such plan.
(ii) All material reports, returns and similar documents with respect
to any Foreign Plan required to be filed with any government agency or
distributed to any Foreign Plan participant have been duly and timely filed
or distributed.
(iii) Each of the Foreign Plans has obtained from the government or
governments having jurisdiction with respect to such plan any required
determination that such plans are in compliance with the laws and
regulations of such government.
(iv) Each of the Foreign Plans has been administered at all times, in
all material respects, in accordance with its terms.
(v) The assets of each of the Foreign Plans (which is an employee
pension benefit plan as defined in Section 3(2) of ERISA and is funded
through a trust, insurance contract or similar funding medium) are at least
equal to the liabilities of such plans (as determined in accordance with
the most recent actuarial valuation available with respect to such plans).
(vi) Purchaser will incur no material liability with respect to any
Foreign Plan solely as a result of the consummation of the transactions
contemplated by this Agreement.
Section 3.10 Taxes. (a) Except as set forth in Section 3.10 of the Company
Disclosure Schedule:
(i) the Company and its Subsidiaries have (x) duly filed (or there
have been filed on their behalf) with the appropriate governmental
authorities all Tax Returns (as hereinafter defined) required to be filed
by them on or prior to the date hereof, and such Tax Returns are true,
correct and complete in all material respects, and (y) duly paid in full or
made provision in accordance with GAAP (or there has been paid or provision
has been made on their behalf) for the payment of all Taxes (as hereinafter
defined) for all periods ending through the date hereof;
(ii) there are no liens for Taxes upon any property or assets of the
Company or any Subsidiary thereof, except for liens for Taxes not yet due;
(iii) neither the Company nor any of its Subsidiaries has made any
change in accounting methods, received a ruling from any taxing authority
or signed an agreement likely to have a Company Material Adverse Effect;
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<PAGE> 20
(iv) the Company and its Subsidiaries have complied in all respects
with all applicable laws, rules and regulations relating to the payment and
withholding of Taxes (including, without limitation, withholding of Taxes
pursuant to Sections 1441 and 1442 of the Code or similar provisions under
any foreign laws) and have, within the time and the manner prescribed by
law, withheld and paid over to the proper governmental authorities all
amounts required to be so withheld and paid over under applicable laws;
(v) no federal, state, local or foreign audits or other administrative
proceedings or court proceedings are presently pending with regard to any
Taxes or Tax Returns of the Company or its Subsidiaries and neither the
Company nor its Subsidiaries has received a written notice of any pending
audits or proceedings;
(vi) the Tax Returns of the Company and its Subsidiaries have been
made available to Parent for all taxable periods in respect of which the
statutory period of limitations for the assessment of Taxes have not
expired, and no material deficiencies either in respect of such Returns or
any other Returns in respect of which the statutory period of limitations
for the assessment of Taxes has expired has been asserted by any applicable
Taxing Authority which have not been resolved and fully paid;
(vii) there are no outstanding requests, agreements, consents or
waivers to extend the statutory period of limitations applicable to the
assessment of any Taxes or deficiencies against the Company or any of its
Subsidiaries, and no power of attorney granted by either the Company or any
of its Subsidiaries with respect to any Taxes is currently in force;
(viii) neither the Company nor any of its Subsidiaries is a party to
any agreement providing for the allocation or sharing of Taxes;
(ix) to the Company's knowledge based on the advice of its independent
accountants, neither the Company nor its Subsidiaries is a party to any
agreement, contract or arrangement that could result, separately or in the
aggregate, in the payment of any "excess parachute payments" within the
meaning of Section 280G of the Code;
(x) neither the Company nor any of its Subsidiaries has, with regard
to any assets or property held, acquired or to be acquired by any of them,
filed a consent to the application of Section 341(f) of the Code, or agreed
to have Section 341(f)(2) of the Code apply to any disposition of a
subsection (f) asset (as such term is defined in Section 341(f)(4) of the
Code) owned by the Company or any of its Subsidiaries;
(xi) to the Company's knowledge based on the advice of its independent
accountants, the deductibility of compensation paid by the Company and/or
its Subsidiaries will not be limited by Section 162(m) of the Code; and
(xii) all transactions that could give rise to an understatement of
the federal income tax liability of the Company or any of its Subsidiaries
within the meaning of Section 6662(d) of the Code are adequately disclosed
on Tax Returns in accordance with Section 6662(d)(2)(B) of the Code if
there is or was no substantial authority for the treatment giving rise to
such understatement.
(b) Except as disclosed in Section 3.10(b) of the Company Disclosure
Schedule, no excess loss accounts or deferred intercompany gains as defined in
the consolidated return regulations promulgated under the Code (the "Treasury
Regulations") exist with respect to the Company of the Subsidiaries.
(c) The Federal income tax net operating loss carryovers available to the
Company and its Subsidiaries, and their expiration dates, are set forth in
Section 3.10(c) of the Disclosure Schedule. Except as set forth in Section
3.10(c) of the Disclosure Schedule, as of the date of this Agreement, the net
operating loss and credit carryovers are not subject to limitations imposed by
Sections 382, 383 or 384 of the Code (or any predecessor thereto) or otherwise
(including Sections 1.1502-21 and 1502-22 of the Treasury Regulations).
(d) "Taxes" shall mean any and all taxes, charges, fees, levies or other
assessments, including, without limitation, income, gross receipts, excise, real
or personal property, sales, withholding, social security,
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<PAGE> 21
occupation, use, service, service use, license, net worth, payroll, franchise,
transfer and recording taxes, fees and charges, imposed by the Internal Revenue
Service or any taxing authority (whether domestic or foreign including, without
limitation, any state, county, local or foreign government or any subdivision or
taxing agency thereof (including a United States possession)), whether computed
on a separate, consolidated, unitary, combined or any other basis; and such term
shall include any interest, fines, penalties or additional amounts attributable
to, or imposed upon, or with respect to, any such amounts. "Tax Return" shall
mean any report, return, document, declaration or other information or filing
required to be supplied to any taxing authority or jurisdiction (foreign or
domestic) with respect to Taxes, including, without limitation, information
returns, any documents with respect to or accompanying payments of estimated
Taxes, or with respect to or accompanying requests for the extension of time in
which to file any such report, return, document, declaration or other
information.
Section 3.11 Contracts. Each Company Agreement is valid, binding and
enforceable and in full force and effect, except where failure to be valid,
binding and enforceable and in full force and effect would not have a Company
Material Adverse Effect, and there are no defaults thereunder, except those
defaults that would not have a Company Material Adverse Effect. Section 3.11 of
the Company Disclosure Schedule sets forth a true and complete list of (i) all
material Company Agreements entered into by the Company or any of its
Subsidiaries since December 31, 1996 and all amendments to any Company
Agreements included as an exhibit to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996 and (ii) all non-competition
agreements imposing restrictions on the ability of the Company or any of its
Subsidiaries to conduct business in any jurisdiction or territory.
Section 3.12 Real Property. (a) Section 3.12 of the Company Disclosure
Schedule sets forth a complete list of all real property owned by the Company or
its Subsidiaries (the"Real Property"). Except as set forth in Section 3.12 of
the Company Disclosure Schedule, the Company or its Subsidiaries has good and
marketable title to the Real Property, free and clear of all Encumbrances, other
than Encumbrances that do not in the aggregate materially detract from the value
or interfere with the use or operation of the Real Property subject thereto.
There are no proceedings, claims, disputes or conditions affecting any Real
Property that might curtail or interfere with in any material respect the use of
such property, nor is an action of eminent domain pending or to the knowledge of
the Company, threatened for all or any portion of the Real Property. Except as
disclosed in Section 3.12 of the Company Disclosure Schedule, the Company is not
a party to any lease, assignment or similar arrangement under which the Company
is a lessor, assignor or otherwise makes available for use by any third party
any portion of the Real Property.
(b) The Company has not received any notice of or other writing referring
to any requirements or recommendations by any insurance company that has issued
a policy covering any part of the Real Property or by any board of fire
underwriters or other body exercising similar functions, requiring or
recommending any repairs or work to be done on any part of the Real Property.
Except as would not materially detract from the value or interfere with the use
or operation of the Real Property subject thereto, the plumbing, electrical,
heating, air conditioning, ventilating and all other structural or material
mechanical systems in the buildings upon the Real Property are in good working
order and working condition, so as to be adequate for the operation of the
business of the Company as heretofore conducted, and the roof, basement and
foundation walls of all buildings on the Real Property are free of leaks and
other material defects, except for any matter otherwise covered by this sentence
which does not have, individually or in the aggregate, a Company Material
Adverse Effect.
(c) The Company has obtained all appropriate licenses, permits, easements
and rights of way, including proofs of dedication, required to use and operate
the Real Property in the manner in which the Real Property is currently being
used and operated, except for such licenses, permits or rights of way the
failure of which to have obtained does not have, individually or in the
aggregate, a Company Material Adverse Effect.
(d) The Company has not received notification that the Company is in
violation of any applicable building, zoning, anti-pollution, health or other
law, ordinance or regulation in respect of the Real Property or structures or
their operations thereon and no such violation exists, except for such
violations that do not, individually or in the aggregate, have a Company
Material Adverse Effect.
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Section 3.13 Intellectual Property. (a) Except as disclosed in Section 3.13
of the Company Disclosure Schedule, there are no trademarks, trade names,
service marks, logos, copyrights, or registrations or applications for
registration of any of the foregoing, patents or applications therefor, or
computer software programs which are owned by the Company or any of its
Subsidiaries or used in the operation of the business of the Company or any of
its Subsidiaries as currently conducted (collectively, the "Intellectual
Property") that are material to the conduct of the business of the Company or
any of its Subsidiaries as currently conducted.
(b) Except as set forth in Section 3.13 of the Company Disclosure Schedule
or as disclosed in the Company SEC Documents, as of the date hereof, to the
Company's knowledge, there are no pending or threatened claims of which the
Company or any of its Subsidiaries have been given written notice, by any person
challenging the ownership or use by the Company or any of its Subsidiaries of
any material Intellectual Property, which, if such claim were resolved adversely
to the Company, would have a Company Material Adverse Effect. The Company and
its Subsidiaries have such ownership of, or such rights by license, lease or
other agreement to, the Intellectual Property as are necessary for the operation
of their respective businesses as currently conducted, except as set forth in
Section 3.13 of the Company Disclosure Schedule or otherwise where the failure
to have such right would not have a Company Material Adverse Effect.
(c) To the knowledge of the Company, the Company and its Subsidiaries have
such title or such rights by license, lease or other agreement to the computer
software programs which are owned, licensed, leased or otherwise used by the
Company and its Subsidiaries and which are material to the conduct of their
businesses as currently conducted, as are necessary to permit the conduct of
their businesses as currently conducted, except as set forth in Section 3.13 of
the Company Disclosure Schedule or otherwise where the failure to have such
right would not have a Company Material Adverse Effect.
(d) All patents, registrations and applications for Intellectual Property
set forth in Section 3.13 of the Company Disclosure Schedule (i) are valid,
subsisting, in proper form and enforceable, and have been duly maintained,
including the submission of all necessary filings and fees in accordance with
the legal and administrative requirements of the appropriate jurisdictions and
(ii) have not lapsed, expired or been abandoned, and no patent, registration or
application therefor is the subject of any opposition, interference,
cancellation proceeding or other legal or governmental proceeding before any
governmental, registration or other authority in any jurisdiction.
(e) Except as set forth on Section 3.13 of the Company Disclosure Schedule,
all consents, filings, and authorizations by or with governmental authorities or
third parties necessary with respect to the consummation of the transactions
contemplated hereby as they may affect the Intellectual Property have been
obtained.
(f) Neither the Company nor any of its Subsidiaries has entered into any
material consent, indemnification, forbearance to sue, settlement agreement or
cross-licensing arrangement with any person relating to the Intellectual
Property or the intellectual property of any third party other than as may be
contained in the license agreements listed in Section 3.13 of the Disclosure
Schedule.
(g) Except as set forth on Section 3.13 of the Company Disclosure Schedule,
the Company and its Subsidiaries is not, nor will it be as a result of the
execution and delivery of this Agreement or the performance of its obligations
under this Agreement, in breach of any license, sublicense or other agreement
relating to the Intellectual Property.
(h) No former or present employees, officers or directors of the Company or
any of its Subsidiaries hold any right, title or interest directly or
indirectly, in whole or in part, in or to any Intellectual Property.
Section 3.14 Labor Matters. (a) Except as set forth in Section 3.14 of the
Company Disclosure Schedule, (i) there is no labor strike, dispute, slowdown,
stoppage or lockout actually pending, or to the knowledge of the Company,
threatened against or affecting the Company or any of its Subsidiaries and
during the past five years there has not been any such action (ii) neither the
Company nor any of its Subsidiaries is a party to or bound by any collective
bargaining or similar agreement with any labor organization, or work rules or
practices agreed to with any labor organization or employee association
applicable to employees of the Company or any of its Subsidiaries, (iii) none of
the employees of the Company or any of its Subsidiaries is
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<PAGE> 23
represented by any labor organization and the Company does not have any
knowledge of any union organizing activities among the employees of the Company
or any of its Subsidiaries within the past five years, nor does any question
concerning representation exist concerning such employees, (iv) there are no
material written personnel policies, rules or procedures applicable to employees
of the Company or any of its Subsidiaries, other than those set forth on Section
3.14 of the Company Disclosure Schedule, true and correct copies of which have
heretofore been delivered to Parent, (v) the Company and each of its
Subsidiaries is in compliance, in all material respects, with all applicable
laws respecting employment and employment practices, terms and conditions of
employment, wages, hours of work and occupational safety and health, and is not
engaged in any unfair labor practices as defined in the National Labor Relations
Act or other similar laws of any jurisdiction, (vi) there is no unfair labor
practice or similar charge or complaint against the Company or any of its
Subsidiaries pending or, to the knowledge of the Company, threatened before the
National Labor Relations Board or any similar state or foreign agency, (vii)
there is no grievance arising out of any collective bargaining or similar
agreement or other grievance procedure relating to any employee of the Company
of any of its Subsidiaries, (viii) to the knowledge of the Company, no charges
with respect to or relating to the Company or any of its Subsidiaries are
pending before the Equal Employment Opportunity Commission or any other federal,
state, local or foreign agency responsible for the prevention of unlawful
employment practices, (ix) neither the Company nor any of its Subsidiaries has
received notice of the intent of any federal, state, local or foreign agency
responsible for the enforcement of labor or employment laws to conduct an
investigation with respect to or relating to the Company or any of its
Subsidiaries and no such investigation is in progress, and (x) there are no
complaints, lawsuits or other proceedings pending or, to the knowledge of the
Company, threatened in any forum by or on behalf of any present or former
employee of the Company or any of its Subsidiaries, any applicant for employment
or classes of the foregoing alleging breach of any express or implied contract
or employment, any laws governing employment or the termination thereof or other
discriminatory, wrongful or tortious conduct in connection with the employment
relationship.
(b) Since the enactment of the Worker Adjustment and Retraining
Notification Act (the "WARN Act"), (i) the Company has not effectuated a "plant
closing," (as defined in the WARN Act) affecting any site of employment or one
or more facilities or operating units within any site of employment or facility
of the Company, (ii) there has not occurred a "mass layoff" (as defined in the
WARN Act) affecting any site of employment or facility of the Company or any of
its Subsidiaries; nor has the Company or any of its Subsidiaries been affected
by any transaction or engaged in layoffs or employment terminations sufficient
in number to trigger application of any similar state, local or foreign law or
regulation, and (iii) none of the employees of the Company or any of its
Subsidiaries has suffered an "employment loss" (as defined in the WARN Act)
during the ninety (90) day period prior to the date of this Agreement.
(c) As used in the Section 3.14, the representations made with respect to
the Subsidiaries other than Minserco, Inc. and Boonville Mining Services, Inc.
are made only to the Company's knowledge.
Section 3.15 Compliance with Laws. The Company and its Subsidiaries have
complied in a timely manner and in all material respects with all laws, rules
and regulations, ordinances, judgments, decrees, orders, writs and injunctions
of all United States federal, state, local, foreign governments and agencies
thereof which affect the business, properties or assets of the Company and its
Subsidiaries, and no notice, charge, claim, action or assertion has been
received by the Company or any of its Subsidiaries or has been filed, commenced
or, to the Company's knowledge, threatened against the Company or any of its
Subsidiaries alleging any violation of any of the foregoing. All licenses,
permits and approvals required under such laws, rules and regulations are in
full force and effect except where the failure to be in full force and effect
would not have a Company Material Adverse Effect.
Section 3.16 Environmental Matters. (a) Except as set forth in Section
3.16(a) of the Company Disclosure Schedule, each of the Company and its
Subsidiaries is in compliance with all federal, state, local and foreign laws
and regulations relating to pollution or protection of human health or the
environment, including, without limitation, ambient air, surface water, ground
water, land surface or subsurface strata, and natural resources (together
"Environmental Laws" and including, without limitation, laws and regulations
relating to emissions, discharges, releases or threatened releases of chemicals,
pollutants, contaminants, wastes, toxic or hazardous substances or wastes,
petroleum and petroleum products, polychlorinated biphenyls
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<PAGE> 24
(PCBs), or asbestos or asbestos-containing materials ("Materials of
Environmental Concern")), or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Materials of Environmental Concern except for such noncompliance that would not
have a Company Material Adverse Effect. Such compliance includes, but is not
limited to, the possession by the Company and each of its Subsidiaries of all
permits and other governmental authorizations required under all applicable
Environmental Laws, and compliance with the terms and conditions thereof. All
material permits and other governmental authorizations currently held by the
Company and each of its Subsidiaries pursuant to the Environmental Laws are
identified in Section 3.16(a) of the Company Disclosure Schedule.
(b) Except as set forth in Section 3.16(b) of the Company Disclosure
Schedule, neither the Company nor any of its Subsidiaries has received any
communication (written or oral), whether from a governmental authority, citizens
group, employee or otherwise, that alleges that the Company or any of its
Subsidiaries is not in compliance with any Environmental Laws, and there are no
circumstances that may prevent or interfere, to the knowledge of the Company,
with such compliance in the future. The Company has provided to Parent all
information that is in the possession of or reasonably available to the Company
regarding environmental matters pertaining to or the environmental condition of
the business of the Company and its Subsidiaries, or the compliance (or
noncompliance) by the Company and its Subsidiaries with any Environmental Laws.
(c) Except as set forth in Section 3.16(c) of the Company Disclosure
Schedule, there is no claim, action, cause of action, investigation or notice
(written or oral) (together, "Environmental Claim") by any person or entity
alleging potential liability (including, without limitation, potential liability
for investigatory costs, cleanup costs, governmental response costs, natural
resources damages, property damages, person injuries, or penalties) arising out
of, based on or resulting from (a) the presence, or release into the
environment, of any Material of Environmental Concern at any location, whether
or not owned or operated by the Company or any of its Subsidiaries or (b)
circumstances forming the basis of any violation, or alleged violation, of any
Environmental Law, that in either case is pending or threatened against the
Company or any of its Subsidiaries, or against any person or entity whose
liability for any Environmental Claim the Company has retained or assumed either
contractually or by operation of law.
(d) Except as set forth in Section 3.16(d) of the Company Disclosure
Schedule, there are no past or present actions, activities, conditions, events,
incidents, or circumstances, to the knowledge of the Company, including, without
limitation, the release, emission, discharge, presence or disposal of any
Material of Environmental Concern, that could form the basis of any
Environmental Claim against the Company or any of its Subsidiaries or, to
Company's knowledge, against any person or entity whose liability for any
Environmental Claim the Company or any of its Subsidiaries has retained or
assumed either contractually or by operation of law, except, in either case,
where the same would not have a Company Material Adverse Effect.
(e) Without in any way limiting the generality of the foregoing, to the
Company's knowledge: (i) all on-site and off-site locations where the Company or
any of its Subsidiaries has (previously or currently) stored, disposed or
arranged for the disposal of Materials of Environmental Concern are identified
in Section 3.16(e) of the Company Disclosure Schedule, (ii) all underground
storage tanks, and the capacity and contents of such tanks, located on any
property owned, leased, operated or controlled by Seller are identified in
Section 3.16(e) of the Company Disclosure Schedule, (iii) except as set forth in
Section 3.16(e) of the Company Disclosure Schedule and except as to matters that
would not have a Company Material Adverse Effect, there is no asbestos contained
in or forming part of any building, building component, structure or office
space owned, leased, operated or controlled by the Company or any of its
Subsidiaries, and (iv) except as set forth in Section 3.16(e) of the Company
Disclosure Schedule and except as to matters that would not have a Company
Material Adverse Effect, no PCBs or PCB-containing items are used or stored at
any property owned, leased, operated or controlled leased by the Company and its
Subsidiaries.
Section 3.17 Product Liability. Except as described in Section 3.17 of the
Company Disclosure Schedule, there are not presently pending, or to the
knowledge of the Company, threatened any civil, criminal or administrative
actions, suits, demands, claims, hearings, notices of violation, investigations,
proceedings or demand letters relating to any alleged hazard or alleged defect
in design, manufacture, materials or
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workmanship, including any failure to warn or alleged breach of express or
implied warranty or representation, relating to any product manufactured,
distributed or sold by or on behalf of the Company and its Subsidiaries.
Section 3.18 Information in Disclosure Documents. None of the written
information supplied or to be supplied by the Company for the purpose of
inclusion or incorporation by reference in any syndication and other materials
to be delivered to potential financing sources in connection with the
Transactions or otherwise in connection with the Debt Financing (as hereinafter
defined) (the "Disclosure Documents") will, at the date delivered, contain any
untrue statement of material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
Section 3.19 Information in Proxy Statement. The Proxy Statement, if any
(or any amendment thereof or supplement thereto), will, at the date mailed to
Company stockholders and at the time of the meeting of Company stockholders to
be held in connection with the Merger, not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading, except that no
representation is made by the Company with respect to statements made therein
based on information supplied in writing by Parent or the Purchaser for
inclusion in the Proxy Statement. The Proxy Statement will comply in all
material respects with the provisions of the Exchange Act and the rules and
regulations thereunder.
Section 3.20 Potential Conflict of Interest. Except as set forth in Section
3.20 of the Company Disclosure Schedule or in the Company SEC Documents filed
prior to the date hereof, since December 31, 1996, there have been no
transactions, agreements, arrangements or understandings between the Company or
its Subsidiaries, on the one hand, and their respective affiliates, on the other
hand, that would be required to be disclosed under Item 404 of Regulation S-K
under the Securities Act. Except as set forth in Section 3.20 of the Company
Disclosure Schedule or in the SEC Reports filed prior to the date hereof, no
officer of the Company or any of its Subsidiaries owns, directly or indirectly,
any interest in (excepting not more than 1% stock holdings for investment
purposes in securities of publicly held and traded companies) or is an officer,
director, employee or consultant of any person which is a competitor, lessor,
lessee, customer or supplier of the Company; and no officer or director of the
Company or any of its Subsidiaries (i) owns, directly or indirectly, in whole or
in part, any Intellectual Property which the Company or any of its Subsidiaries
is using or the use of which is necessary for the business of the Company or its
Subsidiaries; (ii) has any claim, charge, action or cause of action against the
Company or any of its Subsidiaries, except for claims for accrued vacation pay,
accrued benefits under the Plans and similar matters and agreements existing on
the date hereof; (iii) has made, on behalf of the Company or any of its
Subsidiaries, any payment or commitment to pay any commission, fee or other
amount to, or to purchase or obtain or otherwise contract to purchase or obtain
any goods or services from, any other Person of which any officer or director of
the Company or any of its Subsidiaries, or, to the Company's knowledge, a
relative of any of the foregoing, is a partner or stockholder (except stock
holdings solely for investment purposes in securities of publicly held and
traded companies); or (iv) owes any money to the Company or any of its
Subsidiaries.
Section 3.21 Opinion of Financial Advisor. The Company has received the
opinion of Jefferies & Company, Inc., dated the date hereof, to the effect that,
as of such date, the consideration to be received in the Offer and the Merger by
the Company's stockholders is fair to the Company's stockholders from a
financial point of view, a copy of which opinion has been delivered to Parent
and the Purchaser.
Section 3.22 Insurance. The Company and each of its Subsidiaries have
policies of insurance and bonds of the type and in amounts customarily carried
by persons conducting businesses or owning assets similar to those of the
Company and its Subsidiaries. There is no material claim pending under any of
such policies or bonds as to which coverage has been questioned, denied or
disputed by the underwriters of such policies or bonds. All premiums due and
payable under all such policies and bonds have been paid and the Company and its
Subsidiaries are otherwise in compliance in all material respects with the terms
of such policies and bonds. The Company has no knowledge of any threatened
termination of, or material premium increase with respect to, any of such
policies.
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Section 3.23 Suppliers and Customers. Since December 31, 1996, no material
licensor, vendor, supplier, licensee or customer of the Company or any of its
Subsidiaries has cancelled or otherwise modified its relationship with the
Company or its Subsidiaries and, to the Company's knowledge, (i) no such person
has any intention to do so, and (ii) the consummation of the transactions
contemplated hereby will not adversely affect any of such relationships.
Section 3.24 Accounts Receivable; Inventory. Subject to any reserves set
forth in the consolidated balance sheet of the Company included in the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1997 as filed with
the SEC prior to the date of this Agreement (the "Company Balance Sheet"), the
accounts receivable shown in the Company Balance Sheet arose in the ordinary
course of business; were not, as of the date of the Company Balance Sheet,
subject to any material discount, contingency, claim of offset or recoupment or
counterclaim; and represented, as of the date of the Company Balance Sheet, bona
fide claims against debtors for sales, leases, licenses and other charges. All
accounts receivable of the Company and its Subsidiaries arising after the date
of the Company Balance Sheet through the date of this Agreement arose in the
ordinary course of business and, as of the date of this Agreement, are not
subject to any material discount, contingency, claim of offset or recoupment or
counterclaim, except for normal reserves consistent with past practice. The
amount carried for doubtful accounts and allowances disclosed in the Company
Balance Sheet is believed by the Company as of the date of this Agreement to be
sufficient to provide for any losses which may be sustained or realization of
the accounts receivable shown in the Company Balance Sheet. As of the date of
the Company Balance Sheet, the inventories shown on the Company Balance Sheet
consisted in all material respects of items of a quantity and quality usable or
saleable in the ordinary course of business. All of such inventories were
acquired in the ordinary course of business and, as of the date of this
Agreement, have been replenished in all material respects in the ordinary course
of business consistent with past practices. All such inventories are valued on
the Company Balance Sheet in accordance with GAAP applied on a basis consistent
with the Company's past practices, and provision has been made or reserves have
been established on the Company Balance Sheet, in each case in an amount
believed by the Company as of the date of this Agreement to be adequate, for all
slow-moving, obsolete or unusable inventories.
Section 3.25 Title and Condition of Properties. The Company and its
Subsidiaries own good and marketable title, free and clear of all Encumbrances,
to all of the personal property and assets shown on the Company Balance Sheet or
acquired after June 30, 1997, except for (A) assets which have been disposed of
to nonaffiliated third parties since June 30, 1997 in the ordinary course of
business, (B) Encumbrances reflected in the Balance Sheet, (C) Encumbrances or
imperfections of title which are not, individually or in the aggregate, material
in character, amount or extent and which do not materially detract from the
value or materially interfere with the present or presently contemplated use of
the assets subject thereto or affected thereby, and (D) Liens for current Taxes
not yet due and payable. All of the machinery, equipment and other tangible
personal property and assets owned or used by the Company or its Subsidiaries
are in good condition and repair, except for ordinary wear and tear not caused
by neglect, and are usable in the ordinary course of business, except for any
matter otherwise covered by this sentence which does not have, individually or
in the aggregate, a Company Material Adverse Effect.
Section 3.26 Marion Acquisition. To the Company's knowledge, the
representations and warranties of the Marion Power Shovel Company, Marion Power
Shovel Pty. Ltd., INTOOL International B.V., and Global-GIX Canada Inc.
(collectively, the "Marion Sellers") and Global Industrial Technologies, Inc.
("Marion Parent") as set forth in that certain Asset Purchase Agreement, dated
as of July 21, 1997 by and among the Marion Sellers and Marion Parent and the
Company, Bucyrus (Australia) Proprietary Ltd., Bucyrus (Africa) (Proprietary)
Limited and Bucyrus Canada Limited (the "Marion Agreement") are true and correct
in all material respects. The purchase by the Company of certain assets of the
Marion Sellers and Marion Parent pursuant to the Marion Agreement shall be
referred to herein as the "Marion Acquisition."
Section 3.27 Full Disclosure. The Company has not knowingly failed to
disclose to Parent any facts material to the Company's business, results of
operations, assets, liabilities, financial condition or prospects. No
representation or warranty by the Company in this Agreement and no statement by
the Company in any document referred to herein (including the Schedules and
Exhibits hereto), contains any untrue statements of
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a material fact or omits to state any material fact necessary, in order to make
the statement made herein or therein, in light of the circumstances under which
they were made, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PARENT AND THE PURCHASER
Parent and the Purchaser, jointly and severally, represent and warrant to
the Company as follows:
Section 4.1 Organization. Parent is a limited liability company duly
organized, validly existing and in good standing under the laws of Delaware and
the Purchaser is a corporation duly organized, validly existing and in good
standing under the laws of Delaware.
Section 4.2 Authorization; Validity of Agreement; Necessary Action. Each of
Parent and the Purchaser has full corporate power and authority to execute and
deliver this Agreement and to consummate the Transactions. The execution,
delivery and performance by Parent and the Purchaser of this Agreement and the
consummation of the Merger and of the Transactions have been duly and validly
authorized by the members of Parent and by the Board of Directors the Purchaser
and by Parent as the sole shareholder of the Purchaser and no other corporate
action on the part of Parent or the Purchaser is necessary to authorize the
execution and delivery by Parent and the Purchaser of this Agreement and the
consummation of the Transactions. This Agreement has been duly executed and
delivered by Parent and the Purchaser and, assuming due and valid authorization,
execution and delivery hereof by the Company, is a valid and binding obligation
of each of Parent and the Purchaser enforceable against each of them in
accordance with its terms, except that (i) such enforcement may be subject to
applicable bankruptcy, insolvency or other similar laws, now or hereafter in
effect, affecting creditors' rights generally, and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
Section 4.3 Consents and Approvals; No Violations. Except for filings,
permits, authorizations, consents and approvals as may be required under, and
other applicable requirements of, the Exchange Act and the HSR Act, none of the
execution, delivery or performance of this Agreement by Parent or the Purchaser,
the consummation by Parent or the Purchaser of the Transactions or compliance by
Parent or the Purchaser with any of the provisions hereof will (i) conflict with
or result in any breach of any provision of the Certificate of Formation of
Parent or the Certificate of Incorporation or By-Laws of the Purchaser, (ii)
require any filing with, or permit, authorization, consent or approval of, any
Governmental Entity, (iii) result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a default (or give rise to
any right of termination, cancellation or acceleration) under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, lease, license,
contract, agreement or other instrument or obligation to which Parent, or any of
its Subsidiaries or the Purchaser is a party or by which any of them or any of
their respective properties or assets may be bound, or (iv) violate any order,
writ, injunction, decree, statute, rule or regulation applicable to Parent, any
of its Subsidiaries or any of their properties or assets, except in the case of
clause (ii), (iii) or (iv) such violations, breaches or defaults which would
not, individually or in the aggregate, have a material adverse effect on the
ability of Parent and Purchaser to consummate the Transactions.
Section 4.4 Information in Proxy Statement. None of the information
supplied by Parent or the Purchaser in writing specifically for inclusion or
incorporation by reference in the Proxy Statement (or any amendment thereof or
supplement thereto) will, at the date mailed to stockholders and at the time of
the meeting of stockholders to be held in connection with the Merger, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading.
Section 4.5 Financing. In order to finance the Transactions, Parent and the
Purchaser have obtained commitments for equity financing in an amount equal to
$143,000,000 (the "Equity Commitments"), with no conditions attached to such
commitments other than satisfaction of the conditions to the obligations of
Parent and the Purchaser set forth in this Agreement. The Company has obtained a
"highly confident" letter from
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Salomon Brothers Inc. as initial purchaser of $150,000,000 in aggregate
principal Senior Subordinated Notes Due 2007 of the Company (the "Notes") and a
commitment letter from Bank One, Milwaukee, National Association. (The letters
referred to in the immediately preceding sentence are hereinafter referred to
collectively, as the"Commitment Letters" and the financing described therein as
the "Debt Financing"). The Equity Commitments and the Debt Financing are
sufficient to consummate the Transactions.
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
Section 5.1 Acquisition Proposals. The Company will notify the Purchaser
immediately if any proposals are received by, any information is requested from,
or any negotiations or discussions are sought to be initiated or continued with
the Company or its officers, directors, employees, investment bankers,
attorneys, accountants or other agents, in each case in connection with any
Takeover Proposal (as defined below) or the possibility or consideration of
making a Takeover Proposal ("Takeover Proposal Interest") indicating, in
connection with such notice, the name of the Person indicating such Takeover
Proposal Interest and the terms and conditions of any proposals or offers. The
Company agrees that it will immediately cease and cause to be terminated any
existing activities, discussions or negotiations, if any, with any parties
conducted heretofore with respect to any Takeover Proposal Interest. The Company
agrees that it shall keep Parent informed, on a current basis, of the status and
terms of any Takeover Proposal Interest. As used in this Agreement, "Takeover
Proposal" shall mean any tender or exchange offer involving the Company, any
proposal for a merger, consolidation or other business combination involving the
Company, any proposal or offer to acquire in any manner a substantial equity
interest in, or a substantial portion of the business or assets of, the Company
(other than immaterial or insubstantial assets or inventory in the ordinary
course of business or assets held for sale), any proposal or offer with respect
to any recapitalization or restructuring with respect to the Company or any
proposal or offer with respect to any other transaction similar to any of the
foregoing with respect to the Company other than the Marion Acquisition or
pursuant to the transactions to be effected pursuant to this Agreement.
Section 5.2 Interim Operations of the Company. The Company covenants and
agrees that, except (i) as expressly contemplated by this Agreement, including
without limitation Section 5.3(b), (ii) as set forth in Section 5.2 of the
Company Disclosure Schedule, (iii) as set forth in the term sheet describing the
terms of the bridge loan by and between the Company and PPM American Special
Investments Fund, L.P., which term sheet is attached as Exhibit A to Section 5.2
of the Company Disclosure Schedule (but subject to Parent's prior written
approval, which approval shall not be unreasonably withheld, of any definitive
documentation with respect thereto), (iv) for the consummation of the Marion
Acquisition pursuant to and in accordance with the terms of the Marion
Agreement, or (v) as agreed in writing by Parent, after the date hereof, and
prior to the time the designees of Parent have been elected to, and shall
constitute a majority of, the Board of Directors of the Company pursuant to
Section 1.3 hereof (the "Appointment Date"):
(a) the business of the Company and its Subsidiaries shall be conducted
only in the ordinary and usual course and, to the extent consistent therewith,
each of the Company and its Subsidiaries shall use its best efforts to preserve
its business organization intact and maintain its existing relations with
customers, suppliers, employees, creditors and business partners;
(b) the Company will not, directly or indirectly, (i) except upon exercise
of the Warrant or Options or other rights to purchase shares of Common Stock
pursuant to the Option Plans outstanding on the date hereof, issue, sell,
transfer or pledge or agree to sell, transfer or pledge any treasury stock of
the Company or any capital stock of any of its Subsidiaries beneficially owned
by it, (ii) amend its Articles of Incorporation or By-laws or similar
organizational documents; or (iii) split, combine or reclassify the outstanding
Shares or any outstanding capital stock of any of the Subsidiaries of the
Company;
(c) neither the Company nor any of its Subsidiaries shall: (i) declare, set
aside or pay any dividend or other distribution payable in cash, stock or
property with respect to its capital stock; (ii) issue, sell, pledge, dispose of
or encumber any additional shares of, or securities convertible into or
exchangeable for, or options,
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warrants, calls, commitments or rights of any kind to acquire (or stock
appreciation rights with respect to), any shares of capital stock of any class
of the Company or its Subsidiaries, other than Shares reserved for issuance on
the date hereof pursuant to the exercise of Options or with respect to SARs
outstanding on the date hereof; (iii) transfer, lease, license, sell, mortgage,
pledge, dispose of, or encumber any assets, other than in the ordinary and usual
course of business and consistent with past practice, or incur or modify any
indebtedness or other liability, other than in the ordinary and usual course of
business and consistent with past practice; or (iv) redeem, purchase or
otherwise acquire, directly or indirectly, any of its capital stock;
(d) make any change in the compensation payable or to become payable to any
of its officers, directors, employees, agents or consultants (other than general
increases in wages to employees who are not officers or directors or affiliates
in the ordinary course consistent with past practice), or to Persons providing
management services, enter into or amend any employment, severance, consulting,
termination or other agreement or employee benefit plan or make any loans to any
of its officers, directors, employees, affiliates, agents or consultants or make
any change in its existing borrowing or lending arrangements for or on behalf of
any of such Persons pursuant to an employee benefit plan or otherwise;
(e) pay or make any accrual or arrangement for payment of any pension,
retirement allowance or other employee benefit pursuant to any existing plan,
agreement or arrangement to any officer, director, employee or affiliate or pay
or agree to pay or make any accrual or arrangement for payment to any officers,
directors, employees or affiliates of the Company of any amount relating to
unused vacation days, except payments and accruals made in the ordinary course
consistent with past practice or as required under the terms of the Plans; adopt
or pay, grant, issue, accelerate or accrue salary or other payments or benefits
pursuant to any pension, profit-sharing, bonus, extra compensation, incentive,
deferred compensation, stock purchase, stock option, stock appreciation right or
other stock-based incentive, group insurance, severance pay, retirement or other
employee benefit plan, agreement or arrangement, or any employment or consulting
agreement with or for the benefit of any director, officer, employee, agent or
consultant, whether past or present except for payments and accruals made in the
ordinary course of business and consistent with past practice or as required
under the terms of the Plans; or amend in any material respect any such existing
plan, agreement or arrangement in a manner inconsistent with the foregoing;
(f) the Company shall not modify, amend or terminate any of the material
Company Agreements or waive, release or assign any material rights on claims,
except in the ordinary course of business and consistent with past practice or
as required under the terms of the Plans;
(g) neither the Company nor any of its Subsidiaries shall permit any
insurance policy naming it as a beneficiary or a loss payable payee to be
cancelled or terminated without notice to Parent except in the ordinary course
of business and consistent with past practice;
(h) neither the Company nor any of its Subsidiaries shall (i) incur or
assume any long-term debt, or except in the ordinary course of business, incur
or assume any short-term indebtedness in amounts not consistent with past
practice; (ii) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the obligations of
any other person, except in the ordinary course of business and consistent with
past practice; (iii) make any loans, advances or capital contributions to, or
investments in, any other person except in the ordinary course of business and
consistent with past practice; or (iv) enter into any material commitment or
transaction (including, but not limited to, any borrowing, capital expenditure
or purchase, sale or lease of assets or real estate) except in the ordinary
course of business and consistent with past practice;
(i) neither the Company nor any of its Subsidiaries shall (i) change any of
the accounting methods used by it unless required by GAAP or (ii) make any
material Tax election or change any material Tax election already made, adopt
any material Tax accounting method, change any material Tax accounting method
unless required by applicable law, enter into any material closing agreement,
settle any material Tax claim or assessment or consent to any material Tax claim
or assessment or any waiver of the statute of limitations for any such claim or
assessment; and
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(j) neither the Company nor any of its Subsidiaries shall pay, discharge or
satisfy any claims, liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than the payment, discharge or
satisfaction of any such claims, liabilities or obligations, in the ordinary
course of business and consistent with past practice, of claims, liabilities or
obligations reflected or reserved against in, or contemplated by, the
consolidated financial statements (or the notes thereto) of the Company;
(k) neither the Company nor any of its Subsidiaries shall adopt a plan of
complete or partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization of the Company or any of
its Subsidiaries (other than the Merger);
(l) neither the Company nor any of its Subsidiaries shall take, or agree to
commit to take, any action that would or is reasonably likely to result in any
of the conditions to the Merger set forth in Article VII or any of the
conditions to the Offer set forth in Annex I not being satisfied, or would make
many representation or warranty of the Company contained herein inaccurate in
any respect at, or as of any time prior to, the Effective Time, or that would
materially impair the ability of the Company to consummate the Merger in
accordance with the terms hereof or materially delay such consummation; and
(m) the Company shall not enter into an agreement, contract, commitment or
arrangement to do any of the foregoing, or to authorize, recommend, propose or
announce an intention to do any of the foregoing.
Section 5.3 No Solicitation. (a) The Company will not, and will use its
best efforts to ensure that its officers, directors, employees, investment
bankers, attorneys, accountants and other agents do not, directly or indirectly:
(i) initiate, solicit or encourage, or take any action to facilitate the making
of, any offer or proposal which constitutes or is reasonably likely to lead to
any Takeover Proposal, (ii) enter into any agreement with respect to any
Takeover Proposal, or (iii) in the event of an unsolicited written Takeover
Proposal for the Company engage in negotiations or discussions with, or provide
any information or data to, any Person (other than Parent, any of its affiliates
or representatives and except for information which has been previously publicly
disseminated by the Company) relating to any Takeover Proposal; provided
however, that nothing contained in this Section 5.3 or any other provision
hereof shall prohibit the Company or the Company's Board of Directors from (i)
taking and disclosing to the Company's stockholders a position with respect to a
tender or exchange offer by a third party pursuant to Rules 14d-9 and 14e-2
promulgated under the Exchange Act or (ii) making such disclosure to the
Company's stockholders as, the Board of Directors may determine in good faith is
required under applicable law after receipt of a written opinion from outside
legal counsel to the Company that such disclosure is required under applicable
law and that the failure to make such disclosure would likely cause the Board of
Directors to violate its fiduciary duties to the Company's stockholders under
applicable law.
(b) Notwithstanding the foregoing, prior to the acceptance of Shares
pursuant to the Offer, the Company may furnish information concerning its
business, properties or assets to any Person pursuant to terms substantially
similar to those contained in the Confidentiality Agreement, dated July 1, 1997
entered into between American Industrial Partners and the Company (the
"Confidentiality Agreement") and may negotiate and participate in discussions
and negotiations with such Person concerning a Takeover Proposal if (x) such
entity or group has on an unsolicited basis submitted a bona fide written
proposal to the Company relating to any such transaction which the Board of
Directors determines in good faith, after receiving advice from Jefferies & Co.
or another nationally recognized investment banking firm, represents a superior
transaction to the Offer and the Merger and (y) in the opinion of the Board of
Directors of the Company, only after receipt of a written opinion from outside
legal counsel to the Company to such effect, the failure to provide such
information or access or to engage in such discussions or negotiations would
likely cause the Board of Directors to violate its fiduciary duties to the
Company's stockholders under, or otherwise violate or subject the Board of
Directors to liability under applicable law (a Takeover Proposal which satisfies
clauses (x) and (y) being referred to herein as a "Superior Proposal"). The
Company shall promptly, and in any event within one business day following any
determination by the Board of Directors that a Takeover Proposal is a Superior
Proposal, notify Parent of such determination of the same and prior to providing
any such party with any material non-public information. The Company shall
promptly provide to Parent any material non-public information regarding the
Company provided to any other party which was not previously provided
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to Parent. At any time after two business days following notification to Parent
of the Company's intent to do so (which notification shall include the identity
of the bidder and the material terms and conditions of the proposal) and if the
Company has otherwise complied with the terms of this Section 5.3(b), the Board
of Directors may terminate this Agreement pursuant to clause (ii) of Section
8.1(f) and enter into an agreement with respect to a Superior Proposal, provided
that the Company shall, concurrently with entering into such agreement, pay or
cause to be paid to Parent the Termination Fee (as defined in Section 8.2(b)
hereof), plus any amount payable at the time for reimbursement of expenses
pursuant to Section 8.2(b) hereof.
(c) Except as set forth in Sections 5.3(b) and 6.1, neither the Board of
Directors of the Company nor any committee thereof shall (i) withdraw or modify,
or propose to withdraw or modify, in a manner adverse to Parent or the
Purchaser, the approval or recommendation by such Board of Directors or any such
committee of the Offer, this Agreement or the Merger, (ii) approve or recommend
or propose to approve or recommend, any Takeover Proposal or (iii) enter into
any agreement with respect to any Takeover Proposal.
ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.1 Proxy Statement. As promptly as practicable after the
consummation of the Offer and if required by the Exchange Act, the Company shall
prepare and file with the SEC, and shall use all reasonable efforts to have
cleared by the SEC, and promptly thereafter shall mail to stockholders, the
Proxy Statement. The Proxy Statement shall contain the recommendation of the
Board of Directors in favor of the Merger, unless the Board of Directors
determines in good faith, after receipt of a written opinion from outside legal
counsel to the Company to such effect, that inclusion of such recommendation in
the Proxy Statement would likely cause the Board of Directors to violate its
fiduciary duties to the Company's stockholders under, or otherwise violate or
subject the Board of Directors to liability under applicable law.
Section 6.2 Meeting of Stockholders of the Company. At the Special Meeting,
if any, the Company shall use its best efforts to solicit from stockholders of
the Company proxies in favor of the Merger and shall take all other action
necessary or, in the reasonable opinion of the Purchaser, advisable to secure
any vote or consent of stockholders required by Delaware Law to effect the
Merger. The Purchaser agrees that it shall vote, or cause to be voted, in favor
of the Merger all Shares directly or indirectly beneficially owned by it.
Section 6.3 Additional Agreements. Subject to the terms and conditions as
herein provided, the Company, Parent and Purchaser will each comply in all
material respects with all applicable laws and with all applicable rules and
regulations of any governmental authority to achieve the satisfaction of the
Minimum Condition and all conditions set forth in Annex I attached hereto and
Article VII hereof, and to consummate and make effective the Merger and the
other transactions contemplated hereby. Each of the parties hereto agrees to use
all reasonable efforts to obtain in a timely manner all necessary waivers,
consents and approvals and to effect all necessary registrations and filings,
and to use all reasonable efforts to take, or cause to be taken, all other
actions and to do, or cause to be done, all other things necessary, proper or
advisable to consummate and make effective as promptly as practicable the
transactions contemplated by this Agreement. In case at any time after the
Effective Time any further action is necessary or desirable to carry out the
purposes of this Agreement, the proper officers and directors of the Company,
Parent and the Purchaser shall use all reasonable efforts to take, or cause to
be taken, all such necessary actions.
Section 6.4 Notification of Certain Matters. The Company shall give prompt
notice to the Purchaser and the Purchaser shall give prompt notice to the
Company, of (i) the occurrence, or non-occurrence of any event whose occurrence,
or non-occurrence would be likely to cause either (A) any representation or
warranty contained in this Agreement to be untrue or inaccurate in any material
respect at any time from the date hereof to the Effective Time or (B) any
condition set forth in Annex I to be unsatisfied in any material respect at any
time from the date hereof to the date the Purchaser purchases Shares pursuant to
the Offer and (ii) any material failure of the Company, the Purchaser, or
Parent, as the case may be, or any officer, director, employee or agent thereof,
to comply with or satisfy any covenant, condition or agreement to be complied
with
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or satisfied by it hereunder; provided, however, that the delivery of any notice
pursuant to this Section 6.4 shall not limit or otherwise affect the remedies
available hereunder to the party receiving such notice.
Section 6.5 Access; Confidentiality. (a) From the date hereof to the
Effective Time, upon reasonable notice, the Company shall (and shall cause each
of its Subsidiaries to) afford to the officers, employees, accountants, counsel,
financing sources and other representatives of Parent, access, during normal
business hours during the period prior to the Appointment Date, to all its
properties, books, contracts, commitments and records and, during such period,
the Company shall (and shall cause each of its Subsidiaries to) furnish promptly
to the Parent (a) a copy of each report, schedule, registration statement and
other document filed or received by it during such period pursuant to the
requirements of federal securities laws and (b) all other information concerning
its business, properties and personnel as Parent may reasonably request. Access
shall include the right to conduct such environmental studies and tests as
Parent, in its reasonable discretion, shall deem appropriate. After the
Appointment Date, the Company shall provide Parent and such persons as Parent
shall designate with all such information, at such time as Parent shall request.
Unless otherwise required by law and until the Appointment Date, Parent and
Purchaser will hold any such information which is non-public in confidence in
accordance with, and will otherwise abide by, the provisions of the
Confidentiality Agreement. No investigation pursuant to this Section 6.5(a)
shall affect any representation or warranty made by the Company hereunder.
(b) Prior to the Closing, the Company and its accountants, counsel, agents
and other representatives shall cooperate with the Purchaser by providing
information about the Company which is necessary for the Purchaser and its
accountants, agents, counsel and other representatives to prepare the Disclosure
Documents and such other documents and other reasonable requests with respect to
such documents. Notwithstanding the penultimate sentence of Section 6.5(a), the
Purchaser may disclose, or cause its representatives to disclose, and at the
request of the Purchaser, the Company shall and shall cause its Subsidiaries to,
disclose information concerning the Company and its Subsidiaries, and their
respective businesses, assets and properties, and the transactions contemplated
by this Agreement in the Disclosure Documents and to prospective financing
sources in connection with the Transactions.
Section 6.6 Consents and Approvals. (a) Each of the Company, Parent and the
Purchaser will take all reasonable actions necessary to comply promptly with all
legal requirements which may be imposed on it with respect to this Agreement and
the Transactions (which actions shall include, without limitation, furnishing
all information required under the HSR Act and in connection with approvals of
or filings with any other Governmental Entity) and will promptly cooperate with
and furnish information to each other in connection with any such requirements
imposed upon any of them or any of their Subsidiaries in connection with this
Agreement and the Transactions. Each of the Company, Parent and the Purchaser
will, and will cause its Subsidiaries to, take all reasonable actions necessary
to obtain (and will cooperate with each other in obtaining) any consent,
authorization, order or approval of, or any exemption by, any Governmental
Entity or other public or private third party required to be obtained or made by
Parent, the Purchaser, the Company or any of their Subsidiaries in connection
with the Transactions or the taking of any action contemplated thereby or by
this Agreement.
(b) The Company and Parent shall take all reasonable actions necessary to
file as soon as practicable notifications under the HSR Act and to respond as
promptly as practicable to any inquiries received from the Federal Trade
Commission and the Antitrust Division of the Department of Justice for
additional information or documentation and to respond as promptly as
practicable to all inquiries and requests received from any State Attorney
General or other Governmental Entity in connection with antitrust matters.
Section 6.7 Company's Brokers or Finders. The Company represents, as to
itself and its Subsidiaries and affiliates, that no agent, broker, investment
banker, financial advisor or other firm or person is or will be entitled to any
brokers' or finder's fee or any other commission or similar fee from the Company
or any of its Subsidiaries in connection with any of the transactions
contemplated by this Agreement except for Jefferies & Company, Inc., whose fees
are set forth in the engagement letter attached as Section 6.7 of the Company
Disclosure Schedule.
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Section 6.8 Purchaser's Brokers or Finders. Each of the Purchaser and
Parent represents, as to itself and its affiliates, that no agent, broker,
investment banker, financial advisor or other firm or person is or will be
entitled to any brokers' or finder's fee or any other commission or similar fee
from either Purchaser or Parent in connection with any of the transactions
contemplated by this Agreement.
Section 6.9 Publicity. The initial press release with respect to the
execution of this Agreement shall be a joint press release acceptable to Parent
and the Company. Thereafter, so long as this Agreement is in effect, neither the
Company, Parent nor any of their respective affiliates shall issue or cause the
publication of any press release or other announcement with respect to the
Merger, this Agreement or the other Transactions without the prior consultation
of the other party, except as such party believes, after receiving the advice of
outside counsel and after informing all other parties thereto, may be required
by law or by any listing agreement with a national securities exchange or
trading market. Information included in Disclosure Documents shall not be deemed
to constitute public disclosure for purposes of this Agreement.
Section 6.10 Directors' and Officers' Insurance and Indemnification. (a) In
the event of any threatened or actual claim, action, suit, proceeding or
investigation, whether civil, criminal or administrative, including, without
limitation, any such claim, addition, suit, proceeding or investigation by or in
the right of the Company or any of its Subsidiaries, in which any of the present
or former officers or directors (the "Indemnified Parties") of the Company or
any of its Subsidiaries is, or is threatened to be, made a party by reason of
the fact that he or she is or was, prior to the Effective Time, a director or
officer of the Company or any of its subsidiaries or is or was, prior to the
Effective Time, serving as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise at the
request of the Company or any of its Subsidiaries, whether such claim arises
before or after the Effective Time, the Company shall indemnify and hold
harmless, and after the Effective Time the Surviving Corporation, jointly and
severally, shall indemnify and hold harmless, as and to the full extent
permitted by applicable law, each such Indemnified Party against any losses,
claims, damages, liabilities, costs, expenses (including reasonable attorneys'
fees and expenses), judgments, fines and amounts paid in settlement in
connection with any such claim, action, suit proceeding or investigation. In the
event of any such claim, action, suit proceeding or investigation (whether
arising before or after the Effective Time), (i) the Indemnified Parties may
retain counsel satisfactory to them (which counsel shall be reasonably
satisfactory to the Company or the Surviving Corporation), and the Company, or
the Surviving Corporation after the Effective Time, shall pay all reasonable
fees and expenses of such counsel for the Indemnified Parties promptly as
statements therefor are received and (ii) the Company and the Surviving
Corporation will use their respective reasonable efforts to assist in the
vigorous defense of any such matter; provided, that neither the Company nor the
Surviving Corporation shall be liable for any settlement effected without its
prior written consent (which consent shall not be unreasonably withheld); and
provided further that the Surviving Corporation shall have no obligation
hereunder to any Indemnified Party when and if a court of competent jurisdiction
shall ultimately determine, and such determination shall have become final and
non-appealable, that indemnification of such Indemnified Party in the manner
contemplated hereby is prohibited by applicable law. The Indemnified Parties as
a group may retain only one law firm to represent them with respect to each such
matter unless there is, under applicable standards of professional conduct, a
conflict of interest on any significant issue between the positions of any two
or more Indemnified Parties, or any similar impediment to the joint
representation of multiple Indemnified Parties by a single law firm.
(b) Until the Effective Time the Company shall keep in effect Section 7.7
of its By-Laws, and thereafter for a period of six years the Surviving
Corporation shall keep in effect in its By-Laws a provision which provides for
indemnification of the Indemnified Parties to the extent permitted by Delaware
Law.
(c) Parent or the Surviving Corporation shall maintain the Company's
existing officers' and directors' liability insurance ("D&O Insurance") for a
period of not less than six years after the Effective Time; provided, that the
Parent may substitute therefor policies of substantially equivalent coverage and
amounts containing terms no less favorable to such former directors or officers;
provided, further, if the existing D&O Insurance expires, is terminated or
cancelled during such period, Parent or the Surviving Corporation will use all
reasonable efforts to obtain substantially similar D&O Insurance; provided,
further, however, that in no event shall Parent be required to pay aggregate
premiums for insurance under this Section 6.10(c) in excess of
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150% of the average of the aggregate premiums paid by the Company in 1995, 1996
and 1997 (through the date hereof) on an annualized basis for such purpose (the
"Average Premium"), which true and correct amounts are set forth in Section
6.10(c) of the Company Disclosure Schedule; and provided, further, that if the
Parent or the Surviving Corporation is unable to obtain the amount of insurance
required by this Section 6.10(c) for such aggregate premium, Parent or the
Surviving Corporation shall obtain as much insurance as can be obtained for an
annual premium not in excess of 150% of the Average Premium.
Section 6.11 Purchaser Compliance. Parent shall cause the Purchaser to
comply with all of its obligations under or related to this Agreement.
Section 6.12 Reasonable Best Efforts. (a) Prior to the Closing, upon the
terms and subject to the conditions of this Agreement, the Purchaser and the
Company, agree to use their respective reasonable 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 under any applicable laws to consummate and make effective
the transactions contemplated by this Agreement as promptly as practicable
including, but not limited to (i) the preparation and filing of all forms,
registrations and notices required to be filed to consummate the transactions
contemplated by this Agreement and the taking of such actions as are necessary
to obtain any requisite approvals, consents, orders, exemptions or waivers by
any third party or Governmental Entity, (ii) the preparation of any Disclosure
Documents requested by the Purchaser and (iii) the satisfaction of the other
parties' conditions to Closing. In addition, no party hereto shall take any
action after the date hereof that would reasonably be expected to materially
delay the obtaining of, or result in not obtaining, any permission, approval or
consent from any Governmental Entity necessary to be obtained prior to Closing.
(b) Prior to the Closing, each party shall promptly consult with the other
parties hereto with respect to, provide any necessary information with respect
to and provide the other (or its counsel) copies of, all filings made by such
party with any Governmental Authority or any other information supplied by such
party to a Governmental Entity in connection with this Agreement and the
transactions contemplated by this Agreement. Each party hereto shall promptly
inform the other of any communication from any Governmental Entity regarding any
of the transactions contemplated by this Agreement. If any party hereto or
affiliate thereof receives a request for additional information or documentary
material from any such Government Entity with respect to the transactions
contemplated by this Agreement, then such party will endeavor in good faith to
make, or cause to be made, as soon as reasonably practicable and after
consultation with the other party, an appropriate response in compliance with
such request. To the extent that transfers of permits or Environmental Permits
are required as a result of execution of this Agreement or consummation of the
transactions contemplated hereby, the Company shall use its best efforts to
effect such transfers.
(c) Notwithstanding the foregoing, nothing in this Agreement shall be
deemed to require the Purchaser to defend against any litigation brought by any
Governmental Entity seeking to prevent the consummation of the transactions
contemplated hereby.
(d) The Company agrees to use its reasonable best efforts to assist the
Purchaser in connection with obtaining any financing in connection with the
consummation of the Transactions, including the Debt Financing. Without limiting
the generality of the foregoing, the Company shall (i) promptly prepare all
reasonably requested financial statements required to be included in the
Disclosure Documents and (ii) take all action reasonably requested by Parent
that is necessary or appropriate to effect the satisfaction and discharge of the
indenture, dated December 14, 1994 (the "Secured Notes Indenture"), between
Bucyrus-Erie Company (predecessor to the Company) and Harris Trust and Savings
Bank, as Trustee (the "Secured Notes Indenture Trustee"), relating to the
Company's 10.5% Secured Notes due December 14, 1999 (the "Secured Notes")
pursuant to Sections 401(1)(B)(iii), 401(2) and 401(3) of the Secured Notes
Indenture and to cause the filing of UCC-3 termination statements covering the
collateral securing the Secured Notes, in each case, effective upon the purchase
of any Shares pursuant to the Offer.
Section 6.13 Rights Plan. In the event that at anytime following the date
hereof, the Company adopts a stockholder rights plan, the Company shall provide
an exception with respect to definitions of "acquiring person" and/or
"triggering event" and terms of similar import contained within such plan with
respect to any shares of Common Stock that may be acquired pursuant to the
exercise of the JNL Option, and the
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subsequent disposition of any such shares to a third party (a "Subsequent
Disposition"), such that any rights that may be issued under such plan are not
modified or changed as a result of any such acquisition or disposition of shares
of Common Stock.
ARTICLE VII
CONDITIONS
Section 7.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger shall be subject to the
satisfaction on or prior to the Closing Date of each of the following
conditions, any and all of which may be waived in whole or in part by the
Company, Parent or the Purchaser, as the case may be, to the extent permitted by
applicable law:
(a) Stockholder Approval. The Merger and this Agreement shall have been
approved and adopted by the requisite vote of the holders of the Shares, if
required by Delaware Law;
(b) Statutes; Court Orders. No statute, rule or regulation shall have been
enacted or promulgated by any governmental authority which prohibits the
consummation of the Merger; and there shall be no order or injunction of a court
of competent jurisdiction in effect precluding consummation of the Merger; and
(c) Purchase of Shares in Offer. The Purchaser shall have made, or caused
to be made, the Offer and shall have purchased, or caused to be purchased, the
Shares pursuant to the Offer; provided, that this condition shall be deemed to
have been satisfied with respect to the obligation of Parent and the Purchaser
to effect the Merger if the Purchaser fails to accept for payment or pay for
Shares pursuant to the Offer in violation of the terms of the Offer or of this
Agreement; and
(d) HSR Approval. The applicable waiting period under the HSR Act shall
have expired or been terminated.
ARTICLE VIII
TERMINATION
Section 8.1 Termination. This Agreement may be terminated and the
transactions contemplated herein may be abandoned at any time before the
Effective Time, whether before or after stockholder approval:
(a) By mutual written consent of the Parent and the Board of Directors of
the Company; or
(b) By Parent if the Offer shall have expired or been terminated without
any Shares being purchased thereunder by the Purchaser as a result of the
occurrence of any of the events set forth in Annex I; or
(c) By either Parent or the Company if a court of competent jurisdiction or
governmental, regulatory or administrative agency or commission shall have
issued an order, decree or ruling or taken any other action (which order, decree
or ruling the parties hereto shall use their best efforts to lift), in each case
permanently restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement; or
(d) By Parent if, without any material breach by Parent or the Purchaser of
its obligations under this Agreement, the purchase of Shares pursuant to the
Offer shall not have occurred on or before February 20, 1998; or
(e) By the Company if, without any material breach by the Company of its
obligations under this Agreement, the purchase of Shares pursuant to the Offer
shall not have occurred on or before February 20, 1998; or
(f) By the Company (i) if there shall be a material breach of any of Parent
or the Purchaser's representations, warranties or covenants hereunder, which
breach cannot be or has not been cured within thirty days of the receipt of
written notice thereof or (ii) to allow the Company to enter into an agreement
in accordance with Section 5.3(b) with respect to a Superior Proposal; provided
that it has complied with all
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provisions thereof, including the notice provision therein, and that it makes
simultaneous payment of the Termination Fee, plus any amounts then due as a
reimbursement of expenses; or
(g) By Parent, if prior to the purchase of Shares pursuant to the Offer,
the Company shall have breached in any material respect (without reference to
any materiality qualification contained therein) any representation, warranty or
covenant or other agreement contained in this Agreement, which breach (i) would
give rise to the failure of a condition set forth in paragraph (e) or (f) of
Annex I hereto and (ii) cannot be or has not been cured within thirty days of
the receipt of written notice thereof; or
(h) By Parent, at any time prior to the purchase of the Shares pursuant to
the Offer, if (i) the Board of Directors of the Company shall withdraw, modify,
or change its recommendation or approval in respect of this Agreement or the
Offer in a manner adverse to the Purchaser, (ii) the Board of Directors of the
Company shall have recommended any proposal other than by Parent or the
Purchaser in respect of a Takeover Proposal, (iii) the Company shall have
exercised a right with respect to Takeover Proposal referenced in Section 5.3(b)
and shall, directly or through its representatives, continue discussions with
any third party concerning a Takeover Proposal for more than ten business days
after the date of receipt of such Takeover Proposal, (iv) a Takeover Proposal
that is publicly disclosed shall have been commenced, publicly proposed or
communicated to the Company which contains a proposal as to price (without
regard to whether such proposal specifies a specific price or a range of
potential prices) and the Company shall not have rejected such proposal within
ten business days of its receipt or, if sooner, the date its existence first
becomes publicly disclosed, or (v) any Person or group (as defined in Section
13(d)(3) of the Exchange Act) other than Parent or the Purchaser or any of their
respective subsidiaries or affiliates shall have become the beneficial owner of
more than 15% of the outstanding Shares (either on a primary or a fully diluted
basis); provided, however, that this provision shall not apply to any Person
that owns more than 15% of the outstanding Shares on the date hereof; provided,
further, that such Person does not further increase its beneficial Ownership
beyond the number of Shares such Person beneficially owns on the date hereof.
Section 8.2 Effect of Termination.
(a) In the event of termination of this Agreement as provided in Section
8.1 hereof, written notice thereof shall forthwith be given to the other party
or parties specifying the provision hereof pursuant to which such termination is
made, and this Agreement shall forthwith become null and void and there shall be
no liability on the part of Parent, the Purchaser or the Company, except (i) as
set forth in Sections 6.5(a) and 9.3 hereof and (ii) nothing herein shall
relieve any party from liability for any breach of this Agreement; provided,
however, the obligation of the Company under Section 6.13 shall survive the
termination of this Agreement but only until immediately after the occurrence of
one (1) Subsequent Disposition.
(b) If (i) Parent shall have terminated this Agreement pursuant to Section
8.1(h), (ii) Parent shall have terminated this Agreement pursuant to Section
8.1(g) and following the date hereof but prior to such termination there shall
have been a Takeover Proposal Interest or (iii) the Company shall have
terminated this Agreement pursuant to Section 8.1(f)(ii), then in any such case
the Company shall pay simultaneously with such termination if pursuant to
Section 8.1(f)(ii) and promptly, but in no event later than two business days
after the date of such termination or event if pursuant to Section 8.1(h) or
8.1(g), to Parent a termination fee (the "Termination Fee") of $7,000,000 plus
an amount, not in excess of $1,500,000, equal to the Purchaser's actual and
reasonably documented out-of-pocket expenses incurred by Parent and the
Purchaser in connection with the Offer, the Merger, this Agreement and the
consummation of the transactions contemplated hereby, which amount shall be
payable by wire transfer to such account as Parent may designate in writing to
the Company. Upon payment of the Termination Fee the Company shall have no
further obligation to Parent or the Purchaser, under this Agreement or
otherwise, by reason of the termination of this Agreement or, if this Agreement
is terminated by Parent pursuant to Section 8.1, by reason of any breach of this
Agreement or any representation, warranty or covenant herein by the Company.
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ARTICLE IX
MISCELLANEOUS
Section 9.1 Amendment and Modification. Subject to applicable law, this
Agreement may be amended, modified and supplemented in any and all respects,
whether before or after any vote of the stockholders of the Company contemplated
hereby, by written agreement of the parties hereto, by action taken by their
respective Boards of Directors or equivalent governing bodies, at any time prior
to the Effective Time with respect to any of the terms contained herein;
provided however, that after the approval of this Agreement by the shareholders
of the Company, no such amendment, modification or supplement shall reduce the
amount or change the form of the Merger Consideration.
Section 9.2 Non-survival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any schedule, instrument
or other document delivered pursuant to this Agreement shall survive the
Effective Time.
Section 9.3 Expenses. Except as expressly set forth in Section 8.2(b), all
fees, costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such fees,
costs and expenses.
Section 9.4 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally, telecopied
(which is confirmed) or sent by a nationally recognized overnight courier
service, such as Federal Express, to the parties at the following addresses (or
at such other address for a party as shall be specified by like notice):
(a) if to Parent or the Purchaser, to:
c/o American Industrial Partners
One Maritime Plaza
Suite 2525
San Francisco, California 94111
Attention: Lawrence W. Ward, Jr.
Telephone No.: (415) 788-7354
Telecopy No.: (415) 788-5302
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Attention: Peter A. Atkins, Esq.
Telephone No.: (212) 735-3700
Telecopy No.: (212) 735-2000
and
(b) if to the Company, to:
Bucyrus International Inc.
1100 Milwaukee Avenue
P.O. Box 500
South Milwaukee, Wisconsin 53172
Attention: W.R. Hildebrand
Telephone No.: (414) 768-4000
Telecopy No.: (414) 768-5060
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with a copy to:
Whyte Hirschboeck Dudek S.C.
111 E. Wisconsin Avenue
Suite 2100
Milwaukee, Wisconsin 53202
Attention: Daryl L. Diesing
Telephone No.: (414) 273-2100
Telecopy No.: (414) 223-5000
Section 9.5 Interpretation. When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. Whenever the words "include", "includes" or "including" are
used in this Agreement they shall be deemed to be followed by the words "without
limitation." As used in this Agreement, the term "affiliates" shall have the
meaning set forth in Rule 12b-2 of the Exchange Act. As used in this Agreement,
the term "Person" shall mean a natural person, partnership, corporation, limited
liability company, business trust, joint stock company, trust, unincorporated
association, joint venture, Governmental Entity or other entity or organization.
Section 9.6 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties.
Section 9.7 Entire Agreement; No Third Party Beneficiaries. This Agreement
and the Confidentiality Agreement (including the documents and the instruments
referred to herein and therein): (a) constitute the entire agreement and
supersedes all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter hereof (including the letter of
intent, dated July 30, 1997, between American Industrial Partners Capital Fund
II, L.P.), and (b) is not intended to confer upon any person other than the
parties hereto any rights or remedies hereunder.
Section 9.8 Severability. Any term or provision of this Agreement that is
held by a court of competent jurisdiction or other authority to be invalid, void
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction or other authority declares that any term or provision
hereof is invalid, void or unenforceable, the parties agree that the court
asking such determination shall have the power to reduce the scope, duration,
area or applicability of the term or provision, to delete specific words or
phrases, or to replace any invalid, void or unenforceable term or provision with
a term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision.
Section 9.9 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware without giving
effect to the principles of conflicts of law thereof.
Section 9.10 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
content of the other parties, except that the Purchaser may assign, in its sole
discretion, any or all of its rights, interests and obligations hereunder to
Parent or to any direct or indirect wholly owned Subsidiary of Parent. Subject
to the preceding sentence, this Agreement will be binding upon, inure to the
benefit of and be enforceable by the parties and their respective successors and
assigns.
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IN WITNESS WHEREOF, Parent, the Purchaser and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized as
of the date first written above.
AMERICAN INDUSTRIAL PARTNERS
ACQUISITION COMPANY, LLC
By /s/ LAWRENCE W. WARD JR.
------------------------------------
Lawrence W. Ward Jr.
President
BUCYRUS ACQUISITION CORP.
By /s/ LAWRENCE W. WARD JR.
------------------------------------
Lawrence W. Ward Jr.
President
BUCYRUS INTERNATIONAL, INC.
By /s/ W. R. HILDEBRAND
------------------------------------
W. R. Hildebrand
President and Chief Executive
Officer
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ANNEX I
Certain Conditions of the Offer. Notwithstanding any other provisions of
the Offer, and in addition to (and not in limitation of) the Purchaser's rights
to extend and amend the Offer at any time in its sole discretion (subject to the
provisions of the Merger Agreement), the Purchaser shall not be required to
accept for payment or, subject to any applicable rules and regulations of the
SEC, including Rule 14e-l(c) under the Exchange Act (relating to the Purchaser's
obligation to pay for or return tendered Shares promptly after termination or
withdrawal of the Offer), pay for, and may delay the acceptance for payment of
or, subject to the restriction referred to above, the payment for, any tendered
Shares, and may terminate or amend the Offer as to any Shares not then paid for,
if (i) Parent shall have failed to receive, and have immediately available to
it, the Debt Financing in the full amounts and on the terms and in accordance
with the conditions set forth in the Commitment Letters (the "Financing
Condition"), (ii) any applicable waiting period under the HSR Act has not
expired or terminated, (iii) the Minimum Condition has not been satisfied, or
(iv) at any time on or after the date of this Agreement and before the time of
acceptance for payment for any such Shares, any of the following events shall
have occurred:
(a) there shall be threatened or pending any suit, action or proceeding by
any Governmental Entity against the Purchaser, Parent, the Company or any
Subsidiary of the Company (i) seeking to prohibit or impose any material
limitations on Parent's or the Purchaser's ownership or operation (or that of
any of their respective Subsidiaries or affiliates) of all or a material portion
of their or the Company's businesses or assets, or to compel Parent or the
Purchaser or their respective Subsidiaries and affiliates to dispose of or hold
separate any material portion of the business or assets of the Company or Parent
and their respective Subsidiaries, in each case taken as a whole, (ii)
challenging the acquisition by Parent or the Purchaser of any Shares under the
Offer, seeking to restrain or prohibit the making or consummation of the Offer
or the Merger or the performance of any of the other transactions contemplated
by the Merger Agreement, or seeking to obtain from the Company, Parent or the
Purchaser any damages that are material in relation to the Company and its
Subsidiaries taken as a whole, (iii) seeking to impose material limitations on
the ability of the Purchaser, or render the Purchaser unable, to accept for
payment, pay for or purchase some or all of the Shares pursuant to the Offer and
the Merger, (iv) seeking to impose material limitations on the ability of
Purchaser or Parent effectively to exercise full rights of ownership of the
Shares, including, without limitation, the right to vote the Shares purchased by
it on all matters properly presented to the Company's shareholders, or (v) which
otherwise is reasonably likely to have a Company Material Adverse Effect;
(b) there shall be any statute, rule, regulation, judgment, order or
injunction enacted, entered, enforced, promulgated, or deemed applicable,
pursuant to an authoritative interpretation by or on behalf of a Government
Entity, to the Offer or the Merger, or any other action shall be taken by any
Governmental Entity, other than the application to the Offer or the Merger of
applicable waiting periods under HSR Act, that is reasonably likely to result,
directly or indirectly, in any of the consequences referred to in clauses (i)
through (v) of paragraph (a) above;
(c) there shall have occurred (i) any general suspension of trading in, or
limitation on prices for, securities on the New York Stock Exchange, the
American Stock Exchange or the NASDAQ Stock Market for a period in excess of 24
hours (excluding suspensions or limitations resulting solely from physical
damage or interference with such exchanges not related to market conditions),
(ii) a declaration of a banking moratorium or any suspension of payments in
respect of banks in the United States (whether or not mandatory), (iii) a
commencement of a war, armed hostilities or other international or national
calamity directly or indirectly involving the United States, (iv) any limitation
(whether or not mandatory) by any United States governmental authority on the
extension of credit generally by banks or other financial institutions, or (v) a
change in general financial, bank or capital market conditions which materially
and adversely affects the ability of financial institutions in the United States
to extend credit or syndicate loans or (vi) in the case of any of the foregoing
existing at the time of the commencement of the Offer, a material acceleration
or worsening thereof;
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(d) since December 31, 1996, there shall have occurred any change (or any
development that, insofar as reasonably can be foreseen, is reasonably likely to
result in any change) that constitutes a Company Material Adverse Effect;
(e) (i) the Board of Directors of the Company or any committee thereof
shall have withdrawn or modified in a manner adverse to Parent or the Purchaser
its approval or recommendation of the Offer, the Merger or this Agreement, or
approved or recommended any Takeover Proposal or (ii) the Company shall have
entered into any agreement with respect to any Superior Proposal in accordance
with Section 5.3(b) of this Agreement;
(f) the representations and warranties of the Company set forth in this
Agreement shall not be true and correct, in any material respect (without
reference to any material qualification contained therein) in each case (i) as
of the date referred to in any representation or warranty which addresses
matters as of a particular date, or (ii) as to all other representations and
warranties, as of the date of this Agreement and as of the scheduled expiration
of the Offer (provided that for purposes of this paragraph (f), other than the
representation and warranty of the Company set forth in Section 3.26 of this
Agreement, the representations and warranties of the Company set forth in this
Agreement shall not be deemed to have been made with respect to the Business of
the Marion Sellers (as the term "Business" is defined in the Marion Agreement)
or any of the assets acquired or liabilities assumed thereunder;
(g) the Company shall have failed to perform any obligation or to comply
with any agreement or covenant to be performed or complied with by it under this
Agreement;
(h) the Purchaser shall have failed to receive a certificate executed by
the President or a Vice President of the Company, dated as of the scheduled
expiration of the Offer, to the effect that the conditions set forth in
paragraphs (f) and (g) of this Annex I have not occurred;
(i) all consents, permits and approvals of Governmental Authorities and
other Persons listed in Section 3.4 of the Company Disclosure Schedule and
identified with an asterisk shall not have been obtained with no material
adverse conditions attached and no material expense imposed on the Company or
any of its Subsidiaries;
(j) the transactions contemplated under the Marion Agreement shall not have
been consummated pursuant to and substantially in accordance with the terms set
forth in the Marion Agreement;
(k) there shall have occurred any change (or any development that, insofar
as reasonably can be foreseen, is or could reasonably be expected to result in
any change) that is materially adverse to the business, operations, properties
(including intangible properties), condition (financial or otherwise), results
of operations, assets, liabilities or prospects of the Business of the Marion
Sellers (as the term "Business" is defined in the Marion Agreement);
(l) the Secured Notes Indenture shall not have been fully satisfied and
discharged pursuant to the terms thereof, and all collateral securing the
Secured Notes shall not have been released (unless the Secured Notes Indenture
Trustee has delivered to the Company a written agreement providing for the
release of such collateral), subject only to the receipt by the Secured Notes
Indenture Trustee of funds (pursuant to the Debt Financing) sufficient to effect
the redemption of the Secured Notes;
(m) JNL shall not have waived the right to at least 30 days prior notice of
redemption provided by Section 1105 of the Secured Notes Indenture, pursuant to
Section 106 of the Secured Notes Indenture (unless JNL shall have entered into a
binding agreement with the Company to sell all of the Secured Notes held by JNL
to the Company, at no more than par, at a time designated by the Company and
acceptable to the Purchaser);
(n) any Person or group (as defined in Section 13(d)(3) of the Exchange
Act) other than Parent or the Purchaser or any of their respective subsidiaries
or affiliates shall have become the beneficial owner (as defined in Rule 13d-3
promulgated under the Exchange Act) of more than 15% of the outstanding Shares
(either on a primary or a fully diluted basis); provided, however, that this
provision shall not apply to any Person that beneficially owns more than 15% of
the outstanding Shares on the date hereof; provided, further,
A-2
<PAGE> 42
that such Person does not further increase its beneficial ownership beyond the
number of Shares such Person beneficially owns on the date hereof; or
(o) this Agreement shall have been terminated in accordance with its terms.
The foregoing conditions are for the sole benefit of Parent and the
Purchaser, may be asserted by Parent or the Purchaser regardless of the
circumstances giving rise to such condition (including any action or inaction by
Parent or the Purchaser) and may be waived by Parent or the Purchaser in whole
or in part at any time and from time to time in the sole discretion of Parent or
the Purchaser, subject in each case to the terms of this Agreement. The failure
by Parent or the Purchaser at any time to exercise any of the foregoing rights
shall not be deemed a waiver of any such right and each such right shall be
deemed an ongoing right which may be asserted at any time and from time to time.
A-3
<PAGE> 1
EXHIBIT 2
GUARANTEE
Guarantee, dated as of August 21, 1997, by and between Bucyrus
International, Inc., a Delaware corporation (the "Company") and American
Industrial Partners Capital Fund II, L.P., a Delaware limited partnership
("Guarantor").
WHEREAS, each of American Industrial Partners Acquisition Company, LLC, a
Delaware limited liability company ("Parent"), and Bucyrus Acquisition
Corporation, a Delaware corporation (the "Purchaser"), is a direct or indirect,
wholly-owned subsidiary of Guarantor; and
WHEREAS, the Company, Parent, and the Purchaser have entered into an
Agreement and Plan of Merger (the "Merger Agreement") of even date herewith; and
WHEREAS, upon the terms and subject to the conditions set forth in the
Merger Agreement, the Purchaser will make a cash tender offer (the "Offer") to
acquire all shares of the issued and outstanding common stock, $.01 par value,
of the Company (the "Shares"), for $18.00 per share net to the seller in cash;
and
WHEREAS, as an inducement to the Company to enter into the Merger
Agreement, the Guarantor has agreed to enter into this agreement;
NOW THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby, the
Company and Guarantor hereby agree as follows:
1. Guarantor hereby unconditionally and irrevocably guarantees, as primary
obligor and not merely as surety, for the benefit of the Company the performance
of all obligations of Parent or the Purchaser pursuant to the Merger Agreement;
provided, however, that the aggregate liability to which the Guarantor may
become subject pursuant to this Guarantee or otherwise in connection with the
transactions contemplated by the Merger Agreement shall not in any event exceed
$7,000,000.
2. Guarantor covenants that this Guarantee will not be discharged except by
complete performance of the obligations contained in this Guarantee. This
Guarantee shall not be affected by, and shall remain in full force and effect
notwithstanding, any bankruptcy, insolvency, liquidation, or reorganization of
Parent or the Purchaser or Guarantor.
3. Guarantor agrees to pay, on demand, and to save the Company harmless
against liability for, any and all costs and expenses (including reasonable fees
and disbursements of counsel) incurred or expended by the Company in connection
with the enforcement of or preservation of any rights under this Guarantee.
4. Guarantor hereby represents, warrants and covenants to the Company as
follows:
a. Guarantor is a limited partnership duly organized and validly
existing under the laws of the State of Delaware. Guarantor has the
necessary power and authority to own and operate its properties and assets
and to carry on its business as currently conducted.
b. Guarantor has all requisite legal power and authority to enter into
this Guarantee. The Guarantor has all requisite legal power and authority
to carry out and perform its obligations under the terms of this Guarantee.
The Guarantee constitutes the valid and binding obligation of Guarantor,
enforceable against it in accordance with its terms, except as enforcement
may be limited by bankruptcy, insolvency, moratorium, reorganization or
other laws or equitable principles relating to or affecting creditors'
rights generally.
c. All partnership action on the part of Guarantor and its general
partner and limited partners necessary to authorize the execution, delivery
and performance of this Guarantee has been taken.
5. This Guarantee shall be deemed to be a contract under the laws of the
State of Delaware and shall for all purposes be governed by and construed in
accordance with the laws of such State.
<PAGE> 2
6. This Guarantee shall terminate and be of no further force or effect upon
the earliest of (i) the consummation of the Merger (as defined in the Merger
Agreement), (ii) October 7, 2004, or (iii) the performance of all obligations of
Parent and the Purchaser pursuant to the Merger Agreement.
IN WITNESS WHEREOF, each of the Company and Guarantor have caused this
Guarantee to be executed on its behalf by its officers thereunto duly
authorized, all as on the date first above written.
BUCYRUS INTERNATIONAL, INC.
By: /s/ W. R. HILDEBRAND
----------------------------------
W. R. Hildebrand
President and Chief Executive
Officer
AMERICAN INDUSTRIAL PARTNERS
CAPITAL FUND II, L.P.
By: /s/ W. RICHARD BINGHAM
----------------------------------
W. Richard Bingham
2
<PAGE> 1
EXHIBIT 3
STOCKHOLDER AGREEMENT
STOCKHOLDER AGREEMENT (this "Agreement"), dated as of August 21, 1997, by
and among American Industrial Partners Acquisition Company, LLC, a Delaware
limited liability company ("Parent"), Bucyrus Acquisition Corp., a Delaware
corporation and a wholly owned subsidiary of Parent ("the Purchaser") and
Jackson National Life Insurance Company, a Michigan corporation (the
"Stockholder").
WHEREAS, the Stockholder is, as of the date hereof, the record and
beneficial owner of 4,228,382 shares of common stock, par value $0.01 per share
(the "Common Stock") of Bucyrus International, Inc., a Delaware corporation (the
"Company") and, together with PPM America, Inc., a Delaware Corporation, shares
voting power and dispositive power with respect to such shares; and
WHEREAS, the Stockholder is, as of the date hereof, the record and
beneficial owner of $63,963,000 in principal amount of the Company's 10.5%
Secured Notes due December 14, 1999 (the "Secured Notes"), which Secured Notes
are governed by that certain Indenture, dated December 14, 1994, between
Bucyrus-Erie Company, predecessor to the Company, and Harris Trust and Savings
Bank, as Trustee (the "Indenture") and by that certain Security Agreement, dated
December 14, 1994, between Bucyrus-Erie Company and Harris Trust and Savings
Bank, as Collateral Agent (the "Security Agreement"); and
WHEREAS, Parent, the Purchaser and the Company concurrently herewith are
entering into an Agreement and Plan of Merger, dated as of the date hereof (the
"Merger Agreement"), which provides, among other things, for the acquisition of
the Company by Parent by means of a cash tender offer (the "Offer") for any and
all of the outstanding shares of Common Stock and for the subsequent merger (the
"Merger") of the Purchaser with and into the Company upon the terms and subject
to the conditions set forth in the Merger Agreement; and
WHEREAS, the Company and the Stockholder concurrently herewith are entering
into a Settlement Agreement, dated as of the date hereof, (the "Settlement
Agreement"), which provides, among other things, for the settlement and release
of certain claims that the Stockholder has asserted against the Company and for
the allocation, as between the Company and the Stockholder, of amounts that the
Company may recover in respect of certain claims against third parties; and
WHEREAS, as a condition to the willingness of Parent and the Purchaser to
enter into the Merger Agreement, and in order to induce Parent and the Purchaser
to enter into the Merger Agreement, the Stockholder has agreed to enter into
this Agreement and the Settlement Agreement.
NOW, THEREFORE, in consideration of the execution and delivery by Parent
and the Purchaser of the Merger Agreement and the foregoing and the mutual
representations, warranties, covenants and agreements set forth herein and
therein, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
SECTION 1. Representations and Warranties of the Stockholder. The
Stockholder hereby represents and warrants, to Parent and the Purchaser as
follows:
(a) The Stockholder is the record and beneficial owner of 4,228,382 shares
of Common Stock (as may be adjusted from time to time pursuant to Section 6
hereof, the "Shares"), and the Stockholder is the record and beneficial owner of
$63,963,000 in principal amount of the Secured Notes (as may be adjusted from
time to time pursuant to Section 6 hereof, the "Stockholder's Secured Notes").
(b) The Stockholder is a corporation duly organized, validly existing and
in good standing under the laws of its respective jurisdiction, has all
requisite corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby, and has taken all
necessary corporate action to authorize the execution, delivery and performance
of this Agreement.
(c) This Agreement has been duly authorized, executed and delivered by the
Stockholder and constitutes the legal, valid and binding obligation of the
Stockholder, enforceable against the Stockholder in
<PAGE> 2
accordance with its terms, except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting enforcement of creditors' rights generally, and (ii) the availability
of the remedy of specific performance or injunctive or other forms of equitable
relief may be subject to equitable defenses and would be subject to the
discretion of the court before which any proceeding therefor may be brought.
(d) Neither the execution and delivery of this Agreement nor the
consummation by the Stockholder of the transactions contemplated hereby will
result in a violation of, or a default under, or conflict with, any contract,
trust, commitment, agreement, understanding, arrangement or restriction of any
kind to which the Stockholder is a party or bound or to which the Shares or the
Secured Notes are subject. Consummation by the Stockholder of the transactions
contemplated hereby will not violate, or require any consent, approval, or
notice under, any provision of any judgment, order, decree, statute, law, rule
or regulation applicable to the Stockholder, the Shares or the Stockholder's
Secured Notes, except for any necessary filing under the Securities Exchange Act
of 1934, as amended (the "Exchange Act") or the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), or state takeover laws.
(e) The Shares and the certificates representing the Shares and the
Stockholder's Secured Notes are now and at all times during the term hereof will
be held by the Stockholder, or by a nominee or custodian for the benefit of the
Stockholder, free and clear of all liens, claims, security interests, proxies,
voting trusts or agreements, understandings or arrangements or any other
encumbrances whatsoever, except for any such encumbrances or proxies arising
hereunder; provided, however, that the Stockholder may transfer all or a portion
of the Shares or the Secured Notes to be a person or entity who, by written
instrument reasonably acceptable in form and substance to Parent, agrees to be
bound by each of the terms of this Agreement.
(f) To the best knowledge of the Stockholder, without independent
investigation, the representations of the Company set forth in Section 3.6 (with
respect to such matters as have been disclosed to the Stockholder or any of its
affiliates in writing prior to the date hereof), 3.7 (with respect to
liabilities or indebtedness owed to the Stockholder or any of its affiliates),
3.8 (with respect to such matters in which the Stockholder or any of its
affiliates is a party) 3.15 (with respect to such matters as to which the
Stockholder or any of its affiliates have received written notice), and 3.20
(with respect to such matters involving the Stockholder or any of its
affiliates) of the Merger Agreement, as modified by the Company Disclosure
Schedule (as defined in the Merger Agreement), are true and correct in all
material respects as of the date of this Agreement. The representations and
warranties of the Stockholder set forth in this paragraph (f) shall terminate
upon the earlier to occur of the Effective Time (as defined in the Merger
Agreement) and the Termination Date.
SECTION 2. Representations and Warranties of Parent and the Purchaser. Each
of Parent and the Purchaser hereby, jointly and severally, represents and
warrants to the Stockholder as follows:
(a) Parent is a limited liability company duly organized, validly existing
and in good standing under the laws of the State of Delaware, has all requisite
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby, and has taken all necessary
corporate action to authorize the execution, delivery and performance of this
Agreement. The Purchaser is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware, has all requisite
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby, and has taken all necessary
corporate action to authorize the execution, delivery and performance of this
Agreement.
(b) This Agreement has been duly authorized, executed and delivered by each
of Parent and the Purchaser and constitutes the legal, valid and binding
obligation of each of Parent and the Purchaser, enforceable against each of them
in accordance with its terms, except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting enforcement of creditors' rights generally and (ii) the availability
of the remedy of specific performance or injunctive or other forms of equitable
relief may be subject to equitable defenses and would be subject to the
discretion of the court before which any proceeding therefor may be brought.
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<PAGE> 3
(c) Neither the execution and delivery of this Agreement nor the
consummation by each of Parent and the Purchaser of the transactions
contemplated hereby will result in a violation of, or a default under, or
conflict with, any contract, trust, commitment, agreement, understanding,
arrangement or restriction of any kind to which each of Parent and the Purchaser
is a party or bound. The consummation by each of Parent and the Purchaser of the
transactions contemplated hereby will not violate, or require any consent,
approval, or notice under, any provision of any judgment, order, decree,
statute, law, rule or regulation applicable to either Parent or the Purchaser,
except for any necessary filing under the HSR Act or state takeover laws.
SECTION 3. Purchase and Sale of the Shares. The Stockholder hereby agrees
that it shall tender the Shares into the Offer promptly, and in any event no
later than the fifth business day following the commencement of the Offer, or,
if the Stockholder has not received the offering materials by such time, within
two business days following receipt of such materials, and that it shall not
withdraw any Shares so tendered. The Purchaser hereby agrees to purchase all the
Shares so tendered at a price per Share equal to $18.00 per Share, or such
higher price per Share as may be offered by the Purchaser in the Offer; provided
that the Purchaser's obligation to accept for payment and pay for the Shares in
the Offer is subject to all the terms and conditions of the Offer set forth in
the Merger Agreement and Annex I thereto.
SECTION 4. Transfer of the Shares and the Stockholder's Secured
Notes. Prior to the termination of this Agreement, except as otherwise provided
herein, the Stockholder shall not: (i) transfer (which term shall include,
without limitation, for the purposes of this Agreement, any sale, gift, pledge
or other disposition), or consent to any transfer of, any or all of the Shares
or the Stockholder's Secured Notes or any interest therein; (ii) enter into any
contract, option or other agreement or understanding with respect to any
transfer of any or all of the Shares or the Stockholder's Secured Notes or any
interest therein; (iii) except as provided in Section 8(b) hereto, grant any
proxy, power-of-attorney or other authorization or consent in or with respect to
the Shares or the Stockholder's Secured Notes; (iv) deposit the Shares or the
Stockholder's Secured Notes into a voting trust or enter into a voting agreement
or arrangement with respect to the Shares or the Stockholder's Secured Notes; or
(v) take any other action with respect to the Shares or the Secured Notes that
would in any way restrict, limit or interfere with the performance of their
obligations hereunder or the transactions contemplated hereby; provided,
however, that the Stockholder may transfer all or a portion of the Shares or the
Secured Notes to a person or entity who, by written instrument reasonably
acceptable in form and substance to Parent, agrees to be bound by each of the
terms of this Agreement.
SECTION 5. Voting of Shares; Grant of Irrevocable Proxy; Appointment of
Proxy.
(a) The Stockholder hereby agrees that, during the term of this Agreement,
at any meeting (whether annual or special and whether or not an adjourned or
postponed meeting) of the holders of Common Stock, however called, or in
connection with any written consent of the holders of Common Stock, the
Stockholder will appear at the meeting or otherwise cause the Shares to be
counted as present thereat for purposes of establishing a quorum and vote or
consent (or cause to be voted or consented) the Shares (i) in favor of the
Merger, (ii) against any action or agreement which would impede, interfere with
or prevent the Merger, including any other extraordinary corporate transaction,
such as a merger, reorganization or liquidation involving the Company and a
third party or any other proposal of a third party to acquire the Company, and
(iii) if requested by Parent, in favor of a shareholder resolution proposed by
Parent pursuant to Section 180.1150(4) of the Wisconsin Business Corporation
Law.
(b) The Stockholder hereby irrevocably grants to, and appoints, Parent and
any nominee thereof, its proxy and attorney-in-fact (with full power of
substitution) during the term of this Agreement, for and in the name, place and
stead of the Stockholder, to vote the Shares, or grant a consent or approval in
respect of the Shares, in connection with any meeting of the stockholders of the
Company (i) in favor of the Merger, and (ii) against any action or agreement
which would impede, interfere with or prevent the Merger, including any other
extraordinary corporate transaction, such as a merger, reorganization or
liquidation involving the Company and a third party or any other proposal of a
third party to acquire the Company.
(c) The Stockholder represents that any proxies heretofore given in respect
of the Shares, if any, are not irrevocable, and that such proxies are hereby
revoked.
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<PAGE> 4
(d) The Stockholder hereby affirms that the irrevocable proxy set forth in
this Section 5 is given in connection with the execution of the Merger
Agreement, and that such irrevocable proxy is given to secure the performance of
the duties of the Stockholder under this Agreement. The Stockholder hereby
further affirms that the irrevocable proxy is coupled with an interest and,
except as set forth in Section 8 hereof, is intended to be irrevocable in
accordance with the provisions of Section 212(e) of the Delaware General
Corporation Law (the "DGCL").
SECTION 6. Certain Events. In the event of any stock split, stock dividend,
merger, reorganization, recapitalization or other change in the capital
structure of the Company affecting the Common Stock, the Secured Notes or the
acquisition of additional shares of Common Stock, additional Secured Notes or
other securities or rights of the Company by the Stockholder, the number of
Shares and the aggregate principal amount of the Stockholder's Secured Notes
shall be adjusted appropriately, and this Agreement and the obligations
hereunder shall attach to any additional shares of Common Stock, additional
Secured Notes or other securities or rights of the Company issued to or acquired
by the Stockholder.
SECTION 7. Grant of Option.
(a) The Stockholder hereby grants to Parent an irrevocable option (the
"Option") to purchase the Shares at a purchase price per share of $18.00 per
Share (the "Exercise Price"), in the manner set forth in this Section.
(b) At any time or from time to time prior to the termination of the Option
granted hereunder in accordance with the terms of this Agreement, Parent (or its
designee) may exercise the Option, in whole but not in part (except as expressly
permitted by Section 7(d)), if on or after the date hereof:
(i) any corporation, partnership, individual, trust, unincorporated
association, or other entity or "person" (as defined in Section 13(d)(3) of
the Exchange Act) other than Parent or any of its "affiliates" (as defined
in the Exchange Act) (a "Third Party"), shall have:
(A) commenced or announced an intention to commence a bona fide
tender offer or exchange offer for any shares of Common Stock, the
consummation of which would result in "beneficial ownership" (as defined
under the Exchange Act) by such Third Party (together with all such
Third Party's affiliates and "associates" (as such term is defined in
the Exchange Act)) of 50% or more of the then outstanding voting equity
of the Company (either on a primary or a fully diluted basis);
(B) acquired beneficial ownership of shares of Common Stock which,
when aggregated with any shares of Common Stock already owned by such
Third Party, its affiliates and associates, would result in the
aggregate beneficial ownership by such Third Party, its affiliates and
associates of 15% or more of the then outstanding voting equity of the
Company (either on a primary or a fully diluted basis), provided,
however, that "Third Party" for purposes of this clause (ii) shall not
include any corporation, partnership, person, other entity or group
which beneficially owns more than 15% of the outstanding voting equity
of the Company (either on a primary or a fully diluted basis) as of the
date hereof and that does not, after the date hereof, increase such
ownership percentage by more than an additional 1% of the outstanding
voting equity of the Company (either on a primary or a fully diluted
basis);
(C) filed a Notification and Report Form under the HSR Act,
reflecting an intent to acquire the Company or any assets or securities
of the Company;
(D) acquired assets constituting 15% or more of the total assets or
earning power of the Company taken as a whole;
(E) entered into an agreement with the Company which contemplates
the acquisition of (x) assets constituting 15% or more of the total
assets or earning power of the Company taken as a whole or (y)
beneficial ownership of 15% or more of the outstanding voting equity of
the Company;
(F) solicited "proxies" in a "solicitation" subject to the proxy
rules under the Exchange Act, executed any written consent or become a
"participant" in any "solicitation" (as such terms are
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<PAGE> 5
defined in Regulation 14A under the Exchange Act), in each case with
respect to the Common Stock; or
(ii) any of the events described in Section 8.1(g) or (h) of the
Merger Agreement that would allow Parent to terminate the Merger Agreement
has occurred (but without the necessity of Parent having terminated the
Merger Agreement).
In the event that Parent wishes to exercise all or any part of the Option,
Parent shall give written notice (the "Option Notice", with the date of the
Option Notice being hereinafter called the "Notice Date") to the Stockholder
specifying the number of Shares it will purchase and a place and date (not
earlier than three (3) nor later than twenty (20) business days from the Notice
Date) for closing such purchase (a "Closing"). Parent's obligation to purchase
Shares upon any exercise of the Option, and the Stockholder's obligation to sell
Shares upon any exercise of the Option, is subject (at the election of each of
Parent or the Stockholder) to the conditions that (i) no preliminary or
permanent injunction or other order against the purchase, issuance or delivery
of the Shares issued by any federal, state or foreign court of competent
jurisdiction shall be in effect (and no action or proceeding shall have been
commenced or threatened for purposes of obtaining such an injunction or order)
and (ii) any applicable waiting period under the HSR Act shall have expired. The
Parent's obligation to purchase Shares upon any exercise of the Option is
further subject (at its election) to the condition that there shall have been no
material breach of the representations, warranties, covenants or agreements of
the Stockholder contained in this Agreement or of the Company contained in the
Merger Agreement. Notwithstanding the foregoing, any failure by Parent to
purchase Shares upon exercise of the Option at any Closing as a result of the
non-satisfaction of any of the foregoing conditions shall not affect or
prejudice Parent's right to purchase such Shares upon the subsequent
satisfaction of such conditions. The Stockholder's obligation to sell Shares
upon any exercise of the Option (and the Stockholder's obligations under Section
5 of this Agreement) is subject (at its election) to the further conditions that
there shall have been no material breach of the representations, warranties,
covenants or agreements of the Purchaser or the Parent contained in this
Agreement or contained in the Merger Agreement, which breach has not been cured
within thirty days of the receipt of written notice thereof from the
Stockholder.
(c) At any Closing, (i) the Stockholder will deliver to Parent the
certificate or certificates representing the number of Shares being purchased in
proper form for transfer upon exercise of the Option in the denominations
designated by Parent in the Option Notice, and, if the Option has been exercised
in part, a new Option evidencing the rights of Parent to purchase the balance of
the Shares subject thereto, and (ii) Parent shall pay the aggregate purchase
price for the Shares to be purchased by wire transfer of immediately available
funds to an account, which account shall be designated in writing to Parent
within five days after execution of this Agreement in the amount of the Exercise
Price times the number of Shares to be purchased.
(d) Notwithstanding any other provision of this Agreement, in the event
that the Merger Agreement is terminated and at any time prior to the Termination
Date (as hereinafter defined) a person other than Parent or any of its
affiliates acquires a majority of the outstanding shares of Common Stock at a
price higher than the Exercise Price (an "Alternative Transaction"), then Parent
shall promptly either reduce the number of Shares subject to the Option, pay
cash to the Stockholder or do both such that the actual Total Profit (as
hereinafter defined) realized or to be realized by Parent upon the consummation
of an Alternative Transaction does not exceed 50% of the Total Profit that
Parent would otherwise realize had it not taken the foregoing actions; provided
that, in the event that Parent elects to reduce the number of Shares subject to
the Option, there shall be pending, at the time Parent makes such election, a
transaction involving the Company that, if consummated, would allow the
Stockholder to dispose of any remaining Shares that would not otherwise be
purchased by Parent upon the exercise of the Option; provided, further, that in
the event such transaction is not consummated within three months following the
time Parent makes such election, Parent shall, at the option of the Stockholder,
purchase any remaining Shares held by the Stockholder such that Parent and the
Stockholder each retain 50% of the Total Profit following such purchase. As used
herein, the term "Total Profit" shall mean the aggregate amount (before taxes)
of the net cash amounts and the fair market value (as reasonably determined by a
nationally recognized investment banking firm acceptable to each of Parent and
the Stockholder or, if one cannot be agreed upon, by Salomon Brothers, Inc.) of
all other forms of consideration received or to be received by Parent pursuant
to the sale of the aggregate number of Shares
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<PAGE> 6
subject to the Option (or any other securities into which such Shares are
converted or exchanged) in any Alternative Transaction, less the aggregate
Exercise Price of all of such Shares.
(e) In the event that Parent or the Purchaser pays a price higher than
$18.00 per share for Shares tendered into the Offer, the Exercise Price shall be
increased to equal such higher price.
(f) The Stockholder has granted the Option to the Parent in order to induce
Parent to enter into and consummate the transactions contemplated by the Merger
Agreement. Parent covenants and agrees that it will perform its obligations
under the Merger Agreement. The provisions of this Section 7(f) are intended
both for the benefit of the Stockholder and for the benefit of the Company and
the other stockholders of the Company, and may not be modified, waived or
amended without the consent of the Company.
SECTION 8. Certain Other Agreements.
(a) The Stockholder will notify the Purchaser immediately if any proposals
are received by, any information is requested from, or any negotiations or
discussions are sought to be initiated or continued with the Stockholder or its
officers, directors, employees, investment bankers, attorneys, accountants or
other agents, in each case in connection with any Takeover Proposal or Takeover
Proposal Interest (as such terms are defined in the Merger Agreement)
indicating, in connection with such notice, the name of the person indicating
such Takeover Proposal Interest and the terms and conditions of any proposals or
offers. The Stockholder agrees that it will immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any parties
conducted heretofore with respect to any Takeover Proposal Interest. The
Stockholder agrees that it shall keep Parent informed, on a current basis, of
the status and terms of any Takeover Proposal Interest. The Stockholder agrees
that it will not, and will use its best efforts to ensure that its officers,
directors, employees, investment bankers, attorneys, accountants and other
agents do not, directly or indirectly: (i) initiate, solicit or encourage, or
take any action to facilitate the making of, any offer or proposal which
constitutes or is reasonably likely to lead to any Takeover Proposal, (ii) enter
into any agreement with respect to any Takeover Proposal, or (iii) in the event
of an unsolicited written Takeover Proposal engage in negotiations or
discussions with, or provide any information or data to, any person (other than
Parent, any of its affiliates or representatives and except for information
which has been previously publicly disseminated by the Company) relating to any
Takeover Proposal. The obligations provided for in this Section 8(a) shall
become effective immediately following the execution and delivery of this
Agreement by the parties hereto.
(b) The Stockholder hereby agrees, if requested by Parent, to take all
action necessary to waive compliance by the Company with the provisions of
Section 1105 of the Indenture relating to the timely issuance of a notice of
redemption prior to the Redemption Date (as defined in the Indenture) in
connection with the Company's redemption of the Secured Notes, pursuant to
Section 106 of the Indenture; provided, however, that Parent shall indemnify and
hold the Stockholder harmless in connection with the foregoing; provided,
further that Parent's maximum liability in connection therewith shall be
$14,500.
SECTION 9. Further Assurances; Stockholder Capacity. (a) Each of the
Stockholder shall, upon request of Parent or the Purchaser, execute and deliver
any additional documents and take such further actions as may reasonably be
deemed by Parent or the Purchaser to be necessary or desirable to carry out the
provisions hereof and to vest the power to vote the Shares as contemplated by
Section 5 hereof in Parent.
(b) Nothing in this Agreement shall be construed to prohibit any affiliate
of the Stockholder who is a member of the Board of Directors of the Company from
taking any action solely in his capacity as a member of the Board of Directors
of the Company to the extent specifically permitted by the Merger Agreement.
SECTION 10. Termination. This Agreement, and all rights and obligations of
the parties hereunder, shall terminate immediately upon the earlier of (a) the
date (the "Termination Date") that is six months following the date upon which
the Merger Agreement is terminated in accordance with its terms or (b) the
Effective Time (as defined in the Merger Agreement); provided, however, that (i)
in the event that an Option Notice is delivered prior to the Termination Date,
the provisions set forth in Section 7 shall survive any termination of this
Agreement, (ii) in the event that the Merger is consummated, the provisions set
forth in Section 11 shall survive any termination of this Agreement.
6
<PAGE> 7
SECTION 11. Expenses. Except as provided in Section 7 hereof, all fees and
expenses incurred by any one party hereto shall be borne by the party incurring
such fees and expenses.
SECTION 12. Public Announcements. Each of Parent, the Purchaser and the
Stockholder agrees that it will not issue any press release or otherwise make
any public statement with respect to this Agreement or the transactions
contemplated hereby without the prior consent of the other party, which consent
shall not be unreasonably withheld or delayed; provided, however, that such
disclosure can be made without obtaining such prior consent if (i) the
disclosure is required by law or by obligations imposed pursuant to any listing
agreement with the Nasdaq National Market and (ii) the party making such
disclosure has first used its best efforts to consult with the other party about
the form and substance of such disclosure.
SECTION 13. Miscellaneous.
(a) Capitalized terms used and not otherwise defined in this Agreement
shall have the respective meanings assigned to such terms in the Merger
Agreement.
(b) All notices and other communications hereunder shall be in writing and
shall be deemed given upon (i) transmitter's confirmation of a receipt of a
facsimile transmission, (ii) confirmed delivery by a standard overnight carrier
or when delivered by hand or (iii) the expiration of five business days after
the day when mailed in the United States by certified or registered mail,
postage prepaid, addressed at the following addresses (or at such other address
for a party as shall be specified by like notice):
(A) if to the Parent or Purchaser, to:
c/o American Industrial Partners
One Maritime Plaza, Suite 2525
San Francisco, CA 94111
Telephone: (415) 788-7354
Facsimile: (415) 788-5302
Attention: Lawrence W. Ward, Jr.
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Telephone: (212) 735-3700
Facsimile: (212) 735-2000
Attention: Peter A. Atkins
and
(B) if to the Stockholder, to:
PPM America, Inc.
225 West Wacker Drive, Suite 1100
Chicago, Illinois 60606
Telephone: (312) 634-2500
Facsimile: (312) 634-0053
Attention: F. John Stark, III
with a copy to:
Anderson Kill & Olick, P.C.
1251 Avenue of the Americas
New York, New York 10020
Telephone: (212) 278-1000
Facsimile: (212) 278-1733
Attention: J. Andrew Rahl, Jr.
7
<PAGE> 8
(c) The headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement.
(d) This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original but all of which shall be considered one and
the same agreement.
(e) This Agreement (including the Merger Agreement and any other documents
and instruments referred to herein) constitutes the entire agreement, and
supersedes all prior agreements and understandings, whether written and oral,
among the parties hereto with respect to the subject matter hereof.
(f) This Agreement shall be governed by, and construed in accordance with,
the laws of the State of Delaware without giving effect to the principles of
conflicts of laws thereof.
(g) Neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any of the parties hereto (whether by operation
of law or otherwise) without the prior written consent of the other parties.
Subject to the preceding sentence, this Agreement will be binding upon, inure to
the benefit of and be enforceable by, the parties and their respective
successors and assigns, and the provisions of this Agreement are not intended to
confer upon any person other than the parties hereto any rights or remedies
hereunder.
(h) If any term, provision, covenant or restriction herein is held by a
court of competent jurisdiction or other authority to be invalid, void or
unenforceable or against its regulatory policy, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated.
(i) Each of the parties hereto acknowledges and agrees that in the event of
any breach of this Agreement, each non-breaching party would be irreparably and
immediately harmed and could not be made whole by monetary damages. It is
accordingly agreed that the parties hereto (i) will waive, in any action for
specific performance, the defense of adequacy of a remedy at law and (ii) shall
be entitled, in addition to any other remedy to which they may be entitled at
law or in equity, to compel specific performance of this Agreement in any action
instituted in any state or federal court sitting in Wilmington, Delaware. The
parties hereto consent to personal jurisdiction in any such action brought in
any state or federal court sitting in Wilmington, Delaware and to service of
process upon it in the manner set forth in Section 13(b) hereof.
(j) No amendment, modification or waiver in respect of this Agreement shall
be effective against any party unless it shall be in writing and signed by such
party.
8
<PAGE> 9
IN WITNESS WHEREOF, Parent, the Purchaser and the Stockholder has caused
this Agreement to be duly executed and delivered as of the date first written
above.
AMERICAN INDUSTRIAL PARTNERS
ACQUISITION COMPANY, LLC
By: /s/ LAWRENCE W. WARD, JR.
----------------------------------
Name: Lawrence W. Ward, Jr.
Title: President
BUCYRUS ACQUISITION CORP.
By: /s/ LAWRENCE W. WARD, JR.
----------------------------------
Name: Lawrence W. Ward, Jr.
Title: President
JACKSON NATIONAL LIFE
INSURANCE COMPANY
By: PPM AMERICA, INC.
As Attorney-In-Fact
By: /s/ F. JOHN STARK, III
----------------------------------
Name: F. John Stark, III
Title: Senior Vice President and
General Counsel
9
<PAGE> 1
EXHIBIT 4
PAGES 4 THROUGH 17 OF THE COMPANY'S PROXY STATEMENT DATED MARCH 26, 1997 FOR ITS
ANNUAL MEETING OF STOCKHOLDERS HELD APRIL 30, 1997
BOARD OF DIRECTORS
GENERAL
The Board held six meetings in 1996. Each director attended at least 75% of
the aggregate of (a) the total number of meetings of the Board and (b) the total
number of meetings held by all committees of the Board on which the director
served during 1996.
The Board has a standing Audit Committee ("Audit Committee") and a standing
Compensation and Management Development Committee (the "Compensation
Committee"). The Audit Committee consists of Messrs. Poole, Radecki and Stark.
The principal functions performed by the Audit Committee, which met once in
1996, are to meet with the Company's independent public accountants before the
annual audit to review procedures and the scope of the audit; to review the
results of the audit; to review the financial control mechanisms used by the
Company and the adequacy of the Company's accounting and financial controls; and
to annually recommend to the Board a firm of independent public accountants to
serve as the Company's auditors. The Compensation Committee in 1996 consisted of
Messrs. Bartlett and Swansen. The principal functions of the Compensation
Committee, which met once in 1996, are to review and make recommendations to the
Board concerning (i) the compensation and related benefits of elected officers;
(ii) incentive and bonus plans that include elected officers; and (iii)
long-range planning for executive development and succession. It also reviews
Company policies regarding compensation for senior management and other
employees, and establishes and periodically reviews Company policies on
management perquisites. In addition, a committee consisting of Messrs. Bartlett
and Stark administers the 1996 Employees' Stock Incentive Plan and Non-Employee
Directors' Stock Option Plan.
The Board has no standing nominating committee.
DIRECTOR COMPENSATION
Directors of the Company, other than full time employees, currently receive
$2,500 each month, regardless of whether meetings are held or the number of
meetings held. Messrs. Stark and Swansen have declined to accept any fees.
Instead, such fees are paid by the Company directly to Jackson National Life
Insurance Company ("JNL"), the assets of which are managed by PPM America, Inc.,
the employer of Messrs. Stark and Swansen. For the period January 1, 1996 to
March 10, 1996, JNL directed that Messrs. Swansen's and Stark's $2,000 monthly
fees be paid by the Company to Jefferies & Company, of which Mr. Radecki is
Executive Vice President. For the period March 11, 1996 to December 31, 1996,
JNL directed that Messrs. Swansen's and Stark's $2,500 monthly fees be paid by
the Company to Miller Associates, of which Mr. Miller is President. No fees are
paid for attendance at committee meetings, except for Mr. Bartlett who was paid
$13,000 during 1996, at the rate of $1,000 per day for the period January 1,
1996 to March 31, 1996 and $1,500 per day for the period April 1, 1996 to
December 31, 1996, for services performed as a member of certain committees of
the Board. Directors are also reimbursed for out-of-pocket expenses.
In addition to the compensation described above, each director who was not
a full time employee of the Company automatically received an option for 2,000
shares of Common Stock at an option price of $6.00 per share on February 16,
1995 (the effective date of the Non-Employee Directors' Stock Option Plan), an
option for 2,000 shares of Common Stock on February 8, 1996 at an option price
of $9.25 per share and an option for 2,000 shares of Common Stock on February 5,
1997 at an option price of $7.50 per share, in accordance with the terms of such
plan. Under the terms of the Non-Employee Directors' Stock Option Plan, each
person who was a director on the effective date of the plan automatically
received an option for 2,000 shares of Common Stock. The plan further provides
that each person who was not a director on the effective date of the plan
automatically receives an option for 2,000 shares of Common Stock when first
elected as a non-employee director of the Company. Pursuant thereto, Messrs.
Macaluso and Miller were each granted an option for 2,000 shares of Common Stock
on March 11, 1996 at an option price of $9.00 per share. Subsequent to the
<PAGE> 2
initial grant, each non-employee director (who continues to serve in such
capacity) automatically receives an option to purchase an additional 2,000
shares of Common Stock on the date of the first Board meeting of each calendar
year for as long as the plan remains in effect. Notwithstanding the above,
Messrs. Stark and Swansen have declined to accept any options under such plan.
The option price for all options granted under the Non-Employee Directors' Stock
Option Plan is equal to the last sale price of the Common Stock on The Nasdaq
Stock Market on the date of grant. Options granted to non-employee directors
under the Non-Employee Directors' Stock Option Plan terminate on the earlier of
(a) ten years after the date of grant, (b) six months after the non-employee
director ceases to be a director by reason of death, or (c) three months after
the non-employee director ceases to be a director for any reason other than
death.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership as of March 17,
1997 of the outstanding Common Stock by each person who is known to the Company
to be the beneficial owner of five percent or more of the outstanding Common
Stock:
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT OF
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS
------------------- -------------------- ----------
<S> <C> <C>
Jackson National Life....................................... 4,228,382(1) 40.14%
Insurance Company(1)
5901 Executive Drive
Lansing, MI 48911-5333
SSP, Inc.(2)................................................ 1,160,979(2) 11.02%(2)
3801 Kennett Pike
Wilmington, DE 19807
Greycliff Partners(2).......................................
89 Headquarters Plaza
Morristown, NJ 07960
Franklin Resources, Inc..................................... 774,899(3) 7.36%
777 Mariners Island Blvd.
San Mateo, CA 94404
</TABLE>
- -------------------------
(1) According to the Schedule 13D ("13D") statement dated December 23, 1994, as
amended by Amendment No. 1 thereto dated April 4, 1995 (i) JNL shares voting
power and dispositive power with PPM America, Inc. over all such shares;
(ii) PPM America, Inc. serves as the investment advisor to JNL pursuant to a
Discretionary Investment Management Agreement between JNL and PPM America,
Inc. dated as of April 14, 1993; and (iii) JNL and PPM America, Inc. are
both indirect, wholly-owned subsidiaries of Prudential Corporation plc, a
corporation organized under the laws of the United Kingdom.
(2) According to a 13D dated June 16, 1995, Greycliff Partners shares voting and
dispositive power over 1,160,979 shares of Common Stock with Mikael
Salovaara and Alfred C. Eckert, III, its general partners. The 13D also
states that Greycliff Partners is the investment advisor for and shares
voting and dispositive power with the South Street Corporate Recovery Fund
I, L.P., the South Street Leveraged Corporate Recovery Fund, L.P. and the
South Street Corporate Recovery Fund I (International), L.P. (collectively
the "South Street Funds"), except that such powers held by Greycliff
Partners are subject to the supervision and control of the South Street
Funds' respective general partners. Such funds share voting and dispositive
power over 914,908 shares, 223,297 shares and 22,774 shares of Common Stock,
respectively. The 13D also states that SSP, Inc., the ultimate general
partner for both the South Street Corporate Recovery Fund I, L.P. and the
South Street Leveraged Corporate Recovery Fund, L.P., shares voting and
dispositive power over 1,138,205 shares of Common Stock, and that SSP
International, Inc., the ultimate general partner for the South Street
Corporate Recovery Fund I (International), L.P., shares voting and
dispositive power over 22,774 shares of Common Stock. Notwithstanding the
above reference to Greycliff Partners, it is the Company's understanding
that since the filing of the 13D, SSP,
2
<PAGE> 3
Inc. has assumed direct responsibility for exercising the voting and
dispositive power over the South Street Corporate Recovery Fund I, L.P. and
the South Street Leveraged Corporate Recovery Fund, L.P. All such shares
over which Greycliff Partners and the other parties described herein share
beneficial ownership were acquired upon the conversion of certain debt
securities of the Company during bankruptcy. JNL has objected to the proofs
of claim filed with the Bankruptcy Court by the indenture trustees for the
debt securities to the extent that such proofs of claim related to debt
securities beneficially owned by the South Street Funds. As a result of such
objection, the Company believes that the shares of Common Stock beneficially
owned by the South Street Funds are being held in escrow pursuant to an
agreement between JNL and the South Street Funds pending further order of
the Bankruptcy Court with respect to JNL's objection.
(3) Includes 741,331 shares of Common Stock beneficially owned by Age High
Income Fund. Age High Income Fund, a Colorado organization, is a subsidiary
of Franklin Resources, Inc., a Delaware corporation. According to the
Schedule 13G statement dated February 12, 1996 filed with the Securities and
Exchange Commission by Franklin Resources, Inc. and Age High Income Fund (i)
Franklin Resources, Inc. has shared dispositive power over and sole voting
power over 774,899 shares of Common Stock; and (ii) Age High Income Fund has
sole voting power over, shared dispositive power over, the right to receive
dividends from and the right to receive proceeds from the sale of 741,331
shares of Common Stock.
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth the beneficial ownership as of March 17,
1997 of the Common Stock by each director and nominee, each of the executive
officers named in the Summary Compensation Table below, and by all directors and
executive officers of the Company as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
NAME OF OF BENEFICIAL PERCENT
BENEFICIAL OWNER OWNERSHIP(1) CLASS(2)
---------------- ----------------- --------
<S> <C> <C>
C.S. Bartlett, Jr. ......................................... 6,000(3) *
W.R. Hildebrand............................................. 500,000(4) 4.66%
C.S. Macaluso............................................... 4,000(3) *
C.R. Mackus................................................. 972 *
F.W. Miller................................................. 4,100(3) *
M. G. Onsager............................................... 0 *
T.B. Phillips............................................... 0 *
G.A. Poole, Jr. ............................................ 6,000(3) *
J.J. Radecki, Jr. .......................................... 6,000(3)(5) *
F.J. Stark, III............................................. 0(3)(6) *
T.W. Sullivan............................................... 0 *
R.W. Swansen................................................ 0(3)(7) *
A. F. Swanson............................................... 100 *
S.M. Victor................................................. 6,000(3) *
All directors and executive officers as a Group (14
persons).................................................. 533,072 4.95%
</TABLE>
- -------------------------
(1) Unless otherwise noted, amounts indicated reflect shares as to which the
beneficial owner possesses sole voting and dispositive powers. Also included
are shares subject to stock options if such options are exercisable within
60 days of March 17, 1997.
(2) Percentage of total number of shares of Common Stock outstanding, plus, for
each individual owning options and for the group, the assumed exercise of
that number of options which are included in the total number of shares
beneficially owned by them. Asterisk denotes less than 1%.
(3) Includes options to purchase shares of Common Stock granted under the
Non-Employee Directors' Stock Option Plan as follows: for Messrs. Bartlett,
poole, Radecki and Victor -- 6,000 options each; for Messrs. Macaluso and
Miller -- 4,000 options each.
3
<PAGE> 4
(4) Includes 200,000 shares subject to the exercise of options under the 1996
Employees' Stock Incentive Plan, as well as 266,667 shares of restricted
Common Stock issued under the 1996 Employees Stock Incentive Plan over which
Mr. Hildebrand holds sole voting power.
(5) Mr. Radecki was selected as a director of the Company by JNL (which is
deemed to be the beneficial owner of 4,228,382 shares of Common Stock)
pursuant to the provisions of Section 5.04(c) of the Amended Plan. Mr.
Radecki disclaims beneficial ownership of all such shares.
(6) Mr. Stark is a director and an officer of PPM America, Inc., which is deemed
to be the beneficial owner of 4,228,382 shares of Common Stock. Mr. Stark
disclaims beneficial ownership of all such shares.
(7) Mr. Swansen is a director and an officer of PPM America, Inc., which is
deemed to be the beneficial owner of 4,228,382 shares of Common Stock. Mr.
Swansen disclaims beneficial ownership of all such shares.
LEGAL PROCEEDINGS
JNL, currently the holder of approximately 40.14% of the outstanding Common
Stock and 97.2% of the Company's Secured Notes due December 14, 1999 (see
"CERTAIN RELATIONSHIPS -- Ownership of Secured Notes"), filed a claim (the "JNL
503(b) Claim") against the Company with the United States Bankruptcy Court,
Eastern District of Wisconsin ("Bankruptcy Court") 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,
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 $500. JNL has appealed the decision.
4
<PAGE> 5
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information for each of the last
three fiscal years concerning compensation awarded to, earned by or paid to each
person who served as the Company's Chief Executive Officer during fiscal 1996
and each of the four most highly compensated executive officers other than the
Chief Executive Officer who were in office on December 31, 1996. The persons
named in the table are sometimes referred to herein as the "named executive
officers."
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
AWARDS
-----------------------
RESTRICTED
ANNUAL COMPENSATION(1) STOCK SECURITIES ALL OTHER
NAME AND PRINCIPAL ---------------------- AWARDS UNDERLYING COMPENSATION
POSITION YEAR SALARY($) BONUS($) ($)(4) OPTIONS(#) ($)(2)
------------------ ---- --------- -------- ---------- ---------- ------------
<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 (3) -- -- -- --
Interim President and 1995 (3) -- -- -- --
Chief Executive Officer(3)
CRAIG R. MACKUS............... 1996 $123,000 $ 26,975 -- -- $ 4,090
Secretary and Controller 1995 114,900 10,000 -- -- 3,732
1994 105,030 -- -- -- 3,447
MICHAEL G. ONSAGER............ 1996 $101,672 $ 22,666 -- -- $ 3,336
Vice President Engineering 1995 80,361 -- -- -- 2,617
1994 70,255 -- -- -- 2,291
THOMAS B. PHILLIPS............ 1996 $119,168 $ 26,976 -- -- $ 4,299
Vice President Materials 1995 104,202 10,000 -- -- 3,833
1994 97,096 -- -- -- 3,397
TIMOTHY W. SULLIVAN........... 1996 $128,004 $ 34,644 -- -- $ 4,260
Vice President Marketing 1995 114,932 10,000 -- -- 4,124
1994 102,507 -- -- -- 3,362
</TABLE>
- ---------------
(1) Certain personal benefits provided by the Company to the named executive
officers are not included in the table. The aggregate amount of such
personal benefits for each named executive officer in each year reflected in
the table did not exceed the lesser of $50,000 or 10% of the sum of such
officer's salary and bonus in each respective year.
(2) "All Other Compensation" includes the employer match under the Company's
401(k) savings plan for 1996, 1995, and 1994, respectively: W.R. Hildebrand
($4,750), C.R. Mackus ($3,690, $3,403, $3,151), M.G. Onsager ($3,050,
$2,411, $2,108), T.B. Phillips ($3,262, $2,961, $2,913), and T.W. Sullivan
($3,840, $3,798, $3,075); life insurance premium payments for 1996, 1995 and
1994, respectively: W.R. Hildebrand ($2,775), C.R. Mackus ($400, $329,
$296), M.G. Onsager ($286, $206, $183), T.B. Phillips ($1,037, $872, $484),
and T.W. Sullivan ($420, $326, $287); and payments made in 1996 in
connection with employment agreements: W.R. Hildebrand ($258,406 including a
relocation allowance of $187,021 and a pension benefit of $71,385).
(3) 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. SEE "CERTAIN
RELATIONSHIPS -- TRANSACTIONS WITH MANAGEMENT."
5
<PAGE> 6
(4) Represents the market value on the date of grant of restricted Common Stock
granted under the 1996 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 ($2,625,000). Of the 300,000 shares, 33,333
vested on March 11, 1997, 33,333 will vest on March 11, 1998 and 33,334 will
vest on March 11, 1999. The remaining 200,000 shares of restricted Common
Stock vest under a Time Accelerated Restricted Stock Agreement, which
provides for vesting in eight years (assuming continued employment, with
certain exceptions) and provides for earlier release in the third, fourth,
and fifth years if certain earnings targets are reached by the Company.
Dividends are payable on the restricted Common Stock at the same rate as on
unrestricted shares.
OPTION GRANTS TABLE
The following table shows all individual grants of stock options and stock
appreciation rights under the Company's 1996 Employees' Stock Incentive Plan to
the named executive officers during 1996:
<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE OR GRANT DATE
OPTIONS/SARS EMPLOYEES IN BASE PRICE PER EXPIRATION PRESENT
NAME GRANTED (#) 1996 SHARE ($/SH)(1) DATE VALUE ($)(2)
---- ------------- ------------ --------------- ---------- ------------
<S> <C> <C> <C> <C> <C>
W. R. Hildebrand................ 200,000(3) 71% $ 5.0875 3/10/2006 $1,310,000
</TABLE>
- ---------------
(1) The market price of the Common Stock on the date of grant, March 11, 1996,
was $9.00 per share.
(2) Present value is determined as of the grant date, March 11, 1996, using the
Black-Scholes Model. This is a theoretical value for the stock options which
was constructed with the following underlying assumptions: a five year
expected period to time of exercise; a risk free rate of return of 6.34%; an
expected dividend yield of 0%; and a calculated volatility of 66.82%. The
amount realized from a stock option ultimately depends on the market value
of the stock at a future date.
(3) Non-qualified stock options.
Executive officers of the Company are eligible to receive stock options,
stock appreciation rights ("SARs"), restricted stock, and other awards under the
Company's 1996 Employees' Stock Incentive Plan. An award of 30,000 stock options
and 50,000 SARs was made to Mr. Daniel Smoke, the Company's chief financial
officer, upon his hiring in November, 1996, and on February 5, 1997 the Board
approved the award of stock options to various employees, including the named
executive officers (but not including Mr. Hildebrand and Mr. Smoke).
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
The following table provides certain information about stock option
exercises and year-end values of stock options held by Mr. Hildebrand, who is
the only named executive officer who held stock options during the fiscal year
ended December 31, 1996.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS/SARS AT FISCAL OPTIONS/SARS AT
ACQUIRED VALUE YEAR END (#) FISCAL YEAR END(1) ($)
ON EXERCISE REALIZED --------------------------- ---------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Willard R. Hildebrand.......... 0 N/A 200,000 0 $732,500 N/A
</TABLE>
- ---------------
(1) Based on the $8.75 per share market value of the Common Stock on December
31, 1996, determined with reference to the last sale price of the Common
Stock on that date as reported on The Nasdaq Stock Market. Options are
"in-the-money" if the fair market value of the stock on the date indicated
exceeds the exercise price.
6
<PAGE> 7
PENSION PLAN TABLE
The following table sets forth the estimated annual benefits payable on a
straight life annuity basis (prior to offset of one-half of estimated Social
Security benefits) to participating employees, including officers, upon
retirement at normal retirement age for the years of service and the average
annual earnings indicated under the Company's defined benefit pension plan.
<TABLE>
<CAPTION>
YEARS OF SERVICE
----------------------------------------------------
RENUMERATION 35 30 25 20 15
------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$125,000............................... $ 76,563 $ 65,625 $ 54,688 $ 43,750 $ 32,813
150,000............................... 91,875 78,750 65,625 52,500 39,375
175,000............................... 107,188 91,875 76,563 61,250 45,938
200,000............................... 122,500 105,000 87,500 70,000 52,500
225,000............................... 137,813 118,125 98,438 78,750 59,063
250,000............................... 153,125 131,250 109,375 87,500 65,625
300,000............................... 183,750 157,500 131,250 105,000 78,750
400,000............................... 245,000 210,000 175,000 140,000 105,000
450,000............................... 275,625 236,250 196,875 157,500 118,125
500,000............................... 306,250 262,500 218,750 175,000 131,250
</TABLE>
Covered compensation for purposes of the Company's defined benefit pension
plan consists of the average of a participant's highest total salary and bonus
(excluding compensation deferred pursuant to any non-qualified plan) for a
consecutive five year period during the last ten calendar years of service prior
to retirement.
The years of credited service under the defined benefit pension plan for
each of the named executive officers are as follows: Mr. Hildebrand (0), Mr.
Mackus (17), Mr. Onsager (17), Mr. Phillips (20) and Mr. Sullivan (18).
Sections 401(a)(17) and 415 of the Internal Revenue Code of 1986, as
amended, limit the annual benefits which may be paid from a tax-qualified
retirement plan. As permitted by the Employee Retirement Income Security Act of
1974, the Company has supplemental plans which authorize the payment out of
general funds of the Company of any benefits calculated under provisions of the
applicable retirement plan which may be above the limits under these sections.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board, subject to the approval of the
Company Board, is responsible for the compensation packages offered to the
Company's executive officers, including the Chief Executive Officer (the "CEO")
and the named executive officers. Prior to March 11, 1996, the Compensation
Committee consisted of Messrs. Bartlett and Stark; since March 11, 1996, the
Compensation Committee consists of Messrs. Bartlett and Swansen.
EXECUTIVE COMPENSATION
The Compensation Committee, in consultation with the CEO, establishes base
salaries for the executive officers of the Company which the Company believes
are commensurate with their respective responsibilities, position, and
experience. Consideration is also given to the compensation levels of similarly
situated personnel of other companies in the industry where such information is
available. When making adjustments in base salaries, the Compensation Committee
generally considers the foregoing factors as well as corporate financial
performance and return to stockholders. In individual cases where appropriate,
the Compensation Committee also considers nonfinancial performance measures,
such as increases in market share, manufacturing efficiency gains, improvements
in product quality, and improvements in relations with customers, suppliers, and
employees. Executive officer base salaries are reviewed annually. The
Compensation Committee generally begins its review by analyzing the current base
salaries of the executive officers. Based on such review, the corporate
performance of the Company, the individual contributions of the executive
officers, and the factors discussed above, the Compensation Committee then
recommends approval of its determinations to the Company Board.
7
<PAGE> 8
Executive officers and other Company employees participated in the 1996
Management Incentive Plan. Under the 1996 Management Incentive Plan, the
Compensation Committee established a management incentive budget based on
budgeted earnings before interest expense, taxes, depreciation and amortization
("EBITDA") and, in consultation with the CEO, established target incentive bonus
percentages of between 10% and 30% of base salary for executive officers (other
than the CEO, whose target incentive bonus percentage is established pursuant to
his employment agreement -- see "Chief Executive Officer Compensation," below)
and certain employees. These targeted percentages were adjustable pursuant to a
formula based on a range of values whereby the target incentive bonus percentage
would be zero (and no bonuses would be paid) if actual EBITDA was less than 90%
of budgeted EBITDA, and a maximum bonus of two times the target incentive bonus
percentage would be paid if actual EBITDA was 150% or more of budgeted EBITDA.
In 1996, the Company's actual EBITDA exceeded budgeted EBITDA, and the target
incentive bonus percentages were increased by approximately 9%. After target
bonus amounts were established, actual bonuses were further adjusted, again in
consultation with the CEO, based on the achievement of preestablished individual
performance objectives. Various employees, including the named executive
officers, received bonuses under the 1996 Management Incentive Plan.
CHIEF EXECUTIVE OFFICER COMPENSATION
The base salary and certain awards under the Company's 1996 Employees'
Stock Incentive Plan for Mr. Hildebrand, the Company's CEO, were established by
negotiation between the Company and Mr. Hildebrand at the time he was hired in
1996 and are set forth in an employment agreement between the Company and Mr.
Hildebrand. See "CERTAIN RELATIONSHIPS -- EMPLOYMENT AGREEMENT, CHANGE OF
CONTROL." The factors recited in the first paragraph above under "EXECUTIVE
COMPENSATION," were considered by the Compensation Committee and the Board in
these negotiations.
Mr. Hildebrand also participated in the 1996 Management Incentive Plan on
the same basis as the other employees who participated. Mr. Hildebrand's target
incentive bonus percentage of 50% of base salary was established pursuant to his
employment agreement. No individual performance adjustment was made for Mr.
Hildebrand.
INTERNAL REVENUE CODE SECTION 162(M)
Under Section 162(m) of the Internal Revenue Code, the tax deduction by
certain corporate taxpayers, such as the Company, is limited with respect to
compensation paid to certain executive officers unless such compensation is
based on performance objectives meeting specific regulatory criteria or is
otherwise excluded from the limitation. The compensation package of Mr.
Hildebrand, the Company's CEO, does not so qualify, nor does the 1996 Management
Incentive Plan meet the regulatory criteria for exclusion from the limitation.
Where practical, the Compensation Committee intends to qualify compensation paid
to the Company's executive officers in order to preserve the full deductibility
thereof under Section 162(m), although the Compensation Committee reserves the
right in individual cases to cause the Company to enter into compensation
arrangements which may result in some compensation being nondeductible under
Code Section 162(m).
BUCYRUS INTERNATIONAL, INC.
COMPENSATION COMMITTEE
C. Scott Bartlett, Jr.
F. John Stark, III (prior to March 11,
1996)
Russell W. Swansen (from March 11,
1996)
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
From July 25, 1995 to March 11, 1996, the Compensation Committee consisted
of Messrs. Bartlett and Stark. The Compensation Committee now consists of
Messrs. Bartlett and Swansen. Mr. Swansen is an Executive Officer of PPM
America, Inc., which serves as investment advisor to, and is a sister company
to, JNL, owner of approximately 40.14% of the outstanding Common Stock. JNL is
also a holder of
8
<PAGE> 9
approximately $63,963,000 face amount of the Company's Secured Notes due
December 14, 1999 (the "Secured Notes"). For a description of such notes, see
"CERTAIN RELATIONSHIPS -- Ownership of Secured Notes."
PERFORMANCE INFORMATION
The following graph compares the Company's cumulative total stockholder
return with the cumulative total return of the Standard & Poor's 500 Stock Index
and the Machinery (Diversified) Subgroup of the Standard & Poor's 500 Stock
Index. The graph assumes $100 was invested on December 31, 1994 and assumes the
reinvestment of dividends. The companies currently in the Machinery
(Diversified) Subgroup are Case Corp., Caterpillar, Inc., Cincinnati Milacron,
Cooper Industries, Deere & Co., Dover Corporation, Harnischfeger Industries,
Ingersoll-Rand, NACCO Industries and Timken Co. Data for only 1995 and 1996 is
presented since the Common Stock did not begin to publicly trade until December
22, 1994.
COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG BUCYRUS INTERNATIONAL, INC., STANDARD & POOR'S 500 STOCK INDEX
AND MACHINERY (DIVERSIFIED) SUBGROUP INDEX
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
S&P 500 Stock Index......................................... $100 $137 $169
Machinery (Diversified) Subgroup Index...................... 100 124 154
Bucyrus International, Inc.................................. 100 116 125
</TABLE>
CERTAIN RELATIONSHIPS
TRANSACTIONS WITH MANAGEMENT
The Company entered into the Management Agreement with Miller Associates,
pursuant to which the Company engaged Miller Associates to provide certain
management services, including those of Mr. Miller as Interim President and
Chief Executive Officer and James D. Annand as Interim Chief Financial Officer.
Mr. Miller is the President of Miller Associates.
The Management Agreement provided that Messrs. Miller and Annand and
certain other employees of Miller Associates (the "Project Team") would provide
management services and expertise to the Company and manage the operations of
the Company commencing on August 2, 1995 until terminated by the Company as
described below. Pursuant to the Management Agreement, the Company agreed to pay
Miller Associates a monthly fee of $65,000 for each of August and September 1995
and $55,000 for each month thereafter until
9
<PAGE> 10
the Company hired a new chief executive officer and such person commenced
employment with the Company. The Company also agreed to reimburse Miller
Associates for all reasonable out-of-pocket expenses incurred by Miller
Associates in connection with the Project Team's performance under the
Management Agreement. The Management Agreement further provided that neither Mr.
Miller or Mr. Annand, nor any other employee of Miller Associates, would be
considered an employee of the Company and that Miller Associates would be
responsible for payment of compensation, disability benefits and unemployment
insurance, and for the payment and withholding of payroll taxes. The Management
Agreement was terminated with the hiring of Mr. Hildebrand as President and
Chief Executive Officer on March 11, 1996. As provided by the Management
Agreement, following the termination thereof, Mr. Annand remained as Interim
Chief Financial Officer through August 1996. The total cost to the Company in
1996 for these services was approximately $268,000.
EMPLOYMENT AGREEMENT; CHANGE OF CONTROL
The Company and Mr. Hildebrand are parties to an Employment Agreement,
dated March 11, 1996, pursuant to which Mr. Hildebrand was employed as President
and Chief Executive of the Company. The Company also agreed to use its best
efforts to elect him as a director. The base salary provided is $400,000 per
year, subject to increase at the discretion of the Board. Mr. Hildebrand is also
eligible to participate in the Company's Management Incentive Plan ("Bonus
Plan") which shall provide 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. The Employment Agreement provided for a payment
of $187,021 to compensate Mr. Hildebrand for his change of residence as well as
reimbursement of reasonable relocation costs. Mr. Hildebrand is entitled to
participate in the Company's employee benefit plan for senior executives and is
provided other fringe benefits, such as country club membership, vacation and
the use of a Company car. To reimburse Mr. Hildebrand for lost retirement
benefits, the Company agreed to provide him with a fully vested retirement
benefit at a cost to the Company of $71,385.
The initial term of the Employment Agreement is three (3) years, with two
(2) automatic one-year renewals unless the Company terminates at least two (2)
months before a renewal period. In addition, the Company may terminate Mr.
Hildebrand's employment at any time for "cause," as defined, and on two (2)
months' notice without cause. Mr. Hildebrand may terminate his employment at any
time by giving at least ninety (90) days' notice. Mr. Hildebrand is to receive
different severance compensation based on whether the termination is (i) for
"cause," (ii) voluntary on Mr. Hildebrand's part, (iii) voluntary on the
Company's part without "cause," or (iv) due to death or Disability, as defined.
The Employment Agreement provides for certain payments in the event that
Mr. Hildebrand's employment is terminated as a result of a "Qualifying
Termination," as defined, due to a "Change of Control" of the Company, defined
(i) as acquisition of 20% or more of the voting power of the Company's
securities by a person who did not own 5% or more of the Company's voting
securities on the date of the Employment Agreement, (ii) as shareholder approval
of a merger or consolidation of the Company with another corporation where the
former Company shareholders own less than 50% of the combined entity, (iii) as
shareholder approval of a sale of substantially of all of the Company's assets,
(iv) if, during any period of two (2) consecutive years, individuals who, at the
beginning of such period, constituted the Board cease to constitute at least a
majority of the directors, unless the election or nomination for election of
each new director was approved by the vote of at least two-thirds of the
directors then still in office who were directors at the beginning of the
period, (v) the sale by JNL or any of its affiliates of more than 66% of the
Common Stock owned by JNL on March 11, 1996, except to JNL or any affiliate of
JNL, or (vi) the Company shall become eligible to terminate the registration of
any class of its securities then registered under the Securities Exchange Act of
1934, as amended.
One of the events of Qualifying Termination is termination by Mr.
Hildebrand for "Good Reason," which is defined as (i) assignment of duties
materially inconsistent with the President's duties, responsibilities and status
or a material reduction or material alteration thereof, (ii) basing Mr.
Hildebrand at least fifty (50) miles further from his residence than the
distance such residence is, at the date of the Change of Control, from
10
<PAGE> 11
the Company's headquarters, (iii) a reduction in Mr. Hildebrand's base salary,
or (iv) a material reduction in Mr. Hildebrand's participation in various
Company plans. Upon the termination of employment under a Qualifying Termination
within six (6) months before, or twenty-four (24) months after, a Change of
Control, the Company is obligated to pay Mr. Hildebrand's base salary for the
greater of (i) the remainder of the employment term, or (ii) one (1) year. In
addition, Mr. Hildebrand is to receive the average of the bonus compensation
paid to him in the past two (2) years, or if bonus compensation has been paid
for one (1) year or less preceding the Qualifying Termination, a fractional
share of such bonus. The Employment Agreement provides that if any compensation
which would be payable under the Employment Agreement contingent on a Change in
Control would result in the imposition of an excise tax on Mr. Hildebrand
pursuant to the Internal Revenue Code or in the non-deductibility of such
compensation by the Company for Federal income tax purposes, then arrangements
shall be made to pay Mr. Hildebrand one dollar ($1) less than the maximum which
he would receive without becoming subject to the excise tax or which the Company
may pay without losing its deduction; provided, however, such reduction will be
made only if it results in Mr. Hildebrand receiving a greater net benefit than
he would have received had a reduction not occurred and an excise tax been paid.
Pursuant to the Employment Agreement, Mr. Hildebrand was granted
non-qualified stock options for 200,000 shares of Common Stock, 100,000 shares
of restricted Common Stock, and 200,000 shares of restricted Common Stock
pursuant to a Time Accelerated Restricted Stock Agreement. The agreements
covering the 300,000 shares of restricted Common Stock provide that the
restriction period ends on a Change of Control and that all such shares will
then be free of restrictions.
SENIOR EXECUTIVE TERMINATION BENEFITS AGREEMENTS
In December, 1995, the Company and each of Messrs. Mackus, Phillips and
Sullivan (each an "Executive") entered into Senior Executive Termination
Benefits Agreements which provided for the payment of certain termination
benefits (generally, the continuation of base salary for a period of 18 months
and continued participation in the Company's employee benefit and fringe benefit
plans for a period of 12 months following termination) if their employment was
terminated in any case other than voluntary termination, termination for
"cause," as defined, or upon normal retirement. These terminations benefits
would also have been payable following certain events, such as a change in
function or status with the Company, or a Company-imposed requirement that he
relocate his residence or primary place of business. These Agreements also
provided for an increase in Messrs. Mackus', Phillips' and Sullivan's base
salaries to $123,000, $115,000 and $128,000, respectively, and a cash bonus of
$10,000, which was paid to each in 1995. These agreements expired by their terms
on December 31, 1996. The Company is in the process of negotiating Employment
Agreements with Messrs. Mackus, Onsager, Phillips and Sullivan.
FINANCIAL ADVISORY AGREEMENT
The Company entered into a Letter Agreement (the "Letter Agreement") dated
March 7, 1997, with Jefferies & Company ("Jefferies") pursuant to which
Jefferies will act as the Company's exclusive financial advisor in connection
with a specified transaction. Mr. Radecki, a director of the Company, an
Executive Vice President of Jefferies. The Company has agreed pursuant to the
Letter Agreement to pay Jefferies a one-time retainer fee and a fee for each
fairness opinion that Jefferies issues. The Company will, in addition, pay
Jefferies a success fee and all reasonable out-of-pocket expenses incurred by
Jefferies in connection with the Letter Agreement. The Letter Agreement also
contains standard indemnification provisions whereby the Company will indemnify
and hold harmless Jefferies and certain related parties from liabilities arising
out of the Letter Agreement. The Company had a similar agreement dated June 14,
1995, and amended on August 9, 1995, with Jefferies and Chanin and Company
("Chanin"), of which Mr. Victor, a director of the Company, is Executive Vice
President and a principal, pursuant to which Jefferies and Chanin acted as
financial advisors. This prior agreement has expired.
11
<PAGE> 12
REGISTRATION RIGHTS AGREEMENT
Pursuant to the terms of the Second Amended Joint Plan of Reorganization
(the "Amended Plan"), under which the Company emerged from Bankruptcy on
December 14, 1994 (the "Effective Date"), the Company entered into a
Registration Rights Agreement (the "Registration Rights Agreement") which grants
rights to each person entitled to receive in the aggregate 1,000,000 or more
shares of Common Stock (a "Relevant Holder") pursuant to the provisions of the
Amended Plan. To the knowledge of the Company, JNL is the only person or entity
entitled to the benefits of the Registration Rights Agreement. Pursuant to the
Registration Rights Agreement, a Relevant Holder has the right to (a) require
the Company under certain circumstances to file a registration statement under
the Securities Exchange Act of 1933 ("Securities Act"), to permit a public
offering of Common Stock owned by such Relevant Holders; and (b) participate in
certain other registrations of Common Stock under the Securities Act made on
behalf of the Company for other holders of Common Stock. Under the terms of the
Registration Rights Agreement, Relevant Holders holding 15% or more of the
shares of Common Stock then entitled to the benefits of such agreement may
request the Company to file one or more registration statements under the
Securities Act with respect to their shares of Common Stock, and the Company is
required to use its best efforts to effect such registration provided that the
Company generally will not be required to effect more than three such
registrations. Relevant Holders also may participate in offerings proposed by
the Company. These rights are subject to certain conditions and limitations,
among them the right of the Company to postpone for a reasonable period of time
(but not exceeding 120 days) the requested filing of a registration statement if
the Company determines such registration would interfere with a material
corporate transaction, development or other specified matters. Pursuant to the
terms of the Registration Rights Agreement, the Company must pay all expenses,
other than fees and commissions of underwriters, incident to the registration
and sale of shares of Common Stock held by Relevant Holders. The registration
rights, if not fully exercised, terminate on the third anniversary of the
Effective Date.
OWNERSHIP OF SECURED NOTES
On February 29, 1996, JNL, the holder of approximately 40.14% of the
outstanding Common Stock (see "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT"), purchased from parties other than the Company approximately
$56,000,000 face amount of the Company's Secured Notes. The Secured Notes pay
interest semi-annually at a rate of 10.5% per annum, if paid in cash, or 13.0%
per annum if paid in kind. Interest on the Secured Notes is payable in kind at
the discretion of the Company. Because all interest on the Secured Notes has
been paid in kind, JNL now holds approximately $63,963,000 of the Secured Notes,
or approximately 97.2% of the $65,785,000 of Secured Notes outstanding on
December 31, 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, subject, however, to a prior security
interest in such assets securing not more than $16,000,000 of indebtedness.
Messrs. Radecki, Stark and Swansen, directors of the Company, were selected by
JNL prior to the Effective Date to serve as directors.
12
<PAGE> 1
EXHIBIT 5.1
PPM
AMERICA
April 14, 1997 PPM America, Inc.
225 West Wacker Drive
Chicago, Illinois 60606
Telephone (312) 634-2500
Mr. Daniel J. Smoke
Vice President and Chief Financial Officer
Bucyrus International, Inc.
1100 Milwaukee Avenue
South Milwaukee, WI 53172-0500
Dear Dan:
The PPM America Special Investments Fund, L.P. (the "Fund") is pleased to
issue a commitment, upon the terms and subject to the conditions set forth in
this letter (the "Commitment Letter"), to make available to Bucyrus
International, Inc. ("Bucyrus") a Term Loan (the "Facility") having the terms
set forth below, and on Exhibit A, hereto.
This Commitment to provide the Facility is subject to the negotiation,
execution and delivery of definitive documentation with respect to the Facility,
satisfactory to the Fund in its sole discretion.
This Commitment to provide the Facility is also subject to all actions to
be taken, undertakings to be made and obligations to be incurred by Bucyrus
referred to in Exhibit A hereto, and there not having occurred or becoming known
to the Fund any material adverse change in the financial condition, operation or
assets of Bucyrus or Marion from that shown in the information made available to
the Fund on or prior to the date hereof.
By your signature below, you further agree: (a) to pay Four Hundred and
Fifty Thousand Dollars ($450,000 U.S.) payable to PPM America Special
Investments Fund, L.P., as consideration for the issuance of this Commitment
Letter (the "Commitment Fee"); and (b) to indemnify and hold harmless the Fund
and its officers, directors, employees, affiliates, agents and controlling
persons from and against any and all losses, claims, damages and liabilities to
which any such person may become subject arising out of, or in connection with,
this Commitment Letter, the transactions contemplated hereby or other expenses
incurred in connection with investigating or defending any of the foregoing,
whether or not the transaction contemplated hereby are consummated, provided
that the foregoing indemnity set forth in this clause (b) will not, as to any
indemnified person, apply to losses, claims, damages, liabilities or related
expenses to the extent that they arise from the bad faith, willful misconduct or
gross negligence of such indemnified person.
This Commitment Letter shall not be assignable by you without the prior
written consent of the fund, and may not be amended or any provision hereof
waived or modified except by an instrument in writing signed by you and the
Fund.
This Commitment Letter shall be governed by, and construed in accordance
with, the laws of the State of New York.
Therefore, if you desire for the Fund to commit to this Facility, please
immediately send by wire transfer the $450,000 Commitment Fee to the account
identified below, which fee is non-refundable in all circumstances.
<PAGE> 2
If the foregoing correctly sets forth our agreement, please indicate your
acceptance of the terms hereof by signing in the appropriate space below and
returning to us the enclosed duplicate original of this Commitment Letter not
later than 5:00 p.m., Chicago Time, on Wednesday, April 16, 1997. The Fund's
commitment hereunder shall expire at this time unless the Fund has theretofore
received such executed originals and the payment of such fees.
Upon signing this Commitment Letter, please wire transfer the Commitment
Fee to the following account:
Bank Name: Norwest Bank Minnesota, N.A.
ABA#: 091000019
Crediting Account Name: Norwest MN TTEE for PPM America Special Investments Fund
Account Number:
This Commitment Letter may be executed in any number of counterparts, each
of which shall be an original and all of which, when taken together, shall
constitute one agreement.
Very truly yours,
PPM AMERICA SPECIAL INVESTMENTS FUND,
L.P.
By: /s/ F. JOHN STARK, III
------------------------------------
Senior Managing Director
PPM America
Special Investments Fund, L.P.
Agreed to and accepted as of
the date first above written,
BUCYRUS INTERNATIONAL, INC.
By: /s/ DANIEL J. SMOKE
----------------------------------
2
<PAGE> 3
EXHIBIT A CONFIDENTIAL
TERMS AND CONDITIONS
BUCYRUS INTERNATIONAL BRIDGE FINANCING
Borrower: Bucyrus International, Inc.
Lender: PPM America Special Investments Fund, L.P.
("Fund"). The Fund proposes to underwrite the Term
Loan, but reserves the right to syndicate this Term
Loan, on an assignment basis under which the Fund
would serve as agent to a group of lenders
acceptable to the Fund. Each lender also has the
right to participate or assign its rights and
interest in the Term Loan. The Borrower agrees to
execute such documentation as the Fund, or any
lender, deems necessary or advisable to effect such
syndication, assignment, and/or participation. If
new lenders enter the Facility by syndication, or
otherwise by assignment, references to Fund herein
shall generally mean the Fund and such new lenders.
Facilities: Term Loan
Financing Amount: $45,000,000
Anticipated Closing Date: To be determined, but in no case later than July
15, 1997 (the "Closing").
Maturity: 180 days from the Closing (the "Maturity Date").
Use of Proceeds: To fund the purchase of the business and assets of
the Marion Power Shovel Company ("Marion"), a
wholly-owned subsidiary of Global Industrial
Technologies, Inc. ("Global").
Repayment: The Term Loan is due and payable in full on the
Maturity Date.
Prepayment: Optional -- The Term Loan may be pre-paid in whole
at the Borrower's option, without premium or
penalty.
Commitment Fee: 1.00% of the Financing Amount payable upon issuance
of a Commitment Letter by the fund and acceptance
of this Commitment Letter by the Borrower.
Facility Fee: 1.00% of the Financing Amount payable upon
execution of a definitive Purchase Agreement
between the Borrower and Marion.
Financing Fee: 2.50% of the Financing Amount payable at Closing.
Rates of Interest: 3 Month LIBOR plus the Term Loan Margin of 5%. In
the event the Term Loan is not paid at its
Maturity, the Default Term Loan Margin will be 9%.
Interest will be calculated on an actual 360 day
basis and is payable monthly on the last day of
each interest period.
Default Interest: As indicated above, overdue principal shall bear
interest at LIBOR plus 9.00%.
Maintenance Fee: If the Term Loan remains outstanding for one month
after the Closing, the Borrower shall pay a fee
equal to 1.0% of the Financing Amount (the
"Maintenance Fee") to the Fund. The Borrower shall
pay an additional 1.0% Maintenance Fee to the Fund
every two months thereafter that the Term Loan
remains outstanding until the Maturity Date.
A-1
<PAGE> 4
Late Charge: A late charge equal to 1% of overdue principal will
be due as of the date of default and on the same
day of each month thereafter, for as long as the
loan remains outstanding.
Warrants: At closing the Fund shall receive warrants
representing a 0.5% fully diluted equity stake in
the Borrower at a strike price of one cent per
share. Thirty days after Closing, if the Term Loan
remains outstanding, the Fund shall receive
warrants for an additional 0.5% of the fully
diluted equity of the Borrower. If the Term Loan
remains outstanding on the 91st day after Closing,
the Fund shall receive warrants for an additional
2.0% of the fully diluted equity of the Borrower.
If the Term Loan remains outstanding at Maturity,
the Fund shall receive warrants for an additional
2.0% of the fully diluted equity of the Borrower.
Ranking: Amounts outstanding under the Term Loan will rank
pari passu in right of payment with all other
general unsecured obligations of the Borrower, and
will rank senior in right of payment to all other
existing and future subordinated indebtedness of
the Borrower.
Guarantees: Amounts outstanding under the Term Loan shall be
guaranteed by each subsidiary, present and future,
of the Borrower on a subordinated basis to such
Guarantor's guarantee of the Senior Secured Credit
Facilities.
Conditions:
Precedent to Funding: Usual and customary for credit facilities of this
size, type and purpose, and others to be reasonably
specified by The Fund. Including but not limited
to: execution of definitive credit agreement
providing for the subject credit facilities;
closing certificate representing accuracy of
Representations and Warranties; compliance with all
covenants and the absence of Events of default; no
material adverse change in financial condition or
prospects since the date of the most recently
received financial statements of the borrower, its
subsidiaries, or Marion; payment of all fees due
hereunder; all corporate and governmental consents
required for the purchase of Marion; final
definitive agreement of acquisition of Marion by
the Borrower is in place; written acceptance by the
lead subordinated debt agent (which agent is
acceptable to the Fund) of an engagement for the
Borrower's proposed issuance of public notes to
take out the Term Loan; satisfactory corporate
board resolutions and legal opinions; and all legal
matter to be acceptable to the Fund and its
counsel.
Representations and
Warranties: Representations and Warranties typical of a
transaction of this type, including, without
limitation, Representations and Warranties as to
organization, good standing and qualification;
authorization of borrowing; compliance with the
law; financial condition; title to property; liens;
no material adverse change in financial condition
or prospects; litigation; payment of taxes;
governmental regulations; disclosure; licenses;
trademarks; patents; Regulation U; and
representations concerning current management
contracts.
Affirmative Covenants: Affirmative Covenants acceptable to the Fund to
include those typical of transactions of this
nature and to apply to Borrower and all
subsidiaries, including Marion.
A-2
<PAGE> 5
Negative Covenants: Negative Covenants to include those typical of
transactions of this nature and to apply to
Borrower and all subsidiaries, including Marion,
including, without limitation the following:
(i) Prohibition on sales, mergers, and
acquisitions (except concurrently with full
repayment of this Facility; other than Marion).
(ii) Prohibition on additional indebtedness except
for debt under the Revolving Credit Facility.
(iii) Prohibition on liens, guarantees, lease
obligations, and sale-leaseback transaction subject
to allowances to be defined.
(iv) Prohibition on change of business.
(v) Prohibition on dividends.
(vi) Limitations on capital expenditures to be
defined.
Events of Default: (i) Payment default.
(ii) Breach of Representations or Warranties.
(iii) Violation of Covenant(s).
(iv) Cross default to other debt.
(v) Bankruptcy, insolvency.
Other Events of Default as appropriate.
Expenses and
Indemnifications: Borrower shall reimburse, indemnify and hold
harmless the Fund for all damages, costs, expenses,
and liabilities incurred by or asserted against it
(including fees and expenses of outside counsel to
the Fund for preparation and negotiation of the
commitment letter and all other loan documents) in
connection with or by reason of the preparation,
administration, or enforcement of the credit
agreement and any other transaction contemplated
thereby (including syndication) or the use or
intended use of the proceeds of the Loan other than
as a result of the wilful misconduct or gross
negligence of the Fund. This obligation shall be
binding whether or not this credit agreement is
consummated.
Governing Law: State of New York.
A-3
<PAGE> 1
EXHIBIT 5.2
PPM WORLDWIDE
June 30, 1997 PPM America, Inc.
225 West Wacker Drive
Chicago, Illinois 60606
Telephone (312) 634-2500
Mr. Daniel J. Smoke
Vice President and Chief Financial Officer
Bucyrus International, Inc.
1100 Milwaukee Avenue
South Milwaukee, WI 53172-0500
RE: $45 million Term Loan Commitment (the "Facility") between Bucyrus
International, Inc. ("Bucyrus"), as borrower, and PPM America Special
Investments Fund, L.P. (the "Fund"), as lender; dated April 14, 1997.
Dear Dan:
Bucyrus has requested a 45 day extension of the Closing Date for the $45
million Commitment referenced above. In that connection, the Fund is pleased to
extend the Closing Date from the current deadline of July 15, 1997, to August
30, 1997 (the "Extension"). All other Terms and Conditions of the Facility shall
remain unchanged from the original April 14, 1997, Commitment Letter and Exhibit
A.
By your signature below, you agree to pay Three Hundred Thirty-Seven
Thousand and Five Hundred Dollars ($337,500 U.S.), as consideration for this
extension of the Closing Date ("Extension Fee"), as well as accelerating payment
of the Facility Fee of Four Hundred Fifty Thousand Dollars ($450,000 U.S.). Both
amounts are payable to the PPM America Special Investments Fund, L.P.
This Extension shall be governed by, and construed in accordance with, the
laws of the State of New York.
If the foregoing correctly sets forth our agreement, please indicate your
acceptance of the terms hereof by signing in the appropriate space below and
returning to us the enclosed duplicate original of this letter ("Extension
Letter") not later than 12:00 p.m., Chicago Time, on Monday, June 30, 1997. The
fund's proposal to extend hereunder shall expire at this time unless the Fund
has received such executed originals and payment of the fees.
Upon signing this Extension Letter, please wire transfer the Extension and
Facility Fees to the following account:
Bank Name: Norwest Bank Minnesota, N.A.
ABA #: 091000019
Crediting Account Name: Norwest MN TTEE for PPM America Special Investments
Fund
Account number:
This Extension Letter may be executed in any number of counterparts, each
of which shall be an original and all of which, when taken together, shall
constitute one agreement.
Very truly yours,
PPM AMERICA SPECIAL
INVESTMENTS FUND, L.P.
By: /s/ Levoyd E. Robinson
------------------------------------
Agreed to and accepted as of
the date first above written,
BUCYRUS INTERNATIONAL, INC.
By: /s/ Daniel J. Smoke
--------------------------------------------------------
<PAGE> 1
EXHIBIT 5.3
August 20, 1997
Mr. Daniel J. Smoke
Vice President and Chief Financial Officer
Bucyrus International, Inc.
1100 Milwaukee Avenue
South Milwaukee, WI 53172-0500
Re: Commitment with respect to Bridge Facility
Dear Dan:
This letter shall serve as an amendment to the commitment letter dated
April 14, 1997 (the "Commitment Letter") issued to Bucyrus International, Inc.
(the "Company") by PPM America Special Investments Fund, L.P. (the "Fund") to
provide bridge financing in the amount of $45,000,000 to the Company.
Exhibit A to the Commitment Letter is hereby amended to delete all
provisions therein requiring the Company to issue warrants to the Fund.
Exhibit A is further amended by adding the following section immediately
following the section entitled "Late Charge":
"Additional Facility Fee: At Closing, Fund shall receive an additional
facility fee of $800,000. If the Term Loan
remains outstanding thirty days after Closing,
Fund shall receive an additional facility fee of
$800,000. If the Term Loan remains outstanding on
the 91st day after Closing, Fund shall receive an
additional facility fee of $3.2 million. If the
Term Loan remains outstanding at Maturity, Fund
shall receive an additional facility fee of $3.2
million."
If the foregoing correctly sets forth our agreement please indicate your
acceptance of the terms set forth herein by executing a copy of this letter in
the space provided below.
Very truly yours,
PPM America Special Investments Fund,
L.P.
By: /s/ LEVOYD E. ROBINSON
------------------------------------
Levoyd E. Robinson, CFA
Managing Director
Agreed to and accepted as of the date
first above written
BUCYRUS INTERNATIONAL, INC.
By: /s/ D. J. SMOKE
----------------------------------
<PAGE> 1
EXHIBIT 5.4
BRIDGE LOAN AGREEMENT
BY AND AMONG
PPM AMERICA SPECIAL INVESTMENTS FUND, L.P.,
AS AGENT AND LENDER,
THE OTHER LENDERS PARTY HERETO
AND
BUCYRUS INTERNATIONAL, INC., AS BORROWER
AND
BUCYRUS (AUSTRALIA) PROPRIETARY LTD.,
AND
BUCYRUS CANADA LIMITED, AS SUBSIDIARY BORROWERS
DATED: AUGUST 26, 1997
<PAGE> 2
BRIDGE LOAN AGREEMENT
This Bridge Loan Agreement dated August 26, 1997 is entered into by and
between Bucyrus International, Inc., a Delaware corporation (the "Company" or
"Borrower"); Bucyrus (Australia) Proprietary Ltd., an Australian corporation
("Bucyrus Australia"); Bucyrus Canada Limited, a Canadian corporation ("Bucyrus
Canada", and together with Bucyrus Australia, individually, a "Subsidiary
Borrower" or "Borrower" and, collectively, the "Subsidiary Borrowers"); each of
the lenders that is a signatory hereto identified under the caption "LENDERS" on
the signature pages hereof or shall become a "Lender" hereunder (individually a
"Lender" and, collectively, the "Lenders"); and PPM America Special Investments
Fund, L.P., a Delaware limited partnership, as agent for the Lenders (in such
capacity, together with its successors in such capacity, the "Agent").
WITNESSETH:
WHEREAS, the Company and the Subsidiary Borrowers have entered into an
Asset Purchase Agreement dated as of July 21, 1997 (as the same may be modified
and supplemented and in effect from time to time, the "Asset Purchase
Agreement") by and among Global Industrial Technologies, Inc., a Delaware
corporation ("Global"), and certain subsidiaries of Global, pursuant to which
the Company and the Subsidiary Borrowers have agreed to purchase and assume, and
the Sellers (as defined in the Purchase Agreement) have agreed to sell, certain
assets and liabilities of the Sellers (as so defined) (the "Acquisition");
WHEREAS, in connection with the foregoing, the Company and the Subsidiary
Borrowers have requested that the Lenders make bridge loans to the Company and
the Subsidiary Borrowers in an aggregate principal amount not exceeding
$45,000,000 to provide the required financing for the Acquisition including the
fees, costs and expenses associated with such Acquisition; and
WHEREAS, the Lenders are willing to make such loans on the terms and
conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual conditions and agreements
set forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. DEFINITIONS
All terms used herein which are defined in Article 1 or Article 9 of the
Uniform Commercial Code shall have the meanings given therein unless otherwise
defined in this Agreement. All references to the plural herein shall also mean
the singular and to the singular shall also mean the plural. All references to
Borrower (as hereinafter defined) and Lender pursuant to the definitions set
forth in the recitals hereto, or to any other person herein, shall include their
respective successors and assigns. The words "hereof", "herein", "hereunder",
"this Agreement" and words of similar import when used in this Agreement shall
refer to this Agreement as a whole and not any particular provision of this
Agreement and as this Agreement now exists or may hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced. An Event of
Default shall exist or continue or be continuing until such Event of Default is
cured within the cure period permitted hereunder for such cure or is waived in
accordance with Section 11.3. Any accounting term used herein unless otherwise
defined in this Agreement shall have the meanings customarily given to such term
in accordance with GAAP (as hereinafter defined). For purposes of this
Agreement, the following terms shall have the respective meanings given to them
below:
"Acceleration Date" shall have the meaning assigned thereto in Section 3.3.
"Acquisition" shall have the meaning assigned thereto in the recitals
hereof.
"Adjusted Eurodollar Rate" shall mean, with respect to each Interest Period
for any Eurodollar Rate Loan, the rate per annum (rounded upwards, if necessary,
to the next one-sixteenth (1/16) of one (1%) percent) determined by dividing (a)
the Eurodollar Rate for such Interest Period by (b) a percentage equal to: (i)
one (1) minus (ii) the Reserve Percentage. For purposes hereof, "Reserve
Percentage" shall mean the
<PAGE> 3
reserve percentage, expressed as a decimal, prescribed by any United States or
foreign banking authority for determining the reserve requirement which is or
would be applicable to deposits of United States dollars in a non-United States
or an international banking office of Reference Bank used to fund a Eurodollar
Rate Loan or any Eurodollar Rate Loan made with the proceeds of such deposit,
whether or not the Reference Bank actually holds or has made any such deposits
or loans. The Adjusted Eurodollar Rate shall be adjusted on and as of the
effective day of any change in the Reserve Percentage.
"Applicable Lending Office" shall mean, for each Lender and for either
Eurodollar Rate Loans or Prime Rate Loans, the "Lending Office" of such Lender
(or of an affiliate of such Lender) designated for such Bridge Loan on the
signature pages hereof or such other office of such Lender (or of an affiliate
of such Lender) as such Lender may from time to time specify to the Agent and
the Borrowers as the office by which its Eurodollar Rate Loans or Prime Rate
Loans are to be made and maintained.
"AIP Acquisition" shall mean the purchase of at least 51% of the capital
stock of the Company by American Industrial Partners or an affiliated entity or
any other competing offer to acquire the capital stock of the Company accepted
by the Company.
"Asset Purchase Agreement" shall have the meaning assigned thereto in the
recitals hereof.
"BankOne Credit Agreement" shall mean that certain Credit Agreement dated
as of December 14, 1994 between Bank One, Milwaukee, National Association and
the Company, as in effect on the date hereof.
"Borrowers" shall mean collectively, the Company and the Subsidiary
Borrowers.
"Bridge Loan Commitment" means (a) as to any Lender, the commitment of such
Lender to make Bridge Loans as set forth on the signature page of this Agreement
opposite such Lender's signature and (b) as to all Lenders, the aggregate
commitment of all Lenders to make Bridge Loans.
"Bridge Loans" shall mean the loans made by the Lenders to the Borrowers as
provided for in Section 2.1 hereof.
"Bridge Notes" shall mean the notes evidencing the Bridge Loans pursuant to
Section 2.1 hereof.
"Business Day" shall mean (a) for the Prime Rate Loans, any day other than
a Saturday, Sunday, or other day on which commercial banks are authorized or
required to close under the laws of the State of New York or the State of
Illinois, and a day on which the Reference Bank and the Lenders are open for the
transaction of business, and (b) for all Eurodollar Rate Loans, any such day as
described in (a) above in this definition of Business Day, excluding any day on
which banks are closed for dealings in dollar deposits in the London interbank
market or other applicable Eurodollar Rate market.
"Capital Expenditures" shall mean, for any period, expenditures (including,
without limitation, the aggregate amount of Capital Lease Obligations incurred
during such period) made by the Company or any of its Consolidated Subsidiaries
to acquire or construct fixed assets, plant and equipment (including renewals,
improvements and replacements, but excluding repairs) during such period
computed in accordance with GAAP.
"Capital Lease Obligations" shall mean, for any Person, all obligations of
such Person to pay rent or other amounts under a lease of (or other agreement
conveying the right to use) property to the extent such obligations are required
to be classified and accounted for as a capital lease on a balance sheet of such
Person under GAAP, and, for purposes of this Agreement, the amount of such
obligations shall be the capitalized amount thereof, determined in accordance
with GAAP.
"Change of Control" shall mean any transaction or event as a result of
which any "person" or "group" (as such terms are used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended) is or becomes the
beneficial owner, directly or indirectly, of more than 50% of the issued and
outstanding shares of the capital stock of the Company.
"Code" shall mean the Internal Revenue Code of 1986, as the same now exists
or may from time to time hereafter be amended, modified, recodified or
supplemented, together with all rules, regulations and interpretations
thereunder or related thereto.
2
<PAGE> 4
"Consolidated Subsidiary" shall mean, for any Person, each Subsidiary of
such Person (whether now existing or hereafter created or acquired) the
financial statements of which shall be (or should have been) consolidated with
the financial statements of such Person in accordance with GAAP. Notwithstanding
the foregoing, for purposes of this Agreement, with respect to the Company, each
Subsidiary Borrower shall be deemed to be a Consolidated Subsidiary of the
Company.
"Dollars" and "$" shall mean lawful money of the United States of America.
"Default" shall mean an Event of Default or an event that with notice or
lapse of time or both would become an Event of Default.
"Effective Date" shall mean the date upon which all the conditions
precedent in Section 5 hereof are satisfied to each Lender's satisfaction or
waived by the Lenders and the Bridge Loans are made hereunder.
"Environmental Laws" shall mean all federal, state, district, local and
foreign laws, rules, regulations, ordinances, and consent decrees relating to
health, safety, hazardous substances, pollution and environmental matters, as
now or at any time hereafter in effect, applicable to Borrower's business and
facilities (whether or not owned by it), including laws relating to emissions,
discharges, releases or threatened releases of pollutants, contamination,
chemicals, or hazardous, toxic or dangerous substances, materials or wastes into
the environment (including, without limitation, ambient air, surface water,
ground water, land surface or subsurface strata) or otherwise relating to the
generation, manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of pollutants, contaminants, chemicals, or
hazardous, toxic or dangerous substances, materials or wastes.
"ERISA" shall mean the United States Employee Retirement Income Security
Act of 1974, as the same now exists or may hereafter from time to time be
amended, modified, recodified or supplemented, together with all rules,
regulations and interpretations thereunder or related thereto.
"ERISA Affiliate" shall mean any person required to be aggregated with
Borrowers or any of its subsidiaries under Sections 414(b), 414(c), 414(m) or
414(o) of the Code.
"Eurodollar Default Rate" shall mean the rate of nine (9%) percent per
annum in excess of the Adjusted Eurodollar Rate.
"Eurodollar Rate Loans" shall mean any Bridge Loan or portion thereof on
which interest is payable based on the Adjusted Eurodollar Rate in accordance
with the terms hereof.
"Eurodollar Rate" shall mean with respect to the Interest Period for a
Eurodollar Rate Loan, the interest rate per annum equal to the arithmetic
average of the rates of interest per annum (rounded upwards, if necessary, to
the next one-sixteenth (1/16) of one (1%) percent) at which Reference Bank is
offered deposits of United States dollars in the London interbank market (or
other Eurodollar Rate market selected by Borrowers and approved by Lender) on or
about 9:00 a.m. (New York time) two (2) Business Days prior to the commencement
of such Interest Period in amounts substantially equal to the principal amount
of the Eurodollar Rate Loans requested by and available to Borrowers in
accordance with this Agreement, with a maturity of comparable duration to the
Interest Period.
"Event of Default" shall mean the occurrence or existence of any event or
condition described in Section 10.1 hereof.
"Fee Letter" shall mean the letter dated the date hereof between the Fund,
the Company and the Subsidiary Borrowers, as the same may be modified and
supplemented and in effect from time to time.
"Financing Agreements" shall mean, collectively, this Agreement, the Bridge
Notes, the Fee Letter, all guarantees and other agreements, documents and
instruments now or at any time hereafter executed and/or delivered by any
Borrower or any Obligor in connection with this Agreement, as the same now exist
or may hereafter be amended, modified, supplemented, extended, renewed, restated
or replaced.
"Fund" shall mean PPM America Special Investments Fund, L.P., a Delaware
limited partnership.
3
<PAGE> 5
"GAAP" shall mean generally accepted accounting principles in the United
States of America as in effect from time to time as set forth in the opinions
and pronouncements of the Accounting Principles Board and the American Institute
of Certified Public Accountants and the statements and pronouncements of the
Financial Accounting Standards Boards which are applicable to the circumstances
as of the date of determination consistently applied.
"Global" shall have the meaning assigned thereto in the recitals hereof.
"Guarantor" shall mean each of the Company's subsidiaries who have executed
a Guarantee and any other Person who may hereafter guarantee payment or
performance of the whole or any part of the Obligations.
"Guaranty Agreements" shall mean, individually and collectively, the
Guarantee, dated of even date herewith, by each Guarantor in favor of Lenders,
as the same may be amended, modified, or supplemented.
"Interest Period" shall mean for any Eurodollar Rate Loan, a period of
approximately 30 days duration, the exact duration to be determined in
accordance with the customary practice in the applicable Eurodollar Rate market.
"Interest Rate" shall mean, as to Eurodollar Rate Loans, a rate of five
(5%) percent per annum in excess of the Adjusted Eurodollar Rate (based on the
Eurodollar Rate applicable for the Interest Period) and as to Prime Rate Loans,
a rate of two and one-half (2 1/2%) percent per annum in excess of the Prime
Rate; provided, that, the Interest Rate shall mean the Eurodollar Default Rate
as to Eurodollar Rate Loans and the Prime Default Rate as to Prime Rate Loans,
without notice, for the period on and after the date of termination of this
Agreement, or the date of the occurrence of any Default (which cannot be cured
within the cure period before it becomes an Event of Default), or Event of
Default, and for so long as such Default or Event of Default is continuing as
determined by the Majority Lenders and until such time as all Obligations are
indefeasibly paid in full (notwithstanding entry of any judgment against any
Borrower).
"Majority Lenders" shall mean Lenders holding at least 51% of the aggregate
outstanding principal amount of the Bridge Loans or, if the Bridge Loans shall
not have been made, at least 51% of the Bridge Loan Commitments.
"Marion Assets" shall mean the fixed assets, including equipment, furniture
and fixtures, acquired pursuant to the Purchase Agreements.
"Maturity Date" shall mean the earlier to occur of (a) the date seven days
from the date that the Senior Note Offering shall be consummated and (b) the
date one hundred eighty days from the Effective Date (provided that, if such day
is not a U.S. Business Day then such date shall be the immediately preceding
U.S. Business Day).
"Obligations" shall mean the Bridge Loans and all other obligations,
liabilities and indebtedness of every kind, nature and description owing by any
Borrower to the Agent, or any Lender and/or any of their respective affiliates,
including principal, interest, charges, fees, costs and expenses, however
evidenced, whether as principal, surety, endorser, guarantor or otherwise,
whether arising under this Agreement or otherwise, whether now existing or
hereafter arising, whether arising before, during or after the initial or any
renewal term of this Agreement or after the commencement of any case with
respect to any Borrower under the United States Bankruptcy Code or any similar
statute (including, without limitation, the payment of interest and other
amounts which would accrue and become due but for the commencement of such
case), whether direct or indirect, absolute or contingent, joint or several, due
or not due, primary or secondary, liquidated or unliquidated, secured or
unsecured, and however acquired by any Lender or the Agent.
"Obligor" shall mean any guarantor, endorser, acceptor, surety or other
person liable on or with respect to the Obligations, other than any Borrower.
"Person" or "person" shall mean any individual, sole proprietorship,
partnership, corporation (including, without limitation, any corporation which
elects subchapter S status under the Internal Revenue Code of
4
<PAGE> 6
1986, as amended), business trust, unincorporated association, joint stock
corporation, trust, joint venture or other entity or any government or any
agency or instrumentality or political subdivision thereof.
"Prime Default Rate" shall mean the rate of six and one-half (6 1/2%)
percent per annum in excess of the Prime Rate.
"Prime Rate" shall mean the highest prime or equivalent rate of interest
(expressed as an annual rate) publicly announced by The Chase Manhattan Bank,
N.A. or Bank of America National Trust and Savings Association from time to time
as its "prime rate", each change in such rate to take effect on the date of
effective change of such prime rate.
"Prime Rate Loans" shall mean any Bridge Loan or portion thereof on which
interest is payable based on the Prime Rate in accordance with the terms hereof.
"Project Financing" means indebtedness of the Borrowers incurred to pay the
costs associated with the manufacture of mining machinery or other products
pursuant to a binding purchase contract, which Indebtedness is secured by the
inventory being financed and the related accounts and which has a maturity date
not later than the date of the final payment by the customer under the purchase
contract.
"Purchase Agreements" shall mean, individually and collectively, the Asset
Purchase Agreement, together with bills of sale, quitclaim deeds, assignment and
assumption agreements and such other instruments of transfer as are referred to
therein and all side letters with respect thereto, and all agreements, documents
and instruments executed and/or delivered in connection therewith, as all of the
foregoing now exist or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced; provided, that, the term "Purchase
Agreements" as used herein shall not include any of the "Financing Agreements"
as such term is defined herein.
"Purchased Assets" shall mean all of the assets and properties acquired or
to be acquired by the Borrowers from the Sellers pursuant to the Purchase
Agreements.
"Reference Bank" shall mean Bank of America National Trust and Savings
Association, or such other bank as the Majority Lenders may from time to time
designate.
"Sellers" shall have the meaning assigned thereto in the Asset Purchase
Agreement.
"Senior Notes Offering" shall mean the issuance by the Company of an
aggregate principal amount of at least $100,000,000 of senior notes as
contemplated by that certain Offering Memorandum dated July, 1997.
"U.S. Business Day" shall mean any day other than a Saturday, Sunday or
other day on which commercial banks are authorized or required to close under
the laws of the State of New York or the State of Illinois and a day on which
the Reference Bank and the Lenders are open for the transaction of business.
SECTION 2. CREDIT FACILITIES
2.1 Bridge Loans.
(a) Each Lender severally agrees, on the terms and conditions of this
Agreement, to make a bridge loan to each Borrower in the amount set forth
under such Lender's name on Schedule 2.1 hereto in Dollars on the Effective
Date (provided that the same shall occur no later than August 31, 1997) in
an aggregate principal amount with respect to all Bridge Loans made by such
Lender to the Borrowers up to but not exceeding the Bridge Loan Commitment
of such Lender. Each Bridge Loan made to each Borrower by each Lender shall
be evidenced by a Bridge Note, substantially in the form of Exhibit A
hereto, duly executed and delivered by Borrowers concurrently herewith and
(ii) repaid, together with interest and other amounts, in accordance with
this Agreement, the Bridge Notes and the other Financing Agreements.
(b) Any portion of the Bridge Loan Commitments not used on the
Effective Date shall be automatically terminated. The Bridge Loan
Commitments once terminated may not be reinstated.
5
<PAGE> 7
(c) Each Borrower hereby promises to pay to the Agent for account of
each Lender the entire outstanding principal amount of such Lender's Bridge
Loan to such Borrower, and each Bridge Loan shall mature, on the Maturity
Date.
(d) The Borrowers may prepay the outstanding principal balance of the
Bridge Loans, in whole or in part, at any time, from time to time, without
premium or penalty (except as otherwise provided in Section 4.4 hereof),
upon at least five (5) Business Days prior written notice to the Agent. All
voluntary prepayments of the principal of the Bridge Loans shall be
accompanied by the payment of all accrued but unpaid interest to the date
of prepayment and, in the event that any such prepayment shall be made on a
day other than the last day of the applicable Interest Period for any
Bridge Loan that is a Eurodollar Rate Loan, any amounts payable by the
Borrowers pursuant to Section 4.4(b) hereof.
2.2 Mandatory Prepayments.
(a) If any Borrower sells, transfers, leases or otherwise disposes of
any of its properties, business or assets (collectively, the "Assets"),
including any Assets permitted to be sold pursuant to Section 9.5 in excess
of $1,000,000 in the aggregate, other than sales of Assets in the ordinary
course of business, such Borrower shall pay to the Agent for the account of
the Lenders, unless otherwise agreed by the Majority Lenders, as and when
received by such Borrower as a mandatory prepayment of the Bridge Loans,
the proceeds received by such Borrower from such sale, net of any payments
made by Borrower on any indebtedness secured by a lien on such Assets, and
Borrower's closing costs associated with such sale, to be applied as
follows: (A) provided that no Event of Default has occurred and is
continuing, one hundred percent (100%) of such proceeds shall be applied to
the principal of such Borrower's Bridge Loans, together with unpaid
interest accrued on such amount to the date of such payment, until payment
thereof in full, or (B) provided an Event of Default has occurred and is
continuing, one hundred percent (100%) of such proceeds shall be applied to
the Obligations in such order and manner as the Majority Lenders determine.
(b) Within seven days following the consummation of the Senior Notes
Offering, the Company shall pay to the Agent for account of the Lenders as
a mandatory prepayment of the Bridge Loans to be applied to the Obligations
in such order and manner as the Majority Lenders determine the lesser of
(i) an amount equal to the aggregate amount of all cash received by the
Company and its Subsidiaries in respect thereof net of reasonable expenses
incurred by the Company and its Subsidiaries in connection therewith or
(ii) an amount equal to the indefeasible payment in full of all
Obligations.
SECTION 3. INTEREST AND FEES
3.1 Interest.
(a) Each Borrower hereby promises to pay to the Agent, for the account
of each Lender, interest on the outstanding principal amount of such
Borrower's Bridge Loans and all other non-contingent Obligations which are
past due at the Interest Rate. All interest accruing hereunder on and after
the occurrence of any Event of Default or termination or non-renewal hereof
shall be payable on demand. Borrowers shall pay to the Agent for account of
each Lender, upon demand by any Lender (or any Lender may, at its option,
charge any loan account of Borrower) any amounts required to compensate any
Lender, the Reference Bank or any participant with any Lender for any cost
or expense incurred by such person, as a result of the conversion of the
Interest Rate from the Eurodollar Rate to the Prime Rate.
(b) Subject to the terms and conditions of this Agreement, Bridge
Loans may initially be Prime Rate Loans or Eurodollar Rate Loans at the
election of the Company. At least two Business Days prior to the date the
Bridge Loans are made hereunder, the Company shall notify the Agent that
Bridge Loans shall be either Eurodollar Rate Loans or Prime Rate Loans;
provided, however, all Bridge Loans outstanding shall either be Eurodollar
Rate Loans or Prime Rate Loans.
(c) The Company may request that Eurodollar Rate Loans be converted to
Prime Rate Loans at the end of an Interest Period. Subject to the terms and
conditions contained herein, three (3) Business Days after receipt by the
Agent of such a request from the Company, Eurodollar Rate Loans shall be
6
<PAGE> 8
converted to Prime Rate Loans, provided, that, all outstanding Eurodollar
Rate Loans are converted to Prime Rate Loans. Prime Rate Loans may not be
converted to Eurodollar Rate Loans.
(d) Any Eurodollar Rate Loans shall automatically convert to Prime
Rate Loans upon the last day of the applicable Interest Period, unless the
Agent has received and the Majority Lenders have approved, a request to
continue such Eurodollar Rate Loan at least three (3) Business Days prior
to such last day in accordance with the terms hereof. Any Eurodollar Rate
Loans shall, upon the determination of the Majority Lenders, upon notice by
the Agent to the Company, convert to Prime Rate Loans in the event that (i)
Default or an Event of Default, shall exist or (ii) this Agreement shall
terminate or not be renewed. Borrower shall pay to the Agent for account of
each Lender, upon demand by any Lender (or any Lender may, at its option,
charge any loan account of Borrower) any amounts required to compensate any
Lender, the Reference Lender or any participant with any Lender for any
cost or expense incurred by such person, as a result of the conversion of
Eurodollar Rate Loans to Prime Rate Loans pursuant to any of the foregoing.
(e) Interest shall be payable by Borrowers to the Agent for account of
each Lender monthly in arrears not later than the first day of each
calendar month and shall be calculated on the basis of a three hundred
sixty (360) day year and actual days elapsed. The interest rate on
non-contingent Obligations bearing interest at the Prime Rate shall
increase or decrease by an amount equal to each increase or decrease in the
Prime Rate effective on the first day of the month after any change in such
Prime Rate is announced based on the Prime Rate in effect on the last day
of the month in which any such change occurs. In no event shall charges
constituting interest payable by Borrowers to any Lender exceed the maximum
amount or the rate permitted under any applicable law or regulation, and if
any such part or provision of this Agreement is in contravention of any
such law or regulation, such part or provision shall be deemed amended to
conform thereto.
3.2 Maintenance Fee. In the event that any Bridge Loan shall be outstanding
on the date thirty days after the Effective Date, on such date Borrowers shall
pay to the Agent for the account of each Lender a fee equal to 1% of the
original aggregate principal amount of the Bridge Loan Commitment of such
Lender. In addition, in the event that any Bridge Loan shall be outstanding (i)
on the date ninety days after the Effective Date and (ii) one hundred and fifty
days after the Effective Date, on each such date Borrowers shall pay to the
Agent for account of each Lender a fee equal to 1% of the aggregate original
principal amount of the Bridge Loan Commitment of such Lender.
3.3 Late Fee. In the event that any Bridge Loan shall not be paid in full
on the Maturity Date, or payment of the Obligations are accelerated pursuant to
Section 10.2 (the "Acceleration Date"), Borrowers shall pay to the Agent for
account of each Lender on the Maturity Date or the Acceleration Date, as
applicable, and on each thirty day anniversary thereafter for so long as any
Bridge Loan shall remain outstanding a fee equal to 1% of the aggregate
principal amount outstanding of the Bridge Loans of such Lender as of each such
date.
SECTION 4. PAYMENTS; PRO RATA TREATMENT; INCREASED COSTS, ETC.
4.1 (a) All payments of principal, interest and other amounts to be made by
the Borrowers under this Agreement, the notes and the Fee Letter shall be made
in Dollars, in immediately available funds, without deduction, set-off or
counterclaim, to the Agent pursuant to the following instructions: Norwest Bank
Minnesota, N.A., ABA 091000019, Corporate Trust Clearing Account # ,
Account Number: , Account Name: Norwest MN TTEE for PPM America Special
Investments Fund (Short name: PPM America), Attention: Ilene Stelzner/Kathy
Nickolay, Reference Bucyrus International. All such amounts shall be made not
later than 1:00 p.m. New York time on the date on such payment shall become due
(each such payment made after such time on such due date to be deemed to have
been made on the next succeeding U.S. Business Day).
(b) The amounts payable by the Borrowers at any time hereunder and under
the notes to each Lender shall be a separate and independent debt and each
Lender shall be entitled to protect and enforce its rights arising out of this
Agreement and the notes, and it shall not be necessary for any other Lender or
the Agent to consent to, or be joined as an additional party in, any proceedings
for such purposes.
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(c) Any Lender for whose account any such payment is to be made may (but
shall not be obligated to) debit the amount of any such payment that is not made
by such time to any ordinary deposit account of any Borrower with such Lender
(with notice to the Company and the Agent), provided that such Lender's failure
to give such notice shall not affect the validity thereof.
(d) Borrowers shall, at the time of making each payment under this
Agreement or any note for account of any Lender, specify to the Agent (which
shall so notify the intended recipient(s) thereof) the Bridge Loans or other
amounts payable by the Borrowers hereunder to which such payment is to be
applied (and in the event that the Borrowers fail to so specify, or if an Event
of Default has occurred and is continuing, the Agent may distribute such payment
to the Lenders for application in such manner as it, or the Majority Lenders,
subject to Section 4.2 hereof, may determine to be appropriate).
(e) Each payment received by the Agent under this Agreement or any note for
account of any Lender shall be paid by the Agent promptly to such Lender, in
immediately available funds, for account of such Lender's Applicable Lending
Office for the Bridge Loans or other obligation in respect of which such payment
is made.
(f) If the due date of any payment under this Agreement or any note would
otherwise fall on a day that is not a Business Day, such date shall be extended
to the next succeeding Business Day, and interest shall be payable for any
principal so extended for the period of such extension.
4.2 Pro Rata Treatment. Except to the extent otherwise provided herein: (a)
each borrowing of Bridge Loans from the Lenders under Section 2.1 hereof shall
be made from the relevant Lenders, each payment of fees under Section 3.2 hereof
shall be made for account of the relevant Lenders, pro rata according to the
amounts of their respective Bridge Loan Commitments; (b) each payment or
prepayment of principal of Bridge Loans by the Borrowers shall be made for
account of the relevant Lenders pro rata according with the respective unpaid
principal amounts of the Bridge Loans held by them; and (c) each payment of
interest on Bridge Loans and each payment of fees under Section 3.3 hereof by
the Borrowers shall be made for account of the relevant Lenders pro rata in
accordance with the amounts of interest or fees (as the case may be) on such
Bridge Loans then due and payable to the respective Lenders.
4.3 Sharing of Payments. (a) Each Borrower agrees that, in addition to (and
without limitation of) any right of set-off, banker's lien or counterclaim a
Lender may otherwise have, each Lender shall be entitled, at its option (to the
fullest extent permitted by law), to set off and apply any deposit (general or
special, time or demand, provisional or final), or other indebtedness, held by
it for the credit or account of any Borrower at any of its offices, in Dollars
or in any other currency, against any principal of or interest on any of such
Lender's Bridge Loans, or any other amount payable to such Lender hereunder,
that is not paid when due (regardless of whether such deposit or other
indebtedness are then due to any Borrower), in which case it shall promptly
notify the Company and the Agent thereof, provided that such Lender's failure to
give such notice shall not affect the validity thereof.
(b) If any Lender shall obtain from any Borrower payment of any principal
of or interest on any Bridge Loan owing to it or payment of any other amount
under this Agreement or any other Financing Agreement through the exercise of
any right of set-off, banker's lien or counterclaim or similar right or
otherwise (other than from the Agent as provided herein), and, as a result of
such payment, such Lender shall have received a greater percentage of the
principal of or interest on the Bridge Loans or such other amounts then due
hereunder or thereunder by any Borrower to such Lender than the percentage
received by any other Lender, it shall promptly purchase from such other Lenders
participations in (or, if and to the extent specified by such Lender, direct
interests in) the Bridge Loans or such other amounts, respectively, owing to
such other Lenders (or in interest due thereon, as the case may be) in such
amounts, and make such other adjustments from time to time as shall be
equitable, to the end that all the Lenders shall share the benefit of such
excess payment (net of any expenses that may be incurred by such Lender in
obtaining or preserving such excess payment) pro rata in accordance with the
unpaid principal of and/or interest on the Bridge Loans or such other amounts,
respectively, owing to each of the Lenders. To such end all the Lenders shall
make appropriate adjustments among themselves (by the resale of participations
sold or otherwise) if such payment is rescinded or must otherwise be restored.
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(c) Each Borrower agrees that any Lender so purchasing such a
participation (or direct interest) may exercise all rights of set-off,
banker's lien, counterclaim or similar rights with respect to such
participation as fully as if such Lender were a direct holder of Bridge
Loans or other amounts (as the case may be) owing to such Lender in the
amount of such participation.
(d) Nothing contained herein shall require any Lender to exercise any
such right or shall affect the right of any Lender to exercise, and retain
the benefits of exercising, any such right with respect to any other
indebtedness or obligation of the Borrower. If, under any applicable
bankruptcy, insolvency or other similar law, any Lender receives a secured
claim in lieu of a set-off to which this Section 4.3 applies, such Lender
shall, to the extent practicable, exercise its rights in respect of such
secured claim in a manner consistent with the rights of the Lenders
entitled under this Section 4.3 to share in the benefits of any recovery on
such secured claim.
4.4 Changes in Laws; Increased Costs of Loans.
(a) Notwithstanding anything to the contrary contained herein, all
Eurodollar Rate Loans shall, upon notice by any Lender to Agent and
Borrowers, convert to Prime Rate Loans in the event that (i) any change in
applicable law or regulation (or the interpretation or administration
thereof) shall either (A) make it unlawful for Lender, Reference Bank or
any participant to make or maintain Eurodollar Rate Loans or to comply with
the terms hereof in connection with the Eurodollar Rate Loans, by an amount
deemed by such Lender to be material, or (B) shall result in the increase
in the costs to any Lender, Reference Bank or any participant of making or
maintaining any Eurodollar Rate Loans or (C) reduce the amounts received or
receivable by any Lender in respect thereof, by an amount deemed by Lender
to be material or (ii) the cost to Lender, Reference Bank or any
participant of making or maintaining any Eurodollar Rate Loans shall
otherwise increase by an amount deemed by any Lender to be material.
Borrowers shall pay to such Lender, upon demand by such Lender (or such
Lender may, at its option, charge any loan account of Borrower) any amounts
required to compensate such Lender, the Reference Bank or any participant
with such Lender for any loss (including loss of anticipated profits), cost
or expense incurred by such person as a result of the foregoing, including,
without limitation, any such loss, cost or expense incurred by reason of
the liquidation or reemployment of deposits or other funds acquired by such
person to make or maintain the Eurodollar Rate Loans or any portion
thereof. A certificate of any Lender setting forth the basis for the
determination of such amount necessary to compensate such Lender as
aforesaid shall be delivered to Agent and Borrowers and shall be
conclusive, absent manifest error.
(b) If any payments or prepayments in respect of the Eurodollar Rate
Loans are received by the Agent other than on the last day of the
applicable Interest Period (whether pursuant to acceleration, upon
maturity, upon prepayment or otherwise), Borrowers shall pay to the Agent
for the account of the Lenders upon demand by the Agent (or any Lender may,
at its option, as provided in Section 4.3 hereof, charge any loan account
of any Borrower) any amounts required to compensate such Lender, the
Reference Bank or any participant with such Lender for any additional loss
(including loss of anticipated profits), cost or expense incurred by such
person as a result of such prepayment or payment, including, without
limitation, any loss, cost or expense incurred by reason of the liquidation
or reemployment of deposits or other funds acquired by such person to make
or maintain such Eurodollar Rate Loans or any portion thereof.
SECTION 5. CONDITIONS PRECEDENT
5.1 Conditions Precedent to Bridge Loans. Each of the following is a
condition precedent to the Lenders making the Bridge Loans hereunder:
(a) Lenders shall have received, in form and substance satisfactory to
Majority Lenders, evidence that the Purchase Agreements have been duly
executed and delivered by and to the appropriate parties thereto and the
transactions contemplated under the terms of the Purchase Agreements have
been consummated prior to or contemporaneously with the making of the
Bridge Loans hereunder in
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accordance with the terms thereof without any modification or waivers
thereunder (except any thereof which shall be consented to by the Majority
Lender);
(b) all requisite corporate action and proceedings in connection with
this Agreement and the other Financing Agreements shall be satisfactory in
form and substance to the Agent and the Majority Lenders, and Agent and
Lenders shall have received all information and copies of all documents,
including, without limitation, records of requisite corporate action and
proceedings which Agent or Lenders may have requested in connection
therewith, such documents where requested by Lenders or its counsel to be
certified by appropriate corporate officers or governmental authorities;
(c) no material adverse change shall have occurred in the financial
condition, assets (including the Purchased Assets), business or prospects
of the Company and its Consolidated Subsidiaries taken as a whole, since
the date of the latest financial statements dated June 30, 1997 furnished
to the Agent with respect to the Company and its Consolidated Subsidiaries
and no change or event shall have occurred which would impair the ability
of any Borrower or any Obligor to perform its obligations hereunder or
under any of the other Financing Agreements to which it is a party or of
Lenders to enforce the Obligations;
(d) Lenders shall have received, in form and substance satisfactory to
Lenders, a pro-forma balance sheet of the Company and its Consolidated
Subsidiaries reflecting the initial transactions contemplated hereunder,
including, but not limited to, (i) the consummation of the Acquisition and
the other transactions contemplated by the Purchase Agreements and (ii) the
Bridge Loan provided by Lenders to the Borrowers on the date hereof and the
use of the proceeds of the Bridge Loans as provided herein, accompanied by
a certificate, dated of even date herewith, of the chief financial officer
of the Company stating that such pro-forma balance sheet represents the
reasonable, good faith opinion of such officer as to the subject matter
thereof as of the date of such certificate;
(e) Lenders shall have received, in form and substance satisfactory to
Lenders, a closing certificate signed by the Chief Financial Officer of
each Borrower dated as of the date hereof and as of the Effective Date,
stating that (i) the representations and warranties set forth in Section 8
hereof are true and correct on and as of each such date, (ii) the Borrowers
are in compliance with all terms and provisions set forth in this Agreement
on each such date, and (iii) no Default or Event of Default, has occurred
or is continuing;
(f) Agent shall have received written instructions from the Borrowers
directing the application of proceeds of the Bridge Loans made pursuant to
this Agreement;
(g) Lenders shall have received, in form and substance satisfactory to
Lenders, a certificate from the Company regarding the solvency of the
Company and its Consolidated Subsidiaries, which includes a pro forma
balance sheet and cash flow projections, signed by the President and Chief
Financial Officer of the Company, dated as of the date hereof and as of the
Effective Date;
(h) Lenders shall have received, in form and substance satisfactory to
Lenders, the opinion letter of counsel(s) to the Borrowers with respect to
the Purchase Agreements and the Financing Agreements and such other matters
as Lenders may request; and
(i) the other Financing Agreements (including, without limitation, the
Guaranty Agreements and the Bridge Notes) and all instruments and documents
hereunder and thereunder shall have been duly executed and delivered to
Lenders, in form and substance satisfactory to Lenders.
(j) Lenders shall have received a certification by the President or
Chief Financial Officer of the Company with respect to the engagement of
Jeffries & Company, Inc. and Salomon Brothers Inc. as agents for the Senior
Notes Offering;
(k) Agent and Lenders shall have received such other information,
documents, agreements, commitments and undertakings as Agent and Lenders
shall reasonably request; and
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(l) All fees payable by the Borrowers hereunder and under the Fee
Letter on or prior to the Effective Date shall have been paid to the Agent
and the Lenders, as applicable.
5.2 Conditions Precedent to the Bridge Loans. Each of the following is an
additional condition precedent to Lenders making the Bridge Loans hereunder:
(a) all representations and warranties contained herein and in the
other Financing Agreements shall be true and correct with the same effect
as though such representations and warranties had been made on and as of
the date of the making of the Bridge Loans and after giving effect thereto;
and
(b) no Default and no Event of Default, shall exist or have occurred
and be continuing on and as of the date of the making of the Bridge Loans
and after giving effect thereto.
SECTION 6.COLLECTION AND ADMINISTRATION; JOINT SEVERALABILITY; RIGHTS OF
CONTRIBUTION
6.1 Payments. All Obligations shall be payable to the Agent on behalf of
the Lenders, as provided in Section 4.1(a) or such other place as Agent may
designate from time to time. Agent may apply payments received or collected from
any Borrower or for the account of any Borrower to such of the Obligations,
whether or not then due, in such order and manner as Agent determines. If after
receipt of any payment of, any of the Obligations, Agent or any Lender is
required to surrender or return such payment or proceeds to any Person for any
reason, then the Obligations intended to be satisfied by such payment or
proceeds shall be reinstated and continue and this Agreement shall continue in
full force and effect as if such payment or proceeds had not been received by
Agent or such Lender. Borrowers shall be liable to pay to Agent and Lenders, and
do hereby indemnify and hold Agent and Lenders harmless for the amount of any
payments or proceeds surrendered or returned. This Section 6.1 shall remain
effective notwithstanding any contrary action which may be taken by Agent or
Lenders in reliance upon such payment or proceeds. This Section 6.1 shall
survive the payment of the Obligations and the termination or non-renewal of
this Agreement.
6.2 Authorization to Make Loans. Each Lender is authorized to make the
Bridge Loans based upon telephonic or other instructions received from anyone
purporting to be an officer of the Company or other authorized person.
6.3 Use of Proceeds. Borrowers shall use the proceeds of the Bridge Loans
solely for: (a) payments to the Seller in accordance with the Purchase
Agreements with respect to the Acquisition (b) costs, expenses and fees in
connection with the preparation, negotiation, execution and delivery of the
Purchase Agreements, this Agreement and the other Financing Agreements (c)
capital contributions or loans to the Subsidiary Borrowers and to Bucyrus
(Africa) (Proprietary) Limited not to exceed $7,000,000 in the aggregate and (d)
working capital purposes. None of the proceeds will be used, directly or
indirectly, for the purpose of purchasing or carrying any margin security or for
the purposes of reducing or retiring any indebtedness which was originally
incurred to purchase or carry any margin security or for any other purpose which
might cause any of the Bridge Loans to be considered a "purpose credit" within
the meaning of Regulation G of the Board of Governors of the Federal Reserve
System, as amended.
6.4 Limitation on Obligations. Notwithstanding anything herein to the
contrary, the liability of each of the Subsidiary Borrowers hereunder and under
the Financing Agreements is expressly limited to the outstanding principal
amount due under the Bridge Loans made by the Lenders to such Subsidiary
Borrower plus interest, and such Subsidiary Borrower's pro rata share of all
charges, fees, costs and expenses and other Obligations, however evidenced,
related to such Bridge Loans.
6.5 Guaranty.
(a) The Company hereby guarantees to each Lender and the Agent and
their respective successors and assigns the prompt payment in full when due
(whether at stated maturity, by acceleration or otherwise) of the principal
of and interest on the Bridge Loans made by the Lenders to the Subsidiary
Borrowers and all other Obligations from time to time owing to the Lenders
or the Agent by the Subsidiary Borrowers under this Agreement, the Bridge
Notes and the Financing Agreements, in each
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case strictly in accordance with the terms thereof (such obligations being
herein collectively called the "Guaranteed Obligations"). The Company
hereby further agrees that if any of the Subsidiary Borrowers shall fail to
pay in full when due (whether at stated maturity, by acceleration or
otherwise) any of the Guaranteed Obligations, the Company will promptly pay
the same, without any demand or notice whatsoever, and that in the case of
any extension of time of payment or renewal of any of the Guaranteed
Obligations, the same will be promptly paid in full when due (whether at
extended maturity, by acceleration or otherwise) in accordance with the
terms of such extension or renewal.
(b) The obligations of the Company under Section 6.5(a) hereof are, to
the fullest extent permitted by law, absolute and unconditional
irrespective of the value, genuineness, validity, regularity or
enforceability of the obligations of the Subsidiary Borrowers under this
Agreement, the Bridge Notes or any other agreement or instrument referred
to herein or therein, or any substitution, release or exchange of any other
guarantee of or any security for any of the Guaranteed Obligations, and, to
the fullest extent permitted by applicable law, irrespective of any other
circumstance whatsoever that might otherwise constitute a legal or
equitable discharge or defense of a surety or guarantor, it being the
intent of this Section 6.5(b) that the obligations of the Company hereunder
shall be absolute and unconditional under any and all circumstances (other
than full and final payment of the Guaranteed Obligations). Without
limiting the generality of the foregoing, it is agreed that, to the fullest
extent permitted by law, the occurrence of any one or more of the following
shall not alter or impair the liability of the Company hereunder which
shall remain absolute and unconditional as described above:
(i) at any time or from time to time, without notice to the
Company, the time for any performance of or compliance with any of the
Guaranteed Obligations shall be extended, or such performance or
compliance shall be waived;
(ii) Any of the acts mentioned in any of the provisions of this
Agreement or the Bridge Notes or any other agreement or instrument
referred to herein or therein shall be done or omitted; or
(iii) the maturity of any of the Guaranteed Obligations shall be
accelerated, or any of the Guaranteed Obligations shall be modified,
supplemented or amended in any respect, or any right under this
Agreement or the Bridge Notes or any other agreement or instrument
referred to herein or therein shall be waived or any other guarantee of
any of the Guaranteed Obligations or any security therefor shall be
released or exchanged in whole or in part or otherwise dealt with;
the Company hereby expressly waives diligence, presentment, demand of
payment, protest and all notices whatsoever, and any requirement that the
Agent or any Lender exhaust any right, power or remedy or proceed against
the Subsidiary Borrowers under this Agreement or the Bridge Notes or any
other agreement or instrument referred to herein or therein, or against any
other Person under any other guarantee of, or security for, any of the
Guaranteed Obligations.
(c) The obligations of the Company under this Section 6.5 shall be
automatically reinstated if and to the extent that for any reason any
payment by or on behalf of the Subsidiary Borrowers in respect of the
Guaranteed Obligations is rescinded or must be otherwise restored by any
holder of any of the Guaranteed Obligations, whether as a result of any
proceedings in bankruptcy or reorganization or otherwise and the Company
agrees that it will indemnify the Agent and each Lender on demand for all
reasonable costs and expenses (including, without limitation, fees of
counsel) incurred by the Agent or such Lender in connection with such
rescission or restoration, including any such costs and expenses incurred
in defending against any claim alleging that such payment constituted a
preference, fraudulent transfer or similar payment under any bankruptcy,
insolvency or similar law.
(d) The Company hereby postpones all rights of subrogation or
contribution until such time as the Obligations have been fully, finally
and indefeasibly paid in full in cash, whether arising by contract or
operation of law (including, without limitation, any such right arising
under the Bankruptcy Code) or otherwise by reason of any payment by it
pursuant to the provisions of this Section 6.5.
(e) The guarantee in this Section 6.5 is a continuing guarantee, and
shall apply to all Guaranteed Obligations whenever arising.
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SECTION 7. AGENT
7.1 Appointment, Powers and Immunities. Each Lender hereby appoints and
authorizes the Agent to act as its agent hereunder and under the other Financing
Agreements with such powers as are specifically delegated to the Agent by the
terms of this Agreement and of the other Financing Agreements, together with
such other powers as are reasonably incidental thereto. The Agent (which term as
used in this sentence and in Section 7.5 and the first sentence of Section 7.6
hereof shall include reference to its affiliates and its own and its affiliates'
officers, directors, employees and agents):
(a) shall have no duties or responsibilities except those expressly
set forth in this Agreement and in the other Financing Agreements, and
shall not by reason of this Agreement be a trustee for any Lender;
(b) shall not be responsible to the Lenders for any recitals,
statements, representations or warranties contained in this Agreement or in
any other Financing Agreements, or in any certificate or other document
referred to or provided for in, or received by any of them under, this
Agreement or any other Financing Agreements, or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this
Agreement, any note or any other Financing Agreements or any other document
referred to or provided for herein or therein or for any failure by any
Borrower or any other Person to perform any of its obligations hereunder or
thereunder;
(c) shall not be required to initiate or conduct any litigation or
collection proceedings hereunder or under any other Financing Agreements;
and
(d) shall not be responsible for any action taken or omitted to be
taken by it hereunder or under any other Financing Agreements or under any
other document or instrument referred to or provided for herein or therein
or in connection herewith or therewith, except for its own gross negligence
or willful misconduct.
The Agent may employ agents and attorneys-in-fact and shall not be responsible
for the negligence or misconduct of any such agents or attorneys-in-fact
selected by it in good faith. The Agent may deem and treat the payee of a note
as the holder thereof for all purposes hereof unless and until an assignment
agreement in form and substance satisfactory to the Agent, shall have been filed
with the Agent.
7.2 Reliance by Agent. The Agent shall be entitled to rely upon any
certification, notice or other communication (including, without limitation, any
thereof by telephone, telecopy, telegram or cable) reasonably believed by it to
be genuine and correct and to have been signed or sent by or on behalf of the
proper Person or Persons, and upon advice and statements of legal counsel,
independent accountants and other experts selected by the Agent. As to any
matters not expressly provided for by this Agreement or any other Financing
Agreements, the Agent shall in all cases be fully protected in acting, or in
refraining from acting, hereunder or thereunder in accordance with instructions
given by the Majority Lenders as is required in such circumstance, and such
instructions of such Lenders and any action taken or failure to act pursuant
thereto shall be binding on all of the Lenders.
7.3 Defaults. The Agent shall not be deemed to have knowledge or notice of
the occurrence of a Default unless the Agent has received notice from a Lender
or any Borrower specifying such Default and stating that such notice is a
"Notice of Default". In the event that the Agent receives such a notice of the
occurrence of a Default, the Agent shall give prompt notice thereof to the
Lenders. The Agent shall (subject to Section 7.7 hereof) take such action with
respect to such Default as shall be directed by the Majority Lenders, provided
that, unless and until the Agent shall have received such directions, the Agent
may (but shall not be obligated to) take such action, or refrain from taking
such action, with respect to such Default as it shall deem advisable in the best
interest of the Lenders except to the extent that this Agreement expressly
requires that such action be taken, or not be taken, only with the consent or
upon the authorization of all of the Lenders.
7.4 Rights as a Lender. With respect to its Bridge Loan Commitment and the
Bridge Loans made by it, the Fund (and any successor acting as Agent) in its
capacity as a Lender hereunder shall have the same rights and powers hereunder
as any other Lender and may exercise the same as though it were not acting as
the Agent, and the term "Lender" shall, unless the context otherwise indicates,
include the Agent in its individual
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capacity. The Fund (and any successor acting as Agent) and its affiliates may
(without having to account therefor to any Lender) accept deposits from, lend
money to, make investments in and generally engage in any kind of banking, trust
or other business with the Borrowers (and any of its subsidiaries or affiliates)
as if it were not acting as the Agent, and the Fund (and any such successor) and
its affiliates may accept fees and other consideration from the Borrowers for
services in connection with this Agreement or otherwise without having to
account for the same to the Lenders.
7.5 Indemnification. The Lenders agree to indemnify the Agent ratably in
accordance with their respective Bridge Loans, for any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind and nature whatsoever that may be imposed
on, incurred by or asserted against the Agent (including by any Lender) arising
out of or by reason of any investigation in or in any way relating to or arising
out of this Agreement or any other Financing Agreements or any other documents
contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby, provided that no Lender shall be liable for any
of the foregoing to the extent they arise from the gross negligence or willful
misconduct of the party to be indemnified.
7.6 Non-Reliance on Agent and Other Lenders. Each Lender agrees that it
has, independently and without reliance on the Agent or any other Lender, and
based on such documents and information as it has deemed appropriate, made its
own credit analysis of the Borrowers and their subsidiaries and decision to
enter into this Agreement and that it will, independently and without reliance
upon the Agent or any other Lender, and based on such documents and information
as it shall deem appropriate at the time, continue to make its own analysis and
decisions in taking or not taking action under this Agreement or under any other
Financing Agreement. The Agent shall not be required to keep itself informed as
to the performance or observance by the Borrowers of this Agreement or any of
the other Financing Agreements or any other document referred to or provided for
herein or therein or to inspect the properties or books of the Borrowers or any
of their subsidiaries. Except for notices, reports and other documents and
information expressly required to be furnished to the Lenders by the Agent
hereunder, the Agent shall not have any duty or responsibility to provide any
Lender with any credit or other information concerning the affairs, financial
condition or business of the Borrowers or any of its subsidiaries (or any of
their affiliates) that may come into the possession of the Agent or any of its
affiliates.
7.7 Failure to Act. Except for action expressly required of the Agent
hereunder and under the other Financing Agreements, the Agent shall in all cases
be fully justified in failing or refusing to act hereunder and thereunder unless
it shall receive further assurances to its satisfaction from the Lenders of
their indemnification obligations under Section 7.5 hereof against any and all
liability and expense that may be incurred by it by reason of taking or
continuing to take any such action.
7.8 Resignation or Removal of Agent. The Agent may resign at any time by
giving notice thereof to the Lenders and the Company, and the Agent may be
removed at any time with or without cause by the Lenders holding at least 75% of
the aggregate outstanding principal amount of the Bridge Loans. Upon any such
resignation or removal, the Majority Lenders shall have the right to appoint a
successor Agent. After any retiring Agent's resignation or removal hereunder as
Agent, the provisions of this Section 7 shall continue in effect for its benefit
in respect of any actions taken or omitted to be taken by it while it was acting
as the Agent.
7.9 Settlement with Lenders. Payments of principal, interest and fees in
respect of the Bridge Loans will be settled one U.S. Business Day after the U.S.
Business Day received in accordance with the provisions of Section 4 hereunder.
7.10 Return of Payments. If Agent determines at any time that any amount
received by Agent under this Agreement or the Financing Agreements must be
returned to any Borrower or paid to any other person pursuant to any solvency
law or otherwise, then, notwithstanding any other term or condition of this
Agreement or the Financing Agreements, Agent will not be required to distribute
any portion thereof to any Lender. In addition, each Lender will repay to Agent
on demand any portion of such amount that Agent has distributed to such Lender,
together with interest at such rate, if any, as Agent is required to pay to
Borrowers or such other Person, without set-off, counterclaim or deduction of
any kind.
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SECTION 8. REPRESENTATIONS AND WARRANTIES
Each Borrower hereby represents and warrants to the Agent and the Lenders
the following (which shall survive the execution and delivery of this
Agreement), the truth and accuracy of which are a continuing condition of the
making of the Bridge Loans by the Lenders to the Borrowers:
8.1 Corporate Existence, Power and Authority; Subsidiaries. Each Borrower
is a corporation duly organized and in good standing under the laws of its state
(or country) of incorporation (or organization) and is duly qualified as a
foreign corporation and in good standing in all states or other jurisdictions
where the nature and extent of the business transacted by it or the ownership of
assets makes such qualification necessary, except for those jurisdictions in
which the failure to so qualify would not have a material adverse effect on such
Borrower's financial condition, results of operation or business. The execution,
delivery and performance of this Agreement, the other Financing Agreements and
the transactions contemplated hereunder and thereunder are all within each
Borrower's corporate powers, have been duly authorized and are not in
contravention of law or the terms of each Borrower's certificate of
incorporation, by-laws, or other organizational documentation, or any indenture,
agreement or undertaking to which any Borrower is a party or by which any
Borrower or its respective property are bound and which is material to the
Company and its Consolidated Subsidiaries taken as a whole. This Agreement and
the other Financing Agreements constitute legal, valid and binding obligations
of Borrowers enforceable in accordance with their respective terms. Neither the
Company nor the Borrowing Subsidiaries have any subsidiaries except as set forth
on Schedule 8.1.
8.2 Financial Statements; No Material Adverse Change. All quarterly and
annual financial statements relating to the Company and its Consolidated
Subsidiaries which have been or may hereafter be delivered by any Borrower to
Lenders have been prepared in accordance with GAAP and all financial statements
fairly present the financial condition and the results of operation of such
Borrower as at the dates and for the periods set forth therein. There has been
no material adverse change in the assets (including the Purchased Assets),
liabilities, properties and condition, financial or otherwise, of the Company
and its Consolidated Subsidiaries taken as a whole since the date of the most
recent audited financial statements furnished by Borrowers to Lenders prior to
the date of this Agreement.
8.3 Tax Returns. Each Borrower has filed, or caused to be filed, in a
timely manner all tax returns, reports and declarations which are required to be
filed by it (without requests for extension except as previously disclosed in
writing to Lenders). All information in such tax returns, reports and
declarations is complete and accurate in all material respects. Each Borrower
has paid or caused to be paid all taxes due and payable or claimed due and
payable in any assessment received by it, or in accordance with a written
agreement between such Borrower and any taxing authority to which taxes are due
and payable, except taxes the validity of which are being contested in good
faith by appropriate proceedings diligently pursued and available to such
Borrower and with respect to which adequate reserves have been set aside on its
books. Adequate provision has been made for the payment of all accrued and
unpaid Federal, State, county, local, foreign and other taxes whether or not yet
due and payable and whether or not disputed.
8.4 Litigation. Except as set forth on Schedule 8.4, there is no present
investigation by any governmental agency pending, or to the best of each
Borrower's knowledge threatened, against or affecting any of any Borrower, any
of its respective subsidiaries, its respective assets (including the Purchased
Assets) or business and there is no action, suit, proceeding or claim by any
Person pending, or to the best of Borrower's knowledge threatened, against any
Borrower, any of its respective subsidiaries, or its respective assets
(including the Purchased Assets) or goodwill, or against or affecting any
transactions contemplated by this Agreement or the Purchase Agreements, which if
adversely determined against any Borrower, any of its respective subsidiaries
would result in any material adverse change in the assets, business or prospects
of the Company and its Consolidated Subsidiaries, taken as a whole or would
impair the ability of the Company, the Subsidiary Borrowers and the Guarantors
taken as a whole to perform their obligations hereunder or under any of the
other Financing Agreements to which any of them are a party or of Lenders to
enforce any Obligations.
8.5 Compliance with Other Agreements and Applicable Laws. No Borrower is in
default in any material respect under, or in violation in any material respect
of any of the terms of, any material agreement, contract,
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instrument, lease or other commitment to which it is a party or by which it or
any of its assets are bound and each Borrower is in compliance in all material
respects with all applicable provisions of laws, rules, regulations, licenses,
permits, approvals and orders of any foreign, Federal, State or local
governmental authority, except as set forth on Schedule 8.5.
8.6 Employee Benefits.
(a) No Borrower has engaged in any transaction in connection with
which such Borrower or any of its ERISA Affiliates could be subject to
either a civil penalty assessed pursuant to Section 502(i) of ERISA or a
tax imposed by Section 4975 of the Code, including any accumulated funding
deficiency described in Section 8.6(c) hereof and any deficiency with
respect to vested accrued benefits described in Section 8.6(d) hereof.
(b) No liability to the Pension Benefit Guaranty Corporation has been
or is expected by any Borrower to be incurred with respect to any employee
pension benefit plan of such Borrower or any of its ERISA Affiliates.
Except as set forth on Schedule 8.8 attached hereto there has been no
reportable event (within the meaning of Section 4043(b) of ERISA) or any
other event or condition with respect to any employee pension benefit plan
of any Borrower or any of its respective ERISA Affiliates which presents a
risk of termination of any such plan by the Pension Benefit Guaranty
Corporation.
(c) Full payment has been made of all amounts which any Borrower or
any of its respective ERISA Affiliates is required under Section 302 of
ERISA and Section 412 of the Code to have paid under the terms of each
employee pension benefit plan as contributions to such plan as of the last
day of the most recent fiscal year of such plan ended prior to the date
hereof, except as set forth on Schedule 8.6 attached hereto, which failure
to make full payment shall be remedied prior to any Borrower or any of its
ERISA Affiliates being subject to either a civil penalty, tax or other
liability imposed by the Code or ERISA, and no accumulated funding
deficiency (as defined in Section 302 of ERISA and Section 412 of the
Code), whether or not waived, exists with respect to any employee pension
benefit plan, including any penalty or tax described in Section 8.6(a)
hereof and any deficiency with respect to vested accrued benefits described
in Section 8.6(d) hereof, except as set forth on Schedule 8.6 attached
hereto.
(d) Except as set forth on Schedule 8.6 attached hereto, the current
value of all vested accrued benefits under all employee pension benefit
plans maintained by any Borrower that are subject to Title IV of ERISA does
not exceed the current value of the assets of such plans allocable to such
vested accrued benefits, including any penalty or tax described in Section
8.6(a) hereof and any accumulated funding deficiency described in Section
8.6(c) hereof. the terms "current value" and "accrued benefit" have the
meanings specified in ERISA.
(e) No Borrower nor any of its respective ERISA affiliates is or has
ever been obligated since December 14, 1994 to contribute to any
"multiemployer plan" (as such term is defined in Section 4001(a)(3) of
ERISA) that is subject to Title IV of ERISA.
8.7 Acquisition of Purchased Assets.
Prior to the making of the Bridge Loans:
(a) The Purchase Agreements and the transactions contemplated
thereunder shall have been duly executed, delivered and performed in
accordance with their terms by the respective parties thereto in all
respects, including the fulfillment (not merely the waiver, except as may
be disclosed to Lenders and consented to in writing by Lenders) of all
material conditions precedent set forth therein and giving effect to the
terms of the Purchase Agreements and the assignments to be executed and
delivered by any Seller (or any of its respective affiliates or
subsidiaries) thereunder, the Borrowers shall have acquired and have good
and marketable title to the Purchased Assets, free and clear of all claims,
liens, pledges and encumbrances of any kind, except as permitted hereunder.
(b) All actions and proceedings, required by the Purchase Agreements,
applicable law or regulation shall have been taken and the transactions
required thereunder shall have been duly and validly taken and consummated.
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(c) No court of competent jurisdiction shall have issued any
injunction, restraining order or other order which prohibits consummation
of the transactions described in the Purchase Agreements and no
governmental or other action or proceeding shall have been threatened or
commenced, seeking any injunction, restraining order or other order which
seeks to void or otherwise modify the transactions described in the
Purchase Agreements.
(d) The Company shall have delivered, or caused to be delivered, to
Lenders, true, correct and complete copies of the Purchase Agreements.
8.8 Intentionally Omitted.
8.9 Accuracy and Completeness of Information. All information furnished by
or on behalf of any Borrower in writing to Lenders in connection with this
Agreement or any of the other Financing Agreements or any transaction
contemplated hereby or thereby is true and correct in all material respects on
the date as of which such information is dated or certified and does not omit
any material fact necessary in order to make such information not misleading. No
event or circumstance has occurred which has had or could reasonably be expected
to have a material adverse affect on the business, assets or prospects of the
Company and its Consolidated Subsidiaries, taken as a whole, which has not been
fully and accurately disclosed to Lenders in writing.
8.10 Approvals. No authorizations, approvals or consents of, and no filings
or registrations with, any governmental or regulatory authority or agency, or
any securities exchange, are necessary for the consummation of the Acquisition
other than those authorizations, approvals, consents, filings and registrations
which have already been obtained.
8.11 Survival of Warranties; Cumulative. All representations and warranties
contained in this Agreement or any of the other Financing Agreements shall
survive the execution and delivery of this Agreement and shall be deemed to have
been made again to Lenders on the date of each credit accommodation hereunder.
The representations and warranties set forth herein shall be cumulative and in
addition to any other representations or warranties which Borrowers shall now or
hereafter give, or cause to be given, to Lenders.
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS
9.1 Maintenance of Existence. Each Borrower shall, and shall cause each of
its subsidiaries to, at all times preserve, renew and keep in full, force and
effect its corporate existence and rights and franchises with respect thereto
and maintain in full force and effect all permits, licenses, trademarks,
tradenames, approvals, authorizations, leases and contracts necessary to carry
on the business as presently or proposed to be conducted; provided, however, a
Consolidated Subsidiary of the Company may merge with and into the Company
provided the Company is the surviving entity.
9.2 Compliance with Laws, Regulations, Etc. Each Borrower shall, and shall
cause each of its Consolidated Subsidiaries to, at all times, comply in all
material respects with all laws, rules, regulations, licenses, permits,
approvals and orders applicable to it and duly observe all material requirements
of any Federal, State or local government authority, including, without
limitation, the Employee Retirement Security Act of 1974, as amended, the
Occupational Safety and Hazard Act of 1970, as amended, the Fair Labor Standards
Act of 1938, as amended, and all statutes, rules, regulations, orders, permits
and stipulations relating to environmental pollution and employee health and
safety, including, without limitation, all of the Environmental Laws.
9.3 Payment of Taxes and Claims. Each Borrower shall, and shall cause each
of its Consolidated Subsidiaries to, duly pay and discharge all taxes,
assessments, contributions and governmental charges upon or against it or its
properties or assets, except for taxes the validity of which are being contested
in good faith by appropriate proceedings diligently pursued and available to
such Borrower and with respect to which adequate reserves have been set aside on
its books. Each Borrower shall be liable for any tax or penalties imposed on
Lenders as a result of the financing arrangements provided for herein and each
Borrower agrees to indemnify and hold Lenders harmless with respect to the
foregoing, and to repay to Lenders on demand the amount thereof, and until paid
by the Borrowers such amount shall be added and deemed part of the Bridge Loans,
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provided, that, nothing contained herein shall be construed to require any
Borrower to pay any income or franchise taxes attributable to the income of
Lenders from any amounts charged or paid hereunder to Lenders. The foregoing
indemnity shall survive the payment of the Obligations and the termination of
this Agreement.
9.4 Financial Statements and Other Information.
(a) Each Borrower shall keep proper books and records in which true
and complete entries shall be made of all dealings or transactions of or in
relation to the business of Borrower and its subsidiaries (if any) in
accordance with GAAP and Borrower shall furnish or cause to be furnished to
Agent: (i) within twenty-five (25) days after the end of each fiscal month,
monthly unaudited consolidated financial statements of Borrowers (including
in each case balance sheets, statements of income and loss, and statements
of cash flow), all in reasonable detail, fairly presenting the financial
position and the results of the operations of Borrowers and their
subsidiaries, as applicable, as of the end of and through such fiscal month
and (ii) within ninety (90) days after the end of each fiscal year, audited
consolidated and upon the request of Agent consolidating financial
statements of Borrowers and their subsidiaries (including in each case
balance sheets, statements of income and loss, statements of cash flow and
statements of shareholders' equity), and the accompanying notes thereto,
all in reasonable detail, fairly presenting the financial position and the
results of the operations of Borrowers and their subsidiaries, as
applicable, as of the end of and for such fiscal year, together with the
opinion of independent certified public accountants, which accountants
shall be an independent accounting firm selected by Borrowers and
reasonably acceptable to Agent, that such financial statements have been
prepared in accordance with GAAP, and present fairly the results of
operations and financial condition of Borrowers and their subsidiaries as
of the end of and for the fiscal year then ended.
(b) The Company shall promptly notify Agent in writing of the details
of the occurrence of any Default or Event of Default.
(c) The Company shall furnish or cause to be furnished to Agent (i)
quarterly projections for the current fiscal year within twenty-five (25)
days after the first day of such fiscal quarter, commencing with the fourth
fiscal quarter of 1997, (ii) annual budgets by January 31 of each year for
such fiscal year and (iii) such other information respecting the business
of any Borrower, as Agent may, from time to time, reasonably request. Agent
and Lenders are hereby authorized to deliver a copy of any financial
statement or any other information relating to the business of any Borrower
to any court or other government agency required by law to do so. Each
Borrower hereby irrevocably authorizes and directs all accountants or
auditors to deliver to Agent, at Borrower's expense, copies of the
financial statements of the Borrowers and any reports or management letters
prepared by such accountants or auditors on behalf of the Borrowers and to
disclose to Agent such information as they may have regarding the business
of the Borrowers. Any documents, schedules, invoices or other papers
delivered to Agent may be destroyed or otherwise disposed of by Agent one
(1) year after the same are delivered to Agent, except as otherwise
designated by the Company to Agent in writing.
9.5 Sale of Assets, Consolidation, Merger, Dissolution, Etc. No Borrower
shall, nor shall it permit any of its Consolidated Subsidiaries to, directly or
indirectly, (a) except as permitted in Section 9.1, merge into or with or
consolidate with any other Person or permit any other Person to merge into or
with or consolidate with it or (b) sell, assign, lease, transfer, abandon or
otherwise dispose of any stock or indebtedness to any other Person or any of its
assets to any other Person, except for (i) sales of stock to employees pursuant
to an employee stock ownership plan upon terms and conditions reasonably
acceptable to Majority Lenders, (ii) the Marion Assets, (iii) sales in the
ordinary course of business, (iv) the real property set forth in Schedule 9.5,
(v) the disposition of worn-out or obsolete equipment or equipment no longer
used in the business of borrower, provided, that, for so long as an Event of
Default exists or has occurred and is continuing, any net proceeds from the
disposition of such equipment are paid to Agent and such sales do not involve
equipment having an aggregate appraised market value in excess of $500,000 for
all such Equipment (other than the Marion Assets) disposed of in any fiscal year
of Borrower, or (c) form or acquire any subsidiaries or any property or business
of any person (other than the Acquisition), or (d) wind up, liquidate or
dissolve or (e) agree to do any of the foregoing.
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9.6 Encumbrances. No Borrower shall, nor shall it permit any of its
Consolidated Subsidiaries to, create, incur, assume or suffer to exist any
security interest, mortgage, pledge, lien, charge or other encumbrance of any
nature whatsoever on any of its assets or properties, except: (a) in existence
on the date hereof and set forth in Schedule 9.6 or as reflected in the
Company's consolidated financial statements dated June 30, 1997; (b) liens
securing the payment of taxes, either not yet overdue or the validity of which
are being contested in good faith by appropriate proceedings diligently pursued
and available to Borrower and with respect to which adequate reserves have been
set aside on its books; (c) non-consensual statutory liens (other than liens
securing the payment of taxes) arising in the ordinary course of such Borrower's
business to the extent: (i) such liens secure indebtedness which is not overdue
or (ii) such liens secure indebtedness relating to claims or liabilities which
are fully insured and being defended at the sole cost and expense and at the
sole risk of the insurer or being contested in good faith by appropriate
proceedings diligently pursued and available to such Borrower, in each case
prior to the commencement of foreclosure or other similar proceedings and with
respect to which adequate reserves have been set aside on its books; (d)zoning
restrictions, easements, licenses, covenants and other restrictions affecting
the use of real property which do not interfere in any material respect with the
use of such real property or ordinary conduct of the business of such Borrower
as presently conducted thereon or materially impair the value of the real
property which may be subject thereto; (e) purchase money security interests in
Equipment (including capital leases) and purchase money mortgages on real estate
not to exceed $3,000,000 in the aggregate at any time outstanding so long as
such security interests and mortgages do not apply to any property of such
Borrower other than the Equipment or real estate so acquired, and the
indebtedness secured thereby does not exceed the cost of the Equipment or real
estate so acquired, as the case may be; and (f) liens in connection with Project
Financing.
9.7 Indebtedness. No Borrower shall, nor shall it permit any of its
Consolidated Subsidiaries to, incur, create, assume, become or be liable in any
manner with respect to, or permit to exist, any obligations or indebtedness,
except (a) the Obligations; (b) trade obligations and normal accruals in the
ordinary course of business not yet due and payable, or with respect to which
such Borrower is contesting in good faith the amount or validity thereof by
appropriate proceedings diligently pursued and available to such Borrower, and
with respect to which adequate reserves have been set aside on its books; (c)
purchase money indebtedness (including capital leases) to the extent not
incurred or secured by liens (including capital leases) in violation of any
other provision of this Agreement; (d) in connection with Project Financing; (e)
obligations under the Bank One Credit Agreement existing on the date hereof; (f)
obligations under that certain Indenture dated as of December 14, 1994 between
the Company and Harris Trust and Savings Bank, as Trustee; (g) unsecured short
term debt not for borrowed money in an aggregate amount not to exceed
$2,000,000; (h)debt with respect to interest rate protection agreements; and (i)
obligations or indebtedness set forth on Schedule 9.7 hereto or as reflected in
the Company's consolidated financial statements dated June 30, 1997; provided,
that, (i) except with respect to payments made under the revolving credit
facility provided for in the Bank One Credit Agreement, such Borrower may only
make regularly scheduled payments of principal and interest in respect of any
indebtedness set forth in this Section 9.7 in accordance with the terms of the
agreement or instrument evidencing or giving rise to such indebtedness as in
effect on the date hereof, (ii) such Borrower shall not, directly or indirectly,
(A) amend, modify, alter or change the terms of such indebtedness or any
agreement, document or instrument related thereto as in effect on the date
hereof if such amendment, modification, alteration or change would have the
effect of increasing such indebtedness, or (B) redeem, retire, deface, purchase
or otherwise acquire such indebtedness, or set aside or otherwise deposit or
invest any sums for such purpose, and (iii) such Borrower shall furnish to Agent
all notices or demands in connection with such indebtedness in excess of
$500,000 either received by such Borrower or on its behalf, promptly after the
receipt thereof, or sent by such Borrower on its behalf, concurrently with the
sending thereof, as the case may be.
9.8 Loans, Investments, Guarantees, Etc. Except as otherwise provided in
other provisions of this Agreement, each Borrower shall not, nor shall it permit
any of its Consolidated Subsidiaries to, directly or indirectly, make any loans
or advance money or property to any person, or invest in (by capital
contribution, dividend or otherwise) or purchase or repurchase the stock or
indebtedness or all or a substantial part of the assets or property of any
person, or guarantee, assume, endorse, or otherwise become responsible for
(directly or indirectly) the indebtedness, performance, obligations or dividends
of any Person or agree to do any of the
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foregoing, except: (a) loans and advances to employees and agents in the
ordinary course of business for travel and entertainment expenses and similar
items; (b) intercompany loans from any Borrower to another Borrower or to a
subsidiary of a Borrower provided such amount does not exceed $15,000,000 in the
aggregate; (c) the endorsement of instruments for collection or deposits in the
ordinary course of business; (d) investments in: (i) short-term direct
obligations of the United States Government, and (ii) commercial paper rated A1
or P1, and (e) the guarantees set forth on Schedule 9.8 hereof.
9.9 Dividends and Redemptions. The Company shall not, directly or
indirectly, declare or pay any dividends on account of any shares of any class
of capital stock of the Company now or hereafter outstanding, or set aside or
otherwise deposit or invest any sums for such purpose, or redeem, retire,
deface, purchase or otherwise acquire any shares of any class of capital stock
(or set aside or otherwise deposit or invest any sums for such purpose) for any
consideration other than common stock except for shares of capital stock held by
employees pursuant to an employee stock ownership plan or employment agreement
or apply or set apart any sum, or make any other distribution (by reduction of
capital or otherwise) in respect of any such shares or agree to do any of the
foregoing, except as set forth on Schedule 9.9 hereto.
9.10 Transactions with Affiliates. No Borrower shall, nor shall it permit
any of its Consolidated Subsidiaries to, enter into any transaction for the
purchase, sale or exchange of property or the rendering of any service to or by
any affiliate, nor shall it permit any of its subsidiaries to, except for: (a)
in the ordinary course of and pursuant to the reasonable requirements of such
Borrower's business which is in the best interest of the Company and its
Consolidated Subsidiaries taken as a whole or (b) upon fair and reasonable terms
no less favorable to such Borrower than such Borrower would obtain in a
comparable arm's length transaction with an unaffiliated person.
9.11 Compliance with ERISA. Each Borrower shall not with respect to any
"employee pension benefit plans" maintained by such Borrower or any of its ERISA
Affiliates:
(a) (i) terminate any of such employee pension benefit plans so as to
incur any liability to the Pension Benefit Guaranty Corporation established
pursuant to ERISA, (ii) allow or suffer to exist any prohibited transaction
involving any of such employee pension benefit plans or any trust created
thereunder which would subject such Borrower or such ERISA Affiliate to a
tax or penalty or other liability on prohibited transactions imposed under
Section 4975 of the Code or ERISA, (iii) fail to pay to any such employee
pension benefit plan any contribution which it is obligated to pay under
Section 302 of ERISA, Section 412 of the Code or the terms of such plan,
(iv) allow or suffer to exist any accumulated funding deficiency, whether
or not waived, with respect to any such employee pension benefit plan, (v)
allow or suffer to exist any occurrence of a reportable event or any other
event or condition which presents a material risk of termination by the
Pension Benefit Guaranty Corporation of any such employee pension benefit
plan that is a single employer plan, which termination could result in any
liability to the Pension Benefit Guaranty Corporation or (vi) incur any
withdrawal liability with respect to any multiemployer pension plan.
(b) As used in this Section 9.11, the terms "employee pension benefit
plans," "employee benefit plans,", "accumulated funding deficiency" and
"reportable event" shall have the respective meanings assigned to them in
ERISA, and the term "prohibited transaction" shall have the meaning
assigned to it in section 4975 of the Code and ERISA.
9.12 Costs and Expenses. Each Borrower shall pay to Agent and Lenders on
demand all costs, expenses, filing fees and taxes (other than income or
franchise taxes of Agent or any Lender) paid or payable in connection with the
preparation, negotiation, execution, delivery, recording, administration,
collection, liquidation, enforcement and defense of the Obligations, this
Agreement, the other Financing Agreements and all other documents related hereto
or thereto, including any amendments, supplements or consents which may
hereafter be contemplated (whether or not executed) or entered into in respect
hereof and thereof, including, but not limited to: (a) costs and expenses paid
or incurred in connection with obtaining payment of the Obligations, and
otherwise enforcing the provisions of this Agreement and the other Financing
Agreements or defending any claims made or threatened against Agent or Lenders
arising out of the transactions contemplated hereby and thereby not caused by
the gross negligence or wilful misconduct of Agent or Lender
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(including, without limitation, preparations for and consultations concerning
any such matters); and (b) the reasonable fees and disbursements of counsel
(including legal assistants) to Agent and Lenders in connection with any of the
foregoing.
9.13 Capital Expenditures. No Borrower shall, nor shall it permit any of
its Consolidated Subsidiaries to, make or incur any Capital Expenditures, if
after giving effort thereto, the aggregate amount of all Capital Expenditures by
the Borrowers and their Consolidated Subsidiaries would exceed $7,000,000 during
any fiscal year.
SECTION 10. EVENTS OF DEFAULT AND REMEDIES
10.1 Events of Default. The occurrence or existence of any one or more of
the following events are referred to herein individually as an "Event of
Default", and collectively as "Events of Default":
(a) Any Borrower (i) fails to pay when due any of the Obligations;
(ii) or fails to perform any of the terms, covenants, conditions or
provisions contained in this Agreement or any of the other Financing
Agreements and such failure to perform is not cured to Agent's and the
Majority Lenders' satisfaction within fifteen (15) days after the sooner to
occur of the Company's receipt of notice of such failure from Agent or any
Lender or the date on which such failure becomes known to any officer of
the Company but provided such failure is capable of being cured within such
15 day period;
(b) any representation, warranty or statement of fact made by any
Borrower to Agent or Lenders in this Agreement, the other Financing
Agreements or any other agreement, schedule, confirmatory assignment or
otherwise shall when made or deemed made be false or misleading in any
material respect;
(c) any Guarantor revokes, terminates or fails to perform any of the
terms, covenants, conditions or provisions of any guarantee, endorsement or
other agreement of such party in favor of Lenders;
(d) any judgment for the payment of money is rendered against any
Borrower or any Guarantor in excess of $750,000 in any one case or in
excess of $1,000,000 in the aggregate and shall remain undischarged or
unvacated for a period in excess of forty-five (45) days or execution shall
at any time not be effectively stayed, or any judgment other than for the
payment of money, or injunction, attachment, garnishment or execution is
rendered against any Borrower or any Guarantor or any of their assets;
(e) any Guarantor (being a natural person or a general partner of a
Guarantor which is a partnership) dies or any Borrower or any Guarantor,
which is a partnership or corporation, dissolves or suspends or
discontinues doing business;
(f) any Borrower or any Guarantor becomes insolvent (however defined
or evidenced), makes an assignment for the benefit of creditors, makes or
sends notice of a bulk transfer or calls a meeting of its creditors or
principal creditors with respect to its inability to pay its obligations
owed to such creditors on customary terms;
(g) a case or proceeding under the bankruptcy laws of the United
States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or
liquidation law or statute of any jurisdiction now or hereafter in effect
(whether at law or in equity) is filed against any Borrower or any
Guarantor or all or any part of its properties and such petition or
application is not dismissed within sixty (60) days after the date of its
filing any Borrower or any Guarantor shall file any answer admitting or not
contesting such petition or application or indicates its consent to,
acquiescence in or approval of, any such action or proceeding or the relief
requested is granted sooner;
(h) a case or proceeding under the bankruptcy laws of the United
States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or
liquidation law or statute of any jurisdiction now or hereafter in effect
(whether at a law or equity) is filed by any Borrower or any Guarantor or
for all or any part of its property; or
21
<PAGE> 23
(i) any default by any Borrower or any Guarantor under any agreement,
document or instrument relating to any indebtedness for borrowed money
owing to any person other than Lenders, or any capitalized lease
obligations, contingent indebtedness in connection with any guarantee,
letter of credit, indemnity or similar type of instrument in favor of any
person other than Lenders, in any case in an amount in excess of $500,000,
which default continues for more than the applicable cure period, if any,
with respect thereto, or any default by any Borrower or any Guarantor under
any material contract, lease, license or other obligation to any person
other than Lenders, which default continues for more than the applicable
cure period, if any, with respect thereto;
(j) a Change of Control shall occur with respect to any Borrower other
than pursuant to the AIP Acquisition;
(k) the indictment or threatened indictment of any Borrower or any
Guarantor under any criminal statute, or commencement or threatened
commencement of criminal or civil proceedings against any Borrower or any
Guarantor, pursuant to which statute or proceedings the penalties or
remedies sought or available include forfeiture of any of the material
property of such Borrower or such Guarantor;
(l) there shall be a material adverse change in the business, assets
or prospects of the Company and its Consolidated Subsidiaries, taken as a
whole, after the date hereof; or
(m) there shall be an event of default under any of the other
Financing Agreements, which default is not cured within the period set
forth therein.
10.2 Remedies.
(a) At any time an Event of Default exists or has occurred and is
continuing, Agent and Lenders shall have all rights and remedies provided
in this Agreement, the other Financing Agreements, and other applicable
law, all of which rights and remedies may be exercised without notice to or
consent by the Borrowers or any Obligor, except as such notice or consent
is expressly provided for hereunder or required by applicable law. All
rights, remedies and powers granted to Agent and Lenders hereunder, under
any of the other Financing Agreements, or other applicable law, are
cumulative, not exclusive and enforceable, in Agent's and Lenders'
discretion, alternatively, successively, or concurrently on any one or more
occasions, and shall include, without limitation, the right to apply to a
court of equity for an injunction to restrain a breach or threatened breach
by Borrower of this Agreement or any of the other Financing Agreements.
(b) Without limiting the foregoing, at any time an Event of Default
exists or has occurred and is continuing, Agent may, in its discretion, and
at the direction of the Majority Lenders, without limitation, (i)
accelerate the payment of all Obligations and demand immediate payment
thereof to Lenders (provided, that, upon the occurrence of any Event of
Default described in Sections 11.1(g) and 11.1(h), all Obligations shall
automatically become immediately due and payable), and/or (ii) terminate
this Agreement.
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW
11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver.
(a) THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS AGREEMENT AND
THE OTHER FINANCING AGREEMENTS AND ANY DISPUTE ARISING OUT OF THE
RELATIONSHIP BETWEEN THE PARTIES HERETO, WHETHER IN CONTRACT, TORT, EQUITY
OR OTHERWISE, SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW
YORK (WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW).
(b) Each Borrower, Agent and each Lender irrevocably consent and
submit to the non-exclusive jurisdiction of the State of New York and the
United States District Court for the Southern District of New York and
waive any objection based on venue or forum non conveniens with respect to
any action instituted therein arising under this Agreement or any of the
other Financing Agreements or in any way
22
<PAGE> 24
connected with or related or incidental to the dealings of the parties
hereto in respect of this Agreement or any of the other Financing
Agreements or the transactions related hereto or thereto, in each case
whether now existing or hereafter arising, and whether in contract, tort,
equity or otherwise, and agree that any dispute with respect to any such
matters shall be heard only in the courts described above (except that
Agent and Lenders shall have the right to bring any action or proceeding
against any Borrower or its property in the courts of any other
jurisdiction which Agent and Lenders deem necessary or appropriate to
enforce their rights against such Borrower or its property).
(c) Each Borrower hereby waives personal service of any and all
process upon it and consents that all such service of process may be made
by certified mail (return receipt requested) directed to its address set
forth on the signature pages hereof with a copy to Whyte, Hirshboeck &
Dudek S.C. at its address set forth in Section 12.2 and service so made
shall be deemed to be completed five (5) days after the same shall have
been so deposited in the U.S. mails, or, at Agent's or any Lender's option,
by service upon such Borrower in any other manner provided under the rules
of any such courts.
(d) EACH BORROWER, AGENT AND EACH LENDER EACH HEREBY WAIVES ANY RIGHT
TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i)
ARISING UNDER THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR
(ii) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF
THE PARTIES HERETO IN RESPECT OF THIS AGREEMENT OR ANY OF THE OTHER
FINANCING AGREEMENTS OR THE TRANSACTIONS RELATED HERETO OR THERETO IN EACH
CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT,
TORT, EQUITY OR OTHERWISE. BORROWERS, AGENT, AND LENDERS EACH HEREBY AGREES
AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL
BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT BORROWERS, AGENT OR
LENDER MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH
ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE
WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
(e) Neither Agent nor any Lender shall have any liability to any
Borrower (whether in tort, contract, equity or otherwise) for losses
suffered by such Borrower in connection with, arising out of, or in any way
related to the transactions or relationships contemplated by this
Agreement, or any act, omission or event occurring in connection herewith,
unless it is determined by a final and non-appealable judgment or court
order binding on Agent and Lenders, that the losses were the result of acts
or omissions constituting gross negligence or willful misconduct. In any
such litigation, Agent and Lenders shall be entitled to the benefit of the
rebuttable presumption that they acted in good faith and with the exercise
of ordinary care in the performance by them of the terms of this Agreement.
11.2 Waiver of Notices. Each Borrower hereby expressly waives demand,
presentment, protest and notice of protest and notice of dishonor with respect
to any and all instruments and commercial paper, included in or evidencing any
of the Obligations and any and all other demands and notices of any kind or
nature whatsoever with respect to the Obligations and this Agreement, except
such as are expressly provided for herein. No notice to or demand on any
Borrower which Agent or Lenders may elect to give shall entitle any Borrower to
any other or further notice or demand in the same, similar or other
circumstances.
11.3 Amendments and Waivers. Neither this Agreement nor any provision
hereof shall be amended, modified, waived or discharged orally or by course of
conduct, but only by a written agreement signed by an authorized officer of the
Agent and the Majority Lenders (or, all of the Lenders, as the case may be). The
Lenders shall not, by any act, delay, omission or otherwise be deemed to have
expressly or impliedly waived any of their rights, powers and/or remedies unless
such waiver shall be in writing and signed by an authorized officer of the Agent
and the Majority Lenders (or, all of the Lenders, as the case may be). Any such
waiver shall be enforceable only to the extent specifically set forth therein. A
waiver by the Agent or the Lenders of any right, power and/or remedy on any one
occasion shall not be construed as a bar to or waiver of any such
23
<PAGE> 25
right, power and/or remedy which the Agent or the Lenders would otherwise have
on any future occasion, whether similar in kind or otherwise.
11.4 Waiver of Counterclaims. Each Borrower waives all rights to interpose
any claims, deductions, setoffs or counterclaims of any nature (other then
compulsory counterclaims) in any action or proceeding with respect to this
Agreement, the Obligations, the Collateral or any matter arising therefrom or
relating hereto or thereto.
11.5 Indemnification. EACH BORROWER SHALL INDEMNIFY AND HOLD AGENT AND EACH
LENDER, AND THEIR RESPECTIVE DIRECTORS, AGENTS, EMPLOYEES AND COUNSEL, HARMLESS
FROM AND AGAINST ANY AND ALL LOSSES, CLAIMS, DAMAGES, LIABILITIES, COSTS OR
EXPENSES IMPOSED ON, INCURRED BY OR ASSERTED AGAINST ANY OF THEM IN CONNECTION
WITH ANY LITIGATION, INVESTIGATION, CLAIM OR PROCEEDING COMMENCED OR THREATENED
RELATED TO THE NEGOTIATION, PREPARATION, EXECUTION, DELIVERY, ENFORCEMENT,
PERFORMANCE OR ADMINISTRATION OF THIS AGREEMENT, ANY OTHER FINANCING AGREEMENTS,
OR ANY UNDERTAKING OR PROCEEDING RELATED TO ANY OF THE TRANSACTIONS CONTEMPLATED
HEREBY OR ANY ACT, OMISSION, EVENT OR TRANSACTION RELATED OR ATTENDANT THERETO,
INCLUDING, WITHOUT LIMITATION, AMOUNTS PAID IN SETTLEMENT, COURT COSTS, AND THE
FEES AND EXPENSES OF COUNSEL BUT EXCLUDING LOSSES, CLAIMS, DAMAGES, LIABILITIES,
COSTS OR EXPENSES CAUSED BY THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF AGENT,
LENDERS, THEIR RESPECTIVE DIRECTORS, AGENTS OR EMPLOYEES. TO THE EXTENT THAT THE
UNDERTAKING TO INDEMNIFY, PAY AND HOLD HARMLESS SET FORTH IN THIS SECTION MAY BE
UNENFORCEABLE BECAUSE IT VIOLATES ANY LAW OR PUBLIC POLICY, BORROWERS SHALL PAY
THE MAXIMUM PORTION WHICH IT IS PERMITTED TO PAY UNDER APPLICABLE LAW TO AGENT
AND LENDERS IN SATISFACTION OF INDEMNIFIED MATTERS UNDER THIS SECTION. THE
FOREGOING INDEMNITY SHALL SURVIVE THE PAYMENT OF THE OBLIGATIONS AND THE
TERMINATION OF THIS AGREEMENT.
11.6 No Immunity. To the extent that any Borrower may be or become
entitled, in any jurisdiction in which judicial proceedings may at any time be
commenced with respect to this Agreement or the Bridge Notes or any other
Financing Agreement, to claim for itself or its properties or revenues any
immunity from suit, court jurisdiction, attachment prior to judgment, attachment
in aid of execution of a judgment, execution of a judgment or from any other
legal process or remedy relating to its obligations under this Agreement or the
Bridge Notes or any other Financing Agreement, and to the extent that in any
such jurisdiction there may be attributed such an immunity (whether or not
claimed), such Borrower hereby irrevocably agrees not to claim and hereby
irrevocably waives such immunity to the fullest extent permitted by the laws of
such jurisdiction.
SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS
12.1 Term.
(a) This Agreement and the other Financing Agreements shall become
effective as of the Effective Date and shall continue in full force and
effect for a term ending on the Maturity Date unless sooner terminated
pursuant to the terms hereof. Upon the effective date of termination of the
Financing Agreements, each Borrower shall pay to the Agent and the Lenders,
in full, all outstanding and unpaid Obligations.
(b) No termination of this Agreement or the other Financing Agreements
shall relieve or discharge any Borrower of its respective duties,
obligations and covenants under this Agreement or the other Financing
Agreements until all Obligations have been fully and finally discharged and
paid, and the rights and remedies of Agent and Lenders hereunder, under the
other Financing Agreements and applicable law, shall remain in effect until
all such Obligations have been fully and finally discharged and paid.
24
<PAGE> 26
12.2 Notices. All notices, requests and demands hereunder shall be in
writing and (a) made to Agent and each Lender at its address set forth below its
name on the signature pages hereof and to any Borrower at its chief executive
office set forth below its name on the signature pages hereof with a copy to
Whyte, Hirshboeck & Dudek S.C., Suite 2100, 111 E. Wisconsin Avenue, Milwaukee,
Wisconsin 53202, Attention: Daryl L. Diesing, Esq., or to such other address as
either party may designate by written notice to the other in accordance with
this provision, and (b) deemed to have been given or made: if delivered in
person, immediately upon delivery; if by telex, telegram or facsimile
transmission, immediately upon sending and upon confirmation of receipt; if by
nationally recognized overnight courier service with instructions to deliver the
next business day, one (1) business day after sending; and if by certified mail,
return receipt requested, five (5) days after mailing.
12.3 Partial Invalidity. If any provision of this Agreement is held to be
invalid or unenforceable, such invalidity or unenforceability shall not
invalidate this Agreement as a whole, but this Agreement shall be construed as
though it did not contain the particular provision held to be invalid or
unenforceable and the rights and obligations of the parties shall be construed
and enforced only to such extent as shall be permitted by applicable law.
12.4 Successors. This Agreement, the other Financing Agreements and any
other document referred to herein or therein shall be binding upon and inure to
the benefit of and be enforceable by the Agent, Lenders, any Borrower and their
respective successors and assigns, except that no Borrower may assign its rights
under this Agreement, the other Financing Agreements and any other document
referred to herein or therein without the prior written consent of the Agent and
the Majority Lenders. Any Lender may with the consent of the Agent and, after
notice to Borrower, assign its rights and delegate its obligations under this
Agreement and the other Financing Agreements and further may assign, or sell
participations in, all or any part of the Bridge Loans or any other interest
herein to another financial institution or other person, in which event, the
assignee or participant shall have, to the extent of such assignment or
participation, the same rights and benefits as it would have if it were the
Lenders hereunder, except as otherwise provided by the terms of such assignment
or participation.
12.5 Entire Agreement. This Agreement, the other Financing Agreements, any
supplements hereto or thereto, and any instruments or documents delivered or to
be delivered in connection herewith or therewith represents the entire agreement
and understanding concerning the subject matter hereof and thereof between the
parties hereto, and supersede all other prior agreements, understandings,
negotiations and discussions, representations, warranties, commitments,
proposals, offers and contracts concerning the subject matter hereof, whether
oral or written.
IN WITNESS WHEREOF, the Agent, Lenders and the Borrowers have caused these
presents to be duly executed as of the day and year first above written.
BORROWERS:
BUCYRUS INTERNATIONAL, INC.
By: /s/ DANIEL J. SMOKE
--------------------------------------
Title: Vice President -- Finance and
Chief Financial Officer
Address:
c/o 1100 Milwaukee Avenue
South Milwaukee, Wisconsin 53172
25
<PAGE> 27
BUCYRUS (AUSTRALIA)
PROPRIETARY LTD.
By: /s/ DANIEL J. SMOKE
--------------------------------------
Title: Assistant Secretary
Address:
c/o 1100 Milwaukee Avenue
South Milwaukee, Wisconsin 53172
BUCYRUS CANADA LIMITED
By: /s/ DANIEL J. SMOKE
--------------------------------------
Title: Secretary
Address:
c/o 1100 Milwaukee Avenue
South Milwaukee, Wisconsin 53172
Bridge Loan Commitment LENDER
$40,000,000 PPM AMERICA SPECIAL
INVESTMENTS FUND, L.P.
Commitment Percentage: By: /s/ LEVOYD E. ROBINSON
.88888888% --------------------------------------
Title: Managing Director
Address:
225 West Wacker Drive
Suite 1100A
Chicago, IL 60606
Bridge Loan Commitment: BANK OF MONTREAL
$5,000,000
Commitment Percentage: By: /s/ BRADFORD B. COURI
.11111111% --------------------------------------
Title: Senior Trader
Address:
115 South LaSalle Street
Chicago, Illinois 60603
AGENT
PPM AMERICA SPECIAL
INVESTMENTS FUND, L.P.
By: /s/ LEVOYD E. ROBINSON
--------------------------------------
Title: Managing Director
Address:
225 West Wacker Drive
Suite 1100A
Chicago, IL 60606
26
<PAGE> 28
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
SECTION 1. DEFINITIONS................................................. 1
SECTION 2. CREDIT FACILITIES........................................... 5
2.1 Bridge Loans................................................ 5
2.2 Mandatory Prepayments....................................... 6
SECTION 3. INTEREST AND FEES........................................... 6
3.1 Interest.................................................... 6
3.2 Maintenance Fee............................................. 7
3.3 Late Fee.................................................... 7
SECTION 4. PAYMENTS; PRO RATA TREATMENT; INCREASED COSTS, ETC.......... 7
4.2 Pro Rata Treatment.......................................... 8
4.3 Sharing of Payments......................................... 8
4.4 Changes in Laws; Increased Costs of Loans; U.S. Taxes....... 9
SECTION 5. CONDITIONS PRECEDENT........................................ 9
5.1 Conditions Precedent to Bridge Loans........................ 9
5.2 Conditions Precedent to the Bridge Loans.................... 11
SECTION 6. COLLECTION AND ADMINISTRATION; JOINT SEVERALABILITY; RIGHTS
OF CONTRIBUTION............................................. 11
6.1 Payments.................................................... 11
6.2 Authorization to Make Loans................................. 11
6.3 Use of Proceeds............................................. 11
6.4 Limitation on Obligations................................... 11
6.5 Guaranty.................................................... 11
SECTION 7. AGENT....................................................... 13
7.1 Appointment, Powers and Immunities.......................... 13
7.2 Reliance by Agent........................................... 13
7.3 Defaults.................................................... 13
7.4 Rights as a Lender.......................................... 13
7.5 Indemnification............................................. 14
7.6 Non-Reliance on Agent and Other Lenders..................... 14
7.7 Failure to Act.............................................. 14
7.8 Resignation or Removal of Agent............................. 14
7.9 Settlement with Lenders..................................... 14
7.10 Return of Payments.......................................... 14
SECTION 8. REPRESENTATIONS AND WARRANTIES.............................. 15
8.1 Corporate Existence, Power and Authority; Subsidiaries...... 15
8.2 Financial Statements; No Material Adverse Change............ 15
8.3 Tax Returns................................................. 15
8.4 Litigation.................................................. 15
8.5 Compliance with Other Agreements and Applicable Laws........ 15
8.6 Employee Benefits........................................... 16
8.7 Acquisition of Purchased Assets............................. 16
8.9 Accuracy and Completeness of Information.................... 17
8.10 Approvals................................................... 17
8.11 Survival of Warranties; Cumulative.......................... 17
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS.......................... 17
9.1 Maintenance of Existence.................................... 17
9.2 Compliance with Laws, Regulations, Etc...................... 17
9.3 Payment of Taxes and Claims................................. 17
9.4 Financial Statements and Other Information.................. 18
9.5 Sale of Assets, Consolidation, Merger, Dissolution, Etc..... 18
</TABLE>
i
<PAGE> 29
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
9.6 Encumbrances................................................ 18
9.7 Indebtedness................................................ 18
9.8 Loans, Investments, Guarantees, Etc......................... 19
9.9 Dividends and Redemptions................................... 20
9.10 Transactions with Affiliates................................ 20
9.11 Compliance with ERISA....................................... 20
9.12 Costs and Expenses.......................................... 20
9.13 Capital Expenditures........................................ 21
SECTION 10. EVENTS OF DEFAULT AND REMEDIES.............................. 21
10.1 Events of Default........................................... 21
10.2 Remedies.................................................... 22
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING
LAW......................................................... 22
11.1 Governing Law; Choice of Forum; Service of Process; Jury
Trial Waiver................................................ 22
11.2 Waiver of Notices........................................... 23
11.3 Amendments and Waivers...................................... 23
11.4 Waiver of Counterclaims..................................... 23
11.5 Indemnification............................................. 23
11.6 No Immunity................................................. 23
SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS............................ 24
12.1 Term........................................................ 24
12.2 Notices..................................................... 25
12.3 Partial Invalidity.......................................... 25
12.4 Successors.................................................. 25
12.5 Entire Agreement............................................ 25
</TABLE>
ii
<PAGE> 1
EXHIBIT 6
CONFIDENTIALITY AGREEMENT
THIS CONFIDENTIALITY AGREEMENT, dated as of July 1, 1997, is made by and
between Bucyrus International, Inc., a Delaware corporation ("Bucyrus") and
American Industrial Partners ("Advisor").
WHEREAS, Bucyrus has requested that Advisor provide certain information to
Bucyrus and participate in discussions with Bucyrus regarding certain future
business agreements relating to Bucyrus, and
WHEREAS, in order to further such discussions, Advisor has requested access
to certain information concerning Bucyrus and its business, and Bucyrus has
consented to provide such information subject to restrictions on its use and
further disclosure, and
WHEREAS, Advisor recognizes that the information requested and/or provided
by Bucyrus is non-public, confidential and/or proprietary and, in consideration
of its disclosure hereunder, is willing to abide by the restrictions required by
Bucyrus.
NOW, THEREFORE, in consideration of the foregoing, and the mutual covenants
contained herein, and other good and valuable information, the receipt of which
is hereby mutually acknowledged, the parties hereby agree as follows:
1. Advisor agrees to treat all information and materials about Bucyrus
disclosed by Bucyrus during the course of these discussions as confidential, and
to hold all such information and materials ("Confidential Information") in trust
and confidence, exercising no less care in maintaining the security thereof as
Advisor does or would with respect to its own confidential and proprietary
information.
2. Advisor agrees to use Confidential Information only for the purpose of
considering, analyzing and providing information to Bucyrus regarding the
business agreements referenced above.
3. Advisor will limit the disclosure, distribution and discussion of
Confidential Information to those directors, officers, employees and consultants
of Advisor who are (a) directly involved in Advisor's consideration of the
proposed transaction and (b) aware of and subject to Advisor's obligations of
confidentiality hereunder. In the event Advisor or any person to whom Advisor
has disclosed Confidential Information becomes legally compelled to disclose any
Confidential Information, such person will provide Bucyrus with prompt notice of
such requirement so that Bucyrus may seek a protective order or other
appropriate remedy and/or waive compliance with the terms of this agreement. In
the event a protective order or other remedy is not obtained, or compliance is
waived, Advisor agrees that there will be furnished to the authorities
compelling disclosure only such portion of the Confidential Information as
Advisor's counsel shall advise in writing must be disclosed. Prior to such
disclosure, Advisor and Bucyrus will consult and use all reasonable efforts to
agree on the nature, form, timing and content of such disclosure.
4. Upon the request of Bucyrus, Advisor shall return to Bucyrus all
written Confidential Information, and shall promptly destroy all copies of any
analyses, summaries or extracts prepared by Advisor or for its use containing or
reflecting any Confidential Information. Advisor shall provide a written
affidavit, signed by an officer of Advisor, that all such Confidential
Information has been returned or destroyed.
5. Neither Advisor nor any affiliate of Advisor shall, prior to the third
anniversary date of this agreement, without the prior written consent of
Bucyrus' Board of Directors:
a. effect or propose or make any statement publicly or to the Board
of Directors of Bucyrus with respect to (i) any form of business
combination with, or restructuring or recapitalization of Bucyrus,
(ii) any purchase of securities or assets of Bucyrus, or (iii) any
proposal to seek representation on the Board of Directors of
Bucyrus or otherwise to seek to influence or control the
management, Board of Directors or policies of Bucyrus; or
<PAGE> 2
b. instigate, encourage, join, act in concert with or assist any
third party in doing any of the foregoing, other than as a
participant in a transaction when the Advisor is not the lead
participant, not in control and is not the agent.
6. Advisor acknowledges that it is aware, and that it will advise all
persons who are informed as to the matters which are the subject of this
agreement, that applicable securities laws may prohibit any person who has
received material, non-public information about Bucyrus from purchasing or
selling securities of Bucyrus or from communicating such information to any
other person under circumstances in which it is reasonably foreseeable that such
person is likely to purchase or sell such securities.
7. Advisor acknowledges that the disclosure of Confidential Information in
violation of this agreement could cause irreparable injury to Bucyrus, and that
the remedy at law for such breach would be inadequate. Therefore, if Advisor
engages in any act in violation hereof, Bucyrus shall be entitled, in addition
to such other remedies and damages as may be available to it by law or
hereunder, to injunctive or other equitable relief.
8. The parties mutually agree not to disclose the discussions contemplated
by this agreement to any third parties except as and in a form mutually agreed
between the parties, or as explicitly required by law.
9. The term "Confidential Information" does not include:
a. information which was known to Advisor prior to receipt from
Bucyrus;
b. information which is now generally available in the public domain,
or which in the future enters the public domain through no fault
of Advisor, but only from such date as such information becomes so
available;
c. information which is disclosed to Advisor at any time by a third
party without violation by such party of an independent obligation
of confidentiality (but for a period of two years following the
date of this agreement, Advisor shall, before using or further
disclosing information so obtained, take reasonable steps to
determine the circumstances under which such information was
obtained by such third party);
d. technical information which was or is independently developed by
an employee of Advisor not having access to Confidential
Information supplied by Bucyrus; or
e. information released from its confidential status by the prior
written consent of Bucyrus.
10. Bucyrus makes no representation or warranty as to the accuracy or
completeness of Confidential Information.
11. This agreement shall be governed by and interpreted in accordance with
the internal laws of the state of Wisconsin.
IN WITNESS WHEREOF, the parties hereto have entered into this
Confidentiality Agreement as of the date first written above.
<TABLE>
<S> <C>
BUCYRUS INTERNATIONAL, INC. AMERICAN INDUSTRIAL PARTNERS
By: /s/ W. R. HILDEBRAND By: /s/ LAWRENCE W. WARD JR.
--------------------------------------------
- -------------------------------------------- Lawrence W. Ward Jr.
W. R. Hildebrand Principal
President & Chief Executive Officer
</TABLE>
2
<PAGE> 1
EXHIBIT 7
Jefferies & Company, Inc.
11100 Santa Monica Boulevard, 10th Floor
Los Angeles, California 90025
Telephone (310) 575-5200 (800) 933-6656
CORPORATE FINANCE Fax (310) 575-5165
March 7, 1997
Mr. Williard R. Hildebrand
Chief Executive Officer
BUCYRUS INTERNATIONAL, INC.
1100 Milwaukee Avenue
South Milwaukee, WI 53172
Dear Mr. Hildebrand:
This letter agreement (the "Agreement") confirms that Bucyrus
International, Inc. (the "Company") has engaged Jefferies & Company, Inc.
("Jefferies" or the "Financial Advisor") to act as exclusive financial advisor
to the Company in connection with the Company's proposed acquisition (the
"Acquisition") of Marion Power Shovel ("Marion").
1. Retention. The Company hereby retains Jefferies as its exclusive
financial advisor in connection with the Acquisition.
2. Information on the Company. The Company recognizes and confirms that in
rendering services hereunder, the Financial Advisors have been, prior to the
date hereof, and hereinafter will be, using and relying on and assuming the
accuracy of, without independent verification, data, material and other
information with respect to the Company, furnished to the Financial Advisors by
or on behalf of the Company and their agents, counsel, employees and
representatives (the "Information").
The Financial Advisor will perform due diligence; however, the Company
recognizes and confirms that the Financial Advisor: (a) will use and rely
primarily on the Information and on information available from generally
recognized public sources in performing the services contemplated by this
Agreement without having independently verified the same; (b) does not assume
responsibility for the accuracy or completeness of the Information and such
other information, (c) will not make an appraisal of any assets of the Company
or Marion; and (d) retains the right to continue to perform due diligence on the
Company during the course of the engagement. The Company represents and warrants
that any prospectus, placement memorandum or similar disclosure materials
utilized by the Company in connection with the Acquisition will not contain any
untrue statement of a material fact or omit to state any material fact necessary
to make the statements therein, in light of the circumstances in which they were
made, not false or misleading. The Financial Advisor agrees to keep the
Information confidential so long as it is and remains non-public, unless
disclosure is required by law or requested by any government, regulatory or
self-regulatory agency or body, and the Financial Advisor will not make use
thereof, except in connection with our services hereunder for the Company.
3. Use of Name. The Company agrees that any reference to the Financial
Advisor in any release, communication, or material distributed to prospective
purchasers of the Notes, is subject to the Financial Advisor's prior written
approval. If the Financial Advisor resigns prior to the dissemination of any
such release, communication or material, no reference shall be made therein to
the Financial Advisor despite any prior written approval which may have been
given therefor.
4. Use of Advice. No advice rendered by the Financial Advisor in connection
with the services performed by the Financial Advisor pursuant to this Agreement
will be quoted by either party hereto, nor will any such advice be referred to,
in any report, document, release or other communication, whether written or
oral,
<PAGE> 2
prepared, issued or transmitted by such party or any person or corporation
controlling, controlled by or under common control with such party or any
director, officer, employee, agent or representative of any such party, without
the prior written authorization of both parties hereto, except to the extent
required by law (in which case the appropriate party shall so advise the other
in writing prior to such use and shall consult with the other with respect to
the form and timing of disclosure), provided that the foregoing shall not
prohibit appropriate internal communication or reference with respect to such
advice internally within such parties.
5. Compensation. In full payment for services rendered and to be rendered
hereunder by Jefferies, the Company agrees to pay to Jefferies as follows:
(a) In consideration of the services rendered by Jefferies hereunder
as exclusive financial advisor in connection with the Acquisition, the
Company agrees to pay to Jefferies in cash, immediately upon execution of
this Agreement, $100,000 as a one-time retainer fee (the "Retainer").
(b) The Company agrees to pay Jefferies a fee of $150,000 in cash for
delivery of any fairness opinion issued in conjunction with the Acquisition
contemplated herein, payable immediately upon execution of such fairness
option.
(c) In consideration of the services rendered by Jefferies hereunder
as exclusive financial advisor in connection with the Acquisition, the
Company agrees to pay to Jefferies in cash upon the successful consummation
of the Acquisition, $250,000 as a success fee (the "Success Fee").
(d) In addition to the compensation to be paid to Jefferies as
provided in Sections 5(a), 5(b) and 5(c) hereof, the Company shall pay to,
or on behalf of, Jefferies, promptly as billed, all out-of-pocket expenses
incurred by Jefferies in connection with its services to be rendered
hereunder (including, without limitation, the fees and disbursements of
Jefferies' counsel, travel and lodging expenses, word processing charges,
messenger and duplicating services, facsimile expenses and other customary
expenditures).
(e) Jefferies may resign at any time and the Company may terminate
Jefferies' services at any time, each by giving notice to the other. If
Jefferies resigns or the Company terminates Jefferies' services for any
reason, Jefferies and its counsel shall be entitled to receive all of the
amounts due pursuant to Sections 5(a), 5(b), 5(c) and 5(d) hereof up to and
including the effective date of such termination or resignation, as the
case may be. In addition, if Jefferies' services hereunder are terminated
by the Company, and the Company completes a transaction similar to the
Acquisition contemplated herein within one year of Jefferies being
terminated, then the Company shall pay Jefferies within five (5) days of
the closing of such transaction in cash the fees as outlined in Sections
5(a), 5(b) and 5(c), as applicable.
(f) No fee paid or payable to Jefferies or any of its affiliates shall
be credited against any other fee paid or payable to Jefferies or any of
its affiliates.
6. Representations and Warranties. The Company represents and warrants to
Jefferies that this Agreement has been duly authorized, executed and delivered
by the Company; and, assuming the due execution by the Financial Advisor,
constitutes a legal, valid and binding agreement of the Company, enforceable
against the Company, in accordance with its terms. The Company represents that,
to the best of its knowledge, the Information will not, when delivered and at
the closing of the Acquisition, contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements therein in
light of the circumstances under which they were made not misleading. The
Company agrees to advise the Financial Advisor promptly of the occurrence of any
event or any other change prior to the closing known to it which results in the
Information containing any untrue statement of a material fact or omitting to
state any material fact necessary to make the statements contained therein, in
light of the circumstances under which they were made, not misleading.
7. Indemnity. In partial consideration of the services to be rendered
hereunder the Company agrees to indemnify Jefferies and certain other
indemnified persons in accordance with Schedule A attached hereto.
8. Survival of Certain Provisions. The indemnity and contribution
agreements contained in Schedule A to this Agreement, the representations and
warranties of the Company contained in Section 6 of this
2
<PAGE> 3
Agreement, and the provisions of Sections 3, 4, 5 and this Section 9 of this
Agreement shall remain operative and in full force and effect regardless of (a)
any investigation made by or on behalf of the Financial Advisor, or by or on
behalf of any affiliate of the Financial Advisor or any person controlling
either, (b) completion of the Acquisition, (c) the resignation of the Financial
Advisor or any termination of the Financial Advisor's services or (d) any
expiration or termination of this Agreement, and shall be binding upon, and
shall inure to the benefit of, any successors, assigns, heirs and personal
representatives of the Company, the Financial Advisor, and the Indemnified
Persons identified in Schedule A.
9. Notices. Notice given pursuant to any of the provisions of this
Agreement shall be in writing and shall be mailed or delivered (a) if to the
Company, at the address set forth above, and (b) if to Jefferies, at the offices
of Jefferies at 11100 Santa Monica Boulevard, Suite 1000, Los Angeles,
California 90025, Attention: Jerry M. Gluck, Executive Vice President and
General Counsel.
10. Counterparts. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all of which
shall constitute one and the same instrument.
11. Third Party Beneficiaries. This Agreement has been and is made solely
for the benefit of the Company, the Financial Advisor and the other Indemnified
Persons referred to in Schedule A hereof and their respective successors and
assigns, and no other person shall acquire or have any right under or by virtue
of this Agreement.
12. Construction. This Agreement incorporates the entire understanding of
the parties and supersedes all previous agreements relating to the subject
matter hereof should they exist and shall be governed by, and construed in
accordance with, the laws of the State of New York, without regard to principals
of conflicts of law.
13. Headings. The section headings in this Agreement have been inserted as
a matter of convenience of reference and are not part of this Agreement.
14. Press Announcements. At any time after the consummation or other public
announcement of the Acquisition, the Financial Advisor may place an announcement
in such newspapers and publications as it may choose, stating that the Financial
Advisor has acted as exclusive financial advisor to the Company in connection
with the Acquisition contemplated by this Agreement.
15. Amendment. This Agreement may not be modified or amended except in a
writing duly executed by the parties hereto.
16. Term. Except as provided herein, this Agreement shall run from the date
of this letter to a date of one year thereafter, unless extended by mutual
consent of the parties (the "Term").
3
<PAGE> 4
Please sign and return an original and one copy of this letter to the
undersigned to indicate your acceptance of the terms set forth herein, whereupon
this letter and your acceptance shall constitute a binding agreement between the
Company and Jefferies as of the date first above written.
Sincerely,
JEFFERIES & COMPANY, INC.
By: /s/ JOSEPH J. RADECKI, JR.
------------------------------------
Joseph J. Radecki, Jr.
Executive Vice President
Accepted and Agreed:
BUCYRUS INTERNATIONAL, INC.
By: /s/ WILLIARD R. HILDEBRAND
--------------------------------------------------------
Mr. Williard R. Hildebrand
Chief Executive Officer
4
<PAGE> 5
SCHEDULE A
March 7, 1997
JEFFERIES & COMPANY, INC.
11100 Santa Monica Boulevard, 10th Floor
Los Angeles, CA 90025
Ladies and Gentlemen:
This letter agreement is entered into pursuant to, and in order to induce
Jefferies & Company, Inc. ("Jefferies" or the "Financial Advisor") to enter
into, the engagement letter dated March 7, 1997 (the "Agreement") between
Bucyrus International, Inc. (the "Company") and Jefferies. Unless otherwise
noted, all capitalized terms used herein shall have the meanings set forth in
the Agreement.
Since Jefferies will be acting on behalf of the Company in connection with
the transactions contemplated by the Agreement, and as part of the consideration
for the agreement of Jefferies to furnish its services pursuant to such
Agreement, the Company agrees to indemnify and hold harmless Jefferies and its
affiliates and their officers, directors, partners, counsel, employees and
agents, and any other persons controlling Jefferies or any of its respective
affiliates within the meaning of either Section 15 of the Securities Act of 1933
or Section 20 of the Securities Exchange Act of 1934, and the respective agents,
employees, officers, directors, partners, counsel and shareholders of such
persons (Jefferies and each such other person being referred to as an
"Indemnified Person"), to the fullest extent lawful, from and against all
claims, liabilities, losses, damages and expenses (or actions in respect
thereof) related to or arising out of (i) actions taken or omitted to be taken
by the Company, its affiliates, employees or agents, (ii) actions taken or
omitted to be taken by any Indemnified Person (including acts or omissions
constituting ordinary negligence) pursuant to the terms of, or in connection
with services rendered pursuant to, the Agreement or any transaction or proposed
transaction contemplated thereby or any Indemnified Person's role in connection
therewith, provided, however, that the Company shall not be responsible for any
losses, claims, damages, liabilities or expenses of any Indemnified Person to
the extent that it is finally judicially determined that they result solely from
actions taken or omitted to be taken by such Indemnified Person in bad faith or
to be due primarily to such Indemnified Person's gross negligence, and (iii) any
untrue statement or alleged untrue statement of a material fact contained in the
Information, or in any amendment or supplement thereto, or arising out of or
based upon any omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein not misleading.
Each Indemnified Person shall give prompt written notice to the Company
after the receipt by such Indemnified Person of any written notice of the
commencement of any action, suit or proceeding for which such Indemnified Person
will claim indemnification or contribution pursuant to this Agreement. The
Company shall have the right, exercisable by giving written notice to an
Indemnified Person within 10 business days after the receipt of written notice
from such Indemnified Person or such commencement, to assume, at its expense,
the defense of any such action, suit or proceeding; provided, however, that an
Indemnified Person shall have the right to employ counsel in any such action,
suit or proceeding, and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Indemnified Person
unless: (i) the Company fails to assume the defense of such action, suit or
proceeding or fails to employ separate counsel reasonably satisfactory to such
Indemnified Person in any such action, suit or proceeding; or (ii) the Company
and such Indemnified Person shall have been advised by counsel that there may be
one or more defenses available to such Indemnified Person which are in conflict
with, different from or additional to those available to the Company, any of its
affiliates, or another Indemnified Person, as the case may be (in which case, if
such Indemnified Person notifies the Company in writing that it elects to employ
separate counsel at the expense of the Company, the Company shall not have the
right to assume the defense of such action, suit or proceeding on behalf of such
Indemnified Person); it being understood, however, that the Company shall not,
in connection with any one such action or proceeding or separate but
substantially similar or related actions or proceedings arising out of the same
general allegations or circumstances, be liable for the fees and expenses of
more than one separate firm of attorneys (together with appropriate local
counsel) at any time acting for each Indemnified Person in any one jurisdiction.
The Company shall not settle or compromise or
A-1
<PAGE> 6
consent to the entry of any judgment in or otherwise seek to terminate any
pending or threatened action, claim, suit or proceeding in which any Indemnified
Person is or could be a party and as to which indemnification or contribution
could have been sought by such Indemnified Person hereunder (whether or not such
Indemnified Person is a party thereto), unless such Indemnified Person has given
its prior written consent or the settlement, compromise, consent or termination
includes an express unconditional release of such Indemnified Person,
satisfactory in form and substance to such Indemnified Person, from all losses,
claims, damages or liabilities arising out of such action, claim, suit or
proceeding.
If for any reason (other than the bad faith or gross negligence of an
Indemnified Person as provided above) the foregoing indemnity is unavailable to
an Indemnified Person or insufficient to hold an Indemnified Person harmless,
then the Company, to the fullest extent permitted by law, shall contribute to
the amount paid or payable by such Indemnified Person as a result of such
claims, liabilities, losses, damages or expenses in such proportion as is
appropriate to reflect the relative benefits received by the Company on the one
hand and by Jefferies on the other, from the transaction or proposed transaction
under the Agreement or, if allocation on that basis is not permitted under
applicable law, in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and Jefferies on the other, but
also the relative fault of the Company and Jefferies, as well as any relevant
equitable considerations. Notwithstanding the provisions hereof, the aggregate
contribution of all Indemnified Persons to all claims, liabilities, losses,
damages and expenses shall not exceed the amount of fees actually received by
Jefferies pursuant to the Agreement. It is hereby further agreed that the
relative benefits to the Company on the one hand and Jefferies on the other with
respect to any transaction or proposed transaction contemplated by the Agreement
shall be deemed to be in the same proportion as (i) the total value of the
transaction bears to (ii) the fees paid to Jefferies with respect to such
transaction. The relative fault of the Company on the one hand and Jefferies on
the other with respect to the transaction shall be determined by reference to,
among other things, whether any untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company or by Jefferies and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. No Indemnified Person shall have any liability to
the Company or any other officer, director, employee or affiliate thereof in
connection with the services rendered pursuant to the Agreement except for any
liability for claims, liabilities, losses or damages finally judicially
determined to have resulted primarily from actions taken or omitted to be taken
by such Indemnified Person in bad faith or as a result of gross negligence. The
indemnity, contribution and expense reimbursement obligations set forth herein
(i) shall be in addition to any liability the Company may have to any
Indemnified Person at common law or otherwise, (ii) shall survive the expiration
of the Term, (iii) shall apply to any modification of Jefferies' engagement and
shall remain in full force and effect following the completion or termination of
the Agreement, (iv) shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of Jefferies or any other
Indemnified Person and (v) shall be binding on any successor or assign of the
Company and successors or assigns to all or substantially all of the Company's
business and assets.
In addition, the Company agrees to reimburse the Indemnified Persons for
all expenses (including fees and expenses of counsel) as they are incurred in
connection with investigating, preparing or defending any such action or claim,
whether or not in connection with litigation in which any Indemnified Person is
a named party. If any of the Jefferies' personnel appears as witnesses, are
deposed or are otherwise involved in the defense of any action against
Jefferies, the Company or the Company's directors, the Company will pay
Jefferies (i) with respect to each day that one of Jefferies' professional
personnel appears as a witness or is deposed and/or (ii) with respect to each
day that one of Jefferies' professional personnel is involved in the preparation
therefor, (a) a fee of $2,000 per day for each such person with respect to each
appearance as a witness or for a deposition and (b) at a rate of $200 per hour
with respect to each hour of preparation for any such appearance and the Company
will reimburse Jefferies for all reasonable expenses incurred by Jefferies by
reason of any of its personnel being involved in any such action.
A-2
<PAGE> 7
Please sign and return an original and one copy of this letter to the
undersigned to indicate your acceptance of the terms set forth herein, whereupon
this letter and your acceptance shall constitute a binding agreement between the
Company and Jefferies as of the date of the Agreement.
Sincerely,
BUCYRUS INTERNATIONAL, INC.
By: /s/ WILLIARD R. HILDEBRAND
------------------------------------
Williard R. Hildebrand
Chief Executive Officer
Accepted and Agreed:
JEFFERIES & COMPANY, INC.
By: /s/ JOSEPH J. RADECKI, JR.
--------------------------------------------------------
Joseph J. Radecki, Jr.
Executive Vice President
A-3
<PAGE> 1
EXHIBIT 8
Jefferies & Company, Inc.
11100 Santa Monica Boulevard, 10th Floor
Los Angeles, California 90025
Telephone (310) 575-5200 (800) 933-6656
CORPORATE FINANCE Fax (310) 575-5165
July 30, 1997
Mr. Williard R. Hildebrand, II
Chief Executive Officer
BUCYRUS INTERNATIONAL, INC.
1100 Milwaukee Avenue
South Milwaukee, WI 53172
Dear Mr. Hildebrand:
This letter agreement (the "Agreement") confirms that Bucyrus
International, Inc. (the "Company") has engaged Jefferies & Company, Inc.
("Jefferies" or the "Financial Advisor") to act as exclusive financial advisor
to the Company in connection with the proposed acquisition of the Company (the
"Acquisition") by American Industrial Partners or another party (the
"Purchaser").
1. Retention. The Company hereby retains Jefferies as its exclusive
financial advisor in connection with the Acquisition.
2. Information on the Company. The Company recognizes and confirms that in
rendering services hereunder, the Financial Advisor has been, prior to the date
hereof, and hereinafter will be, using and relying on and assuming the accuracy
of, without independent verification, data, material and other information with
respect to the Company, furnished to the Financial Advisor by or on behalf of
the Company and their agents, counsel, employees and representatives (the
"Information").
The Company recognizes and confirms that the Financial Advisor: (a) will
use and rely primarily on the Information and on information available from
generally recognized public sources in performing the services contemplated by
this Agreement without having independently verified the same; (b) does not
assume responsibility for the accuracy or completeness of the Information and
such other information; (c) will not make an appraisal of any assets of the
Company or the Purchaser; and (d) retains the right to continue to perform due
diligence during the course of the engagement. The Company represents and
warrants that any prospectus, placement memorandum or similar disclosure
materials utilized by the Company in connection with the Acquisition will not
contain any untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein, in light of the circumstances in
which they were made, not false or misleading. The Financial Advisor agrees to
keep the Information confidential so long as it is and remains non-public,
unless disclosure is required by law or requested by any government, regulatory
or self-regulatory agency or body, and the Financial Advisor will not make use
thereof, except in connection with our services hereunder for the Company.
3. Use of Name. The Company agrees that any reference to the Financial
Advisor in any release, communication, or material distributed by the Company,
is subject to the Financial Advisor's prior written approval. If the Financial
Advisor resigns prior to the dissemination of any such release, communication or
material, no reference shall be made therein to the Financial Advisor despite
any prior written approval which may have been given therefor.
4. Use of Advice. Except as provided in Section 5(b) below, no advice
rendered by the Financial Advisor in connection with the services performed by
the Financial Advisor pursuant to this Agreement will be quoted by either party
hereto, nor will any such advice be referred to, in any report, document,
release or other
<PAGE> 2
communication, whether written or oral, prepared, issued or transmitted by such
party or any person or corporation controlling, controlled by or under common
control with such party or any director, officer, employee, agent or
representative of any such party, without the prior written authorization of
both parties hereto, except to the extent required by law (in which case the
appropriate party shall so advise the other in writing prior to such use and
shall consult with the other with respect to the form and timing of disclosure),
provided that the foregoing shall not prohibit appropriate internal
communication or reference with respect to such advice internally within such
parties.
5. Compensation. In full payment for services rendered and to be rendered
hereunder by Jefferies, the Company agrees to pay to Jefferies as follows:
(a) In consideration of the services rendered by Jefferies hereunder
as exclusive financial advisor in connection with the Acquisition, the
Company agrees to pay to Jefferies in cash, immediately upon execution of
this Agreement, $250,000 as a one-time retainer fee (the "Retainer").
(b) The Company agrees to pay Jefferies a fee of $250,000 in cash for
the fairness opinion issued in conjunction with the Acquisition
contemplated herein, payable immediately upon delivery of such fairness
opinion.
(c) In consideration of the services rendered by Jefferies hereunder
as exclusive financial advisor in connection with the Acquisition, the
Company agrees to pay to Jefferies in cash upon the successful consummation
of the Acquisition, $1,250,000 as a success fee (the "Success Fee").
(d) In addition to the compensation to be paid to Jefferies as
provided in Sections 5(a), 5(b) and 5(c) hereof, the Company shall pay to,
or on behalf of, Jefferies, promptly as billed, all out-of-pocket expenses
incurred by Jefferies in connection with its services to be rendered
hereunder (including, without limitation, the fees and disbursements of
Jefferies' counsel, travel and lodging expenses, word processing charges,
messenger and duplicating services, facsimile expenses and other customary
expenditures).
(e) Jefferies may resign at any time and the Company may terminate
Jefferies' services at any time, each by giving notice to the other. If
Jefferies resigns or the Company terminates Jefferies' services for any
reason, Jefferies and its counsel shall be entitled to receive all of the
amounts due pursuant to Sections 5(a), 5(b), 5(c) and 5(d) hereof up to and
including the effective date of such termination or resignation, as the
case may be. In addition, if Jefferies' services hereunder are terminated
by the Company, and the Company completes a transaction similar to the
Acquisition contemplated herein within one year of Jefferies being
terminated, then the Company shall pay Jefferies within five (5) days of
the closing of such transaction in cash the fees as outlined in Sections
5(a), 5(b) and 5(c) as applicable.
(f) No fee paid or payable to Jeffries or any of its affiliates shall
be credited against any other fee paid or payable to Jefferies or any of
its affiliates.
(6) Representations and Warranties. The Company represents and warrants to
Jefferies that this Agreement has been duly authorized, executed and delivered
by the Company, and, assuming the due execution by the Financial Advisor,
constitutes a legal, valid and binding agreement of the Company, enforceable
against the Company, in accordance with its terms. The Company represents that,
to the best of its knowledge, the Information will not, when delivered and at
the closing of the Acquisition, contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements therein in
light of the circumstances under which they were made not misleading. The
Company agrees to advise the Financial Advisor promptly of the occurrence of any
event or any other change prior to the closing known to it which results in the
Information containing any untrue statement of a material fact or omitting to
state any material fact necessary to make the statements contained therein, in
light of the circumstances under which they were made, not misleading.
(7) Indemnity. In partial consideration of the services to be rendered
hereunder the Company agrees to indemnify Jefferies and certain other
Indemnified Persons in accordance with Schedule A attached hereto.
2
<PAGE> 3
(8) Survival of Certain Provisions. The indemnity and contribution
agreements contained in Section 7 and Schedule A to this Agreement, the
representations and warranties of the Company contained in Section 6 of this
Agreement, and the provisions of Section 5 of this Agreement shall remain
operative and in full force and effect regardless of (a) any investigation made
by or on behalf of the Financial Advisor, or by or on behalf of any affiliate of
the Financial Advisor or any person controlling either, (b) completion of the
Acquisition, (c) the resignation of the Financial Advisor or any termination of
the Financial Advisor's services or (d) any expiration or termination of this
Agreement, and shall be binding upon, and shall inure to the benefit of, any
successors, assigns, heirs and personal representatives of the Company, the
Financial Advisor, and the Indemnified Persons identified in Schedule A.
9. Notices Notice given pursuant to any of the provisions of this Agreement
shall be in writing and shall be mailed or delivered (a) if to the Company, at
the address set forth above, and (b) if to Jefferies, at the offices of
Jefferies at 11100 Santa Monica Boulevard, Suite 1000, Los Angeles, California
90025, Attention: Jerry M. Gluck, Executive Vice President and General Counsel.
10. Counterparts. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all of which
shall constitute one and the same instrument.
11. Third Party Beneficiaries. This Agreement has been and is made solely
for the benefit of the Company, the Financial Advisor and the other Indemnified
Persons referred to in Schedule A hereof and their respective successors and
assigns, and no other person shall acquire or have any right under or by virtue
of this Agreement.
12. Construction. This Agreement incorporates the entire understanding of
the parties and supersedes all previous agreements relating to the subject
matter hereof should they exist and shall be governed by, and construed in
accordance with, the laws of the State of New York, without regard to principles
of conflicts of law.
13. Headings. The section headings in this Agreement have been inserted as
a matter of convenience of reference and are not part of this Agreement.
14. Press Announcements. At any time after the consummation or other public
announcement of the Acquisition, the Financial Advisor may place an announcement
in such newspapers and publications as it may choose, stating that the Financial
Advisor has acted as exclusive financial advisor to the Company in connection
with the Acquisition contemplated by this Agreement.
15. Amendment. This Agreement may not be modified or amended except in a
writing duly executed by the parties hereto.
16. Term. Except as provided herein, this Agreement shall run from the date
of this letter to a date of one year thereafter, unless extended by mutual
consent of the parties (the "Term").
3
<PAGE> 4
Please sign and return an original and one copy of this letter to the
undersigned to indicate your acceptance of the terms set forth herein, whereupon
this letter and your acceptance shall constitute a binding agreement between the
Company and Jefferies as of the date first above written.
Sincerely,
JEFFERIES & COMPANY, INC.
By: /s/ JOSEPH J. RADECKI, JR.
------------------------------------
Joseph J. Radecki, Jr.
Executive Vice President
Accepted and Agreed:
BUCYRUS INTERNATIONAL, INC.
By: /s/ WILLIARD R. HILDEBRAND
--------------------------------------------------------
Mr. Williard R. Hildebrand
Chief Executive Officer
4
<PAGE> 5
SCHEDULE A
July 30, 1997
JEFFERIES & COMPANY, INC.
11100 Santa Monica Boulevard, 10th Floor
Los Angeles, CA 90025
Ladies and Gentlemen:
This letter agreement is entered into pursuant to, and in order to induce
Jefferies & Company, Inc. ("Jefferies" or the "Financial Advisor") to enter
into, the engagement letter dated July 30, 1997 (the "Agreement") between
Bucyrus International, Inc. (the "Company") and Jefferies. Unless otherwise
noted, all capitalized terms used herein shall have the meanings set forth in
the Agreement.
Since Jefferies will be acting on behalf of the Company in connection with
the transactions contemplated by the Agreement, and as part of the consideration
for the agreement of Jefferies to furnish its services pursuant to such
Agreement, the Company agrees to indemnify and hold harmless Jefferies and its
affiliates and their officers, directors, partners, counsel, employees and
agents, and any other persons controlling Jefferies or any of its respective
affiliates within the meaning of either Section 15 of the Securities Act of 1933
or Section 20 of the Securities Exchange Act of 1934, and the respective agents,
employees, officers, directors, partners, counsel and shareholders of such
persons (Jefferies and each such other person being referred to as an
"Indemnified Person"), to the fullest extent lawful, from and against all
claims, liabilities, losses, damages and expenses (or actions in respect
thereof) related to or arising out of (i) actions taken or omitted to be taken
by the Company, its affiliates, employees or agents, (ii) actions taken or
omitted to be taken by any Indemnified Person (including acts or omissions
constituting ordinary negligence) pursuant to the terms of, or in connection
with services rendered pursuant to, the Agreement or any transaction or proposed
transaction contemplated thereby or any Indemnified Person's role in connection
therewith, provided, however, that the Company shall not be responsible for any
losses, claims, damages, liabilities or expenses of any Indemnified Person to
the extent that it is finally judicially determined that they result solely from
actions taken or omitted to be taken by such Indemnified Person in bad faith or
to be due primarily to such Indemnified Person's gross negligence, and (iii) any
untrue statement or alleged untrue statement of a material fact contained in the
Information, or in any amendment or supplement thereto, or arising out of or
based upon any omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein not misleading.
Each Indemnified Person shall give prompt written notice to the Company
after the receipt by such Indemnified Person of any written notice of the
commencement of any action, suit or proceeding for which such Indemnified Person
will claim indemnification or contribution pursuant to this Agreement. The
Company shall have the right, exercisable by giving written notice to an
Indemnified Person within 10 business days after the receipt of written notice
from such Indemnified Person of such commencement, to assume, at its expense,
the defense of any such action, suit or proceeding; provided, however, that an
Indemnified Person shall have the right to employ counsel in any such action,
suit or proceeding, and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Indemnified Person
unless: (i) the Company fails to assume the defense of such action, suit or
proceeding or fails to employ separate counsel reasonably satisfactory to such
Indemnified Person in any such action, suit or proceeding; or (ii) the Company
and such Indemnified Person shall have been advised by counsel that there may be
one or more defenses available to such Indemnified Person which are in conflict
with, different from or additional to those available to the Company, any of its
affiliates, or another Indemnified Person, as the case may be (in which case, if
such Indemnified Person notifies the Company in writing that it elects to employ
separate counsel at the expense of the Company, the Company shall not have the
right to assume the defense of such action, suit or proceeding on behalf of such
Indemnified Person); it being understood, however, that the Company shall not,
in connection with any one such action or proceeding or separate but
substantially similar or related actions or proceedings arising out of the same
general allegations or circumstances, be liable for the fees and expenses of
more than one separate firm of attorneys (together with appropriate local
counsel) at any time acting for each Indemnified Person in any one jurisdiction.
The Company shall not settle or compromise or
A-1
<PAGE> 6
consent to the entry of any judgment in or otherwise seek to terminate any
pending or threatened action, claim, suit or proceeding in which any Indemnified
Person is or could be a party and as to which indemnification or contribution
could have been sought by such Indemnified Person hereunder (whether or not such
Indemnified Person is a party thereto), unless such Indemnified Person has given
its prior written consent or the settlement, compromise, consent or termination
includes an express unconditional release of such Indemnified Person,
satisfactory in form and substance to such Indemnified Person, from all losses,
claims, damages or liabilities arising out of such action, claim, suit or
proceeding.
If for any reason (other than the bad faith or gross negligence of an
Indemnified Person as provided above) the foregoing indemnity is unavailable to
an Indemnified Person or insufficient to hold an Indemnified Person harmless,
then the Company, to the fullest extent permitted by law, shall contribute to
the amount paid or payable by such Indemnified Person as a result of such
claims, liabilities, losses, damages or expenses in such proportion as is
appropriate to reflect the relative benefits received by the Company on the one
hand and by Jefferies on the other, from the transaction or proposed transaction
under the Agreement or, if allocation on that basis is not permitted under
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits received by the Company on the one hand and Jefferies on the
other, but also the relative fault of the Company and Jefferies, as well as any
relevant equitable considerations. Notwithstanding the provisions hereof, the
aggregate contribution of all Indemnified Persons to all claims, liabilities,
losses, damages and expenses shall not exceed the amount of fees actually
received by Jefferies pursuant to the Agreement. It is hereby further agreed
that the relative benefits to the Company on the one hand and Jefferies on the
other with respect to any transaction or proposed transaction contemplated by
the Agreement shall be deemed to be in the same proportion as (i) the total
value of the transaction bears to (ii) the fees paid to Jefferies with respect
to such transaction. The relative fault of the Company on the one hand and
Jefferies on the other with respect to the transaction shall be determined by
reference to, among other things, whether any untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or by Jefferies and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. No Indemnified Person shall have any
liability to the Company or any other officer, director, employee or affiliate
thereof in connection with the services rendered pursuant to the Agreement
except for any liability for claims, liabilities, losses or damages finally
judicially determined to have resulted primarily from actions taken or omitted
to be taken by such Indemnified Person in bad faith or as a result of gross
negligence. The indemnity, contribution and expense reimbursement obligations
set forth herein (i) shall be in addition to any liability the Company may have
to any Indemnified Person at common law or otherwise, (ii) shall survive the
expiration of the Term, (iii) shall apply to any modification of Jefferies'
engagement and shall remain in full force and effect following the completion or
termination of the Agreement, (iv) shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of Jefferies or any
other Indemnified Person and (v) shall be binding on any successor or assign of
the Company and successors or assigns to all or substantially all of the
Company's business and assets.
In addition, the Company agrees to reimburse the Indemnified Persons for
all expenses (including fees and expenses of counsel) as they are incurred in
connection with investigating, preparing or defending any such action or claim,
whether or not in connection with litigation in which any Indemnified Person is
a named party. If any of Jefferies' personnel appears as witnesses, are deposed
or are otherwise involved in the defense of any action against Jefferies, the
Company or the Company's directors, the Company will pay Jefferies (i) with
respect to each day that one of Jefferies' professional personnel appears as a
witness or is deposed and/or (ii) with respect to each day that one of
Jefferies' professional personnel is involved in the preparation therefor, (a) a
fee of $2,000 per day for each such person with respect to each appearance as a
witness or for a deposition and (b) at a rate of $200 per hour with respect to
each hour of preparation for any such appearance and the Company will reimburse
Jefferies for all reasonable expenses incurred by Jefferies by reason of any of
its personnel being involved in any such action.
A-2
<PAGE> 7
Please sign and return an original and one copy of this letter to the
undersigned to indicate your acceptance of the terms set forth herein, whereupon
this letter and your acceptance shall constitute a binding agreement between the
Company and Jefferies as of the date of the Agreement.
Sincerely,
BUCYRUS INTERNATIONAL, INC.
By: /s/ WILLIARD R. HILDEBRAND
------------------------------------
Williard R. Hildebrand
Chief Executive Officer
Accepted and Agreed:
JEFFERIES & COMPANY, INC.
By: /s/ JOSEPH J. RADECKI, JR.
--------------------------------------------------------
Joseph J. Radecki, Jr.
Executive Vice President
A-3
<PAGE> 1
EXHIBIT 9
JOINT PROSECUTION AGREEMENT
This Agreement is dated as of the 21st day of August, 1997 by and among
BUCYRUS INTERNATIONAL, INC. ("BI"), and JACKSON NATIONAL LIFE INSURANCE COMPANY
("JNL"), both for itself and in its capacity as a representative of the estate
of Bucyrus Erie Company ("Bucyrus") pursuant to Section 1123(b)(3)(b) of the
Bankruptcy Code.
WHEREAS, BI is the successor in interest to Bucyrus-Erie Company
("Bucyrus") and B-E Holdings, Inc. ("Holdings" and, collectively with Bucyrus,
the "Debtors") under the Debtors' Second Amended Plan of Reorganization (the
"Plan") which was consummated on December 14, 1994 in proceedings (the
"Bankruptcy Proceedings") captioned In re B-E Holdings, Inc. and Bucyrus-Erie
Company, Case Nos. 9420786, 94-20787 (Bankr.E.D.Wis.) (RAE) in the United States
Bankruptcy Court for the Eastern district of Wisconsin (the "Bankruptcy Court");
WHEREAS, JNL objected in February, 1995 to the application for compensation
of fees and expenses of Milbank, Tweed, Hadley & McCloy ("Milbank") for its
representation of Bucyrus in the Bankruptcy Proceedings, JNL appealed the
Bankruptcy Court's partial award of fees and expenses to from Bucyrus to Milbank
in April 1996, Bucyrus subsequently joined in that objection in January, 1997
and JNL and Bucyrus are now prosecuting that objection and seeking disgorgement
to Bucyrus of up to approximately $1.8 million of fees and expenses previously
paid to Milbank (the "Disgorgement Claim"), as well as sanctions and other
relief;
WHEREAS, the Disgorgement Claims would have been lost but for the efforts
of JNL to preserve Bucyrus' rights in them by objecting to Milbank's fee
application, appealing the Bankruptcy Court's allowance of Milbank's fees and
thereafter discovering Milbank's fraud on the Bankruptcy Court, Bucyrus and JNL
in the course of monitoring the trial between Mikael Salovaara and Alfred C.
Eckert, all at great effort and expense to JNL at a time when Milbank still
represented Bucyrus;
WHEREAS, BI and JNL each have additional claims against Milbank and each of
them had contemplated commencing separate additional actions against Milbank,
its partners and other for malpractice, fraud and other claims related to and in
connection with Milbank's representation of the Debtors and BI and other matters
before, during and after the Bankruptcy Proceedings;
WHEREAS, Milbank has asserted that it will pursue counterclaims and other
legal remedies against both BI and JNL if they if fact pursue any of their
claims against Milbank;
WHEREAS, Milbank has also alleged that BI owes payment to Milbank for
billed and unbilled fees, expenses and other charges arising after December 14,
1994 in an alleged amount of approximately $1,000,000 (collectively, the
"Milbank Fees");
WHEREAS, BI and JNL both believe that their respective Milbank Claims may
in some instances overlap, be duplicative of or conflict with each other and JNL
and BI also disagree as to the extent to which each of them has the right to
prosecute and retain the proceeds of certain of such claims;
WHEREAS, BI wishes to avoid the cost and expenditure of time and effort
involved in prosecuting claims against Milbank and defending any counterclaims
and other proceedings brought by Milbank in response to such claims and Jackson
has agreed to advance such costs and expenses on behalf of BI and to indemnify
BI for them;
WHEREAS, BI and JNL both wish to avoid the potential for confusion and
conflict which may ensue if they separately prosecute their respective claims
against Milbank;
WHEREAS, JNL made an application for reimbursement of its professional fees
and expenses incurred in the Bankruptcy Proceedings pursuant to Section 503(b)
of the Bankruptcy Code (the "503(b) Claim"), the Bankruptcy Court allowed that
application to the extent of $500, JNL appealed the Bankruptcy
<PAGE> 2
Court's ruling to the United States District Court for the Eastern District of
Wisconsin, that court has now referred the 503(b) Claim back to the Bankruptcy
Court and BI continues to oppose the 503(b) Claim; and
WHEREAS, BI and JNL believe that continuing the dispute between them over
the 503(b) Claim may impede their ability to prosecute the Milbank Claims and
they accordingly both wish to compromise and settle their disagreements over the
503(b) Claim and the prosection of claims against Milbank;
NOW, THEREFORE, the parties have agreed as follows;
1. Effective September 1, 1997, JNL and BI shall jointly prosecute all of
their respective claims against Milbank (collectively, the "Milbank Claims") in
their respective names subject to the terms and conditions of this Agreement.
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 the Milbank Claims including, without limitation, the reasonable fees and
disbursements of counsel and other professional advisors and all other amounts
contemplated by the first sentence of Paragraph 2 below; (ii) the next
$8,675,000 of proceeds from the Milbank Claims, if any, will be paid to JNL,
provided that Bucyrus will retain ten percent of the proceeds of the
Disgorgement Claims, if any, and 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 BI. Notwithstanding the foregoing, BI shall also
receive the benefit of any reduction of any obligation it may have to pay the
Milbank Fees. JNL and BI will each provide the other with all such documentation
available to it which evidences expenses contemplated by this Paragraph 1 as the
other party shall reasonably request. JNL may, in its discretion after
consultation with the designated representative of BI, direct prosecution of the
Milbank Claims in a manner and to the extent which JNL reasonably deems
necessary to minimize the cost and expense of doing so, provided, however, that
BI and JNL shall at all times vigorously prosecute the defense of Milbank's
claims or counterclaims for the Milbank Fees.
2. JNL shall advance all of the costs and expenses of prosecuting the
Milbank Claims incurred on or after September 1, 1997 and shall indemnify and
hold BI and the Debtors harmless in connection with all of the Milbank Claims on
the same terms and conditions as those which were provided for in the
Indemnification Agreement dated as of November 30, 1994 between the Debtors and
JNL as if the Milbank Claims were "Claims" thereunder. Notwithstanding the
foregoing, BI shall bear the cost of: (i) its own reasonable general and
administrative expenses for work done and time spent by employees who are not
officers; (ii) the first fifteen days of interview, preparation, deposition,
witness or related time spent by officers of BI other than Willard R.
Hildebrand; (iii) incidental time spent by officers of BI; (iv) BI's own gross
negligence, willful misconduct and its actions or omissions taken or made in
contravention of the terms and conditions of this Agreement; and (v) payment (as
distinguished from netting), if any, of the Milbank Fees. JNL may direct and
implement the manner of prosecution and terms of settlement or other resolution
of the Milbank Claims in its discretion, provided that if JNL for any reason
elects to resolve, settle or cease prosecution of any or all of the Milbank
Claims. JNL shall give BI notice of its decision to do so. BI thereupon may, but
shall not be obligated to, elect within ten business days to prosecute such
Milbank Claims upon payment to JNL of all amounts JNL would have received under
this Agreement, if any, after giving effect to the terms of such proposed
resolution, settlement or cessation of prosecution as to which JNL has given BI
notice, whereupon BI may thereafter prosecute such Milbank Claims, and retain
all recoveries therefrom, at its own cost and expense. In that event, BI
thereafter shall indemnify and hold JNL harmless on the terms and conditions of
the first two sentences of this Paragraph 2 as if BI were the indemnifying party
and JNL the indemnified party thereunder and this Paragraph 2 shall otherwise
thereafter be of no further force and effect as to the Milbank Claims in
question.
3. JNL and BI agree to settle and resolve the 503(b) Claim on the terms and
conditions set forth in, and as evidenced by, a Settlement Agreement in the form
of Exhibit A attached.
4. BI, the Debtors and JNL have shared and will continue to share legal
advice, work product, attorney-client privileged communications and other
confidential information received from their respective counsel which pertains
to the Claims (collectively, together with the terms and conditions of this
Agreement, the "Confidential Information"), and they agree that when any
Confidential Information has been or is shared,
2
<PAGE> 3
their respective counsel have been and will be acting as consultants to one
another in conjunction with the Claims. BI and JNL each waive all conflicts of
interest, if any, which their respective counsel have or might have had with
respect to the Milbank Claims of the other.
5. JNL and BI each covenant and agree with the other that they each will
provide the other with all information and all other cooperation which they
reasonably can provide in order to effectuate the proposes of this Agreement, to
promote the parties' ability to prosecute the Milbank Claims on the terms and
conditions of this Agreement, as well as any other claims which JNL may in its
discretion pursue against Non-Related Persons under the Plan and any other party
connected with the Bankruptcy Proceedings (collectively, the "Claims"), and
otherwise to comply with the terms and conditions of this Agreement. Without
limitation of the foregoing, JNL, BI and the Debtors will at all times: (i) to
the extent they have any right to do so, make all of their present and former
officers and employees available to cooperate in prosecuting the Claims and
cause them to do so; (ii) share and make available, and allow the review and
copying of all documents and other information which may be relevant to the
Claims; and (iii) execute and deliver any and all agreements, documents and
instruments, in their own name or otherwise, to the full extent of their legal
power and authority, which either JNL or BI may reasonably request in order to
prosecute and pursue the Claims pursuant to and in accordance with the terms of
this Agreement. JNL and BI shall each be entitled to injunctive relief to
enforce the terms and conditions of this Paragraph 5.
6. Nothing in this Agreement shall constitute or is intended to be a waiver
of any attorney-client, work product or any other privilege or immunity,
including protections or requirements imposed by or available under any
applicable law. All documents and other information contemplated hereby shall
remain jointly subject to the attorney-client privilege and the work product
privilege, and will be kept confidential by JNL and BI, except as reasonably
needed to review, pursue and litigate the Claims. Each of the parties to this
Agreement agrees that it will not disclose any Confidential Information, except
to the extent reasonably necessary to implement the terms and conditions of this
Agreement, to prosecute the Claims and as otherwise required by applicable law
or a court or government agency of competent jurisdiction, in each case to the
extent that the same: (i) is not publicly available; or (ii) was not or could
not be obtained from another source not bound by any obligation of
confidentiality to either party hereto. Without limitation of the foregoing, if
either party receives any subpoena or other request for disclosure of
Confidential Information, the party receiving the same shall so notify the other
party as promptly as practicable and both parties shall cooperate with each
other in any efforts which either of them reasonably elects to pursue at their
own expense in order to preserve the confidentiality of the information in
question.
7. Nothing in this Agreement shall constitute an agreement by BI or JNL to
limit its freedom or ability to make its own independent, unilateral decisions
about the conduct of its business or any other matter, except to the extent
expressly set forth in this Agreement. This Agreement is intended to facilitate
cooperation between BI and JNL in reviewing, pursuing and litigating the Claims.
BI and JNL hereby covenant that they will act in good faith toward one another
in their use of the Confidential Information and will make all reasonable
efforts to protect each other's interest when using any Confidential Information
received from one another in reviewing, pursuing and litigating the Claims.
8. Nothing in this Agreement shall be construed as limiting or waiving the
right of Jackson to pursue or realize all of the proceeds of any Claim which is
not a Milbank Claim. Nothing in this Agreement shall be construed as an
admission by any person that any claim, defense or objection of any other person
has merit. Nothing in this Agreement shall constitute or evidence an assignment
by either party hereto of any of its rights in its own respective Milbank Claims
to the other.
9. BI and JNL each represent and warrant to the other that it has the
requisite power and authority under its respective organizational documents and
otherwise (if applicable) to execute and deliver this Agreement, that this
Agreement has been duly authorized, executed and delivered by it and constitutes
its legal, valid and binding obligation, and is enforceable against it in
accordance with its terms. No other representations or warranties of any kind
have been made to induce any party to enter into this Agreement. This Agreement
represents the entire agreement between the parties and supersedes all prior
negotiations, representations or agreements between the parties, either written
or oral, on the subject hereof including,
3
<PAGE> 4
without limitation, the Joint Privilege and Confidentiality Agreement between
the parties hereto dated April 9, 1997, which shall be of no further force and
effect as to future events. No amendment, change or modification of any
provision of this Agreement, or any waiver thereof, shall be effective unless in
writing signed by the party to be charged. BI and JNL shall each bear their own
costs and expenses incurred prior to September 1, 1997 and otherwise in
connection with the negotiation, execution and delivery of this Agreement. This
Agreement shall bind and inure to the benefit of the principals, agents,
representatives, successors, heirs and assigns of the parties hereto.
10. The parties agree to resolve any controversy or dispute arising under
or relating to this Agreement (except to the extent otherwise provided in
Paragraph 5) in binding arbitration before a panel of the American Arbitration
Association, or another alternative dispute resolution forum mutually acceptable
to the parties, and pursuant to the rules and procedures of that organization.
Any such arbitration will take place in New York City. The terms and language of
this Agreement are the result of negotiations between the parties hereto and
there shall be no presumption that any ambiguities in this Agreement should be
resolved against either party hereto. Any controversy concerning the
construction of this Agreement shall be decided without regard to authorship.
11. This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original. This Agreement shall in all respects be
interpreted, enforced, governed and construed by and under the laws of the State
of New York without reference to principles of conflicts of law or choice of
law.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the date first written above.
By: /s/ WILLARD R. HILDEBRAND
------------------------------------
for Bucyrus International, Inc.,
Bucyrus-Erie Company and B-E
Holdings, Inc.
By: /s/ F. JOHN STARK, III
------------------------------------
PPM America, Inc., as
attorney-in-fact for
Jackson National Life Insurance
Company
4
<PAGE> 1
EXHIBIT 10
SETTLEMENT AGREEMENT
This agreement is made and entered into effective this 21st day of August,
1997, by and among BUCYRUS INTERNATIONAL, INC. ("BI") and JACKSON NATIONAL LIFE
INSURANCE COMPANY ("JNL").
WHEREAS, BI is the successor in interest to Bucyrus-Erie Company
("Bucyrus") and B-E Holdings, Inc. ("Holdings" and, collectively with Bucyrus,
the "Debtors") under the Debtors' Second Amended Plan of Reorganization (the
"Plan") which was consummated on December 14, 1994 in proceedings captioned In
re B-E Holdings, Inc. and Bucyrus-Erie Company, Case Nos. 94-20786, 94-20787
(Bankr. E.D. Wis.) (RAE) (the "Bankruptcy Proceedings") in the United States
Bankruptcy Court for the Eastern District of Wisconsin (the "Bankruptcy Court");
WHEREAS, JNL made an application for reimbursement of its professional fees
and expenses incurred in the Bankruptcy Proceedings pursuant to Section 503(b)
of the Bankruptcy Code (the "503(b) Claim"), the Bankruptcy Court allowed that
application to the extent of $500, JNL appealed the Bankruptcy Court's ruling to
the United States District Court for the Eastern District of Wisconsin and that
court has now referred the 503(b) Claim back to the Bankruptcy Court for further
proceedings; and
WHEREAS, BI and JNL both wish to compromise and settle their disagreements
over the 503(b) Claim;
NOW, THEREFORE:
1. BI and JNL have agreed to settle and resolve the 503(b) Claim for a cash
payment to JNL of $200,000. JNL and BI also jointly agree to petition the
Bankruptcy Court to withdraw its June 6, 1996 ruling with respect to the 503(b)
Claim. The settlement of the 503(b) claim will be evidenced by a Stipulation and
Order of Dismissal in the form of Exhibit A attached. The parties shall also
execute and deliver a mutual release in the form of Exhibit B attached.
2. It is expressly understood that this Agreement is subject to and
expressly contingent upon the entry of a final, non-appealable order of the
Bankruptcy Court in the Bankruptcy Proceedings.
3. Nothing in this Agreement shall be construed as an admission by any
person that any claim, defense or objection of any other person has merit. This
Agreement represents the entire agreement between the parties and supersedes all
prior negotiations, representations or agreements between the parties, either
written or oral, on the subject hereof. The parties warrant and represent, each
to the other, that they have been fully informed and have full knowledge of the
terms, conditions and legal effects of this Agreement, and that each party is
authorized to enter into this Agreement and related instruments. No amendment,
change or modification of any provision of this Agreement, or any waiver
thereof, shall be effective unless in writing signed by the party to be charged.
BI and JNL shall each bear their own costs and expenses incurred in connection
with the negotiation, execution and delivery of this Agreement. This Agreement
shall bind and inure to the benefit of the principals, agents, representatives,
successors, heirs and assigns of the parties hereto. This Agreement may be
executed in two or more counterparts, each of which shall be deemed to be an
original.
<PAGE> 2
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the date first written above.
By: /s/ W. R. HILDEBRAND
--------------------------------------
W. R. Hildebrand
for Bucyrus International, Inc.,
Bucyrus-Erie Company
and B-E Holdings, Inc.
By: /s/ F. JOHN STARK III
--------------------------------------
F. John Stark III
PPM America, Inc., as attorney-in-fact
for
Jackson National Life Insurance
Company
2
<PAGE> 1
EXHIBIT 11
- --------------------------------------------------------------------------------
American Industrial Partners
Directors
Tom H. Barrett
W. Richard Bingham
Robert Cizik
Robert L. Purdum
Burnell R. Roberts
Theodore C. Rogers
One Maritime Plaza
Suite 2525
San Francisco, CA 94111
415.788.7354
415.788.5302 (Fax)
July 30, 1997
STRICTLY PRIVATE AND CONFIDENTIAL
Mr. W. R. Hildebrand
President and Chief Executive Officer
Bucyrus International, Inc.
1100 Milwaukee Avenue
P.O. Box 500
South Milwaukee, WI 53172-0500
Dear Bill:
We appreciate the opportunity we have had to discuss with you and your
financial advisor a potential acquisition of Bucyrus International, Inc. (the
"Company") by American Industrial Partners or an affiliated entity (the
"Purchaser"). Our firm has had on-going discussions with the Company relating to
our interest in acquiring the Company, or a portion thereof, since 1993. The
Company's recent announcement of its agreement to acquire the Marion Power
Shovel business prompted us to contact the Company's financial advisor to renew
our expression of interest. We have conducted a business due diligence review of
the Company and its business which is now substantially complete.
As a result, we are pleased to submit this written proposal to acquire all
of the outstanding shares of capital stock of the Company pursuant to the terms
set forth below. We believe that the price proposed -- $18 per share cash -- and
the other terms contemplated represent a very favorable transaction for the
Company's stockholders. In this regard, we note that the price proposed is based
on the discussions we have had with and is fully responsive to the level
discussed with the Company's financial advisor.
Our investment fund, American Industrial Partners Capital Fund II L.P. (the
"Fund"), has in excess of $500 million capital expendable for equity investments
under a blind pool arrangement which is contingent only upon the approval of the
directors of the Fund. The directors of the Fund have approved the proposal
embodied in this letter, subject to the completion of legal, accounting , tax
and environmental due diligence which we are confident can be completed within
ten business days with appropriate cooperation from the Company and its
advisors.
The Fund is prepared to commit at least $144 million of equity capital to
finance the transaction, including the purchase of all outstanding equity
interests in the Company and the repayment of certain indebtedness for borrowed
money of the Company. In accordance with discussions with the Company's
financial advisor, the balance of the required financing would come from the
proceeds of the sale in a 144A private placement of long-term Senior
Subordinated Notes in the aggregate principal amount of approximately $150
million and from a draw upon the Company's currently proposed revolving credit
facility. Based upon our discussions with the Company's financial advisor, our
own review of the Company's business and our prior record of completion of
transactions of this type (we have never failed to complete a transaction
because
<PAGE> 2
of financing ), we are confident that the financing outlined herein can be
accomplished in an expeditious manner. These circumstances, together with the
conservative nature of the proposed financing structure, should provide the
Company's Board of Directors with a high degree of comfort regarding our ability
to complete the acquisition proposed in this letter on a timely basis.
We are fully prepared to marshall the internal and external resources
necessary to move ahead promptly. Importantly, however, as set forth in
paragraphs 5 and 6 of the proposal outlined below, our willingness to proceed
with this proposal is subject to our mutual understanding that the Company will
negotiate definitive agreements with us on an exclusive basis.
The basic outline of our proposal is as follows:
1. Structure/Price. The Purchaser would enter into a merger agreement
with the Company ("Merger Agreement"), pursuant to which the Purchaser would
acquire all outstanding shares of capital stock of the Company (the "Shares") at
a price equal to $18 per share in cash (the "Transaction Price"). We will
endeavor to proceed with a first-step cash tender offer at the Transaction Price
for any and all outstanding Shares, provided that this can be accomplished
consistent with the financing terms set forth in the second paragraph on page 2,
above.
2. Agreement to Tender and Option. Concurrently with the execution of the
Merger Agreement, the stockholder holding approximately 40% of the outstanding
Shares (the "Major Stockholder") would execute and deliver to the Purchaser an
agreement (the "Stockholder Agreement") pursuant to which the Major Stockholder
agrees to tender all of the Shares held by it to the Purchaser in the tender
offer (if made) and to vote all such Shares in favor of the merger, and granting
to the Purchaser an option to purchase all of such Shares at an exercise price
equal to the Transaction Price. The option would be exercisable in certain
circumstances to be enumerated in the definitive Stockholder Agreement,
including upon termination of the Merger Agreement, and would remain exercisable
for a period of time thereafter, to be mutually agreed. In the event that an
entity other than the Purchaser acquired a majority of the outstanding Shares at
a price higher than the Transaction Price pursuant to an agreement signed within
such period, the Purchaser and the Major Stockholder would share 50/50 in the
amount by which the price in such other acquisition exceeded the Transaction
Price.
3. Definitive Agreements and Conditions. The transaction is subject to
the negotiation and execution of definitive agreements with terms satisfactory
to the Company, the Major Stockholder and the Purchaser. The definitive
agreements will contain representations, warranties and covenants customary in
transactions of this type. Prior to the execution of the definitive agreements,
(i) the transaction, including the merger, the Merger Agreement and the
Stockholder Agreement, shall have been approved by the Board of Directors of the
Company and (ii) the Purchaser shall have completed a due diligence review of
the assets and business of the Company satisfactory to the Purchaser. The
definitive agreements themselves will include conditions to closing customary in
transactions of this type, including the following:
a. The debt financing necessary to finance the transaction shall be
available to the Purchaser on the terms previously disclosed to the
Company.
b. The acquisition of Marion Power Shovel by the Company shall have
been consummated on substantially the terms, including the use of the PPM
America Special Investments Fund, L.P., Inc. bridge financing, previously
disclosed to the Purchaser.
c. All required consents of third parties, if any, shall have been
received.
d. All filings required under the Hart-Scott-Rodino-Antitrust
Improvement Act of 1976, as amended, shall have been made and all waiting
periods shall have expired.
e. There shall have been no material adverse change (as defined in
the definitive agreements) between the date of the Company's latest
publicly available audited balance sheet and the date of closing.
f. If a first-step tender offer is commenced, stockholders holding at
least 51% of the Shares on a fully diluted basis shall have tendered their
Shares in the tender offer.
4. Termination Fee. The definitive Merger Agreement will provide that in
the event that the Merger Agreement is terminated due to certain circumstances
to be enumerated in the definitive Merger Agreement, the Purchaser will be
entitled to a termination fee of $7 million.
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<PAGE> 3
5. Exclusivity. Until the earliest to occur of (i) three weeks following
the date of your acceptance of this letter proposal, (ii) the abandonment of the
transaction by the Purchaser and (iii) the execution of the definitive
agreements: (a) neither the Company nor its representatives or agents will
solicit offers from, engage in discussions or negotiations with or provide
financial or operating information to, any other party for the purpose of
determining any or which is reasonably likely to lead to interest in acquiring
the Company or any of its securities or material assets, (b) the Company will
cease any current discussions with any third parties and (c) the Company will
promptly notify the Purchaser in the event that it receives any unsolicited
indication of interest or proposal concerning an acquisition proposal. The
definitive Merger Agreement will provide restrictions substantially similar to
the foregoing, subject to certain limited exceptions, including a fiduciary out,
to be set forth in the definitive Merger Agreement.
6. Certain Expenses/Fee. If within six months after the date hereof the
Company signs an agreement pursuant to which (by stock purchase, merger, asset
purchase or otherwise) control of the Company or a substantial part of its
assets is acquired by a third party, then (within five (5) business days of the
closing of such transaction) the Company shall reimburse American Industrial
Partners and its affiliates for their expenses (including legal, accounting and
consulting fees) not exceeding $500,000 incurred in connection with this
proposal and shall pay American Industrial Partners a fee of $1 million.
7. Enforceability. Upon its acceptance by you, except for paragraphs 5
and 6, this letter will constitute an expression of intent only and shall not be
deemed legally binding upon the parties hereto. This letter does not set forth
all of the matters upon which agreement must be reached in order for the
proposed transaction to be consummated. Notwithstanding anything contained in
this paragraph, the provisions of paragraphs 5 and 6 of this letter shall
constitute a legally binding and enforceable agreement between us.
If the foregoing meets with your approval, please indicate your acceptance
and, with respect to paragraphs 5 and 6 only, your agreement, by signing and
returning the accompanying copy of this letter, whereupon we shall proceed
promptly to commence our due diligence review and to prepare drafts of the
definitive agreements.
Very truly yours,
AMERICAN INDUSTRIAL PARTNERS
CAPITAL FUND II, L.P.
By: American Industrial Partners
II, L.P.
its General Partner
By: American Industrial Partners
Corporation
its General Partner
By: Theodore C. Rogers
its General Partner and Director
/s/ THEODORE C. ROGERS
----------------------------------
ACCEPTED AND, WITH RESPECT
TO PARAGRAPHS 5 AND 6,
AGREED TO THIS 31st DAY OF
JULY, 1997
BUCYRUS INTERNATIONAL, INC.
By: /s/ W. R. HILDEBRAND
--------------------------------
W. R. Hildebrand
President and Chief Executive
Officer
3
<PAGE> 1
EXHIBIT 12
PRESS RELEASE
BUCYRUS INTERNATIONAL, INC.
(NASDAQ: BCYR)
FOR IMMEDIATE RELEASE
BUCYRUS INTERNATIONAL, INC.
TO BE ACQUIRED BY
AMERICAN INDUSTRIAL PARTNERS
South Milwaukee, Wisconsin, July 31, 1997, Willard R. Hildebrand, President
and CEO of Bucyrus International, Inc. ("Bucyrus"), announced today that Bucyrus
has entered into a letter of intent with American Industrial Partners Capital
Fund II, L.P. ("American Industrial Partners"), providing for the acquisition of
Bucyrus by American Industrial Partners or one of its affiliates. Under the
terms of the letter of intent, American Industrial Partners would acquire all of
the shares of Bucyrus at a price of $18 per share. The transaction is subject to
customary contingencies, including the execution of a definitive agreement,
financing, and shareholder, board of directors and regulatory approvals.
Bucyrus stated that this transaction is not expected to have any effect on
its previously announced acquisition of The Marion Power Shovel Company.
Bucyrus is one of the world's leading manufacturers of large scale surface
mining equipment and a provider of aftermarket parts and services.
American Industrial Partners is a private investment partnership which
makes equity investments in public and privately held companies located
principally in the United States.
Contact: Willard R. Hildebrand, President and Chief Executive Officer or
Daniel J. Smoke, Vice President and Chief Financial Officer
(414) 768-5375 or (414) 768-5378
<PAGE> 1
EXHIBIT 13
PRESS RELEASE
BUCYRUS INTERNATIONAL, INC.
(NASDAQ: BCYR)
FOR IMMEDIATE RELEASE
BUCYRUS INTERNATIONAL, INC.
SIGNS DEFINITIVE MERGER AGREEMENT WITH
AMERICAN INDUSTRIAL PARTNERS
SOUTH MILWAUKEE, WISCONSIN, August 20, 1997 . . . Bucyrus International,
Inc. (NASDAQ: BCYR) and American Industrial Partners Acquisition Company, LLC
("American Industrial Partners"), jointly announced that they have signed a
definitive merger agreement for American Industrial Partners to acquire all of
the outstanding shares of common stock of Bucyrus. Pursuant to the merger
agreement, American Industrial Partners will pay $18.00 per each outstanding
share of Bucyrus common stock. Bucyrus currently has 10,534,574 shares of common
stock outstanding.
The transaction will be a cash tender offer followed by a cash merger to
acquire any shares not previously tendered. The transaction has been recommended
by the Board of Directors of Bucyrus and approved by American Industrial
Partners.
In connection with the execution of the merger agreement, American
Industrial Partners entered into a stockholder agreement with Jackson National
Life Insurance Company ("Jackson"), which is the holder of approximately 40% of
the outstanding shares of common stock of Bucyrus. The stockholder agreement
provides for, among other things, Jackson's commitment to tender its shares into
the tender offer and the granting of an option to American Industrial Partners
to purchase Jackson's shares for $18.00 per share.
American Industrial Partners expects to commence its cash tender offer on
or before August 27, 1997. The cash tender offer is subject to, among other
things, American Industrial Partners receiving at least 51% of the fully diluted
shares of common stock of Bucyrus. The closing of the transaction is subject to
the satisfaction of various conditions, including, but not limited to,
expiration of the waiting period under the Hart-Scott-Rodino Act.
Bucyrus is one of the world's leading manufacturers of large scale surface
mining equipment and a provider of aftermarket parts and services.
American Industrial Partners was formed at the direction of American
Industrial Partners Capital Fund II, L.P., a private investment limited
partnership which makes equity investments in public and privately held
companies located principally in the United States.
<PAGE> 1
EXHIBIT 14
Jefferies & Company, Inc.
11100 Santa Monica Boulevard, 10th Floor
Los Angeles, California 90025
Telephone (310 575-5200 (800) 933-6656
CORPORATE FINANCE Fax (310) 575-5165
August 19, 1997
Board of Directors
BUCYRUS INTERNATIONAL, INC.
1100 Milwaukee Avenue
P.O. Box 500
South Milwaukee, WI 53172-0500
Dear Ladies and Gentlemen,
We understand that American Industrial Partners Acquisition Company, LLC, a
Delaware limited liability company ("Parent") and Bucyrus Acquisition Corp., a
Delaware corporation (the "Purchaser") which is a wholly-owned subsidiary of
Parent, have offered to enter into an Agreement and Plan of Merger (the "Merger
Agreement") with Bucyrus International, Inc. ("Bucyrus" or the "Company")
pursuant to which, subject to the terms and conditions therein set forth, (i)
the Purchaser will make a cash tender offer (the "Tender Offer") to acquire any
and all shares of the issued and outstanding stock, $.01 par value, of the
Company (the "Common Shares") for $18.00 per share (the "Offer Price") and (ii)
the Purchaser will be merged with and into the Company and the issued and
outstanding Common Shares (except Dissenting Shares, as defined in the Merger
Agreement, and Common Shares held in the treasury of the Company or owned by the
Purchaser or any direct or indirect wholly-owned subsidiary of the Purchaser)
will be canceled and extinguished and converted into the right to receive the
Offer Price in cash (the "Merger" and, with the Tender Offer, the
"Transaction").
You asked us to render our opinion as to whether the Offer Price is fair,
from a financial point of view, to the holders of Common Shares.
It is understood that we are not opining as to the fairness of the
transactions contemplated by the Stockholder Agreement referred to in the Merger
Agreement or any consideration under such Stockholder Agreement or any rights or
obligations of the persons identified as the Major Stockholders therein. Our
opinion is directed only to the fairness of the Offer Price to be received by
the holders of Common Shares in the Transaction.
Jefferies & Company, Inc. ("Jefferies"), as part of its investment banking
business, is regularly engaged in the evaluation of capital structures and the
rendering of advice in financial restructurings and recapitalizations. In
addition, Jefferies performs valuations of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements, financial restructuring and other financial services. Jefferies has
received a retainer and a fee for providing this opinion in connection with its
engagement as financial advisor to the Company and will receive a success fee
upon consummation of the Transaction. In addition, Jefferies will be compensated
for services relating to the Company's acquisition of assets of The Marion Power
Shovel Company and the placement of senior notes. In addition to delivering its
opinion, Jefferies has actively assisted the Company in obtaining and
negotiating the terms of the Transaction. Joseph J. Radecki, Jr., an Executive
Vice President of Jefferies, is currently a member of the Board of Directors of
Bucyrus. Mr. Radecki has abstained from voting on any matters pertaining to the
approval of the Transaction by the Board of Directors, and intends to abstain
from voting on such matters in the future.
<PAGE> 2
In connection with our opinion, we have reviewed a draft copy of the
Agreement dated August 15, 1997 and related exhibits thereto and certain
financial and other information that was publicly available or furnished to us
by Bucyrus, including certain internal financial analyses, financial forecasts,
pro forma financial information reports and other information prepared by
management of Bucyrus. We have also discussed with representatives of management
of Bucyrus the business, properties and prospects of Bucyrus and undertaken
other reviews, analyses and inquiries relating to Bucyrus as we have deemed
appropriate.
In our review and analysis and in rendering this opinion, we have relied
upon, and have not independently verified, the accuracy, completeness and fair
presentation of all financial and other information (including financial
projections, pro forma financial information, and estimates) that were provided
to us by or on behalf of Bucyrus, or which were publicly available, and this
opinion is conditioned upon such information (whether written or oral) being
complete, accurate and fair in all material respects. With regard to the
historical financial information, we have relied upon the opinion, issued by the
Company's independent public accountants, in connection with the Company's
audited financial statements. With respect to the above noted projected and pro
forma financial information, we have assumed, with your permission and without
independent verification, that such information has been reasonably prepared on
bases reasonably reflecting management's best currently available estimates and
good faith judgments as to the future performance of Bucyrus and that Bucyrus
will perform in accordance with such projections for all periods specified
therein. We have not made an independent evaluation or appraisal or conducted a
physical inspection of any of the assets of Bucyrus, nor have we been furnished
with any such appraisals. Our opinion is based on economic, monetary, political,
market, and other conditions existing and which can be evaluated as of the date
of this opinion; however, such conditions are subject to rapid and unpredictable
change. We have assumed, with your permission, that all consents, authorizations
and agreements of other parties necessary to consummate the Transaction have
been, or will be, obtained without material expense. Our opinion is addressed
solely to the fairness of the Offer Price, from a financial point of view, in
the Transaction to the holders of the Common Shares on the assumption that the
Company and its Board of Directors have determined that, from the standpoint of
its business and prospects, it is appropriate and desirable to consummate the
Transaction and the other transactions and agreements contemplated by the
Agreement. Our opinion does not address the relative merits of the Transaction
as compared to any alternative business transactions that might be available to
the Company.
In conducting our analysis and arriving at our opinion as expressed herein,
we have considered such financial and other factors as we have deemed
appropriate under the circumstances, including, among others: (i) the terms and
business and financial aspects of the Transaction; (ii) the historical and
current markets for the Company's common stock and for other securities of
certain companies believed by Jefferies to be comparable to the Company; (iii)
certain of the Company's operating and financial information, including
projections and pro forma financial statements provided by management relating
to the Company's business and prospects; (iv) publicly available financial data
and stock market performance data of Bucyrus and other public companies which
Jefferies deemed generally comparable to the Company; (v) publicly available
financial data on certain merger and acquisition transactions; (vi) the
Agreement and related exhibits and schedules (which we have assumed, with your
permission, were delivered to us in substantially final form); and (vii) the
Company's Annual Reports to Shareholders and Annual Reports on Form 10-K for the
fiscal years ended on December 31, 1995 and 1996, and its Quarterly Report on
Form 10-Q for the period ended June 30, 1997.
Our advisory services and the opinion set forth in this letter are provided
for the information and assistance of the Board of Directors of the Company in
connection with its consideration of the Transaction, and such opinion does not
constitute a recommendation as to whether any holder of Common Shares should
tender Common Shares pursuant to the Tender Offer or as to how any such holder
should vote with respect to the Merger.
2
<PAGE> 3
Based upon and subject to the foregoing, and based upon such other matters
as we consider relevant, it is our opinion as investment bankers that, as of the
date hereof, the Offer Price to be paid in the Transaction is fair, from a
financial point of view, to the holders of Common Shares.
Sincerely,
/s/ JEFFERIES & COMPANY, INC.
--------------------------------------
JEFFERIES & COMPANY, INC.
3
