UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from __________ to __________
Commission file number 1-871
BUCYRUS INTERNATIONAL, INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 39-0188050
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
P. O. BOX 500
1100 MILWAUKEE AVENUE
SOUTH MILWAUKEE, WISCONSIN 53172
(Address of Principal (Zip Code)
Executive Offices)
(414) 768-4000
(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes [ X ] No [ ]
As of March 25, 1999, 1,442,350 shares of common stock of the Registrant
were issued and outstanding. Of the total outstanding shares of common stock
on March 25, 1999, 1,430,300 were held of record by American Industrial
Partners Acquisition Company, LLC, which may be deemed an affiliate of Bucyrus
International, Inc. There is no established public trading market for such
stock.
Documents Incorporated by Reference. None.
<PAGE>
PART I
ITEM 1. BUSINESS
Bucyrus International, Inc. (the "Company"), formerly known as Bucyrus-
Erie Company, was incorporated in Delaware in 1927 as the successor to a
business which commenced in 1880. The Company is currently wholly-owned by
American Industrial Partners Acquisition Company, LLC ("AIPAC").
The Company designs, manufactures and markets large excavation machinery
used for surface mining, and supplies replacement parts and service for such
machines. The Company's principal products are large walking draglines,
electric mining shovels and blasthole drills, which are used by customers who
mine coal, iron ore, copper, phosphate, bauxite and other minerals throughout
the world.
This Report includes "forward-looking statements" within the meaning of
Section 21E of the Securities Exchange Act of 1934, as amended. Discussions
containing such forward-looking statements may be found in this section, as
well as in ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS and elsewhere within this Report.
Forward-looking statements include statements regarding the intent, belief or
current expectations of the Company, primarily with respect to the future
operating performance of the Company or related industry developments. When
used in this Report, terms such as "anticipate," "believe," "estimate,"
"expect," "indicate," "may be," "objective," "plan," "predict," and "will be"
are intended to identify such statements. Readers are cautioned that any such
forward-looking statements are not guarantees of future performance and
involve risks and uncertainties, and that actual results may differ from those
described in the forward-looking statements as a result of various factors,
many of which are beyond the control of the Company. Forward-looking
statements are based upon management's expectations at the time they are made.
Although the Company believes that the expectations reflected in such forward-
looking statements are reasonable, it can give no assurance that such
expectations will prove to have been correct. Important factors that could
cause actual results to differ materially from such expectations ("Cautionary
Statements") are disclosed in this Report. All subsequent written or oral
forward-looking statements attributable to the Company or persons acting on
behalf of the Company are expressly qualified in their entirety by the
Cautionary Statements.
Industry Overview
The large-scale surface mining equipment manufactured and serviced by the
Company is used primarily in coal, copper and iron ore mines throughout the
world. Growth in demand for these commodities is a function of population
growth and continuing improvements in standards of living in many areas of the
world. The market for new surface mining equipment is somewhat cyclical in
nature due to market fluctuations for these commodities; however, the
aftermarket for parts and services is more stable because these expensive,
complex machines are typically kept in continuous operation for 15 to 30 years
and require regular maintenance and repair throughout their productive lives.
The largest markets for this mining equipment have been in Australia,
Canada, China, India, South Africa, South America and the United States.
Together, these markets typically account for approximately 90% of all new
machines sold, although in any given year markets in other countries may
assume greater importance.
Markets Served
The Company's products are used in a variety of different types of mining
operations, including gold, phosphate, bauxite and oil sands, as well as for
land reclamation. The Company manufactures surface mining equipment primarily
for large companies and quasi-governmental entities engaged in the mining of
coal, iron ore and copper throughout the world. Until the late 1980's, coal
mining accounted for the largest percentage of industry demand for the
Company's machines, and it continues to be one of the largest users of
replacement parts and services. In recent years, however, copper mining
operations have accounted for an increasingly greater share of new machine
sales.
Copper. The Indonesia recession that started in the later half of
1997 and spread to many Asian countries has reduced the demand for
copper. With the lower demand for copper metal in that part of the world
and production of new copper mines increasing the copper supply, an
imbalance of supply over demand occurred in 1998. The price of copper
declined from $1.18 per pound in May 1997 to $0.64 at the end of 1998.
The Chilean Copper Commission (the "Commission") stated that the Western
World will have an excess of copper through the year 2000. However, the
Commission is forecasting a demand of 13.82 million tonnes in the year
2003 and a supply of 13.64 million tonnes that should cause the price of
copper to recover.
Iron Ore. Iron ore is the only source of primary iron and is mined
in more than 50 countries. Five countries produce more than two-thirds
of the over one billion tonnes produced annually. China is first
followed by Brazil, Australia, Russia and the United States. Estimated
iron ore production in 1998 declined 1.7%, which was the result of
depressed economies in Asia. The price of iron ore has declined as a
result of the lower demand. However, the International Iron and Steel
Institute is estimating a 9% increase in steel consumption by the year
2005. This increase will drive the demand for iron ore, and in the long
term increase prices.
Coal. The demand for steam coal, which represents approximately 85%
of total coal mining activity, is based largely on the demand for
electric power and the price and availability of competing sources of
energy such as oil, natural gas and nuclear power. Initially, the 1973
Arab oil embargo resulted in an unprecedented increase in the demand for
coal production, reflecting expectations that oil prices would continue
to rise. Eventually the effects of a worldwide recession, escalating
interest rates, energy conservation efforts and an increase in the
world's supply of oil resulted in a sharp drop in demand for coal. More
recently, coal production in the United States has been impacted by the
Clean Air Act, causing higher sulfur coal mines to be closed or to have
outputs drastically curtailed. Many machines have been shut down and a
few have been relocated to lower sulfur coal mines in eastern Appalachia
and Wyoming's Powder River Basin where excess production capacity and
stagnant demand have driven coal prices downward. Nevertheless, the
increase in demand for coal in developing countries with rapidly growing
populations, such as India and China, has stimulated coal mining
production worldwide and is eventually expected to increase both domestic
and foreign demand for excavation equipment. The Energy Information
Administration is forecasting an increase in world energy demand and an
increase in world coal consumption.
The Company's excavation machines are used for land reclamation as well
as for mining, which has a positive effect on the demand for its products and
replacement parts and expands the Company's potential customer base. Current
federal and state legislation regulating surface mining and reclamation may
affect some of the Company's customers, principally with respect to the cost
of complying with, and delays resulting from, reclamation and environmental
requirements.
OEM Products
The Company's line of original equipment manufactured products includes a
full range of rotary blasthole drills, electric mining shovels and draglines.
Rotary Blasthole Drills. Most surface mines require breakage or
blasting of rock, overburden, or ore by explosives. To accomplish this,
it is necessary to bore out a pattern of holes into which the explosives
are placed. Rotary blasthole drills are used to drill these holes and
are usually described in terms of the diameter of the hole they bore.
The average life of a blasthole drill is 15 to 20 years.
The Company offers a line of rotary blasthole drills ranging in hole
diameter size from 9.0 inches to 17.5 inches and ranging in price from
approximately $1,500,000 to $2,800,000 per drill, depending on machine
size and variable features.
In an effort to enhance drill sales and expand its market position,
the Company introduced the Model 39R diesel hydraulic blasthole drill in
1996, the Company's third drill model and first diesel hydraulic
blasthole drill. This innovative machine breaks new ground in
maneuverability and the ability to drill in difficult terrain, as well as
offering extraordinary drill productivity and functions unavailable in
other manufacturers' models.
Electric Mining Shovels. Mining shovels are primarily used to load
coal, copper ore, iron ore, other mineral-bearing materials, overburden,
or rock into trucks. There are two basic types of mining shovels,
electric and hydraulic. Electric mining shovels are able to handle
larger shovels or "dippers", allowing them to load greater volumes of
rock and minerals, while hydraulic shovels are smaller and more
maneuverable. The Company manufactures only electric mining shovels.
The average life of an electric mining shovel is 15 to 20 years.
Mining shovels are characterized in terms of weight and dipper
capacity. The Company offers a full line of electric mining shovels,
weighing from 400 to 1,000 tons and having dipper capacities from 12 to
80 cubic yards. Prices range from approximately $3,000,000 to
approximately $9,000,000 per shovel.
Draglines. Draglines are primarily used to remove overburden, which
is the earth located over a coal or mineral deposit, by dragging a large
bucket through the overburden, carrying it away and depositing it in a
remote spoil pile. The Company's draglines weigh from 500 to 7,500 tons,
and are typically described in terms of their "bucket size", which can
range from nine to 220 cubic yards. The Company currently offers a full
line of models ranging in price from $10,000,000 to over $60,000,000 per
dragline. The average life of a dragline is 20 to 30 years.
Draglines are the industry's largest and most expensive type of
equipment, and while sales are sporadic, each dragline represents a
significant sales opportunity.
Aftermarket Parts and Services
The Company has a comprehensive aftermarket business that supplies
replacement parts and services for the surface mining industry. The Company's
aftermarket services include maintenance and repair labor, technical advice,
refurbishment and relocation of older, installed machines, particularly
draglines. The Company also provides engineering, manufacturing and servicing
for the consumable rigging products that attach to dragline buckets (such as
dragline teeth and adapters, shrouds, dump blocks and chains) and shovel
dippers (such as dipper teeth, adapters and heel bands).
In general, the Company realizes higher margins on sales of parts and
services than it does on sales of new machines. Moreover, because the
expected life of large, complex mining machines ranges from 15 to 30 years,
the Company's aftermarket business is inherently more stable and predictable
than the fluctuating market for new machines. Over the life of a machine, net
sales generated from aftermarket parts and services can exceed the original
purchase price.
A substantial portion of the Company's international repair and
maintenance services are provided through its global network of wholly-owned
foreign subsidiaries and overseas offices operating in Australia, Brazil,
Canada, Chile, China, England, India, Mauritius and South Africa. The
Company's two wholly-owned domestic subsidiaries, Minserco, Inc. ("Minserco")
and Boonville Mining Services, Inc. ("BMSI"), provide repair and maintenance
services throughout North America. Minserco, which maintains offices in
Florida, Kentucky, Texas and Wyoming, provides comprehensive structural and
mechanical engineering, non-destructive testing, repairs and rebuilds of
machine components, product and component upgrades, contract maintenance,
turnkey erections and machine moves. Minserco's services are provided almost
exclusively to maintenance and repair of Bucyrus machines operating in North
America. BMSI, located in Boonville, Indiana, manufactures replacement parts
and provides repair and rebuild services both for Bucyrus machines and other
manufacturers' equipment. The majority of BMSI's business is located in North
America.
To comply with the increasing aftermarket demands of larger mining
customers, the Company offers comprehensive Maintenance and Repair Contracts
("MARCs"). Under these contracts, the Company provides all replacement parts,
regular maintenance services and necessary repairs for the excavation
equipment at a particular mine with an on-site support team. In addition,
some of these contracts call for Company personnel to operate the equipment
serviced. MARCs are highly beneficial to the Company's mining customers
because they promote high levels of equipment reliability and performance,
allowing the customer to concentrate on mining production. MARCs typically
have terms of three to five years with standard termination and renewal
provisions, although some contracts allow termination by the customer for any
cause. New mines in areas such as Chile, Argentina and Peru are the primary
targets for MARCs because it is difficult and expensive for mining companies
to establish the necessary infrastructures for ongoing maintenance and repair
in remote locations.
The Bennett & Emmott Acquisition
On February 10, 1999, the Company announced that it has agreed to
purchase Bennett & Emmott (1986) Ltd. ("Bennett & Emmott"), a privately owned
Canadian company with extensive experience in the field repair and service of
heavy machinery for the surface mining industry. In addition to the surface
mining industry, Bennett & Emmott services a large number of customers in the
pulp and paper, sawmill, oil and natural gas industries in Western Canada, the
Northwest Territories and the Yukon. The company provides design and
manufacturing services, as well as in-house and field repair and testing of
electrical and mechanical equipment. Bennett & Emmott also distributes
compressors, generators and related products.
Customers
The Company does not consider itself dependent upon any single customer
or group of customers; however, on an annual basis a single customer may
account for a large percentage of sales, particularly new machine sales. In
1998 and 1997, one customer accounted for approximately 19% and 14%,
respectively, of the Company's consolidated net sales. In 1996, a different
customer accounted for approximately 14% of the Company's consolidated net
sales.
Marketing, Distribution and Sales
In the United States, new mining machinery is primarily sold directly by
Company personnel, and to a lesser extent through a northern Minnesota
distributor who supplies customers in the iron ore mining regions of the Upper
Midwest. Outside of the United States, new equipment is sold by Company
personnel, through independent distributors and through the Company's
subsidiaries and offices located in Australia, Brazil, Canada, Chile, China,
England, India, Mauritius and South Africa. Aftermarket parts and services
are primarily sold directly by Company personnel and through independent
distributors, the Company's foreign subsidiaries and offices and the Company's
domestic subsidiaries, Minserco and BMSI. The Company believes that marketing
through its own global network of subsidiaries and offices offers better
customer service and support by providing customers with direct access to the
Company's technological and engineering expertise.
Typical payment terms for new equipment require a down payment, and
invoicing is done on a percentage of completion basis such that a substantial
portion of the purchase price is received by the time shipment is made to the
customer. Sales contracts for machines are predominantly at fixed prices,
with escalation clauses in certain cases. Most sales of replacement parts
call for prices in effect at the time of order. During 1998, price increases
from inflation had a relatively minor impact on the Company's reported net
sales; however, the strong United States dollar negatively affected net sales
reported by the Company's foreign subsidiaries.
Foreign Operations
A substantial portion of the Company's net sales and operating earnings
is attributable to operations located abroad. Over the past five years, over
75% of the Company's new machine sales have been in international markets.
The Company's foreign sales, consisting of exports from the United States and
sales by consolidated foreign subsidiaries, totaled $223,203,000 in 1998,
$235,750,000 in 1997 and $191,888,000 in 1996. Approximately $235,529,000 of
the Company's backlog of firm orders at December 31, 1998 represented orders
for export sales compared with $178,237,000 at December 31, 1997 and
$133,115,000 at December 31, 1996.
The Company's largest foreign markets are in Australia, Chile, China and
South Africa. The Company also employs direct marketing strategies in
developing markets such as India, Indonesia, Jordan, Morocco and Russia. In
recent years, Australia and South Africa have emerged as strong producers of
metallurgical coal, while Chile and South Africa have continued to be leading
producers of other minerals, primarily copper and gold, respectively. The
Company expects that India, Russia and China will become major coal producing
regions in the future. In India, the world's second most populous country,
the demand for coal as a major source of energy is expected to increase over
the next several decades.
New machine sales in foreign markets are supported by the Company's
established network of foreign subsidiaries and overseas offices that directly
market the Company's products and provide ongoing services and replacement
parts for equipment installed abroad. The availability and convenience of the
services provided through this worldwide network not only promotes higher
margin aftermarket sales of parts and services, but also gives the Company an
advantage in securing new machine orders.
The Company and its domestic subsidiaries normally price their products,
including direct sales of new equipment to foreign customers, in U.S. dollars.
Foreign subsidiaries normally procure and price aftermarket replacement parts
and repair services in the local currency. Approximately 70% of the Company's
net sales are priced in U.S. dollars. The value, in U.S. dollars, of the
Company's investments in its foreign subsidiaries and of dividends paid to the
Company by those subsidiaries will be affected by changes in exchange rates.
The Company does not normally enter into currency hedges, although it may do
so with regard to certain individual contracts.
Further segment and geographical information is included in ITEM 8 -
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Competition
There are a limited number of manufacturers of new surface mining
equipment. The Company is one of two manufacturers of electric mining shovels
and draglines. The Company's only competitor in electric mining shovels and
draglines is Harnischfeger Corporation, although electric mining shovels also
compete against hydraulic shovels of which there are at least six other
manufacturers. In rotary blasthole drills, the Company competes with at least
three other manufacturers, including Harnischfeger Corporation. Methods of
competition are diverse and include product design and performance, service,
delivery, application engineering, pricing, financing terms and other
commercial factors.
For most owners of the Company's machines, the Company is the primary
replacement source for large, heavily engineered, integral components;
however, the Company encounters intense competition for sales of smaller, less
sophisticated, consumable replacement parts and repair services in certain
markets. The Company's competition in parts sales consists primarily of
smaller independent firms called "will-fitters" that produce copies of the
parts manufactured by the Company and other original equipment manufacturers.
These copies are generally sold at lower prices than genuine parts produced by
the manufacturer. Outside North America, customers mainly rely upon the
Company's subsidiaries, distributors or direct sales from the United States
for aftermarket parts and services.
The Company has a variety of programs to attract large volume customers
for its replacement parts. Although will-fitters engage in significant price
competition in parts sales, the Company possesses clear non-price advantages
over will-fitters. The Company's engineering and manufacturing technology and
marketing expertise exceed that of its will-fit competitors, who are in many
cases unable to duplicate the exact specifications of genuine Bucyrus parts.
Moreover, use of parts not manufactured by the Company can void the warranty
on a new Bucyrus machine, which generally runs for one year on new equipment,
with certain components being warranted for longer periods.
Raw Materials and Supplies
The Company purchases from outside vendors the semi- and fully-processed
materials (principally structural steel, castings and forgings) required for
its manufacturing operations, and other items, such as electrical equipment,
that are incorporated directly into the end product. The Company's foreign
subsidiaries purchase components and manufacturing services both from local
subcontractors and from the Company. Certain additional components are
sometimes purchased from subcontractors, either to expedite delivery schedules
in times of high demand or to reduce costs. Moreover, in countries where
local content preferences or requirements exist, local subcontractors are used
to manufacture a substantial portion of the components required in the
Company's foreign manufacturing operations. Although the Company is not
dependent upon any single supplier, there can be no assurance that the Company
will continue to have an adequate supply of raw materials or components
necessary to enable it to meet the demand for its products. Competitors are
believed to be subject to similar conditions.
Manufacturing
A substantial portion of the design, engineering and manufacturing of the
Company's machines is done at the Company's South Milwaukee, Wisconsin plant.
The size and weight of these mining machines dictates that the machines be
shipped to the job site in sub-assembled units where they are assembled for
operation with the assistance of Company technicians. Planning and on-site
coordination of machine assembly is a critical component of the Company's
service to its customers. Moreover, to reduce lead time and assure that
customer delivery requirements are met, the Company maintains an inventory of
sub-assembled units for frequently utilized components of various types of
equipment.
The Company manufactures and sells replacement parts and components and
provides comprehensive aftermarket service for its entire line of mining
machinery. The Company's large installed base of surface mining machinery
provides a steady stream of parts sales due to the long useful life of the
Company's machines, averaging 20 to 30 years for draglines and 15 to 20 years
for electric mining shovels and blasthole drills. Parts sales and aftermarket
services comprise a substantial portion of the Company's net sales. The
Company also provides aftermarket service for certain equipment of other
original equipment manufacturers through BMSI.
Although a majority of the Company's operating profits are derived from
sales of parts and services, the long-term prospects of the Company depend
upon maintaining a large installed equipment base worldwide. Therefore, the
Company remains committed to improving the design and engineering of its
existing line of machines, as well as developing new products.
Backlog
The backlog of firm orders was $262,457,000 at December 31, 1998 and
$216,021,000 at December 31, 1997. Approximately 45% of the backlog at
December 31, 1998 is not expected to be filled during 1999.
Inventories
Inventories at December 31, 1998 were $113,226,000 compared with
$115,015,000 at December 31, 1997. At December 31, 1998 and December 31,
1997, finished goods inventory (primarily replacement parts) totalling
$71,308,000 and $76,996,000, respectively, were held to meet delivery
requirements of customers. At December 31, 1997, inventories included
$6,925,000 of the fair value adjustment recorded in connection with the
acquisition of the Company by AIPAC.
Patents, Licenses and Franchises
The Company has a number of United States and foreign patents, patent
applications and patent licensing agreements. It does not consider its
business to be materially dependent upon any patent, patent application,
patent license agreement or group thereof.
Research and Development
Expenditures for design and development of new products and improvements
of existing mining machinery products, including overhead, aggregated
$8,247,000 in 1998, $7,384,000 in 1997 and $6,930,000 in 1996. All
engineering and product development costs are charged to Engineering and Field
Service Expense as incurred.
Environmental Factors
Environmental problems have not interfered in any material respect with
the Company's manufacturing operations. The Company believes that its
compliance with statutory requirements respecting environmental quality will
not materially affect its capital expenditures, earnings or competitive
position. The Company has an ongoing program to address any potential
environmental problems.
Current federal and state legislation regulating surface mining and
reclamation may affect some of the Company's customers, principally with
respect to the cost of complying with, and delays resulting from, reclamation
and environmental requirements. The Company's products are used for
reclamation as well as for mining, which has a positive effect on the demand
for such products and replacement parts therefor.
Employees
At December 31, 1998, the Company employed approximately 1,800 persons.
The four-year contract with the union representing hourly workers at the South
Milwaukee, Wisconsin facility and the four-year contract with the union
representing hourly workers at the Memphis, Tennessee facility expire in
April, 2001 and August, 2002, respectively.
Seasonal Factors
The Company does not consider a material portion of its business to be
seasonal.
ITEM 2. PROPERTIES
The Company's principal manufacturing plant in the United States is
located in South Milwaukee, Wisconsin, and is owned by the Company. This
plant comprises approximately 1,038,000 square feet of floor space. A portion
of this facility houses the Company's corporate offices. The major buildings
at this facility are constructed principally of structural steel, concrete and
brick and have sprinkler systems and other devices for protection against
fire. The buildings and equipment therein, which include machine tools and
equipment for fabrication and assembly of the Company's mining machinery,
including draglines, electric mining shovels and blasthole drills, are well-
maintained, in good condition and in regular use.
The Company leases a facility in Memphis, Tennessee, which has
approximately 110,000 square feet of floor space and is used as a central
parts warehouse. The current lease is for five years commencing in July 1996
and contains an option to renew for an additional five years.
BMSI leases a facility in Boonville, Indiana which has approximately
60,000 square feet of floor space on a 5.84 acre parcel of land. The facility
has the manufacturing capability of large machining, gear cutting, heavy
fabricating, rebuilding and stress relieving. The major manufacturing
buildings are constructed principally of structural steel with metal siding.
The Company also has administrative and sales offices and, in some
instances, repair facilities and parts warehouses, at certain of its foreign
locations, including Argentina, Australia, Brazil, Canada, Chile, China,
England, India and South Africa.
ITEM 3. LEGAL PROCEEDINGS AND OTHER CONTINGENCIES
Joint Prosecution
On September 25, 1997, the Company and Jackson National Life Insurance
Company ("JNL") commenced an action against Milbank, Tweed, Hadley & McCloy
("Milbank") in the Milwaukee County Circuit Court (the "Milwaukee Action").
The Company sought damages against Milbank arising out of Milbank's alleged
malpractice, breach of fiduciary duty, common law fraud, breach of contract,
unjust enrichment and breach of the obligation of good faith and fair dealing.
JNL sought damages against Milbank arising out of Milbank's alleged tortious
interference with contractual relations, abuse of process and common law
fraud. On December 31, 1998, the Company and JNL settled the Milwaukee
Action, which was thereafter dismissed by the agreement of the parties on
February 24, 1999. The amounts to be received by the Company in connection
with the settlement of the Milwaukee Action are included in Other Income in
the Consolidated Statements of Operations.
West Machine and Tool Works
On September 23, 1997, Minserco was found liable to BR West Enterprises,
Inc. d/b/a West Machine and Tool Works ("West") in litigation pending in the
United States District Court for the Eastern District of Texas (the "Texas
Court") for damages claimed with regard to an alleged joint venture agreement
(the "Minserco Litigation"). On October 29, 1997, a final judgment was
entered in the approximate amount of $4,300,000, including attorney's fees and
costs. Minserco strongly disputed the Findings of Fact and Conclusions of Law
entered by the Texas Court and had appealed the case to the United States
Court of Appeals for the Fifth Circuit. On November 5, 1997, the Company was
sued by West in the Texas Court on substantially similar grounds asserted in
the Minserco Litigation in an apparent attempt to hold the Company liable for
the damages awarded to West in the Minserco Litigation. On June 19, 1998, the
Company and Minserco settled the Minserco Litigation, and all claims against
either the Company or Minserco were dismissed with prejudice.
Product Liability
The Company is normally subject to numerous product liability claims,
many of which relate to products no longer manufactured by the Company or its
subsidiaries, and other claims arising in the ordinary course of business.
The Company has insurance covering most of said claims, subject to varying
deductibles ranging from $300,000 to $3,000,000, and has various limits of
liability depending on the insurance policy year in question. It is the view
of management that the final resolution of said claims and other similar
claims which are likely to arise in the future will not individually or in the
aggregate have a material effect on the Company's financial position or
results of operations, although no assurance to that effect can be given.
Environmental and Related Matters
The Company's operations and properties are subject to a broad range of
federal, state, local and foreign laws and regulations relating to
environmental matters, including laws and regulations governing discharges
into the air and water, the handling and disposal of solid and hazardous
substances and wastes, and the remediation of contamination associated with
releases of hazardous substances at Company facilities and at off-site
disposal locations. These laws are complex, change frequently and have tended
to become more stringent over time. Future events, such as compliance with
more stringent laws or regulations, more vigorous enforcement policies of
regulatory agencies or stricter or different interpretations of existing laws,
could require additional expenditures by the Company, which may be material.
Certain environmental laws, such as the Federal Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA"), provide for
strict, joint and several liability for investigation and remediation of
spills and other releases of hazardous substances. Such laws may apply to
conditions at properties presently or formerly owned or operated by an entity
or its predecessors, as well as to conditions at properties at which wastes or
other contamination attributable to an entity or its predecessors come to be
located.
The Company was one of 53 entities named by the United States
Environmental Protection Agency ("EPA") as potentially responsible parties
("PRPs") with regard to the Millcreek dumpsite, located in Erie County,
Pennsylvania, which is on the National Priorities List of sites for cleanup
under CERCLA. The Company was named as a result of allegations that it
disposed of foundry sand at the site in the 1970s. Both the United States
government and the Commonwealth of Pennsylvania initiated actions to recover
cleanup costs. The Company has settled with both with respect to its
liability for past costs. In addition, 37 PRPs, including the Company, have
received Administrative Orders issued by the EPA pursuant to Section 106(a) of
CERCLA to perform site capping and flood control remediation at the Millcreek
site. The Company is one of 18 parties responsible for a share of the
estimated $7,000,000 in costs, which share is presently proposed as per capita
but may be subject to reallocation before the conclusion of the case.
In December 1990, the Wisconsin Department of Natural Resources ("DNR")
conducted a pre-remedial screening site inspection on property owned by the
Company located at 1100 Milwaukee Avenue in South Milwaukee, Wisconsin.
Approximately 35 acres of this site were allegedly used as a landfill by the
Company until approximately 1983. The Company disposed of certain
manufacturing wastes at the site, primarily foundry sand. The DNR's Final
Site Screening Report, dated April 16, 1993, summarized the results of
additional investigation. A DNR Decision Memo, dated July 21, 1991, which was
based upon the testing results contained in the Final Site Screening Report,
recommended additional groundwater, surface water, sediment and soil sampling.
To date, the Company is not aware of any initiative by the DNR to require any
further action with respect to this site. Consequently, the Company has not
regarded, and does not regard, this site as presenting a material contingent
liability. There can be no assurance, however, that additional investigation
by the DNR will not be conducted with respect to this site at some later date
or that this site will not in the future require removal or remedial actions
to be performed by the Company, the costs of which could be material,
depending on the circumstances.
Prior to 1985, a wholly-owned, indirect subsidiary of the Company
provided comprehensive general liability insurance coverage for affiliate
corporations. The subsidiary issued such policies for occurrences during the
years 1974 to 1984, which policies could involve material liability. Claims
have been made under certain of these policies for certain potential CERCLA
liabilities of former subsidiaries of the Company. It is possible that other
claims could be asserted in the future with respect to such policies. While
the Company does not believe that liability under such policies will result in
material costs, this cannot be guaranteed.
Along with multiple other parties, the Company or its subsidiaries are
currently PRP's under CERCLA and analogous state laws at three additional
sites at which the Company and/or its subsidiaries (including the above
referenced insurance subsidiary by insurance claim) may incur future costs.
The Company believes that one of these cases has been settled. While CERCLA
imposes joint and several liability on responsible parties, liability for each
site is likely to be apportioned among the parties. The Company does not
believe that its potential liability in connection with these sites or any
other discussed above, either individually or in the aggregate, will have a
material adverse effect on the Company's business, financial condition or
results of operations. However, the Company cannot guarantee that it will not
incur cleanup liability in the future with respect to sites formerly or
presently owned or operated by the Company, or with respect to off-site
locations, the costs of which could be material.
While no assurance can be given, the Company believes that expenditures
for compliance and remediation will not have a material effect on its capital
expenditures, results of operations or competitive position.
The Company has also been named as a defendant in eight pending premises
liability asbestos cases which are proceeding in the state courts of Indiana
and in federal court, and has been named as a defendant in one product
liability asbestos case. In all these cases, insurance carriers have accepted
the defense of such cases. These cases are in preliminary stages and while
the Company does not believe that costs associated with these matters will be
material, it cannot guarantee that this will be the case.
Other
The Company is involved in various other litigation arising in the normal
course of business. It is the view of management that the Company's recovery
or liability, if any, under pending litigation is not expected to have a
material effect on the Company's financial position or results of operations,
although no assurance to that effect can be given.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders of the Company
during the fourth quarter of 1998.
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Substantially all of the Company's common stock is held by AIPAC and
there is no established public trading market therefor. The Company does not
have a recent history of paying dividends and has no present intention to pay
dividends in the foreseeable future.
In 1998, the Company sold 12,800 shares of its common stock to certain of
its executive officers at a price of $100 per share. The number of shares
purchased by the named executive officers was as follows: Mr. Light, 5,000
shares at a cost of $500,000; Mr. Hildebrand, 4,000 shares at a cost of
$400,000; Mr. Mackus, 500 shares at a cost of $50,000; Mr. Phillips, 750
shares at a cost of $75,000; Mr. Smoke, 750 shares at a cost of $75,000; and
Mr. Sullivan, 750 shares at a cost of $75,000. Exemption from registration of
the shares sold under the Securities Act of 1933 (the "Securities Act") is
claimed under Section 4(2) of the Securities Act because the offer and sale
thereof was restricted to a limited number of individuals, all of whom were
members of management of the Company, without any advertising or other selling
efforts commonly associated with a "public offering".
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Predecessor (b) Predecessor(b)
Year ended September 24- January 1- Years Ended December 14- January 1-
December 31, December 31, September 23, December 31, December 31, December 13,
1998(a) 1997(a) 1997 1996 1995 1994 1994
(Dollars In Thousands, Except Per Share Amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated Statements
of Operations Data:
Net sales $315,838 $ 95,212 $211,465 $263,786 $231,921 $ 7,810 $186,174
Earnings (loss)
before extra-
ordinary gain
and cumulative
effects of changes
in accounting
principles $ (8,264) $ (7,158) $ (4,874) $ 2,878 $(18,772) $ (552) $(22,833)
Earnings (loss)
per share of
common stock
before extra-
ordinary gain
and cumulative
effects of changes
in accounting
principles (c):
Basic $ (5.75) $ (5.00) $ (.48) $ .28 $ (1.84) $ (.05) $ (2.46)
Diluted $ (5.75) $ (5.00) $ (.47) $ .28 $ (1.84) $ (.05) $ (2.46)
Adjusted
EBITDA (d) $ 35,967 $ 9,936 $ 18,704 $ 19,247 $ 8,256 $ 392 $ 12,883
Cash dividends per
common share $ - $ - $ - $ - $ - $ - $ -
Consolidated Balance
Sheets Data:
Total assets $417,195 $406,107 N/A $172,895 $174,038 $179,873 N/A
Long-term debt $202,308 $174,612 N/A $ 66,627 $ 58,021 $ 53,170 N/A
<FN>
(a) As a result of purchase accounting due to the acquisition of the Company by AIPAC on September 24, 1997, the
financial statements of the Company subsequent to this date are not comparable to the financial statements of the
Predecessor.
(b) Upon emergence from bankruptcy and the implementation of fresh start reporting as of December 14, 1994, the
financial statements subsequent to this date are not comparable to the financial statements of the Predecessor
prior to this date.
(c) Net loss per share of common stock for the period September 24, 1997 to December 31, 1997 is calculated on a
retroactive basis to reflect a stock split on March 17, 1998. See Note G to the Consolidated Financial Statements
for further discussion of this change in the Company's capital structure.
(d) Earnings before extraordinary gain, interest expense, income taxes, depreciation, amortization, non-cash stock
compensation, (gain) loss on sale of fixed assets, nonrecurring items, restructuring expenses, reorganization items
and inventory fair value adjustment charged to cost of products sold.
</TABLE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Acquisitions
On August 21, 1997, the Company entered into an Agreement and Plan of
Merger (the "AIP Agreement") with AIPAC, which is wholly-owned by American
Industrial Partners Capital Fund II, L.P., and Bucyrus Acquisition Corp.
("BAC"), a wholly-owned subsidiary of AIPAC. On August 26, 1997, pursuant to
the AIP Agreement, BAC commenced an offer to purchase for cash 100% of the
outstanding shares of common stock of the Company at a price of $18.00 per
share (the "AIP Tender Offer"). Consummation of the AIP Tender Offer occurred
on September 24, 1997, and BAC was merged with and into the Company on
September 26, 1997 (the "AIP Merger"). The Company was the surviving entity
in the AIP Merger. The purchase of the Company's outstanding shares of common
stock by AIPAC resulted in a change in control of voting interest.
On August 26, 1997, the Company consummated the acquisition (the "Marion
Acquisition") of certain assets and liabilities of The Marion Power Shovel
Company, a subsidiary of Global Industrial Technologies, Inc. ("Global"), and
of certain subsidiaries and divisions of Global that represented Global's
surface mining equipment business in Australia, Canada and South Africa
(collectively referred to herein as "Marion"). The cash purchase price for
Marion was $36,720,000, which includes acquisition expenses of $1,695,000.
The Company financed the Marion Acquisition and related expenses by utilizing
an unsecured bridge loan (the "Bridge Loan") provided by a former affiliate of
the Company, in the amount of $45,000,000. The Bridge Loan was repaid in full
on September 24, 1997 with a portion of the proceeds from the sale of the
Private Notes (see below).
On September 24, 1997, the Company completed the private placement of
$150,000,000 aggregate principal amount of its 9-3/4% Senior Notes due 2007
(the "Private Notes") in a transaction under Rule 144A of the Securities Act
of 1933, as amended (the "Act"). Following the completion of the sale of the
Private Notes, the Company purchased and cancelled its 10.5% Secured Notes due
December 14, 1999 (the "Secured Notes") at a cost of $67,414,000 including
accrued interest, utilizing a portion of the proceeds from the sale of the
Private Notes. On December 18, 1997, the Company completed the exchange of
$150,000,000 aggregate principal amount of its 9-3/4% Senior Notes due 2007
(the "Senior Notes") for the Private Notes. The Senior Notes were registered
under the Act.
In connection with the acquisition of the Company by AIPAC and the Marion
Acquisition, the assets and liabilities of the acquired companies have been
adjusted to their estimated fair values. Also, upon emergence from bankruptcy
in 1994, total assets were recorded at their assumed reorganization value,
with the reorganization value allocated to identifiable tangible and
intangible assets on the basis of their estimated fair value, and liabilities
were adjusted to the present values of amounts to be paid where appropriate.
The consolidated financial statements include the related amortization charges
associated with the fair value adjustments.
Liquidity and Capital Resources
Liquidity
Working capital and current ratio are two financial measurements which
provide an indication of the Company's ability to meet its short-term
obligations. These measurements at December 31, 1998, 1997 and 1996 were as
follows:
1998 1997 1996
(Dollars in Thousands)
Working capital $129,568 $120,883 $ 78,814
Current ratio 3.1 to 1 2.9 to 1 2.9 to 1
The increase in working capital for the year ended December 31, 1997 was
primarily due to the acquisition of Marion and to the adjustment of assets and
liabilities to fair value as a result of the acquisition of the Company by
AIPAC.
The Company is presenting below a calculation of earnings (loss) before
interest expense, income taxes, depreciation, amortization, non-cash stock
compensation, (gain) loss on sale of fixed assets, nonrecurring items and
inventory fair value adjustment charged to cost of products sold ("Adjusted
EBITDA"). Since cash flow from operations is very important to the Company's
future, the Adjusted EBITDA calculation provides a summary review of cash flow
performance. In addition, the Company is required to maintain certain minimum
EBITDA levels as defined under its bank credit agreement (see below). The
Adjusted EBITDA calculation is not an alternative to operating income under
generally accepted accounting principles as an indicator of operating
performance or to cash flows as a measure of liquidity. The following table
reconciles Earnings (Loss) Before Income Taxes to Adjusted EBITDA:
Predecessor
Year Ended September 24- January 1- Year Ended
December 31, December 31, September 23, December 31,
1998 1997 1997 1996
(Dollars in Thousands)
Earnings (loss)
before income
taxes $ (5,861) $ (7,441) $ (2,233) $ 4,636
Nonrecurring
items (1) - - 10,051 -
Depreciation 10,331 2,678 3,125 3,882
Amortization 5,701 1,435 770 1,142
Non-cash stock
compensation - - 677 668
(Gain) loss on
sale of fixed
assets 11 (3) (275) 362
Inventory fair
value adjustment
charged to cost
of products
sold 6,925 8,350 283 -
Interest expense 18,860 4,917 6,306 8,557
________ ________ ________ ________
Adjusted EBITDA $ 35,967 $ 9,936 $ 18,704 $ 19,247
(1) Nonrecurring items consist of $6,690,000 of expense to cash out the
outstanding stock options and stock appreciation rights in connection with the
acquisition of the Company by AIPAC and $3,361,000 of loan fees incurred in
connection with the Bridge Loan that was utilized to purchase Marion. The
loan fees were expensed when the Bridge Loan was repaid.
The Company entered into a new three-year credit agreement with Bank One,
Wisconsin on September 24, 1997 which provides the Company with a $75,000,000
senior secured revolving credit facility (the "Revolving Credit Facility")
with a $25,000,000 sublimit for standby letters of credit. Borrowings under
the Revolving Credit Facility bear interest at variable rates and are subject
to a borrowing base formula based on receivables, inventory and machinery and
equipment. Direct borrowings under the Revolving Credit Facility at
December 31, 1998 and 1997 were $49,950,000 and $22,215,000, respectively, at
a weighted average interest rate of 8.0% and 8.7%, respectively. The increase
in direct borrowings from December 31, 1997 was primarily due to increased
working capital requirements and increased capital expenditures. The issuance
of standby letters of credit under the Revolving Credit Facility and certain
other bank facilities reduces the amount available for direct borrowings under
the Revolving Credit Facility. At December 31, 1998 and 1997, there were
$2,750,000 and $3,556,000, respectively, of standby letters of credit
outstanding under the Revolving Credit Facility. The Revolving Credit
Facility is secured by substantially all of the assets of the Company, other
than real property and 35% of the stock of its foreign subsidiaries, and is
guaranteed by certain of the Company's domestic subsidiaries (the
"Guarantors") who have also pledged substantially all of their assets as
security. The amount available for direct borrowings under the Revolving
Credit Facility at December 31, 1998 was $14,988,000.
The Company has outstanding $150,000,000 of its Senior Notes which were
issued pursuant to an indenture dated as of September 24, 1997 among the
Company, the Guarantors and Harris Trust and Savings Bank, as Trustee (the
"Senior Notes Indenture"). The Senior Notes mature on September 15, 2007.
Interest thereon is payable each March 15 and September 15.
Both the Revolving Credit Facility and the Senior Notes Indenture contain
certain covenants which may affect the Company's liquidity and capital
resources. Also, both the Revolving Credit Facility and the Senior Notes
Indenture contain numerous covenants that limit the discretion of management
with respect to certain business matters and place significant restrictions
on, among other things, the ability of the Company to incur additional
indebtedness, to create liens or other encumbrances, to make certain payments
or investments, loans and guarantees, and to sell or otherwise dispose of
assets and merge or consolidate with another entity.
The Revolving Credit Facility also contains a number of financial
covenants that require the Company (A) to maintain certain financial ratios,
including: (i) ratio of adjusted funded debt to EBITDA (as defined);
(ii) fixed charge coverage ratio; and (iii) interest coverage ratio; and (B)
to maintain a minimum net worth and other covenants which limit the ability of
the Company and the Guarantors to incur liens; merge, consolidate or dispose
of assets; make loans and investments; incur indebtedness; engage in certain
transactions with affiliates; incur contingent obligations; enter into joint
ventures; enter into lease agreements; pay dividends and make other
distributions; change its business; redeem the Senior Notes; and make capital
expenditures.
The Senior Notes Indenture contains certain covenants that, among other
things, limit the ability of the Company and the Guarantors to: (i) incur
additional indebtedness; (ii) pay dividends or make other distributions with
respect to capital stock; (iii) make certain investments; (iv) use the
proceeds of the sale of certain assets; (v) enter into certain transactions
with affiliates; (vi) create liens; (vii) enter into certain sale and
leaseback transactions; (viii) enter into certain mergers and consolidations
or a sale of substantially all of its assets; and (ix) prepay the Senior
Notes. Such covenants are subject to important qualifications and
limitations. In addition, the Senior Notes Indenture defines "EBITDA"
differently than "EBITDA" under the Revolving Credit Facility.
A failure to comply with the obligations contained in the Revolving
Credit Facility or the Senior Notes Indenture could result in an Event of
Default (as defined) under the Revolving Credit Facility or an Event of
Default (as defined) under the Senior Notes Indenture that, if not cured or
waived, would permit acceleration of the relevant debt and acceleration of
debt under other instruments that may contain cross-acceleration or cross-
default provisions.
The Company believes that current levels of cash and liquidity, together
with funds generated by operations and funds available from the Revolving
Credit Facility, will be sufficient to permit the Company to satisfy its debt
service requirements and fund operating activities for the foreseeable future.
The Company is subject to significant business, economic and competitive
uncertainties that are beyond its control. Accordingly, there can be no
assurance that the Company's financial resources will be sufficient for the
Company to satisfy its debt service obligations and fund operating activities
under all circumstances.
Capital Resources
At December 31, 1998, the Company had approximately $5,000,000 of open
capital appropriations of which approximately $1,000,000 is related to the new
computer system being installed by the Company. In 1996, a machine shop
modernization program began at the Company's South Milwaukee, Wisconsin
manufacturing facility that involved a $20,000,000 investment in the latest
technology in the machine tool industry. The Company has spent approximately
$7,000,000 to date on this program but is currently reevaluating it to
determine if the program should be continued. In 1999, the Company expects to
reduce its capital appropriations to historical levels not including the
effects of the new computer system.
Capitalization
The long-term debt to equity ratio at December 31, 1998 and 1997 was
1.7 to 1 and 1.3 to 1, respectively. The long-term debt to total
capitalization ratio at both December 31, 1998 and 1997 was .6 to 1. Total
capitalization is defined as total common shareholders' investment plus long-
term debt plus current maturities of long-term debt and short-term
obligations.
Results of Operations
The amounts presented below for 1997 include combined amounts for the
period September 24 to December 31, 1997 and for the Predecessor period
January 1 to September 23, 1997.
Net Sales
Net sales for 1998 were $315,838,000 compared with $306,677,000 for 1997.
Net sales of repair parts and services for 1998 were $208,570,000 which is an
increase of 5.2% from 1997. This increase is primarily due to the Marion
Acquisition. Machine sales for 1998 were $107,268,000, which is a decrease
of 1.1% from 1997. Net sales of electric mining shovels decreased 15.6%,
while net sales of blasthole drills decreased by 38.2%. These decreases were
offset by increased dragline sales.
Net sales for 1997 were $306,677,000 compared with $263,786,000 for 1996.
Net sales of repair parts and services for 1997 were $198,252,000, which was
an increase of 26.8% from 1996. The increase in repair parts and service net
sales was primarily due to the acquisition of Marion as well as increased
repair parts sales at foreign locations as a result of higher demand for
replacement parts. Machine sales for 1997 were $108,425,000, which was an
increase of 1.0% from 1996. Net sales of electric mining shovels increased
20.0%, while net sales of blasthole drills decreased 40.8% There was an
overall decline in worldwide blasthole drill sales activity in 1997.
Other Income
Other income for 1998 increased primarily as a result of a favorable
legal settlement.
Cost of Products Sold
Cost of products sold for 1998 was $263,211,000 or 83.3% of net sales
compared with $256,744,000 or 83.7% of net sales for 1997 and $215,126,000 or
81.6% of net sales for 1996. Included in cost of products sold for 1998 and
1997 were charges of $6,925,000 and $8,633,000, respectively, as a result of
fair value adjustments to inventory being charged to cost of products sold as
the inventory is sold. The fair value adjustment was made as a result of the
acquisition of the Company by AIPAC. Excluding the effects of the inventory
fair value adjustment, cost of products sold as a percentage of net sales for
1998, 1997 and 1996 was 81.1%, 80.9% and 81.6%, respectively. Also included
in cost of products sold for 1998 and 1997 was $4,450,000 and $1,266,000,
respectively, of additional depreciation expense as a result of the fair value
adjustment to plant and equipment in connection with the acquisition of the
Company by AIPAC.
Engineering and Field Service, Selling, Administrative and Miscellaneous
Expenses
Engineering and field service, selling, administrative and miscellaneous
expenses for 1998 were $46,332,000 or 14.7% of net sales compared with
$39,968,000 or 13.0% of net sales in 1997 and $36,470,000 or 13.8% of net
sales in 1996. The increases for 1998 were primarily due to increased
expenses to support the Marion business acquired and increased non-cash
amortizations of goodwill, intangible assets and financing fees that were
recorded in connection with the acquisition of the Company by AIPAC.
Interest Expense
Interest expense for 1998 was $18,860,000 compared with $11,223,000 for
1997 and $8,557,000 for 1996. Included in interest expense for 1998 and 1997
was $14,544,000 and $4,022,000, respectively, related to the Senior Notes that
were issued at the time the Company was acquired by AIPAC. Included in
interest expense for 1997 and 1996 was $5,064,000 and $7,783,000,
respectively, related to the Secured Notes. The Company purchased and
cancelled the previously outstanding Secured Notes on September 24, 1997.
Nonrecurring Items
Nonrecurring items in 1997 consist of $6,690,000 of expense incurred to
cash out the outstanding options to purchase shares of the Company's common
stock and outstanding stock appreciation rights in connection with the
acquisition of the Company by AIPAC, and $3,361,000 of loan fees incurred in
connection with the Bridge Loan that was utilized to finance the Marion
Acquisition. The Bridge Loan was subsequently repaid on September 24, 1997
and the loan fees were expensed.
Income Taxes
Income tax expense consists primarily of foreign taxes at applicable
statutory rates. For United States tax purposes, there were losses for which
no income tax benefit was recorded.
Net Earnings (Loss)
The net loss for 1998 was $8,264,000 compared with a net loss of
$12,032,000 for 1997 and net earnings of $2,878,000 for 1996. Included in the
net loss for 1998 and 1997 was $6,267,000 and $7,864,000, respectively, (net
of income taxes) of the inventory fair value adjustment related to purchase
accounting. Non-cash depreciation and amortization charges were $16,032,000
in 1998 compared with $8,008,000 in 1997 and $5,024,000 in 1996. Also
included in the net loss for 1997 was $6,690,000 of expense to cash out the
outstanding stock options and stock appreciation rights in connection with the
acquisition of the Company by AIPAC and $3,361,000 of Bridge Loan fees which
were expensed when the Bridge Loan was repaid.
Backlog and New Orders
The Company's consolidated backlog at December 31, 1998 was $262,457,000
compared with $216,021,000 at December 31, 1997 and $158,727,000 at
December 31, 1996. Machine backlog at December 31, 1998 was $113,702,000,
which is an increase of 17.0% from December 31, 1997. The increase was
primarily in electric mining shovels. During the second quarter of 1997, the
Company executed a contract with an Australian mining company for the sale of
a Model 2570WS dragline which is scheduled for completion by December 31,
1999. Included in backlog at December 31, 1998 and 1997 was $27,273,000 and
$51,644,000, respectively, related to this machine. Repair parts and service
backlog at December 31, 1998 was $148,755,000, which is an increase of 25.1%
from December 31, 1997. The increase was primarily due to new MARCs at
foreign locations.
New orders for 1998 were $362,274,000, which is a decrease of .5% from
1997. New machine orders for 1998 were $123,815,000, which is a decrease of
20.9% from 1997. Included in new machine orders for 1997 was approximately
$57,000,000 for the aforementioned 2570WS dragline. New machine orders for
electric mining shovels have increased while new machine orders for blasthole
drills have decreased. As a result of a decline in copper and coal prices
from historically high levels, the demand for machines from these market
segments has been low. In addition, economic and political problems in Asia
have negatively impacted demand for the Company's machines. New repair parts
and service orders for 1998 were $238,459,000, which is an increase of 15.0%
from 1997. The increase was primarily due to new MARCs at foreign locations
and the Marion Acquisition.
Translation of Brazil Financial Statements
The Company has operations in Brazil, whose economy has been considered
highly inflationary by management through December 31, 1997 for purposes of
translating Brazilian financial statements from Brazilian Reals into U.S.
dollars. Effective January 1, 1998, the Company no longer considers Brazil's
economy to be highly inflationary. The effect of this change on the
consolidated financial statements was not material.
Year 2000 Issues
Many computer software applications, hardware and equipment and embedded
chip systems identify dates using only the last two digits of the year. These
products may be unable to distinguish between dates in the year 2000 and dates
in the year 1900. That inability (referred to herein as the "Year 2000
Issue"), if not addressed, could cause applications, equipment or systems to
fail or provide incorrect information after December 31, 1999, or when using
dates after December 31, 1999. The Company uses a number of computer software
programs, operating systems and types of equipment with computer chips in its
internal operations, including applications used in its financial business
systems, order entry and manufacturing systems, manufacturing processes and
administrative functions. To the extent that these contain source code or
computer chips that are unable to interpret appropriately the upcoming
calendar year 2000 and distinguish it from the year 1900, some level of
modification or possible replacement will be necessary.
State of Readiness
The Company has assessed and continues to assess the impact of the Year
2000 Issue on its operations. The Company's assessments have focused on the
three major elements of the Year 2000 Issue: Information Technology ("IT")
systems; Non-IT systems; and third party relationships.
IT Systems
The Company is in the process of replacing its existing computer system.
While the primary purpose of this replacement is to improve the efficiency and
effectiveness of the Company's computer system, Year 2000 Issues are also
being addressed as a part of the IT system replacement. The IT system
replacement for South Milwaukee operations is expected to be completed during
the third quarter of 1999 and implementation of the plan for domestic
subsidiary operations is expected to be completed by the end of 1999. All
computers and software used for the purpose of internal office information
management have been upgraded and are Year 2000 compliant. IT systems used by
the Company's foreign operations have been reviewed and are Year 2000
compliant or will receive minor upgrades to make them Year 2000 compliant by
the end of 1999.
Non-IT Systems
A review of all of the Company's communication systems, elevators, HVAC
systems and equipment and processes used in manufacturing operations to assess
and address Year 2000 Issues is complete and the Company believes that such
systems, equipment and processes are compliant or will be remediated to the
extent necessary to assure Year 2000 compliance.
Third-Party Relationships
The Company's engineering department has reviewed all Company products
for Year 2000 compliance. A service advisory bulletin has been developed for
customers which provides information regarding Year 2000 compliance of
existing products manufactured by the Company. This bulletin describes the
service, if any, that will need to be performed to become compliant. In
addition, the Company conducted a survey of all major suppliers. All critical
suppliers have indicated that their products (incorporated into the Company's
products) are Year 2000 compliant, or that their ability to deliver raw
materials, supplies or services to the Company will not be adversely impacted
by the Year 2000 Issue. Certain other key suppliers have either not responded
or have programs underway to ensure compliance.
Risks and Contingency Plans
Although the Company believes its efforts will adequately address Year
2000 Issues internally, it is possible that the Company will be adversely
affected by problems encountered by its suppliers. There can be no assurance
that, despite any supplier's certification of its ability to do so, the
supplier will be able to provide goods and services in a manner that
satisfactorily address Year 2000 Issues. The most likely worst case scenario
would be a failure by the Company or one or more of its vendors or suppliers
to adequately and timely address the Year 2000 Issue, with the result being
the interruption of manufacturing of the Company's products for an
undeterminable period of time. The degree of sales loss impact would depend
on the severity of the disruption, the time required to correct it, whether
the sales loss was temporary or permanent and the degree to which the
Company's competitors were also impacted by the disruption.
Although the Company believes that its IT systems replacement will
adequately address all material Year 2000 Issues, the Company is in the
process of developing contingency plans that will be designed to mitigate the
impact on the Company if its Year 2000 compliance efforts are not successful.
These contingency plans will include the arranging of alternative computer
hardware and software sources. Based on the results of the Company's survey
of its major suppliers, the Company is developing contingency plans (including
the identification of potential alternative suppliers) where necessary.
The Company does not expect to develop contingency plans relating to its
products previously sold to customers.
Costs to Address the Company's Year 2000 Issues
The Company does not believe that Year 2000 Issues have adversely
impacted the timetable for implementation or the cost of its previously
planned IT system replacement. The estimated incremental cost of the domestic
IT system replacement is approximately $2,900,000 of which $1,400,000 has been
expended as of December 31, 1998. All maintenance and training costs are
being expensed as incurred while all application development costs and the
cost of new hardware and software are being capitalized and depreciated in
accordance with the Company's depreciation policy. All of these costs will be
funded from operating cash flows.
General
The Company believes it is taking reasonable steps which, when fully
implemented, will prevent major business interruptions and will minimize the
Company's risk of exposure to liability to third parties due to the Year 2000
Issue. There can be no assurance, however, that the Company will be
successful in its efforts. Further, the costs of the Company's efforts to
address the Year 2000 Issue and the dates on which the Company believes it
will complete the projects described above are based upon management's best
estimates. There also can be no assurance that these estimates will prove to
be accurate, and the actual cost and progress on these projects could differ
materially from those currently anticipated.
The Company's project time lines and budgets were derived based on
information the Company believes to be reliable and by making numerous
assumptions regarding future events. Specific factors that could cause actual
results to differ include, but are not limited to, (i) the Company's ability
to assess, remediate, test and implement all relevant computer hardware and
software and embedded technology, (ii) the Company's reliance on third-party
assurances and the variability of definitions of "Year 2000 compliance" which
may be used by such third parties, (iii) the adequacy of the Company's
contingency plans, to the extent such contingency plans are developed, and
(iv) similar uncertainties. If the Company's Year 2000 compliance efforts, as
well as the efforts of the Company's suppliers, individually and in the
aggregate, are not successful, it could have a material adverse effect on the
Company's financial position, cash flows and results of operations.
The statements in this Year 2000 Issues section regarding future planning
and events and the timetables and costs associated therewith are "forward
looking statements" within the meaning of the Securities and Exchange Act of
1934.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's market risk is impacted by changes in interest rates and
foreign currency exchange rates.
Interest Rates
The Company's interest rate exposure relates primarily to debt
obligations in the United States. The Company manages its borrowings under
the Revolving Credit Facility through the selection of LIBOR based borrowings
or prime-rate based borrowings. If market conditions warrant, interest rate
swaps may be used to adjust interest rate exposures, although none have been
used to date.
At December 31, 1998, a sensitivity analysis was performed for the debt
obligations that have interest rate risk. Based on this sensitivity analysis,
the Company has determined that a 10% change in the Company's weighted average
interest rate at December 31, 1998 would not have a material effect on the
Company's financial position, results of operations or cash flows.
Foreign Currency
The Company manages foreign currency exchange rate exposure by utilizing
some natural hedges to mitigate some of its transaction and commitment
exposures, and may utilize forward contracts in certain situations.
Based on the Company's overall foreign currency exchange rate exposure at
December 31, 1998, a 10% change in foreign currency exchange rates will not
have a material effect on the Company's financial position, results of
operations or cash flows.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS
Bucyrus International, Inc. and Subsidiaries
(Dollars in Thousands, Except Per Share Amounts)
Predecessor
Year Ended September 24- January 1- Year Ended
December 31, December 31, September 23, December 31,
1998 1997 1997 1996
<S> <C> <C> <C> <C>
REVENUES:
Net sales $315,838 $ 95,212 $211,465 $263,786
Other income 6,704 346 1,289 1,003
________ ________ ________ ________
322,542 95,558 212,754 264,789
________ ________ ________ ________
COSTS AND EXPENSES:
Cost of products sold 263,211 85,229 171,515 215,126
Engineering and field service, selling,
administrative and miscellaneous expenses 46,332 12,853 27,115 36,470
Interest expense 18,860 4,917 6,306 8,557
Nonrecurring items - - 10,051 -
________ ________ ________ ________
328,403 102,999 214,987 260,153
________ ________ ________ ________
Earnings (loss) before income taxes (5,861) (7,441) (2,233) 4,636
Income taxes 2,403 (283) 2,641 1,758
________ ________ ________ ________
Net earnings (loss) $ (8,264) $ (7,158) $ (4,874) $ 2,878
Net earnings (loss) per share of common stock:
Basic $(5.75) $(5.00) $ (.48) $ .28
Diluted $(5.75) $(5.00) $ (.47) $ .28
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Bucyrus International, Inc. and Subsidiaries
(Dollars in Thousands)
Predecessor
Year Ended September 24- January 1- Year Ended
December 31, December 31, September 23, December 31,
1998 1997 1997 1996
<S> <C> <C> <C> <C>
Net earnings (loss) $ (8,264) $ (7,158) $ (4,874) $ 2,878
Other comprehensive income (loss) -
foreign currency translation adjustments (4,756) (3,619) (1,439) (765)
________ ________ ________ ________
Comprehensive income (loss) $(13,020) $(10,777) $ (6,313) $ 2,113
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
Bucyrus International, Inc. and Subsidiaries
(Dollars in Thousands, Except Per Share Amounts)
December 31, December 31,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
LIABILITIES AND COMMON
ASSETS SHAREHOLDERS' INVESTMENT
CURRENT ASSETS: CURRENT LIABILITIES:
Cash and cash equivalents $ 8,821 $ 15,071 Accounts payable and
Receivables 61,727 49,443 accrued expenses $ 54,950 $ 51,906
Inventories 113,226 115,015 Liabilities to customers on
Prepaid expenses and uncompleted contracts and
other current assets 6,381 4,496 warranties 3,168 8,316
Income taxes 950 2,070
Short-term obligations 513 583
Current maturities of long-
term debt 1,006 267
________ ________ ________ ________
Total Current Assets 190,155 184,025 Total Current Liabilities 60,587 63,142
OTHER ASSETS: LONG-TERM LIABILITIES:
Restricted funds on Liabilities to customers
deposit 476 1,056 on uncompleted contracts
Goodwill 71,835 65,929 and warranties 5,414 3,850
Intangible assets - net 42,573 44,796 Postretirement benefits 14,188 14,665
Other assets 11,526 12,677 Deferred expenses
________ ________ and other 14,585 17,585
________ ________
126,410 124,458
34,187 36,100
PROPERTY, PLANT AND EQUIPMENT: LONG-TERM DEBT, less
Land 2,933 2,414 current maturities 202,308 174,612
Buildings and improvements 10,546 9,202
Machinery and equipment 97,481 87,723 COMMON SHAREHOLDERS'
Less accumulated INVESTMENT:
depreciation (10,330) (1,715) Common stock - par value
________ ________ $.01 per share,
authorized 1,700,000
100,630 97,624 shares, issued and
outstanding 1,443,100
shares at December 31,
1998; authorized 1,000
shares, issued and
outstanding 1,000 shares
at December 31, 1997 14 -
Additional paid-in
capital 144,296 143,030
Note receivable from
shareholder (400) -
Accumulated deficit (15,422) (7,158)
Accumulated other
comprehensive income (8,375) (3,619)
________ ________
120,113 132,253
________ ________ ________ ________
$417,195 $406,107 $417,195 $406,107
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF COMMON SHAREHOLDERS' INVESTMENT
Bucyrus International, Inc. and Subsidiaries
(Dollars in Thousands)
Note Accumulated
Additional Unearned Receivable Other
Common Paid-In Stock From Accumulated Comprehensive
Stock Capital Compensation Shareholder Deficit Income
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1996 $ 102 $ 54,259 $ - $ - $(19,324) $ (357)
Grants under stock
compensation plans 3 3,480 (3,483) - - -
Amortization of unearned
stock compensation - - 668 - - -
Net earnings - - - - 2,878 -
Translation adjustments - - - - - (765)
______ ________ ________ ________ ________ ________
Balance at December 31, 1996 105 57,739 (2,815) - (16,446) (1,122)
Amortization of unearned
stock compensation - - 677 - - -
Net loss - - - - (4,874) -
Translation adjustments - - - - - (1,439)
______ ________ ________ ________ ________ ________
Balance at September 23, 1997 105 57,739 (2,138) - (21,320) (2,561)
Merger with Bucyrus
Acquisition Corp. (105) (57,739) 2,138 - 21,320 2,561
Capital contribution - 143,030 - - - -
Net loss - - - - (7,158) -
Translation adjustments - - - - - (3,619)
______ ________ ________ ________ ________ ________
Balance at December 31, 1997 - 143,030 - - (7,158) (3,619)
Stock split 14 (14) - - - -
Issuance of common stock
(12,800 shares) - 1,280 - (400) - -
Net loss - - - - (8,264) -
Translation adjustments - - - - - (4,756)
______ _______ ________ ________ ________ ________
Balance at December 31, 1998 $ 14 $144,296 $ - $ (400) $(15,422) $ (8,375)
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Bucyrus International, Inc. and Subsidiaries
(Dollars in Thousands)
Predecessor
Year Ended September 24- January 1- Year Ended
December 31, December 31, September 23, December 31,
1998 1997 1997 1996
<S> <C> <C> <C> <C>
Cash Flows From Operating Activities
Net earnings (loss) $ (8,264) $ (7,158) $ (4,874) $ 2,878
Adjustments to reconcile net earnings (loss)
to net cash provided by (used in)
operating activities:
Depreciation 10,331 2,678 3,125 3,882
Amortization 5,701 1,435 770 1,142
Non-cash stock compensation expense - - 677 668
Nonrecurring items - - 10,051 -
In kind interest on the Secured Notes
due December 14, 1999 - - - 7,783
(Gain) loss on sale of property, plant
and equipment 11 (3) (275) 362
Changes in assets and liabilities, net of
effects of acquisitions:
Receivables (13,597) 10,725 (19,534) 3,021
Inventories (2,824) 12,891 (11,100) 2,026
Other current assets (1,167) 3,432 (1,434) (1,114)
Other assets (1,771) (405) (385) (1,145)
Current liabilities other than income
taxes, short-term obligations and
current maturities of long-term debt (7,525) (6,237) 17,210 (5,332)
Income taxes (1,280) (1,097) 1,181 (1,991)
Long-term liabilities other than
deferred income taxes (3,761) (456) (2,012) (2,093)
________ ________ ________ ________
Net cash provided by (used in)
operating activities (24,146) 15,805 (6,600) 10,087
________ ________ ________ ________
Cash Flows From Investing Activities
Payment to cash out stock options and
stock appreciation rights - (6,944) - -
Decrease in restricted funds on deposit 580 23 - 1,798
Purchases of property, plant and equipment (12,803) (2,859) (4,331) (4,996)
Proceeds from sale of property, plant
and equipment 1,428 510 1,227 1,058
Acquisition of Bucyrus International, Inc. - (189,622) - -
Purchase of Von's Welding, Inc.,
net of cash acquired - - (841) -
Purchase of surface mining equipment
business of Global Industrial
Technologies, Inc. - - (36,720) -
Receivable from Global Industrial
Technologies, Inc. - 5,275 (5,275) -
________ ________ ________ ________
Net cash used in investing activities (10,795) (193,617) (45,940) (2,140)
________ ________ ________ ________
Cash Flows From Financing Activities
Proceeds from issuance of project
financing obligations - - 5,672 5,402
Reduction of project financing obligations - (8,102) - (8,104)
Net increase (decrease) in other bank
borrowings (70) 20,837 500 (1,350)
Payment of acquisition and refinancing expenses (293) (13,426) (1,476) -
Payment of bridge loan fees - - (3,361) -
(Payment of) proceeds from bridge loan - (45,000) 45,000 -
Capital contribution - 143,030 - -
Proceeds from issuance of long-term debt 28,785 150,000 1,706 849
Payment of long-term debt (350) (65,785) - -
Proceeds from issuance of common stock 880 - - -
________ ________ ________ ________
Net cash provided by (used in)
financing activities 28,952 181,554 48,041 (3,203)
________ ________ ________ ________
Effect of exchange rate changes on cash (261) (352) 417 (131)
________ ________ ________ ________
Net increase (decrease) in cash
and cash equivalents (6,250) 3,390 (4,082) 4,613
Cash and cash equivalents at
beginning of period 15,071 11,681 15,763 11,150
________ ________ ________ ________
Cash and cash equivalents at end of period $ 8,821 $ 15,071 $ 11,681 $ 15,763
Supplemental Disclosures of Cash Flow Information
Cash paid during the period for:
Interest $ 18,080 $ 662 $ 4,046 $ 491
Income taxes - net of refunds 3,569 587 1,218 3,246
</TABLE>
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Bucyrus International, Inc. and Subsidiaries (Continued)
(Dollars in Thousands)
Supplemental Schedule of Non-Cash Investing and Financing Activities
(A) In 1997, the Company purchased all of the common stock of Von's Welding,
Inc. In conjunction with the acquisition, liabilities were assumed as
follows:
1997
Fair value of assets acquired $ 1,979
Cash paid (908)
________
Liabilities assumed $ 1,071
(B) In 1997, the Company purchased certain assets and liabilities of the
surface mining and equipment business of Global Industrial Technologies,
Inc. In conjunction with the acquisition, liabilities were assumed as
follows:
1997
Fair value of assets acquired $ 52,406
Cash paid (36,720)
________
Liabilities assumed $ 15,686
See notes to consolidated financial statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Bucyrus International, Inc. and Subsidiaries
NOTE A - SUMMARY OF ACCOUNTING POLICIES
Nature of Operations
Bucyrus International, Inc. (the "Company") is a Delaware corporation
and a leading manufacturer of surface mining equipment, principally
walking draglines, electric mining shovels and blasthole drills, and
related replacement parts. Major markets for the surface mining
industry are coal mining, copper and iron ore mining, and phosphate
production.
Basis of Presentation
The consolidated financial statements as of December 31, 1998 and
1997 and for the year ended December 31, 1998 and the period
September 24, 1997 to December 31, 1997 were prepared under a basis
of accounting that reflects the fair value of the assets acquired and
liabilities assumed, and the related expenses and all debt incurred
in connection with the acquisition of the Company by American
Industrial Partners Acquisition Company, LLC ("AIPAC") on
September 24, 1997 (see Note B). The Predecessor consolidated
financial statements for periods prior to September 24, 1997 were
prepared using the Company's previous basis of accounting which was
based on the principles of fresh start reporting adopted in 1994 upon
emergence from bankruptcy. Accordingly, the consolidated financial
statements of the Company are not comparable to the Predecessor
consolidated financial statements.
The preparation of the consolidated financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, disclosure of contingent assets
and liabilities and the reported amounts of revenues and expenses.
Actual results could differ from those estimates.
Principles of Consolidation
The consolidated financial statements include the accounts of all
subsidiaries. All significant intercompany transactions, profits and
accounts have been eliminated.
Cash Equivalents
All highly liquid investments with maturities of three months or less
when purchased are considered to be cash equivalents. The carrying
value of these investments approximates fair value.
Restricted Funds on Deposit
Restricted funds on deposit represent cash and temporary investments
used to support the issuance of standby letters of credit and other
obligations. The carrying value of these funds approximates fair
value.
Inventories
In connection with the acquisition of the Company by AIPAC,
inventories were adjusted to estimated fair value. Inventories are
stated at lower of cost (first-in, first-out method) or market
(replacement cost or estimated net realizable value). Advances from
customers are netted against inventories to the extent of related
accumulated costs. Advances in excess of related costs and earnings
on uncompleted contracts are classified as a liability to customers.
Goodwill and Intangible Assets
Goodwill represents the excess of the purchase price paid by AIPAC
for the outstanding shares of common stock of the Company over the
fair value of the net assets of the Company on the date of
acquisition and is being amortized on a straight-line basis over 30
years. Accumulated amortization was $3,174,000 and $591,000 at
December 31, 1998 and 1997, respectively.
Intangible assets were recorded at estimated fair value in connection
with the acquisition of the Company by AIPAC and consist of
engineering drawings, bill-of-material listings, software, trademarks
and tradenames which are being amortized on a straight-line basis
over 10 to 30 years. Accumulated amortization was $2,852,000 and
$628,000 at December 31, 1998 and 1997, respectively.
The Company continually evaluates whether events and circumstances
have occurred that indicate the remaining estimated useful life of
goodwill and intangible assets may warrant revision or that the
remaining balance of each may not be recoverable. When factors
indicate that goodwill and intangible assets should be evaluated for
possible impairment, the Company uses an estimate of the undiscounted
cash flows over the remaining life of the goodwill and intangible
assets in measuring whether they are recoverable.
Property, Plant and Equipment
In connection with the acquisition of the Company by AIPAC, property,
plant and equipment were adjusted to estimated fair value.
Depreciation is provided over the estimated useful lives of
respective assets using the straight-line method for financial
reporting and accelerated methods for income tax purposes. Estimated
useful lives used for financial reporting purposes range from ten to
forty years for buildings and improvements and three to seventeen
years for machinery and equipment.
Foreign Currency Translation
The assets and liabilities of foreign subsidiaries are translated
into U.S. dollars using year-end exchange rates. Revenues and
expenses are translated at average rates during the year.
Adjustments resulting from this translation are deferred and
reflected as a separate component of Common Shareholders' Investment.
Effective January 1, 1998, the Company no longer considers Brazil's
economy to be highly inflationary. The effect of this change on the
Company's consolidated financial statements was not material. The
Company also defers gains and losses resulting from exchange rate
changes on intercompany obligations that are considered to be of a
long-term nature and not to be repaid in the foreseeable future.
Revenue Recognition
Revenue from long-term sales contracts is recognized using the
percentage-of-completion method. At the time a loss on a contract
becomes known, the amount of the estimated loss is recognized in the
consolidated financial statements. Revenue from all other sales is
recognized as products are shipped or services are rendered.
Included in the current portion of liabilities to customers on
uncompleted contracts and warranties are advances in excess of
related costs and earnings on uncompleted contracts of $92,000 and
$3,501,000 at December 31, 1998 and 1997, respectively.
NOTE B - ACQUISITIONS
Acquisition by American Industrial Partners
On August 21, 1997, the Company entered into an Agreement and Plan of
Merger (the "AIP Agreement") with AIPAC, which is wholly-owned by
American Industrial Partners Capital Fund II, L.P. ("AIP"), and
Bucyrus Acquisition Corp. ("BAC"), a wholly-owned subsidiary of
AIPAC. On August 26, 1997, pursuant to the AIP Agreement, BAC
commenced an offer to purchase for cash 100% of the outstanding
shares of common stock of the Company at a price of $18.00 per share
(the "AIP Tender Offer"). Consummation of the AIP Tender Offer
occurred on September 24, 1997, and BAC was merged with and into the
Company on September 26, 1997 (the "AIP Merger"). The Company was
the surviving entity in the AIP Merger and is currently wholly-owned
by AIPAC. The purchase of all of the Company's outstanding shares of
common stock by AIPAC resulted in a change in control of voting
interest.
Approximately $189,622,000 was required to purchase all of the
outstanding shares of the Company's common stock. BAC received
$143,030,000 of the necessary funds to purchase the shares of the
Company's common stock as an equity contribution from AIPAC. The
remainder of the consideration required to consummate the AIP Tender
Offer and pay related expenses was funded by a bridge loan from AIPAC
to BAC, which was repaid in full on September 26, 1997.
The AIP Agreement also provided that each outstanding option to
purchase shares of the Company's common stock and each outstanding
stock appreciation right granted under the Company's Non-Employee
Directors' Stock Option Plan (the "Directors' Stock Option Plan"),
the 1996 Employees' Stock Incentive Plan (the "1996 Employees' Plan)
and any other stock-based incentive plan or arrangement of the
Company, whether or not then exercisable or vested, would be
cancelled (see Note G). In consideration of such cancellation, the
holders of such options and stock appreciation rights received for
each share subject to such option or stock appreciation right an
amount in cash equal to the excess of the offer price of $18 per
share over the per share exercise price of such option or the per
share base price of such stock appreciation right, as applicable,
multiplied by the number of shares subject to such option or stock
appreciation right. Included in nonrecurring items in the
Consolidated Statement of Operations is $6,690,000 of expense
incurred to cash out the outstanding options and stock appreciation
rights.
The acquisition of the Company by AIPAC was accounted for as a
purchase and, accordingly, the assets acquired and liabilities
assumed were adjusted to their estimated fair values. The final
allocation of the purchase price is as follows:
(Dollars in Thousands)
Working capital $ 127,232
Property, plant and equipment 100,855
Intangible assets (including
goodwill of $75,009) 120,397
Other long-term assets and liabilities (205,454)
Total cash purchase price $ 143,030
Marion Acquisition
On August 26, 1997, the Company consummated the acquisition (the
"Marion Acquisition") of certain assets and liabilities of The Marion
Power Shovel Company, a subsidiary of Global Industrial Technologies,
Inc. ("Global"), and of certain subsidiaries and divisions of Global
that represented Global's surface mining equipment business in
Australia, Canada and South Africa (collectively referred to herein
as "Marion"). The purchase price for Marion was $36,720,000, which
includes acquisition expenses of $1,695,000. The net assets acquired
and results of operations since the date of acquisition are included
in the Company's consolidated financial statements.
The Company financed the Marion Acquisition and related expenses by
utilizing an unsecured bridge loan (the "Bridge Loan") provided by a
former affiliate of the Company, in the amount of $45,000,000. The
Bridge Loan was repaid in full on September 24, 1997 with a portion
of the proceeds from the 9-3/4% Senior Notes due 2007 (see Note F).
The Bridge Loan had an interest rate of 10.625% and the total
interest expense incurred by the Company was $385,000. The Company
incurred $3,361,000 of loan fees in connection with the Bridge Loan.
The subsequent expensing of these fees when the Bridge Loan was
repaid are included in nonrecurring items in the Consolidated
Statement of Operations.
The acquisition of Marion by the Company was accounted for as a
purchase and, accordingly, the assets acquired and liabilities
assumed by the Company were recorded at their estimated fair values.
The assets acquired and liabilities assumed in the Marion Acquisition
were revalued in connection with the AIP Merger.
During 1998, the Company finalized the allocations of the purchase
prices relating to the acquisition of the Company by AIPAC and the
Marion Acquisition. The adjustments primarily related to warranty,
employee benefits and a litigation settlement and resulted in a net
increase to liabilities and goodwill of $8,488,000.
Pro Forma Results of Operations
The following unaudited pro forma results of operations assumes that
the Company had been acquired by AIPAC and the Company acquired
Marion on January 1, 1996. Such information reflects adjustments to
reflect additional interest expense and depreciation expense,
amortization of goodwill and the effects of adjustments made to the
carrying value of certain assets and liabilities.
The pro forma results for the year ended December 31, 1997 include
Marion's historical results for the year ended December 31, 1997 and
the pro forma results for the year ended December 31, 1996 include
Marion's historical results for the year ended October 31, 1996.
Year Ended December 31,
1997 1996
(Dollars in Thousands,
Except Per Share Amounts)
(Unaudited)
Net sales $ 346,913 $ 373,411
Net loss (10,297) (19,438)
Net loss per share of
common stock (7.20) (13.59)
The pro forma financial information presented above is not
necessarily indicative of either the results of operations that would
have occurred had the acquisitions been effective on January 1, 1996
or of future operations of the Company.
NOTE C - RECEIVABLES
Receivables at December 31, 1998 and 1997 include $12,470,000 and
$6,186,000, respectively, of revenues from long-term contracts which
were not billable at that date. Billings on long-term contracts are
made in accordance with the payment terms as defined in the
individual contracts.
Current receivables are reduced by an allowance for losses of
$918,000 and $734,000 at December 31, 1998 and 1997, respectively.
NOTE D - INVENTORIES
Inventories consist of the following:
1998 1997
(Dollars in Thousands)
Raw materials and parts $ 16,987 $ 14,896
Costs relating to
uncompleted contracts 4,503 4,861
Customers' advances offset
against costs incurred on
uncompleted contracts (2,296) (2,976)
Work in process 22,724 21,238
Finished products (primarily
replacement parts) 71,308 76,996
________ ________
$113,226 $115,015
In connection with the acquisition of the Company by AIPAC,
inventories were adjusted to estimated fair value. This adjustment
was charged to cost of products sold as the inventory was sold. At
December 31, 1997, the remaining estimated fair value adjustment
included in inventory was $6,925,000, all of which was charged to
cost of products sold in 1998. The charge to cost of products sold
in 1997 was $8,633,000.
NOTE E - ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following:
1998 1997
(Dollars in Thousands)
Trade accounts payable $ 28,407 $ 24,364
Wages and salaries 5,970 6,261
Interest 4,965 4,308
Other 15,608 16,973
________ ________
$ 54,950 $ 51,906
NOTE F - LONG-TERM DEBT AND FINANCING ARRANGEMENTS
Long-term debt consists of the following:
1998 1997
(Dollars in Thousands)
9-3/4% Senior Notes due 2007 $150,000 $150,000
Revolving credit facility 49,950 22,215
Construction Loans at
Bucyrus International
(Chile) Limitada 2,400 2,664
Other 964 -
________ ________
203,314 174,879
Less current maturities of
long-term debt (1,006) (267)
________ ________
$202,308 $174,612
The Company has outstanding $150,000,000 of 9-3/4% Senior Notes due
2007 (the "Senior Notes") which were issued pursuant to an indenture
dated as of September 24, 1997 among the Company, certain of its
domestic subsidiaries (the "Guarantors"), and Harris Trust and
Savings Bank, as Trustee (the "Senior Notes Indenture"). The Senior
Notes mature on September 15, 2007. Interest thereon is payable each
March 15 and September 15. The Senior Notes Indenture contains
certain covenants that, among other things, limit the ability of the
Company and the Guarantors to: (i) incur additional indebtedness;
(ii) pay dividends or make other distributions with respect to
capital stock; (iii) make certain investments; (iv) sell certain
assets; (v) enter into certain transactions with affiliates; (vi)
create liens; (vii) enter into certain sale and leaseback
transactions; and (viii) enter into certain mergers and
consolidations. Such covenants are subject to important
qualifications and limitations.
The Company also entered into a three-year credit agreement with Bank
One, Wisconsin on September 24, 1997 which provides the Company with
a $75,000,000 senior secured revolving credit facility (the
"Revolving Credit Facility") with a $25,000,000 sublimit for standby
letters of credit. Borrowings under the Revolving Credit Facility
bear interest at variable rates and are subject to a borrowing base
formula based on receivables, inventory and machinery and equipment.
Direct borrowings under the Revolving Credit Facility at December 31,
1998 and 1997 were $49,950,000 and $22,215,000, respectively, at a
weighted average interest rate of 8.0% and 8.7%, respectively. The
issuance of standby letters of credit under the Revolving Credit
Facility and certain other bank facilities reduces the amount
available for direct borrowings under the Revolving Credit Facility.
At December 31, 1998 and 1997, there were $2,750,000 and $3,556,000,
respectively, of standby letters of credit outstanding under the
Revolving Credit Facility. The Revolving Credit Facility contains
covenants which, among other things, require the Company to maintain
certain financial ratios and a minimum net worth. The Revolving
Credit Facility is secured by substantially all of the assets of the
Company, other than real property and assets of foreign subsidiaries.
The average borrowing under the Revolving Credit Facility during 1998
was $43,454,000 at a weighted average interest rate of 8.6%, and the
maximum borrowing outstanding was $57,075,000. The average borrowing
under the Revolving Credit Facility during the period September 24,
1997 to December 31, 1997 was $28,512,000 at a weighted average
interest rate of 8.7%, and the maximum borrowing outstanding during
this period was $36,350,000. The amount available for direct
borrowings under the Revolving Credit Facility at December 31, 1998
was $14,988,000.
Maturities of long-term debt are the following for each of the next
five years:
(Dollars in Thousands)
1999 $ 1,006
2000 50,853
2001 787
2002 521
2003 147
At December 31, 1998, the Senior Notes were bid at 74%. Based on
this information, management believes the fair value of the Senior
Notes is approximately $111,000,000.
NOTE G - COMMON SHAREHOLDERS' INVESTMENT
On March 17, 1998, the Company's Board of Directors authorized a
stock split which increased the number of authorized shares of common
stock of the Company from 1,000 shares to 1,600,000 shares.
Simultaneous with this authorization, AIPAC cancelled 9.976% of its
interest in its 1,000 shares of common stock of the Company and
received 1,430,300 shares for their remaining interest (the "Stock
Split"). Subsequently, the Company's Board of Directors increased
the number of authorized shares of common stock of the Company to
1,700,000 shares. Also in 1998, certain members of management of the
Company purchased 12,800 shares of common stock of the Company which
increased the number of issued and outstanding common shares to
1,443,100 at December 31, 1998.
In 1998, the Company's Board of Directors adopted the Bucyrus
International, Inc. 1998 Management Stock Option Plan (the "1998
Option Plan") which authorizes the granting of stock options to key
employees for up to a total of 200,000 shares of common stock of the
Company at exercise prices to be determined in accordance with the
provisions of the 1998 Option Plan. Options granted under the 1998
Option Plan are targeted to vest on the last day of the plan year at
the rate of 25% of the aggregate number of shares of common stock
underlying each series of options per year, provided that the Company
attains specified EBITDA targets. In the event that the EBITDA
target is not attained in any plan year, the options scheduled to
vest at the end of that plan year will vest according to a pro rata
schedule set forth in the 1998 Option Plan. Notwithstanding the
foregoing, all options granted under the 1998 Option Plan shall vest
automatically on the ninth anniversary of the date of the grant,
regardless of performance criteria, and expire and terminate no later
than ten years after the date of grant.
The following table sets forth the activity and outstanding balances
of options exercisable for shares of common stock under the 1998
Option Plan:
Options Available For
Outstanding Future Grants
At plan inception - 150,400
Increase in shares available
for future grants - 49,600
Granted on March 17, 1998
($100 per share) 115,850 (115,850)
Granted on July 31, 1998
($100 per share) 3,350 (3,350)
Granted on December 21, 1998
($100 per share) 59,767 (59,767)
Options forfeited
($100 per share) (2,900) 2,900
_______ _______
Balances at December 31, 1998 176,067 23,933
At December 31, 1998, none of the options outstanding were vested.
The options had a weighted average remaining contractual life of 9.5
years.
In 1995, the Company's Board of Directors adopted the Directors'
Stock Option Plan. As discussed in Note B, options granted under the
Directors' Stock Option Plan were cancelled upon the acquisition of
the Company by AIPAC. The Directors' Stock Option Plan provided for
the automatic grant of non-qualified stock options to non-employee
members of the Board of Directors for up to 60,000 shares of the
Company's common stock at an exercise price based on the last sale
price of the common stock on the date of grant. The following table
sets forth the activity and outstanding balances of options
exercisable for shares of common stock under the Directors' Stock
Option Plan:
Options Available For
Outstanding Future Grants
Balances at January 1, 1996 8,000 52,000
Granted on February 8, 1996
($9.25 per share) 8,000 (8,000)
Granted on March 11, 1996
($9.00 per share) 4,000 (4,000)
_______ _______
Balances at December 31, 1996
($6.00 - $9.25 per share) 20,000 40,000
Granted on February 5, 1997
($7.50 per share) 12,000 (12,000)
Granted on April 30, 1997
($9.375 per share) 2,000 (2,000)
Cashed out pursuant to the
acquisition of the Company
by AIPAC (34,000) -
Cancelled pursuant to the
acquisition of the Company
by AIPAC - (26,000)
_______ _______
Balances at December 31, 1997 - -
At December 31, 1996, all of the options outstanding were exercisable
at a weighted average exercise price of $7.90 per share and had a
weighted average remaining contractual life of 8.7 years. The
weighted average exercise price of options granted in 1996 was $9.17
per share.
In 1996, the Company's Board of Directors adopted the 1996 Employees'
Plan. As discussed in Note B, options and stock appreciation rights
granted under the 1996 Employees' Plan were cancelled upon the
acquisition of the Company by AIPAC. The 1996 Employees' Plan
authorized the granting to key employees of: (a) stock options, which
may be either incentive stock options or non-qualified stock options,
at an exercise price per share not less than 55% of the fair market
value of the Company's common stock on the date of grant; (b) stock
appreciation rights at a grant price of not less than 100% of the
fair market value of the Company's common stock on the date of grant;
(c) restricted stock; and (d) performance shares. The 1996
Employees' Plan provided that up to a total of 1,000,000 shares of
the Company's common stock, subject to adjustment under plan
provisions, would be available for the granting of awards thereunder.
The following table sets forth the activity and outstanding balances
of grants under the 1996 Employees' Plan:
Available For
Granted Future Grants
At plan inception - 1,000,000
Non-qualified stock options
granted on March 11, 1996
($5.0875 per share) 200,000 (200,000)
Restricted stock granted on
March 11, 1996 300,000 (300,000)
Non-qualified stock options
granted on November 7, 1996
($8.75 per share) 30,000 (30,000)
Stock appreciation rights
granted on November 7, 1996
($8.75 per share) 50,000 (50,000)
_______ _________
Balances at December 31, 1996 580,000 420,000
Non-qualified stock options
granted on February 5, 1997
($7.50 per share) 323,000 (323,000)
Options forfeited ($7.50
per share) (11,000) 11,000
Non-qualified stock options and
stock appreciation rights
cashed out pursuant to the
acquisition of the Company
by AIPAC (592,000) -
Lapse of restrictions on
restricted stock (33,333) -
Restricted stock purchased
pursuant to the acquisition
of the Company by AIPAC (266,667) -
Cancelled pursuant to the
acquisition of the Company
by AIPAC - (108,000)
_______ _________
Balances at December 31, 1997 - -
At December 31, 1996, options for 200,000 shares were exercisable at
an exercise price of $5.0875 per share. The weighted average
exercise price of the options granted in 1996 was $5.57 per share.
The weighted average remaining contractual life of the options at
December 31, 1996 was 9.3 years. The remaining contractual life of
the stock appreciation rights at December 31, 1996 was 9.8 years.
Certain grants under the 1996 Employees' Plan resulted in additional
compensation expense to the Company. Stock compensation expense
recognized for the years ended December 31, 1997 and 1996 was
$677,000 and $668,000, respectively.
The Company accounted for the 1998 Option Plan, the Directors' Stock
Option Plan and the 1996 Employees' Plan in accordance with
Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees," as allowed by Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS
123"). Had compensation expense for these plans been determined
consistent with SFAS 123, the Company's net earnings (loss) and net
earnings (loss) per share would have been reduced to the following
pro forma amounts:
Predecessor
Year Ended September 24- January 1 - Year Ended
December 31, December 31, September 23, December 31,
1998 1997 1997 1996
(Dollars in Thousands,
Except Per Share Amounts)
Net earnings
(loss):
As reported $ (8,264) $ (7,158) $ (4,874) $ 2,878
Pro forma (8,698) (7,158) (4,648) 2,688
Net earnings
(loss) per
share of
common stock:
Basic
As reported (5.75) (5.00) (.48) .28
Pro forma (6.05) (5.00) (.45) .26
Diluted
As reported (5.75) (5.00) (.47) .28
Pro forma (6.05) (5.00) (.45) .26
In 1997, the fair value of stock options granted under the Directors'
Stock Option Plan and the 1996 Employees' Plan was equal to the cash
paid for each outstanding stock option in the AIP Tender Offer.
The weighted average grant date fair value of stock options granted
in 1998 under the 1998 Option Plan was $76 per option. The exercise
price of these stock options was equal to the fair value of the
common stock on the date of grant. The fair value was established by
the Company's Board of Directors as the price for which the Company
will buy or sell its common stock. The weighted average grant-date
fair value of stock options granted in 1996 and 1995 under the
Directors' Stock Option Plan was $4.93 and $4.44 per option,
respectively. The weighted average grant-date fair value of stock
options granted under the 1996 Employees' Plan whose exercise price
was less than the market price of the Company's common stock on the
date of grant was $6.55 per option. The weighted average grant-date
fair value of stock options granted under the 1996 Employees' Plan
whose exercise price was equal to the market price of the Company's
common stock on the date of grant was $6.00 per option. The grant-
date fair value of the restricted stock was $9.00 per share. The
grant-date fair value of the stock appreciation rights was $6.00 per
right. The fair value of grants was estimated on the date of grant
using the minimum value method in 1998 and the Black-Scholes option
pricing model in 1996 and 1995 with the following weighted average
assumptions:
1998 Directors' 1996
Option Plan Stock Option Plan Employees' Plan
1998 1996 1995 1996
Risk-free interest rate 5.5% 6.48% 6.41% 6.34%
Expected dividend yield 0% 0% 0% 0%
Expected life 5 years 7 years 7 years 5.6 years
Calculated volatility N/A 67.07% 73.92% 66.10%
NOTE H - INCOME TAXES
Deferred taxes are provided to reflect temporary differences between
the financial and tax basis of assets and liabilities using presently
enacted tax rates and laws. A valuation allowance is recognized if
it is more likely than not that some or all of the deferred tax
assets will not be realized.
Earnings (loss) before income taxes consists of the following:
Predecessor
Year Ended September 24- January 1 - Year Ended
December 31, December 31, September 23, December 31,
1998 1997 1997 1996
(Dollars in Thousands)
United States $ (8,132) $ (5,038) $ (8,876) $ 232
Foreign 2,271 (2,403) 6,643 4,404
_________ _________ _________ _________
Total $ (5,861) $ (7,441) $ (2,233) $ 4,636
The provision for income tax expense (benefit) consists of the
following:
Predecessor
Year Ended September 24- January 1 - Year Ended
December 31, December 31, September 23, December 31,
1998 1997 1997 1996
(Dollars in Thousands)
Foreign income taxes:
Current $ 3,387 $ 1,010 $ 2,697 $ 1,902
Deferred (1,119) (1,343) 6 (430)
_________ _________ _________ _________
Total 2,268 (333) 2,703 1,472
_________ _________ _________ _________
Other (state and
local taxes):
Current 135 50 (62) 274
Deferred - - - 12
_________ _________ _________ _________
Total 135 50 (62) 286
_________ _________ _________ _________
Total income
tax expense
(benefit) $ 2,403 $ (283) $ 2,641 $ 1,758
Total income tax expense (benefit) differs from amounts expected by
applying the Federal statutory income tax rate to earnings (loss)
before income taxes as set forth in the following table:
<PAGE>
<TABLE>
<CAPTION>
Predecessor
Year Ended September 24- January 1- Year Ended
December 31, December 31, September 23, December 31,
1998 1997 1997 1996
Tax Tax Tax Tax
Expense Expense Expense Expense
(Benefit) Percent (Benefit) Percent (Benefit) Percent (Benefit) Percent
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Tax expense (benefit)
at Federal statutory
rate $ (2,051) (35.0)% $ (2,604) (35.0)% $ (782) (35.0)% $ 1,622 35.0%
Valuation allowance
adjustments 531 9.1 1,681 22.6 2,761 123.6 (81) (1.7)
Impact of foreign
subsidiary income,
tax rates and tax
credits 2,925 49.9 425 5.7 616 27.6 7 .2
State income taxes
net of Federal
income tax benefit 20 .3 (14) (.2) (11) (.5) 136 2.9
Nondeductible
goodwill
amortization 904 15.4 207 2.8 - - - -
Other items 74 1.3 22 .3 57 2.6 74 1.5
________ ______ ________ ______ ________ ______ ________ ______
Total income
tax expense (benefit) $ 2,403 41.0% $ (283) (3.8)% $ 2,641 118.3% $ 1,758 37.9%
</TABLE>
Significant components of deferred tax assets and deferred tax
liabilities are as follows:
December 31,
1998 1997
(Dollars in Thousands)
Deferred tax assets:
Postretirement benefits $ 5,966 $ 6,805
Inventory valuation
provisions 7,183 1,836
Accrued and other
liabilities 9,480 9,614
Research and development
expenditures 7,688 8,436
Tax loss carryforward 31,265 28,392
Tax credit carryforward 479 479
Other items 229 314
__________ __________
Total deferred tax assets 62,290 55,876
Deferred tax liabilities:
Excess of book basis over
tax basis of property,
plant and equipment and
intangible assets (40,046) (43,682)
Legal settlement (1,970) -
Valuation allowance (17,994) (11,033)
__________ __________
Net deferred tax asset $ 2,280 $ 1,161
The classification of the net deferred tax assets and liabilities is
as follows:
December 31,
1998 1997
(Dollars in Thousands)
Current deferred tax asset $ 1,577 $ 1,095
Long-term deferred tax asset 962 96
Current deferred tax liability (60) (28)
Long-term deferred tax
liability (199) (2)
__________ __________
Net deferred tax asset $ 2,280 $ 1,161
Due to the recent history of domestic net operating losses, a
valuation allowance has been used to reduce the net deferred tax
assets (after giving effect to deferred tax liabilities) for domestic
operations to an amount that is more likely than not to be realized.
In conjunction with the application of the purchase method of
accounting for the 1997 acquisition of the Company by AIPAC, assets
and liabilities were adjusted to estimated fair value for book
purposes, but there were no changes in tax basis. In 1998, the
valuation allowance increased by $6,961,000. The increase was
primarily the result of final purchase adjustments to the fair value
of assets and liabilities.
As of December 31, 1998, the Company has available approximately
$78,100,000 of federal net operating loss carryforwards ("NOL") from
the years 1988 through 1998, expiring in the years 2003 through 2018,
to offset against future federal taxable income. Because both the
1997 acquisition of the Company by AIPAC and the 1994 consummation of
the Second Amended Joint Plan of Reorganization of B-E Holdings, Inc.
and the Company as modified on December 1, 1994 (the "Amended Plan")
resulted in an "ownership change" within the meaning of Section 382
of the Internal Revenue Code, the use of the majority of such NOL is
subject to certain annual limitations. The total NOL available to
offset federal taxable income in 1999 is approximately $24,800,000.
Additionally, the Company has available for federal income tax
purposes approximately $479,000 of alternative minimum tax credit
carryforward which carries forward indefinitely. However, because
the credit arose prior to the effective date of the Amended Plan, it
will be subject to the annual limitations discussed above and will
not be usable until the year 2010.
The Company also has a significant amount of state NOL's (which
expire in the years 1999 through 2013) available to offset future
state taxable income in states where it has significant operations.
Since the majority of states in which the Company files its state
returns follow rules similar to federal rules, it is expected that
the usage of state NOL's will be limited to approximately
$65,800,000.
Cumulative undistributed earnings of foreign subsidiaries that are
considered to be permanently reinvested, and on which U.S. income
taxes have not been provided by the Company, amounted to
approximately $21,900,000 at December 31, 1998. It is not
practicable to estimate the amount of additional tax which would be
payable upon repatriation of such earnings; however, due to foreign
tax credit limitations, higher effective U.S. income tax rates and
foreign withholding taxes, additional taxes could be incurred.
NOTE I - PENSION AND RETIREMENT PLANS
The Company has several pension and retirement plans covering
substantially all employees. The following tables set forth the
domestic plans' funded status and amounts recognized in the
consolidated financial statements at December 31, 1998 and 1997:
Years Ended December 31,
1998 1997
(Dollars in Thousands)
Change in benefit obligation:
Benefit obligation at
beginning of year $ 72,004 $ 67,237
Service cost 1,883 1,750
Interest cost 5,058 4,929
Amendments 94 2,408
Settlements - (63)
Curtailments - (36)
Actuarial loss 3,265 1,014
Benefits paid (5,085) (5,235)
________ ________
Benefit obligation
at end of year 77,219 72,004
________ ________
Years Ended December 31,
1998 1997
(Dollars in Thousands)
Change in plan assets:
Fair value of plan assets
at beginning of year 68,950 63,718
Actual return on plan assets 4,316 9,700
Employer contributions 1,901 767
Benefits paid (5,085) (5,235)
________ ________
Fair value of plan assets
at end of year 70,082 68,950
________ ________
Net amount recognized:
Funded status (7,137) (3,054)
Unrecognized net
actuarial loss 6,927 1,991
________ ________
Net pension liability $ (210) $ (1,063)
Amounts recognized in
consolidated balance
sheets:
Prepaid benefit costs $ 3,599 $ 5,558
Accrued benefit liabilities (3,809) (6,621)
________ ________
Net pension liability $ (210) $ (1,063)
Weighted-average assumptions
at end of year:
Discount rate 6.875% 7.25%
Expected return on
plan assets 9% 9%
Rate of compensation
increase 4.5% to 5% 4.5% to 5%
Predecessor
Year Ended September 24- January 1- Year Ended
December 31, December 31, September 23, December 31,
1998 1997 1997 1996
(Dollars in Thousands)
Components of
net periodic
benefit cost:
Service cost $ 1,883 $ 486 $ 1,264 $ 1,554
Interest cost 5,058 1,355 3,574 4,431
Expected return
on plan assets (5,987) (1,599) (8,101) (7,697)
Recognized net
actuarial
loss - - 4,170 2,527
________ ________ ________ ________
Total benefit
cost $ 954 $ 242 $ 907 $ 815
The projected benefit obligation, accumulated benefit obligation and
fair value of plan assets for the pension plans with accumulated
benefit obligations in excess of plan assets were $26,729,000,
$19,833,000 and $19,575,000, respectively, at December 31, 1998.
These amounts were $20,537,000, $13,483,000 and $13,076,000,
respectively, at December 31, 1997.
The Company has 401(k) Savings Plans available to substantially all
United States employees. Matching employer contributions are made in
accordance with plan provisions subject to certain limitations.
Matching employer contributions made were $972,000, $862,000
(including $626,000 for the Predecessor) in 1997 and $801,000 in
1996.
NOTE J - POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company provides certain health care benefits to age 65 and life
insurance benefits for certain eligible retired United States
employees. Substantially all current employees may become eligible
for those benefits if they reach early retirement age while working
for the Company. The majority of the costs of such benefits are
funded as they are incurred.
The following table sets forth the plan's status and amounts
recognized in the consolidated financial statements at December 31,
1998 and 1997:
Years Ended December 31,
1998 1997
(Dollars in Thousands)
Change in benefit obligation:
Benefit obligation at
beginning of year $ 16,645 $ 14,869
Service cost 410 426
Interest cost 1,008 1,089
Plan participants'
contributions 82 68
Amendments (2,542) -
Effect of Marion Acquisition - 296
Net actuarial loss 1,159 1,906
Benefits paid (1,843) (2,009)
________ ________
Benefit obligation
at end of year 14,919 16,645
________ ________
Change in plan assets:
Fair value of plan assets
at beginning of year - -
Actual return on plan assets - -
Employer contributions 1,761 1,941
Plan participants'
contributions 82 68
Benefits paid (1,843) (2,009)
________ ________
Fair value of plan assets
at end of year - -
________ ________
Net amount recognized:
Funded status (14,919) (16,645)
Unrecognized net
actuarial loss 1,429 270
Unrecognized prior
service cost (2,358) -
________ ________
Accrued postretirement
benefit liability $(15,848) $(16,375)
Weighted-average assumptions
at end of year:
Discount rate 6.875% 7.25%
Expected return on
plan assets n/a n/a
Rate of compensation
increase n/a n/a
For measurement purposes, an 8% gross health care trend rate was used
for benefits for 1999. Trend rates were assumed to decrease
gradually to 5% in 2002 and remain at that level thereafter.
Predecessor
Year Ended September 24- January 1- Year Ended
December 31, December 31, September 23, December 31,
1998 1997 1997 1996
(Dollars in Thousands)
Components of
net periodic
benefit cost:
Service cost $ 410 $ 124 $ 302 $ 323
Interest cost 1,008 316 774 1,039
Recognized net
actuarial
loss - - 41 -
Amortization
of prior
service cost (184) - - -
________ ________ ________ ________
Net periodic
benefit cost $ 1,234 $ 440 $ 1,117 $ 1,362
Assumed health care cost trend rates have a significant effect on the
amounts reported for the health care plan. A one percentage point
change in assumed health care cost trend rates would have the
following effects:
One Percentage One Percentage
Point Increase Point Decrease
(Dollars in Thousands)
Effect on total of service
and interest cost components $ 123 $ (106)
Effect on postretirement
benefit obligation 1,001 (885)
NOTE K - RESEARCH AND DEVELOPMENT
Expenditures for design and development of new products and
improvements of existing mining machinery products, including
overhead, aggregated $8,247,000 in 1998, $7,384,000 (including
$5,043,000 for the Predecessor) in 1997 and $6,930,000 in 1996. All
engineering and product development costs are charged to engineering
and field service expense as incurred.
NOTE L - CALCULATION OF NET EARNINGS (LOSS) PER SHARE OF COMMON STOCK
Basic net earnings per share of common stock were computed by
dividing net earnings (loss) by the weighted average number of shares
of common stock outstanding. Diluted net earnings (loss) per share
of common stock were calculated after giving effect to dilutive
securities. The following is a reconciliation of the numerators and
the denominators of the basic and diluted net earnings (loss) per
share of common stock calculations:
Predecessor
Year Ended September 24- January 1- Year Ended
December 31, December 31, September 23, December 31,
1998 1997 1997 1996
(Dollars in Thousands,
Except Per Share Amounts)
Basic
Net earnings
(loss) $ (8,264) $ (7,158) $ (4,874) $ 2,878
Weighted
average shares
outstanding 1,436,648 1,430,300 10,259,260 10,234,574
Net earnings
(loss) per
share $ (5.75) $ (5.00) $ (.48) $ .28
Diluted
Net earnings
(loss) $ (8,264) $ (7,158) $ (4,874) $ 2,878
Weighted
average shares
outstanding -
basic 1,436,648 1,430,300 10,259,260 10,234,574
Effect of dilutive
securities -
stock options,
stock appreciation
rights and
restricted
stock - - 174,840 28,070
__________ __________ __________ __________
Weighted
average shares
outstanding -
diluted 1,436,648 1,430,300 10,434,100 10,262,644
Net earnings
(loss) per
share $ (5.75) $ (5.00) $ (.47) $ .28
Net loss per share of common stock for the period September 24, 1997
to December 31, 1997 is calculated on a retroactive basis to reflect
the 1,430,300 shares now owned by AIPAC as a result of the Stock
Split (see Note G).
NOTE M - SEGMENT AND GEOGRAPHICAL INFORMATION
The Company designs, manufactures and markets large excavation
machinery used for surface mining and supplies replacement parts and
services for such machines. The Company manufactures its machines
and replacement parts at one location. There is no significant
difference in the production process for machines and replacement
parts. The Company's products are sold primarily to large companies
and quasi-governmental entities engaged in the mining of coal, iron
ore and copper throughout the world. New equipment and replacement
parts and services are sold in North America primarily by Company
personnel and through independent distributors and its domestic
subsidiaries, and overseas by Company personnel and through
independent distributors and the Company's foreign subsidiaries and
offices.
Due to the relatively low number of new machines sold each year, the
profitability of each machine sale is evaluated on an order by order
basis with specific margin goals being established prior to the sale
of the machine. Historically, there has been very little variance
between the estimated margin on a machine sale and the actual margin
achieved. The sales of replacement parts and services occur on a
consistent basis throughout the year. The gross margins on
replacement parts and service sales are regularly reviewed by the
Company's chief operating decision maker to assess performance. Over
the past several years, the sale of replacement parts and services
has accounted for approximately two-thirds of the Company's annual
net sales. Operating expenses and assets are managed on a macro
basis and are not allocated to machines or replacement parts and
services as part of performance assessment.
Based on the above, the Company's operations are classified as one
operating segment.
The following table summarizes the Company's net sales:
Years Ended December 31,
1998 1997 1996
(Dollars in Thousands)
Machines $107,268 $108,425 $107,396
Parts and services 208,570 198,252 156,390
________ ________ ________
$315,838 $306,677 $263,786
Financial information by geographical area is set forth in the
following table. Each geographic area represents the origin of the
financial information. Long-lived assets of subsidiaries are those
related to the operations of those subsidiaries. United States
assets consist of all other long-lived assets.
Sales to
External Long-Lived
Customers Assets
(Dollars in Thousands)
1998
United States $170,605 $ 90,181
South America 36,260 7,451
Australia, Far East and
South Africa 89,571 2,124
Other Foreign 19,402 874
________ ________
$315,838 $100,630
1997
United States $183,995 $ 86,780
South America 31,057 7,894
Australia, Far East and
South Africa 68,177 2,523
Other Foreign 23,448 427
________ ________
$306,677 $ 97,624
1996
United States $175,675 $ 28,179
South America 27,602 4,676
Australia, Far East and
South Africa 40,896 1,315
Other Foreign 19,613 1,857
________ ________
$263,786 $ 36,027
In 1998 and 1997, one customer accounted for approximately 19% and
14%, respectively, of the Company's consolidated net sales. In 1996,
a different customer accounted for approximately 14% of the Company's
consolidated net sales. The Company is not dependent upon any one
customer.
NOTE N - COMMITMENTS, CONTINGENCIES AND CREDIT RISKS
Joint Prosecution
On September 25, 1997, the Company and Jackson National Life
Insurance Company ("JNL") commenced an action against Milbank, Tweed,
Hadley & McCloy ("Milbank") in the Milwaukee County Circuit Court
(the "Milwaukee Action"). The Company sought damages against Milbank
arising out of Milbank's alleged malpractice, breach of fiduciary
duty, common law fraud, breach of contract, unjust enrichment and
breach of the obligation of good faith and fair dealing. JNL sought
damages against Milbank arising out of Milbank's alleged tortious
interference with contractual relations, abuse of process and common
law fraud. On December 31, 1998, the Company and JNL settled the
Milwaukee Action, which was thereafter dismissed by the agreement of
the parties on February 24, 1999. The amounts to be received by the
Company in connection with the settlement of the Milwaukee Action are
included in Other Income in the Consolidated Statements of
Operations.
West Machine and Tool Works
On September 23, 1997, Minserco, Inc. ("Minserco"), a wholly-owned
subsidiary of the Company, was found liable to BR West Enterprises,
Inc. d/b/a West Machine and Tool Works ("West") in litigation pending
in the United States District Court for the Eastern District of Texas
(the "Texas Court"), for damages claimed with regard to an alleged
joint venture agreement (the "Minserco Litigation"). On October 29,
1997, a final judgment was entered in the approximate amount of
$4,300,000, including attorney's fees and costs. Minserco strongly
disputed the Findings of Fact and Conclusions of Law entered by the
Texas Court and had appealed the case to the United States Court of
Appeals for the Fifth Circuit. On November 5, 1997, the Company was
sued by West in the Texas Court on substantially similar grounds
asserted in the Minserco Litigation in an apparent attempt to hold
the Company liable for the damages awarded to West in the Minserco
Litigation. On June 19, 1998, the Company and Minserco settled the
Minserco Litigation, and all claims against either the Company or
Minserco were dismissed with prejudice.
Environmental
Expenditures for ongoing compliance with environmental regulations
that relate to current operations are expensed or capitalized as
appropriate. Expenditures that relate to an existing condition
caused by past operations and which do not contribute to current or
future revenue generation are expensed. Liabilities are recorded
when environmental assessments indicate that remedial efforts are
probable and the costs can be reasonably estimated. Estimates of the
liability are based upon currently available facts, existing
technology and presently enacted laws and regulations. These
liabilities are included in the Consolidated Balance Sheets at their
undiscounted amounts. Recoveries are evaluated separately from the
liability and, if appropriate, are recorded separately from the
associated liability in the Consolidated Balance Sheets.
Product Liability
The Company is normally subject to numerous product liability claims,
many of which relate to products no longer manufactured by the
Company or its subsidiaries, and other claims arising in the ordinary
course of business. The Company has insurance covering most of said
claims, subject to varying deductibles ranging from $300,000 to
$3,000,000, and has various limits of liability depending on the
insurance policy year in question. It is the view of management that
the final resolution of said claims and other similar claims which
are likely to arise in the future will not individually or in the
aggregate have a material effect on the Company's financial position
or results of operations, although no assurance to that effect can be
given.
Other Litigation
The Company is involved in various other litigation arising in the
normal course of business. It is the view of management that the
Company's recovery or liability, if any, under pending litigation is
not expected to have a material effect on the Company's financial
position or results of operations, although no assurance to that
effect can be given.
Commitments
The Company has obligations under various operating leases and rental
and service agreements. The expense relating to these agreements was
$7,157,000 in 1998, $7,240,000 (including $5,157,000 for the
Predecessor) in 1997 and $5,658,000 in 1996. Future minimum annual
payments under noncancellable agreements are as follows:
(Dollars in Thousands)
1999 $ 4,130
2000 3,958
2001 3,746
2002 3,204
2003 2,757
After 2003 4,223
$ 22,018
Credit Risks
A significant portion of the Company's consolidated net sales are to
customers whose activities are related to the coal, copper and iron
ore mining industries, including some who are located in foreign
countries. The Company generally extends credit to these customers
and, therefore, collection of receivables may be affected by the
mining industry economy and the economic conditions in the countries
where the customers are located. However, the Company closely
monitors extension of credit and has not experienced significant
credit losses. Also, most foreign sales are made to large, well-
established companies. The Company generally requires collateral or
guarantees on foreign sales to smaller companies.
NOTE O - QUARTERLY RESULTS - UNAUDITED
Quarterly results are as follows:
Quarters Ended at End of
March June September December
(Dollars in Thousands,
Except Per Share Amounts)
Net sales:
1998 $ 73,700 $ 80,041 $ 76,149 $ 85,948
1997 - - 10,429 84,783
1997 - Predecessor 59,886 83,876 67,703 -
Gross profit(1):
1998 $ 7,119 $ 16,503 $ 15,412 $ 13,593
1997 - - 2,992 6,991
1997 - Predecessor 11,881 15,620 12,449 -
Net earnings (loss)(1):
1998 $ (9,069) $ (293) $ (868) $ 1,966
1997 - - 1,269 (8,427)
1997 - Predecessor(2) 915 2,508 (8,297) -
Basic net earnings (loss)
per common share(1):
1998 $ (6.33) $ (.20) $ (.60) $ 1.37
1997 - - .89 (5.89)
1997 - Predecessor .09 .24 (.81) -
Diluted net earnings (loss)
per common share(1):
1998 $ (6.33) $ (.20) $ (.60) $ 1.37
1997 - - .89 (5.89)
1997 - Predecessor .09 .24 (.78) -
Weighted average shares
outstanding - basic
(in thousands):
1998 1,432 1,438 1,438 1,439
1997 - - 1,430 1,430
1997 - Predecessor 10,242 10,268 10,268 -
Weighted average shares
outstanding - diluted
(in thousands):
1998 1,432 1,438 1,438 1,439
1997 - - 1,430 1,430
1997 - Predecessor 10,283 10,407 10,623 -
(1) Due to the acquisition of the Company by AIPAC, the results of the
Company are not comparable to the results of the Predecessor.
(2) Included in the Predecessor net loss for the period ended September 23,
1997 were $10,051,000 of nonrecurring items. See Note B.
NOTE P - SUPPLEMENTAL CONSOLIDATING CONDENSED FINANCIAL INFORMATION
The Company's payment obligations under the Senior Notes are
guaranteed by certain of the Company's wholly-owned subsidiaries (the
"Guarantor Subsidiaries"). Such guarantees are full, unconditional
and joint and several. Separate financial statements of the
Guarantor Subsidiaries are not presented because the Company's
management has determined that they would not be material to
investors. The following supplemental financial information sets
forth, on an unconsolidated basis, statement of operations, balance
sheet and statement of cash flow information for the Company (the
"Parent Company"), for the Guarantor Subsidiaries and for the
Company's non-guarantor subsidiaries (the "Other Subsidiaries"). The
supplemental financial information reflects the investments of the
Company in the Guarantor and Other Subsidiaries using the equity
method of accounting. Parent Company amounts for net earnings (loss)
and common shareholders' investment differ from consolidated amounts
as intercompany profit in subsidiary inventory has not been
eliminated in the Parent Company statement but has been eliminated in
the Consolidated Totals.
<PAGE>
<TABLE>
<CAPTION>
Bucyrus International, Inc. and Subsidiaries
Consolidating Condensed Statements of Operations
For the Year Ended December 31, 1998
(Dollars in Thousands)
Parent Guarantor Other Consolidated
Company Subsidiaries Subsidiaries Eliminations Total
<S> <C> <C> <C> <C> <C>
Revenues:
Net sales $206,633 $ 35,444 $145,468 $(71,707) $315,838
Other income 9,100 3 954 (3,353) 6,704
________ ________ ________ ________ ________
215,733 35,447 146,422 (75,060) 322,542
________ ________ ________ ________ ________
Costs and Expenses:
Cost of products sold 177,511 31,550 124,619 (70,469) 263,211
Engineering and field
service, selling,
administrative
and miscellaneous
expenses 29,673 1,939 14,720 - 46,332
Interest expense 18,503 728 2,982 (3,353) 18,860
________ ________ ________ ________ ________
225,687 34,217 142,321 (73,822) 328,403
________ ________ ________ ________ ________
Earnings (loss) before
income taxes and equity
in net earnings of
consolidated subsidiaries (9,954) 1,230 4,101 (1,238) (5,861)
Income taxes 38 492 1,873 - 2,403
________ ________ ________ ________ ________
Earnings (loss) before
equity in net earnings of
consolidated subsidiaries (9,992) 738 2,228 (1,238) (8,264)
Equity in net earnings of
consolidated subsidiaries 2,966 - - (2,966) -
________ ________ ________ ________ ________
Net earnings (loss) $ (7,026) $ 738 $ 2,228 $ (4,204) $ (8,264)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Bucyrus International, Inc. and Subsidiaries
Consolidating Condensed Statements of Operations
For the Period September 24, 1997 to December 31, 1997
(Dollars in Thousands)
Parent Guarantor Other Consolidated
Company Subsidiaries Subsidiaries Eliminations Total
<S> <C> <C> <C> <C> <C>
Revenues:
Net sales $ 64,060 $ 8,047 $ 38,196 $(15,091) $ 95,212
Other income 890 - 242 (786) 346
________ ________ ________ ________ ________
64,950 8,047 38,438 (15,877) 95,558
________ ________ ________ ________ ________
Costs and Expenses:
Cost of products sold 58,115 7,057 35,530 (15,473) 85,229
Engineering and field
service, selling,
administrative
and miscellaneous
expenses 7,759 621 4,473 - 12,853
Interest expense 4,840 92 771 (786) 4,917
________ ________ ________ ________ ________
70,714 7,770 40,774 (16,259) 102,999
________ ________ ________ ________ ________
Earnings (loss) before
income taxes and equity
in net earnings (loss) of
consolidated subsidiaries (5,764) 277 (2,336) 382 (7,441)
Income taxes (benefit) 73 111 (467) - (283)
________ ________ ________ ________ ________
Earnings (loss) before equity
in net earnings (loss) of
consolidated subsidiaries (5,837) 166 (1,869) 382 (7,158)
Equity in net earnings
(loss) of consolidated
subsidiaries (1,703) - - 1,703 -
________ ________ ________ ________ ________
Net earnings (loss) $ (7,540) $ 166 $ (1,869) $ 2,085 $ (7,158)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Bucyrus International, Inc. and Subsidiaries
Consolidating Condensed Statements of Operations
For the Period January 1, 1997 to September 23, 1997 - Predecessor
(Dollars in Thousands)
Parent Guarantor Other Consolidated
Company Subsidiaries Subsidiaries Eliminations Total
<S> <C> <C> <C> <C> <C>
Revenues:
Net sales $126,962 $ 23,836 $ 84,658 $(23,991) $211,465
Other income 1,696 1 274 (682) 1,289
________ ________ ________ ________ ________
128,658 23,837 84,932 (24,673) 212,754
________ ________ ________ ________ ________
Costs and Expenses:
Cost of products sold 107,735 20,240 67,278 (23,738) 171,515
Engineering and field
service, selling,
administrative
and miscellaneous
expenses 16,190 1,871 9,024 30 27,115
Interest expense 5,818 248 922 (682) 6,306
Nonrecurring items 10,051 - - - 10,051
________ ________ ________ ________ ________
139,794 22,359 77,224 (24,390) 214,987
________ ________ ________ ________ ________
Earnings (loss) before
income taxes and equity
in net earnings of
consolidated subsidiaries (11,136) 1,478 7,708 (283) (2,233)
Income taxes (benefit) (412) 576 2,477 - 2,641
________ ________ ________ ________ ________
Earnings (loss) before
equity in net earnings of
consolidated subsidiaries (10,724) 902 5,231 (283) (4,874)
Equity in net earnings of
consolidated subsidiaries 6,133 - - (6,133) -
________ ________ ________ ________ ________
Net earnings (loss) $ (4,591) $ 902 $ 5,231 $ (6,416) $ (4,874)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Bucyrus International, Inc. and Subsidiaries
Consolidating Condensed Statements of Operations
For the Year Ended December 31, 1996 - Predecessor
(Dollars in Thousands)
Parent Guarantor Other Consolidated
Company Subsidiaries Subsidiaries Eliminations Total
<S> <C> <C> <C> <C> <C>
Revenues:
Net sales $174,677 $ 32,235 $ 88,232 $(31,358) $263,786
Other income 1,531 1 582 (1,111) 1,003
________ ________ ________ ________ ________
176,208 32,236 88,814 (32,469) 264,789
________ ________ ________ ________ ________
Costs and Expenses:
Cost of products sold 149,383 27,308 70,133 (31,698) 215,126
Engineering and field
service, selling,
administrative
and miscellaneous
expenses 21,220 1,967 13,266 17 36,470
Interest expense 8,384 433 851 (1,111) 8,557
________ ________ ________ ________ ________
178,987 29,708 84,250 (32,792) 260,153
________ ________ ________ ________ ________
Earnings (loss) before
income taxes and equity
in net earnings of
consolidated subsidiaries (2,779) 2,528 4,564 323 4,636
Income taxes (benefit) (401) 985 1,174 - 1,758
________ ________ ________ ________ ________
Earnings (loss) before
equity in net earnings of
consolidated subsidiaries (2,378) 1,543 3,390 323 2,878
Equity in net earnings of
consolidated subsidiaries 4,933 - - (4,933) -
________ ________ ________ ________ ________
Net earnings (loss) $ 2,555 $ 1,543 $ 3,390 $ (4,610) $ 2,878
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Bucyrus International, Inc. and Subsidiaries
Consolidating Condensed Balance Sheets
December 31, 1998
(Dollars in Thousands)
Parent Guarantor Other Consolidated
Company Subsidiaries Subsidiaries Eliminations Total
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ - $ 60 $ 8,761 $ - $ 8,821
Receivables 32,414 3,926 25,387 - 61,727
Intercompany receivables 77,179 1,855 1,365 (80,399) -
Inventories 67,052 4,728 43,056 (1,610) 113,226
Prepaid expenses and
other current assets 763 596 5,022 - 6,381
________ ________ ________ _________ ________
Total Current Assets 177,408 11,165 83,591 (82,009) 190,155
OTHER ASSETS:
Restricted funds on deposit - - 476 - 476
Goodwill 71,835 - - - 71,835
Intangible assets - net 42,441 132 - - 42,573
Other assets 9,556 - 1,970 - 11,526
Investment in subsidiaries 25,725 - - (25,725) -
________ ________ ________ _________ ________
149,557 132 2,446 (25,725) 126,410
PROPERTY, PLANT AND
EQUIPMENT - net 75,286 14,894 10,450 - 100,630
________ ________ ________ _________ ________
$402,251 $ 26,191 $ 96,487 $(107,734) $417,195
LIABILITIES AND COMMON
SHAREHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Accounts payable and
accrued expenses $ 42,501 $ 1,597 $ 11,185 $ (333) $ 54,950
Intercompany payables - 22,906 54,808 (77,714) -
Liabilities to customers
on uncompleted contracts
and warranties 2,526 - 642 - 3,168
Income taxes 186 28 736 - 950
Short-term obligations 513 - - - 513
Current maturities of
long-term debt 168 - 838 - 1,006
________ ________ ________ _________ ________
Total Current Liabilities 45,894 24,531 68,209 (78,047) 60,587
LONG-TERM LIABILITIES:
Liabilities to customers
on uncompleted contracts
and warranties 4,839 - 575 - 5,414
Postretirement benefits 13,645 - 543 - 14,188
Deferred expenses and other 13,052 206 1,327 - 14,585
________ ________ ________ _________ ________
31,536 206 2,445 - 34,187
LONG-TERM DEBT, less
current maturities 200,746 - 1,562 - 202,308
COMMON SHAREHOLDERS'
INVESTMENT 124,075 1,454 24,271 (29,687) 120,113
________ ________ ________ _________ ________
$402,251 $ 26,191 $ 96,487 $(107,734) $417,195
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Bucyrus International, Inc. and Subsidiaries
Consolidating Condensed Balance Sheets
December 31, 1997
(Dollars in Thousands)
Parent Guarantor Other Consolidated
Company Subsidiaries Subsidiaries Eliminations Total
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ - $ 103 $ 14,968 $ - $ 15,071
Receivables 27,583 3,695 18,856 (691) 49,443
Intercompany receivables 53,751 1,763 847 (56,361) -
Inventories 67,958 1,890 46,888 (1,721) 115,015
Prepaid expenses and
other current assets 978 354 3,164 - 4,496
________ ________ ________ ________ ________
Total Current Assets 150,270 7,805 84,723 (58,773) 184,025
OTHER ASSETS:
Restricted funds on deposit - - 1,056 - 1,056
Goodwill 65,929 - - - 65,929
Intangible assets - net 44,570 226 - - 44,796
Other assets 10,101 33 2,543 - 12,677
Investment in subsidiaries 34,093 - - (34,093) -
________ ________ ________ ________ ________
154,693 259 3,599 (34,093) 124,458
PROPERTY, PLANT AND
EQUIPMENT - net 83,218 3,563 10,843 - 97,624
________ ________ ________ ________ ________
$388,181 $ 11,627 $ 99,165 $(92,866) $406,107
LIABILITIES AND COMMON
SHAREHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Accounts payable and
accrued expenses $ 38,858 $ 2,362 $ 10,550 $ 136 $ 51,906
Intercompany payables 105 6,042 49,055 (55,202) -
Liabilities to customers
on uncompleted contracts
and warranties 7,086 31 1,199 - 8,316
Income taxes 359 59 1,652 - 2,070
Short-term obligations 409 - 174 - 583
Current maturities of
long-term debt - - 267 - 267
________ ________ ________ ________ ________
Total Current Liabilities 46,817 8,494 62,897 (55,066) 63,142
LONG-TERM LIABILITIES:
Liabilities to customers
on uncompleted contracts
and warranties 3,270 - 580 - 3,850
Postretirement benefits 14,099 - 566 - 14,665
Deferred expenses and other 15,820 412 1,353 - 17,585
________ ________ ________ ________ ________
33,189 412 2,499 - 36,100
LONG-TERM DEBT, less
current maturities 172,215 - 2,397 - 174,612
COMMON SHAREHOLDERS'
INVESTMENT 135,960 2,721 31,372 (37,800) 132,253
________ ________ ________ ________ ________
$388,181 $ 11,627 $ 99,165 $(92,866) $406,107
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Bucyrus International, Inc. and Subsidiaries
Consolidating Condensed Statements of Cash Flows
For the Year Ended December 31, 1998
(Dollars in Thousands)
Parent Guarantor Other Consolidated
Company Subsidiaries Subsidiaries Eliminations Total
<S> <C> <C> <C> <C> <C>
Net Cash Provided By
(Used In) Operating
Activities $(22,339) $ 3,140 $ (4,947) $ - $(24,146)
________ ________ ________ ________ ________
Cash Flows From Investing
Activities
Decrease in restricted
funds on deposit - - 580 - 580
Purchases of property,
plant and equipment (8,055) (3,183) (1,565) - (12,803)
Proceeds from sale of
property, plant and
equipment 46 - 1,382 - 1,428
Dividends paid to parent 958 - (958) - -
________ ________ ________ ________ ________
Net cash used in
investing activities (7,051) (3,183) (561) - (10,795)
________ ________ ________ ________ ________
Cash Flows From Financing
Activities
Net (increase) decrease
in other bank borrowings 104 - (174) - (70)
Payment of acquisition
and refinancing expenses (293) - - - (293)
Proceeds from issuance of
long-term debt 28,785 - - - 28,785
Payment of long-term debt (86) - (264) - (350)
Proceeds from issuance
of common stock 880 - - - 880
________ ________ ________ ________ ________
Net cash used in
financing activities 29,390 - (438) - 28,952
________ ________ ________ ________ ________
Effect of exchange rate
changes on cash - - (261) - (261)
________ ________ ________ ________ ________
Net decrease in cash
and cash equivalents - (43) (6,207) - (6,250)
Cash and cash equivalents
at beginning of year - 103 14,968 - 15,071
________ ________ ________ ________ ________
Cash and cash equivalents
at end of year $ - $ 60 $ 8,761 $ - $ 8,821
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Bucyrus International, Inc. and Subsidiaries
Consolidating Condensed Statements of Cash Flows
For the Period September 24, 1997 to December 31, 1997
(Dollars in Thousands)
Parent Guarantor Other Consolidated
Company Subsidiaries Subsidiaries Eliminations Total
<S> <C> <C> <C> <C> <C>
Net Cash Provided by
Operating Activities $ 6,079 $ 440 $ 9,286 $ - $ 15,805
________ ________ ________ ________ ________
Cash Flows From Investing
Activities
Payment to cash out stock
options and stock
appreciation rights (6,944) - - - (6,944)
Decrease in restricted
funds on deposit - - 23 - 23
Purchases of property,
plant and equipment (1,234) (497) (1,128) - (2,859)
Proceeds from sale of
property, plant and
equipment 235 - 275 - 510
Acquisition of Bucyrus
International, Inc. (189,622) - - - (189,622)
Receivable from Global 6,346 - (1,071) - 5,275
________ ________ ________ ________ ________
Net cash used in investing
activities (191,219) (497) (1,901) - (193,617)
________ ________ ________ ________ ________
Cash Flows From Financing
Activities
Reduction of project
financing obligations (8,102) - - - (8,102)
Net increase (decrease)
in other bank borrowings 22,231 (459) (935) - 20,837
Payment of acquisition
and refinancing expenses (13,426) - - - (13,426)
Payment of bridge loan (27,024) - (17,976) - (45,000)
Capital contribution 143,030 - - - 143,030
Proceeds from issuance of
long-term debt 150,000 - - - 150,000
Payment of long-term debt (65,785) - - - (65,785)
Change in intercompany
accounts (17,976) - 17,976 - -
________ ________ ________ ________ ________
Net cash provided by (used in)
financing activities 182,948 (459) (935) - 181,554
________ ________ ________ ________ ________
Effect of exchange rate
changes on cash - - (352) - (352)
________ ________ ________ ________ ________
Net (decrease) increase
in cash and cash
equivalents (2,192) (516) 6,098 - 3,390
Cash and cash equivalents
at beginning of period 2,192 619 8,870 - 11,681
________ ________ ________ ________ ________
Cash and cash equivalents
at end of period $ - $ 103 $ 14,968 $ - $ 15,071
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Bucyrus International, Inc. and Subsidiaries
Consolidating Condensed Statements of Cash Flows
For the Period January 1, 1997 to September 23, 1997 - Predecessor
(Dollars in Thousands)
Parent Guarantor Other Consolidated
Company Subsidiaries Subsidiaries Eliminations Total
<S> <C> <C> <C> <C> <C>
Net Cash Provided by (Used
In) Operating Activities $ (9,085) $ 804 $ 1,681 $ - $ (6,600)
________ ________ ________ ________ ________
Cash Flows From Investing
Activities
Purchases of property,
plant and equipment (985) (144) (3,202) - (4,331)
Proceeds from sale of
property, plant and
equipment 5 - 1,222 - 1,227
Purchase of Von's Welding,
Inc., net of cash
acquired (841) - - - (841)
Purchase of surface mining
and equipment business
of Global Industrial
Technologies, Inc. (15,827) - (20,893) - (36,720)
Receivable from Global (6,346) - 1,071 - (5,275)
Change in intercompany
accounts (1,846) - 1,846 - -
Dividends paid to parent 150 - (150) - -
________ ________ ________ ________ ________
Net cash used in investing
activities (25,690) (144) (20,106) - (45,940)
________ ________ ________ ________ ________
Cash Flows From Financing
Activities
Proceeds from issuance
of project financing
obligations 5,672 - - - 5,672
Net increase in other
bank borrowings 36 (190) 654 - 500
Payment of acquisition
and refinancing expenses (1,476) - - - (1,476)
Payment of bridge loan fees (3,361) - - - (3,361)
Proceeds from bridge loan 27,024 - 17,976 - 45,000
Proceeds from issuance
of long-term debt - - 1,706 - 1,706
________ ________ ________ ________ ________
Net cash provided by (used in)
financing activities 27,895 (190) 20,336 - 48,041
________ ________ ________ ________ ________
Effect of exchange rate
changes on cash - - 417 - 417
________ ________ ________ ________ ________
Net (decrease) increase
in cash and cash
equivalents (6,880) 470 2,328 - (4,082)
Cash and cash equivalents
at beginning of period 9,072 149 6,542 - 15,763
________ ________ ________ ________ ________
Cash and cash equivalents
at end of period $ 2,192 $ 619 $ 8,870 $ - $ 11,681
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Bucyrus International, Inc. and Subsidiaries
Consolidating Condensed Statements of Cash Flows
For the Year Ended December 31, 1996 - Predecessor
(Dollars in Thousands)
Parent Guarantor Other Consolidated
Company Subsidiaries Subsidiaries Eliminations Total
<S> <C> <C> <C> <C> <C>
Net Cash Provided by
Operating Activities $ 5,839 $ 1,140 $ 3,108 $ - $ 10,087
________ ________ ________ ________ ________
Cash Flows From Investing
Activities
Decrease in restricted
funds on deposit - - 1,798 - 1,798
Purchases of property,
plant and equipment (1,929) (96) (2,971) - (4,996)
Proceeds from sale of
property, plant and
equipment 855 - 203 - 1,058
Dividends paid to parent 1,550 (1,250) (300) - -
________ ________ ________ ________ ________
Net cash provided by
(used in) investing
activities 476 (1,346) (1,270) - (2,140)
________ ________ ________ ________ ________
Cash Flows From Financing
Activities
Proceeds from issuance
of project financing
obligations 5,402 - - - 5,402
Reduction of project
financing obligations (8,104) - - - (8,104)
Net decrease in other
bank borrowings (3) - (1,347) - (1,350)
Proceeds from issuance
of long-term debt - - 849 - 849
________ ________ ________ ________ ________
Net cash used in
financing activities (2,705) - (498) - (3,203)
________ ________ ________ ________ ________
Effect of exchange rate
changes on cash - - (131) - (131)
________ ________ ________ ________ ________
Net increase (decrease)
in cash and cash
equivalents $ 3,610 $ (206) $ 1,209 $ - $ 4,613
Cash and cash equivalents
at beginning of year 5,462 355 5,333 - 11,150
________ ________ ________ ________ ________
Cash and cash equivalents
at end of year $ 9,072 $ 149 $ 6,542 $ - $ 15,763
</TABLE>
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and
Shareholders of Bucyrus International, Inc.:
We have audited the accompanying consolidated balance sheets of Bucyrus
International, Inc. (Delaware Corporation) as of December 31, 1998 and 1997
and the related consolidated statements of operations, comprehensive income
(loss), common shareholders' investment and cash flows for the year ended
December 31, 1998, the period from September 24, 1997 to December 31, 1997,
the period from January 1, 1997 to September 23, 1997, and the year ended
December 31, 1996. These financial statements and the schedule referred to
below are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and schedule based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Bucyrus
International, Inc. as of December 31, 1998 and 1997, and the results of its
operations and its cash flows for the year ended December 31, 1998, the period
from September 24, 1997 to December 31, 1997, the period from January 1, 1997
to September 23, 1997, and the year ended December 31, 1996 in conformity with
generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the consolidated
financial statements taken as a whole. The schedule listed in the index at
item 14(a)2 is the responsibility of the Company's management and is presented
for purposes of complying with the Securities and Exchange Commission's rules
and is not part of the basic consolidated financial statements. This schedule
for the year ended December 31, 1998, the period from September 24, 1997 to
December 31, 1997, the period from January 1, 1997 to September 23, 1997, and
the year ended December 31, 1996 has been subjected to the auditing procedures
applied in the audit of the basic consolidated financial statements and, in
our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic consolidated
financial statements taken as a whole.
/w/Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin,
February 3, 1999
<PAGE>
<TABLE>
<CAPTION>
Bucyrus International, Inc. and Subsidiaries
Schedule II - Valuation and Qualifying Accounts and Reserves
For the Year Ended December 31, 1998,
Periods Ended December 31, 1997 and September 23, 1997
and the Year Ended December 31, 1996
(Dollars in Thousands)
Charges
Balance At (Credits) (Charges) Balance At
Beginning To Costs Credits End
Of Period And Expenses To Reserves(1) Of Period
<S> <C> <C> <C> <C>
Allowance for possible losses:
Year ended December 31, 1998:
Notes and accounts receivable - current $ 734 $ 27 $ 157 $ 918
Period September 24, 1997 to December 31, 1997:
Notes and accounts receivable - current $ 684 $ 112 $ (62) $ 734
Predecessor
Period January 1, 1997 to September 23, 1997:
Notes and accounts receivable - current $ 539 $ (8) $ 153 $ 684
Year ended December 31, 1996:
Notes and accounts receivable - current $ 667 $ (19) $ (109) $ 539
<FN>
(1) Includes uncollected receivables written off, net of recoveries, and translation adjustments at the foreign
subsidiaries. The period January 1, 1997 to September 23, 1997 includes $158,000 of allowance for possible
losses acquired in connection with the Marion Acquisition.
</TABLE>
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
Directors
Directors of the Company are elected annually and hold office until the
next annual meeting of shareholders and until their successors are duly
elected and qualified. The executive officers of the Company serve at the
discretion of the Company's Board of Directors (the "Board").
The following table sets forth, for each of the six directors of the
Company, information 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 above is a citizen of the United States and
the address of such person is the Company's principal executive offices.
There are no family relationships among the directors and executive officers
of the Company.
Name Age Principal Occupation and Directorships
W. Richard Bingham 63 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 Dearfield Associates, Great
Lakes Carbon Corporation, RBX Group,
Stanadyne Automotive and Sweetheart
Holdings. He formerly served on the
boards of Avis, Inc., ITT Life
Insurance Corporation and Valero Energy
Corporation. Mr. Bingham has been a
director of the Company since September
1997.
Willard R. Hildebrand 59 Mr. Hildebrand was President and Chief
Executive Officer of the Company from
March 11, 1996 to December 14, 1998.
Mr. Hildebrand was President and Chief
Executive Officer of Great Dane
Trailers, Inc. (a privately held
manufacturer of a variety of truck
trailers) from 1991 to 1996. Prior to
1991, Mr. Hildebrand held a variety of
sales and marketing positions with
Fiat-Allis North America, Inc. and was
President and Chief Operating Officer
from 1985 to 1991. Mr. Hildebrand has
been a director of the Company since
March 1996.
Stephen R. Light 52 Mr. Light has served as President and
Chief Executive Officer since he joined
the Company on December 14, 1998.
Mr. Light was Vice President and
General Manager - Operations of P&H
Mining Equipment Division, Harnishfeger
Industries from 1997 to 1998. From
1986 to 1997, Mr. Light held various
positions in manufacturing, operations
and marketing with Emerson Electric
Company/ESCO Electronics Corporation.
Mr. Light has been a director of the
Company since January 5, 1999.
Kim A. Marvin 37 Mr. Marvin is a director, the Secretary
and a Vice President of American
Industrial Partners Acquisition
Company, LLC. Mr. Marvin joined the
San Francisco office of American
Industrial Partners in 1997 from the
Mergers & Acquisitions Department of
Goldman, Sachs & Co. where he had been
employed since 1994. Mr. Marvin has
been a director of the Company since
September 1997.
Robert L. Purdum 63 Mr. Purdum is a director and a Managing
Director of American Industrial
Partners Corporation. Mr. Purdum
became the Non-Executive Chairman of
the Company's Board following the AIP
Merger. Mr. Purdum retired as Chairman
of Armco, Inc. in 1994. From November
1990 to 1993, Mr. Purdum was Chairman
and Chief Executive Officer of Armco,
Inc. Mr. Purdum has been a director of
AIP Management Co. since joining
American Industrial Partners in 1994.
Mr. Purdum is also a director of
Holophane Corporation and Berlitz
International, Inc. Mr. Purdum has
been a director of the Company since
November 1997.
Theodore C. Rogers 64 Mr. Rogers is a director, the Chairman
of the Board and the Secretary of
American Industrial Partners
Corporation. He co-founded American
Industrial Partners and has been a
director and officer of the firm since
1989. He is currently a director of
Derby International, Inc., Easco
Corporation, Great Lakes Carbon
Corporation, RBX Group, Stanadyne
Automotive, Steel Heddle Group,
Sunshine Materials Inc. and Sweetheart
Holdings. Mr. Rogers has been a
director of the Company since November
1997.
Mr. Lawrence W. Ward, Jr. served as a director of the Company from
September 26, 1997 through January 5, 1999.
Executive Officers
Set forth below are the names, ages and present occupations of all
executive officers of the Company. Executive officers named therein are
elected annually and serve at the pleasure of the Board. Mr. Light is
employed under an employment agreement, the initial term of which expires on
December 31, 2000, when it automatically renews for additional one-year terms
subject to the provisions of the agreement. Messrs. Mackus, Phillips and
Smoke are each employed under one-year employment agreements which
automatically renew for additional one-year terms subject to the provisions
thereof. See ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS -
Employment Agreements.
Employed by
the Company
Name Age, Position and Background Since
Stephen R. Light Mr. Light, age 52, has served 1998
as President and Chief Executive Officer
since he joined the Company on
December 14, 1998. Mr. Light was
Vice President and General Manager -
Operations of P&H Mining Equipment
Division, Harnishfeger Industries
from 1997 to 1998. From 1986 to 1997,
Mr. Light held various positions in
manufacturing, operations and marketing
with Emerson Electric Company/ESCO
Electronics Corporation. Mr. Light
has been a director of the Company
since January 5, 1999.
John F. Bosbous Mr. Bosbous, age 46, has served as 1984
Treasurer since March 1998.
Mr. Bosbous was Assistant Treasurer
from 1988 to 1998, and Assistant to
the Treasurer from August 1984 to
February 1998.
Frank P. Bruno Mr. Bruno, age 62, has served as 1997
Vice President - Human Resources
since December 1, 1997. Mr. Bruno
was a consultant to the Company
from 1996 to 1997. From 1984 to 1995,
Mr. Bruno held various positions in
Human Resources and Administration
with Eagle Industries, Inc.
Craig R. Mackus Mr. Mackus, age 47, has served as 1974
Secretary since May 1996 and as
Controller since February 1988.
Mr. Mackus was Division Controller
and Assistant Corporate Controller
from 1985 to 1988, Manager of
Corporate Accounting from 1981
to 1982 and 1984 to 1985, and
Assistant Corporate Controller of
Western Gear Corporation from
1982 to 1984.
Michael G. Onsager Mr. Onsager, age 44, has served as 1976
Vice President - 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 53, has served as 1970
Executive Vice President - Operations
since June 1998. He was Vice
President - Materials from March 1996
to June 1998, 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 49, has served as Vice 1996
President and 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 1994 to 1995,
Mr. Smoke was self-employed. From 1986
to 1994, Mr. Smoke held a variety of
financial and operating positions with
Eagle Industries, Inc.
Mr. Timothy W. Sullivan served as the Executive Vice President -
Marketing of the Company through December 31, 1998.
ITEM 11. EXECUTIVE COMPENSATION
Compensation of Directors
Directors of the Company are not compensated for their service as
directors, except Mr. Purdum who is paid $12,500 per month, regardless of
whether meetings are held or the number of meetings held. Directors are
reimbursed for out-of-pocket expenses.
Summary Compensation Table
The following table sets forth certain information for each of the last
three fiscal years concerning compensation awarded to, earned by or paid to
each person who served as the Company's Chief Executive Officer during fiscal
1998 and each of the four most highly compensated executive officers other
than the Chief Executive Officer who were in office on December 31, 1998. The
persons named in the table are sometimes referred to herein as the "named
executive officers".
<PAGE>
<TABLE>
<CAPTION>
Annual Long-Term Compensation
Compensation(1) Awards Payouts
Restricted Securities LTIP All Other
Name and Stock Underlying Payouts Compensation
Principal Position Year Salary($) Bonus($) Awards($)(2) Options(#) ($)(3) ($)(4)
<S> <C> <C> <C> <C> <C> <C> <C>
Stephen R. Light(5) 1998 $ 27,693 - - 59,767 - -
President and Chief
Executive Officer
Willard R. Hildebrand (5) 1998 462,498 110,250 - 28,000 - $ 9,050
President and Chief 1997 400,008 258,750 - - $1,800,000 3,153,803
Executive Officer 1996 323,816 200,000 $2,700,000 200,000 - 265,931
Craig R. Mackus 1998 138,542 17,178 - 7,500 - 5,788
Secretary and 1997 132,914 47,680 - 30,000 - 320,456
Controller 1996 123,000 26,975 - - - 4,090
Thomas B. Phillips 1998 148,075 23,153 - 11,250 - 6,212
Executive Vice 1997 128,500 47,914 - 30,000 - 320,175
President-Operations 1996 119,168 26,976 - - - 4,299
Daniel J. Smoke 1998 187,710 32,280 - 14,250 - 70,349
Vice President and 1997 175,008 104,534 - - - 745,794
Chief Financial 1996 26,390 - - 80,000 - 29,255
Officer
Timothy W. Sullivan 1998 159,134 - - 11,250 - 5,888
Executive Vice 1997 153,666 58,685 - 30,000 - 320,245
President-Marketing 1996 128,004 34,644 - - - 4,260
<FN>
_______________
(1) Certain personal benefits provided by the Company to the named executive officers are not included in the above
table as permitted by SEC regulations because 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 300,000 shares of restricted common stock ("Restricted Stock")
granted under the 1996 Employees' Stock Incentive Plan (the "Employees' Stock Incentive Plan"). 100,000 shares of
Restricted Stock were awarded under a Restricted Stock Agreement which provided that 33,333 shares would vest on
March 11, 1997, 33,333 would vest on March 11, 1998, and 33,334 would vest on March 11, 1999. The remaining
200,000 shares of Restricted Stock were awarded under a Time Accelerated Restricted Stock Agreement, which
provided for vesting in eight years (assuming continued employment, with certain exceptions) and provided for
earlier release in the third, fourth and fifth years if certain earnings targets were reached by the Company.
Both the Restricted Stock Agreement and the Time Accelerated Restricted Stock Agreement provided for accelerated
vesting of all shares awarded thereunder in the event of a change-in-control as defined therein. Such accelerated
vesting occurred in 1997 as a result of the AIP Merger. All such shares were acquired by AIPAC pursuant to the
AIP Tender Offer at a price of $18.00 per share. Dividends were payable on the Restricted Stock at the same rate
as on unrestricted shares. On December 31, 1997, no shares of Restricted Stock were held by Mr. Hildebrand.
(3) Represents that value realized by Mr. Hildebrand upon the purchase in the AIP Tender Offer of the 200,000 unvested
shares of Restricted Stock granted to Mr. Hildebrand in 1996 under the Time Accelerated Restricted Stock Agreement
(see Note (2) above). For purposes of the above table, and to avoid double-counting of compensation, the value
realized is measured as the total consideration received for such shares ($3,600,000) minus the compensation
reported under "Restricted Stock Awards" for 1996 in the above table attributable to such 200,000 shares
($1,800,000).
(4) "All Other Compensation" includes the following: (i) the employer match under the Company's 401(k) savings plan
for 1998, 1997 and 1996, respectively: Mr. Hildebrand ($5,000, $4,750 and $4,750), Mr. Mackus ($5,000, $4,750 and
$3,690), Mr. Phillips ($5,000, $4,081 and $3,262), Mr. Smoke ($5,000 and $4,750) and Mr. Sullivan ($5,000, $4,750
and $3,840); (ii) life insurance premium payments for 1998, 1997 and 1996, respectively: Mr. Hildebrand ($4,050,
$4,050 and $2,775), Mr. Mackus ($788, $706 and $400), Mr. Phillips ($1,212, $1,094 and $1,037), Mr. Smoke ($1,111,
$1,044 and $87) and Mr. Sullivan ($888, $495 and $420); (iii) payments made in 1996 under their respective
employment agreements to Mr. Hildebrand ($258,406 including a relocation allowance of $187,021 and a pension
benefit of $71,385) and to Mr. Smoke (a relocation allowance of $64,238 in 1998 and $29,168 in 1997), (iv) the
value realized by each of the named executive officers on September 24, 1997 upon the cancellation of their
respective stock options and stock appreciation rights ("SARs") in connection with the AIP Merger (measured by the
difference between the option/SAR exercise price and $18.00, times the number of options/SARs held) Mr. Hildebrand
($2,582,500), Mr. Mackus ($315,000), Mr. Phillips ($315,000), Mr. Smoke ($740,000) and Mr. Sullivan ($315,000);
and (v) the value realized by Mr. Hildebrand: (A) upon the vesting of 33,333 shares of Restricted Stock granted to
him in 1996 under the Restricted Stock Agreement (see Note 2 above), based upon the $7.875 fair market value of
such shares on the date of vesting, March 11, 1997 ($262,497); and (B) upon the purchase in the AIP Tender Offer
of the 66,667 unvested shares of Restricted Stock granted to him in 1996 under the Restricted Stock Agreement (see
Note (2) above) ($1,200,006). For purposes of the above table, and to avoid double-counting of Mr. Hildebrand's
compensation, the total of his "Other Annual Compensation" for 1997 ($1,462,503) is reduced by the compensation
reported under "Restricted Stock Awards" for 1996 in the above table attributable to such 100,000 shares
($900,000) in arriving at the value realized.
(5) Mr. Hildebrand was President and Chief Executive Officer from March 11, 1996 through December 14, 1998. Mr. Light
became the President and Chief Executive Officer on December 14, 1998. Compensation earned by Mr. Light in 1998
was paid in 1999.
</TABLE>
1998 Management Stock Option Plan
On March 17, 1998, the Board adopted the 1998 Management Stock Option
Plan (the "1998 Option Plan") as part of the compensation and incentive
arrangements for certain management employees of the Company and its
subsidiaries. The 1998 Option Plan provides for the grant of stock options to
purchase up to an aggregate of 200,000 shares of common stock of the Company
at exercise prices to be determined in accordance with the provisions of the
1998 Option Plan. Options granted under the 1998 Option Plan are targeted to
vest on the last day of the plan year at the rate of 25% of the aggregate
number of shares of common stock underlying each series of options per year,
provided that the Company attained a specified target of EBITDA in that plan
year ($40,209,000 in 1998, $50,399,000 in 1999, and yet to be determined for
the years 2000 and 2001). In the event that the EBITDA goal is not attained
in any plan year, the options scheduled to vest at the end of that plan year
will vest according to a pro rata schedule set forth in the 1998 Option Plan,
provided that if less than 90% of the EBITDA goal is achieved, then no portion
of the options shall vest at the end of that plan year. In the event that the
EBITDA goal is surpassed in any plan year, the surplus shall be applied first
to offset any EBITDA deficit from prior plan years, and second to accelerate
vesting of up to one-quarter of the options scheduled to vest in 2001
according to a pro rata schedule set forth in the 1998 Option Plan.
Notwithstanding the foregoing, all options granted under the 1998 Option
Plan shall vest automatically on the ninth anniversary of the date of the
grant, regardless of performance criteria or, in the event of a Company Sale
(as defined in the 1998 Option Plan), immediately prior to such sale. Options
granted pursuant to the 1998 Option Plan may be forfeited or repurchased by
the Company at fair market value in the event of the participating employee's
termination, and if not previously forfeited or exercised, expire and
terminate no later than ten years after the date of grant or, in the event of
a Company Sale, upon the consummation of such sale.
<PAGE>
<TABLE>
<CAPTION>
Option Grants Table
The following table sets forth information concerning the grant of stock options under the Company's
1998 Option Plan during 1998 to the named executive officers.
Potential Realizable
Value at Assumed
Number of Percent of Annual Rates of Stock
Securities Total Price Appreciation
Underlying Options for Ten Year Option
Options Granted to Exercise or Term(3)
Granted Employees in Base Price Expiration
Name (#) 1998(1) ($/share)(2) Date 5% 10%
<S> <C> <C> <C> <C> <C> <C>
S. R. Light 59,767 33.4% $100.00 12/21/08 $3,759,344 $9,526,860
W. R. Hildebrand 28,000 15.6% $100.00 03/17/08 $1,761,200 $4,463,200
C. R. Mackus 7,500 4.2% $100.00 03/17/08 $ 471,750 $1,195,500
T. B. Phillips 11,250 6.3% $100.00 03/17/08 $ 707,625 $1,793,250
D. J. Smoke 14,250 8.0% $100.00 03/17/08 $ 896,325 $2,271,450
T. W. Sullivan 11,250 6.3% $100.00 03/17/08 $ 707,625 $1,793,250
<FN>
(1) A total of 178,967 options were granted to employees under the 1998 Option Plan during 1998.
(2) The exercise price of each option granted was equal to 100% of the fair value of the Company's common
stock on the date of grant. The fair value was established by the Company's Board of Directors as the
price for which the Company will buy or sell its common stock.
(3) The option values presented were calculated based on a per share price of $100.00 on the date of grant
at assumed 5% and 10% annualized rates of appreciation for the term of the grant. The actual value,
if any, that an optionee could realize upon exercise depends on the excess of the market price of the
common stock over the option exercise price on the date the option is exercised. There was no
assurance at the time of grant that the actual value which may be realized by an optionee upon the
exercise of an option will be at or near the value estimated under the model described above.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Aggregate Option Exercises in 1998 and Year-End Option Values
The following table sets forth information regarding the exercise of stock options by each of the
named executive officers during 1998 and the fiscal year-end value of the unexercised stock options held by
such officers.
Value of Unexercised
Number of Securities In-The-Money
Shares Underlying Unexercised Options at End of
Acquired Options at End of Fiscal Year 1998 (1)
On Value Fiscal Year 1998 (#) ($)
Exercise Realized
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
S. R. Light 0 N/A 0 59,767 $ 0 $ 0
W. R. Hildebrand 0 N/A 0 28,000 0 0
C. R. Mackus 0 N/A 0 7,500 0 0
T. B. Phillips 0 N/A 0 11,250 0 0
D. J. Smoke 0 N/A 0 14,250 0 0
T. W. Sullivan 0 N/A 0 11,250 0 0
<FN>
(1) Substantially all of the Company's common stock is held by AIPAC and there is no established public
trading market therefor. At December 31, 1998, the fair value of the common stock is determined to be
$100 per share which is equivalent to the fair market value on the date of grant. The fair value was
established by the Company's Board of Directors as the price for which the Company will buy or sell its
common stock.
</TABLE>
<PAGE>
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.
Years of Service
Remuneration 35 30 25 20 15
$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
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 (1),
Mr. Smoke (1), Mr. Mackus (18), Mr. Phillips (21) and Mr. Sullivan (19).
Mr. Light is not currently a member of the Company's pension plan. He will
become a member on the first anniversary of his employment with the Company.
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 Report on Executive Compensation
The 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.
Executive Compensation
The Board, 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 Board generally
considers the foregoing factors as well as corporate financial performance.
In individual cases where appropriate, the Board 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 officers' base
salaries are reviewed annually. The Board 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 Board will
approve such compensation.
Executive officers and other Company employees participated in the 1998
Management Incentive Plan. Under the 1998 Management Incentive Plan, the
Board 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 35% 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 80% 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 1998, the Company's actual EBITDA did not exceed budgeted
EBITDA, and the target incentive bonus percentages were decreased by
approximately 50%. Various employees, including the named executive officers,
will receive bonuses under the 1998 Management Incentive Plan in 1999.
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 from March 11, 1996
to December 14, 1998, 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 AND RELATED TRANSACTIONS - Employment Agreements;
Mr. Hildebrand. The factors recited in the first paragraph above under
"Executive Compensation" were considered by the Board in these negotiations.
Mr. Hildebrand also participated in the 1998 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.
International 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 does not so qualify, nor does the 1996 Management Incentive
Plan meet the regulatory criteria for exclusion from the limitation. Where
practical, the Board 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 Board 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).
BOARD OF DIRECTORS OF
BUCYRUS INTERNATIONAL, INC.
W. Richard Bingham
Willard R. Hildebrand
Stephen R. Light
Kim A. Marvin
Robert L. Purdum
Theodore C. Rogers
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial owners of more than five
percent of the Company's common stock as of March 25, 1999:
Amount and Nature
Name and Address of of Beneficial Ownership Percent of Class
Beneficial Owner (# of Shares) Class
AIPAC 1,430,300 99.2%
One Maritime Plaza
Suite 2525
San Francisco, CA 9411
The following table sets forth the beneficial ownership of the Company's
common stock by each director, each of the named executive officers and by all
directors and executive officers of the Company as a group as of March 25,
1999:
Amount and Nature
Name of of Beneficial Ownership (1) Percent of Class
Beneficial Owner (# of Shares) Class (2)
W. R. Bingham 0 (3) *
W. R. Hildebrand 4,000 *
S. R. Light 5,000 *
K. A. Marvin 0 (3) *
R. L. Purdum 0 (3) *
T. C. Rogers 0 (3) *
C. R. Mackus 500 *
T. B. Phillips 750 *
D. J. Smoke 750 *
T. W. Sullivan 0 *
All directors and
executive officers
as a group (12 persons) 11,800 *
(1) Amounts indicated reflect shares as to which the beneficial owner
possesses sole voting and dispositive powers.
(2) Asterisk denotes less than 1%.
(3) Messrs. Bingham, Marvin, Purdum and Rogers are officers of AIPAC which
is the beneficial owner of 1,430,300 shares of common stock of the
Company. Messrs. Bingham, Marvin, Purdum and Rogers each disclaim
beneficial ownership of all such shares.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Employment Agreements
The Company has 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.
Mr. Light
On December 9, 1998, the Company entered into an employment agreement
with Mr. Light to serve as the Company's President and Chief Executive Officer
and to serve on the Company's Board of Directors. The term of such agreement
shall continue until December 31, 2000, and may be extended for additional
one-year periods. Mr. Light's base salary is $450,000 per year, subject to
increase at the discretion of the Board, and he is eligible to participate in
an annual performance bonus plan (the "Bonus Plan"). Mr. Light's employment
agreement provides that his annual cash incentive bonus shall be equal to 50%
of his base salary upon the achievement of targeted performance goals, up to a
maximum of 100% of his base salary in the event of exceptional performance, as
determined in accordance with the Bonus Plan. Mr. Light is entitled to
participate in the Company's employee benefit plan for senior executives and
is provided other fringe benefits, such as club membership, vacation, use of a
Company car and a supplemental long-term disability policy. Mr. Light's
employment agreement also contains particular indemnification, termination and
compensation provisions in the event of potential legal action by Mr. Light's
former employer.
In addition, Mr. Light was required to purchase 5,000 shares of the
Company's common stock at a price of $100 per share. Mr. Light paid the
Company $100,000 of the purchase price of such stock and executed a low
interest promissory note to the Company in the amount of $400,000 for the
balance. Principal and interest payments on the note are due on April 1 of
each of 2000, 2001 and 2002. Such annual principal payments shall be in an
amount not less than 50% of Mr. Light's pre-tax bonus in that year, and any
remaining principal or interest shall be due on March 31, 2003. Such
promissory note is secured by Mr. Light's pledge of these shares of stock to
the Company as collateral pursuant to a pledge agreement entered into
contemporaneously with the promissory note and the employment agreement.
Pursuant to Mr. Light's employment agreement, Mr. Light was also granted
options under the 1998 Option Plan to purchase an additional number of shares
to provide Mr. Light with a total equity stake of 4% of the Company's Common
Stock on a fully diluted basis. Such options vest over a three-year period
beginning on January 1, 1999.
Mr. Hildebrand
Mr. Hildebrand served as President and Chief Executive Officer under an
employment agreement with the Company dated March 11, 1996, as amended
March 5, 1998. Mr. Hildebrand's employment agreement, the initial term of
which expires on March 11, 2000, contemplated that the Company and
Mr. Hildebrand would use their mutual best efforts to identify and select a
replacement for Mr. Hildebrand to assume the responsibilities of Chief
Executive Officer of the Company no later than December 31, 1998. On
December 9, 1998, Mr. Light assumed those responsibilities. Pursuant to
Mr. Hildebrand's employment agreement, he will remain employed as the Vice
Chairman of the Company until the end of the initial term of his employment
agreement. In his capacity as Vice Chairman, Mr. Hildebrand's
responsibilities will be limited to advising the Chief Executive Officer of
the Company on strategic planning and international business development ideas
and will not require Mr. Hildebrand to devote more than 5 days per month to
the business and affairs of the Company. The amendment dated March 5, 1998
also requires that Mr. Hildebrand serve as a director of the Company for the
duration of his employment under the agreement.
As Vice Chairman, Mr. Hildebrand's base salary will be $120,000 per year.
For the period January 1, 1997 to September 30, 1997, Mr. Hildebrand's base
salary under his employment agreement was $400,000 per year, which was
increased to $450,000 effective October 1, 1997. Mr. Hildebrand's base salary
was subject to increase at the discretion of the Board, and he was eligible to
participate in the Bonus Plan, which, in Mr. Hildebrand's case, provided 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. As Vice Chairman, Mr. Hildebrand shall not be entitled to receive
any annual bonus. Under his employment agreement, Mr. Hildebrand is entitled
to participate in the Company's employee benefit plan for senior executives
and is provided other fringe benefits, such as club membership, vacation and
the use of a Company car, except that in his current position of Vice
Chairman, he shall not be entitled to vacation time. Mr. Hildebrand's
employment agreement further 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.
In addition, pursuant to his original employment agreement,
Mr. Hildebrand was granted 300,000 shares of Restricted Stock and options for
200,000 shares of the Company's common stock at 55% of its grant date market
price, all of which were redeemed for $18.00 per share in connection with the
AIP Merger. Pursuant to the March 5, 1998 amendment to his employment
agreement, Mr. Hildebrand was offered (i) up to 4,000 shares of common stock
of the Company for $100.00 per share, and (ii) options to purchase seven times
the number of shares of common stock purchased in (i) above at a price of
$100.00 per share pursuant to the Option Plan.
Mr. Smoke
Mr. Smoke serves as Vice President and Chief Financial Officer under an
employment agreement with the Company dated November 7, 1996, as amended
March 17, 1998. For the period January 1, 1997 to November 6, 1997,
Mr. Smoke's base salary under his employment agreement was $175,000 per year,
which was increased to $185,000 effective November 7, 1997, for so long as he
remains the Vice President and Chief Financial Officer. Mr. Smoke's base
salary is 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. Mr. Smoke is entitled to participate in the Company's
employee benefit plan for senior executives and is provided other fringe
benefits, such as club membership, vacation and the use of a Company car.
Mr. Smoke's employment agreement also provides for payments to reimburse him
for costs associated with the relocation of his residence until September 30,
1998.
In addition, pursuant to his original employment agreement, Mr. Smoke was
granted options for 30,000 shares of the Company's common stock, as well as
stock appreciation rights to 50,000 shares, all of which were redeemed for
$18.00 per share in connection with the AIP Merger. Pursuant to the March 17,
1998 amendment to his employment agreement, Mr. Smoke was offered (i) up to
750 shares of common stock of the Company for $100.00 per share, and (ii)
options to purchase seven times the number of shares of common stock purchased
in (i) above at a price of $100.00 per share pursuant to the Option Plan.
Others
Messrs. Mackus and Phillips 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.
Secured Promissory Note and Pledge Agreement
In connection with Mr. Light's employment, he was required to purchase
5,000 shares of the Company's common stock at an aggregate purchase price of
$500,000. Mr. Light borrowed the sum of $400,000 from the Company to pay a
portion of this purchase price and issued a promissory note to the Company in
such amount, secured by his shares of common stock of the Company. The
interest rate due on such loan is 4.52% per annum. The amount outstanding as
of March 25, 1999 was $400,000.
Consulting Agreement
Prior to Mr. Bruno's becoming an officer of the Company, the Company had
retained Mr. Bruno as a consultant in connection with the Marion Acquisition
and paid Mr. Bruno $60,000 in consulting fees, plus expenses, for services
rendered between April 1997 and November 1997.
Cancellation of Stock Options and SARs
Upon the effective date of the AIP Merger, all issued and outstanding
stock options and SARs were cancelled and, regardless of whether such stock
options or SARs had then vested or were exercisable, each holder of stock
options or SARs received cash per share equal to $18.00 less the "strike
price" of such stock options or SARs. The aggregate cost to the Company of
this treatment of stock options and SARs was approximately $6,944,000.
The Company's directors and executive officers received an aggregate of
approximately $10,300,000 in the AIP Tender Offer and the AIP Merger in
consideration for their shares of common stock, stock options, Restricted
Stock and SARs. The named executive officers received the following payments:
Mr. Hildebrand, $7,982,500; Mr. Mackus, $315,000; Mr. Phillips, $315,000,
Mr. Smoke, $740,000; and Mr. Sullivan, $315,000.
Management Services Agreement
AIP provides substantial ongoing financial and management services to the
Company utilizing the extensive operating and financial experience of AIP's
principals. AIP will receive an annual fee of $1,450,000 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 pursuant to a management services agreement among
AIP, the Company and the Guarantors and will be subordinated in right of
payment to the Senior Notes.
AIP Transaction Fee
At the close of the AIP Merger, AIP was paid a fee of $4,000,000 and
reimbursed for out-of-pocket expenses in connection with the negotiation of
the AIP Agreement and for providing certain investment banking services to the
Company including the arrangement and negotiation of the terms of the Senior
Notes and for other financial advisory and management consulting services.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
Page No.
(a) 1. FINANCIAL STATEMENTS
Consolidated Statements of Operations for the 28
year ended December 31, 1998, periods ended
December 31, 1997 and September 23, 1997
and for the year ended December 31, 1996.
Consolidated Statements of Comprehensive Income (Loss) 29
Consolidated Balance Sheets as of December 31, 30-31
1998 and 1997.
Consolidated Statements of Common Shareholders' 32-33
Investment for the year ended December 31, 1998,
periods ended December 31, 1997 and September 23,
1997 and for the year ended December 31, 1996.
Consolidated Statements of Cash Flows for the 34-37
year end December 31, 1998, periods ended
December 31, 1997 and September 23, 1997 and
the year ended December 31, 1996.
Notes to Consolidated Financial Statements 38-78
for the year ended December 31, 1998, periods
ended December 31, 1997 and September 23, 1997
and for the year ended December 31, 1996.
Report of Arthur Andersen LLP 79
2. FINANCIAL STATEMENT SCHEDULE
Report of Arthur Andersen LLP 79
Schedule II - Valuation and Qualifying 80
Accounts and Reserves
All other schedules are omitted because they are inapplicable, not
required by the instructions or the information is included in the
consolidated financial statements or notes thereto.
3. EXHIBITS
The exhibits listed in the accompanying Exhibit Index are filed as a
part of this Annual Report on Form 10-K.
(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the fourth quarter of 1998.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
BUCYRUS INTERNATIONAL, INC.
(Registrant)
By /s/S. R. Light March 26, 1999
Stephen R. Light, President
and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints S. R. Light and D. J. Smoke, and each of them,
his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments to this report, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said attorneys-
in-fact and agents or any of them, or their substitutes, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature and Title Date
/s/ W. RICHARD BINGHAM March 26, 1999
W. Richard Bingham, Director
/s/ WILLARD R. HILDEBRAND March 26, 1999
Willard R. Hildebrand, Director
/s/ STEPHEN R. LIGHT March 26, 1999
Stephen R. Light, President,
Chief Executive Officer and Director
/s/ KIM A. MARVIN March 29, 1999
Kim A. Marvin, Director
/s/ ROBERT L. PURDUM March 29, 1999
Robert L. Purdum, Director
/s/ THEODORE C. ROGERS March 26, 1999
Theodore C. Rogers, Director
/s/ DANIEL J. SMOKE March 25, 1999
Daniel J. Smoke, Vice President
and Chief Financial Officer
(Principal Financial Officer)
/s/ CRAIG R. MACKUS March 25, 1999
Craig R. Mackus, Secretary
and Controller
(Principal Accounting Officer)
<PAGE>
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH
REPORTS FILED PURSUANT TO SECTION 15(d) OF THE
ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED
SECURITIES PURSUANT TO SECTION 12 OF THE ACT
The Registrant does not furnish an annual report or proxy soliciting
material to its security holders.
<PAGE>
BUCYRUS INTERNATIONAL, INC.
EXHIBIT INDEX
TO
1998 ANNUAL REPORT ON FORM 10-K
Incorporated
Exhibit Herein By Filed
Number Description Reference Herewith
2.1 Agreement and Plan of Exhibit 1 to
Merger dated August 21, Registrant's
1997, between Registrant, Tender Offer
American Industrial Solicitation/
Partners Acquisition Recommendation
Company, LLC and Bucyrus Statement on
Acquisition Corp. Schedule 14D-9
filed with the
Commission on
August 26, 1997.
2.2 Certificate of Merger Exhibit 2.2 to
dated September 26, 1997, Registrant's
issued by the Secretary Current Report
of State of the State of on Form 8-K
Delaware. filed with the
Commission on
October 10, 1997.
2.3 Asset Purchase Agreement Exhibit 2.3 to
dated July 21, 1997, by Registration
and among The Marion Power Statement on
Shovel Company, Marion Form S-4 of
Power Shovel Pty Ltd, Registrant,
Intool International B.V., Boonville Mining
Global-GIX Canada Inc., Services, Inc.,
and Global Industrial Minserco, Inc. and
Technologies, Inc. (Sellers) Von's Welding, Inc.
and Registrant, Bucyrus (SEC Registration
(Australia) Proprietary No. 333-39359)
Ltd., Bucyrus (Africa)
(Proprietary) Limited and
Bucyrus Canada Limited
(Buyers).
[OMITTED PROVISIONS SUBJECT
TO CONFIDENTIAL TREATMENT
BY ORDER OF THE SECURITIES
AND EXCHANGE COMMISSION.]
2.4 Second Amended Joint Plan Exhibit 2.1 to
of Reorganization of B-E Registrant's
Holdings, Inc. and Bucyrus- Current Report
Erie Company under Chapter on Form 8-K,
11 of the Bankruptcy Code, filed with the
as modified December 1, Commission and
1994, including Exhibits. dated December 1,
1994.
EI-1
<PAGE>
Incorporated
Exhibit Herein By Filed
Number Description Reference Herewith
2.5 Order dated December 1, Exhibit 2.2 to
1994 of the U.S. Bankruptcy Registrant's
Court, Eastern District of Current Report
Wisconsin, confirming the on Form 8-K
Second Amended Joint Plan filed with the
of Reorganization of B-E Commission and
Holdings, Inc. and Bucyrus- dated December 1,
Erie Company under Chapter 1994.
11 of the Bankruptcy Code,
as modified December 1, 1994,
including Exhibits.
3.1 Restated Certificate Exhibit 3.1 to
of Incorporation of Registrant's
Registrant. Current Report
on Form 8-K
filed with the
Commission on
October 10, 1997.
3.2 By-laws of Registrant. Exhibit 3.2 to
Registrant's
Current Report
on Form 8-K
filed with the
Commission on
October 10, 1997.
3.3 Amendment to By-laws of Exhibit 3.2 to
Registrant effective Registrant's
November 5, 1997. Quarterly Report
on Form 10-Q for
the quarter ended
September 30, 1997.
3.4 Certificate of Amendment Exhibit 3.4 to
to Restated Certificate Registrant's
of Incorporation adopted Annual Report on
March 17, 1998. Form 10-K for
the year ended
December 31, 1997.
3.5 Amendment to By-laws of X
Registrant effective
December 16, 1998.
3.6 Certificate of Amendment to X
Restated Certificate of
Incorporation adopted
December 16, 1998.
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<PAGE>
Incorporated
Exhibit Herein By Filed
Number Description Reference Herewith
4.1 Indenture of Trust dated Exhibit 4.1 to
as of September 24, 1997 Registration
among Registrant, Boonville Statement on
Mining Services, Inc., Form S-4 of
Minserco, Inc. and Von's Registrant,
Welding, Inc. and Harris Boonville Mining
Trust and Savings Bank, Services, Inc.,
Trustee. Minserco, Inc. and
Von's Welding, Inc.
(SEC Registration
No. 333-39359)
4.2 Form of Guarantee of Included as
Boonville Mining Services, Exhibit E
Inc., Minserco, Inc. and to Exhibit 4.1
Von's Welding, Inc. dated above.
as of September 24, 1997
in favor of Harris Trust
and Savings Bank as Trustee
under the Indenture.
4.3 Form of Registrant's Exhibit 4.3 to
9-3/4% Senior Note due 2007. Registration
Statement on
Form S-4 of
Registrant, Boonville
Mining Services, Inc.,
Minserco, Inc. and
Von's Welding, Inc.
(SEC Registration
No. 333-39359)
10.1 Credit Agreement, dated Exhibit 10.1 to
September 24, 1997 between Registrant's
Bank One, Wisconsin and Current Report
Registrant. on Form 8-K
filed with the
Commission on
October 10, 1997.
10.2 Management Services Agreement Exhibit 10.2 to
by and among Registrant, Registration
Boonville Mining Services, Statement on
Inc., Minserco, Inc. and Form S-4 of
Von's Welding, Inc. and Registrant,
American Industrial Partners. Boonville Mining
Services, Inc.,
Minserco, Inc. and
Von's Welding, Inc.
(SEC Registration
No. 333-39359)
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<PAGE>
Incorporated
Exhibit Herein By Filed
Number Description Reference Herewith
10.3 Registration Agreement dated Exhibit 10.3 to
September 24, 1997 by and Registration
among Registrant, Boonville Statement on
Mining Services, Inc., Form S-4 of
Minserco, Inc. and Von's Registrant,
Welding, Inc. and Salomon Boonville Mining
Brothers, Inc., Jefferies & Services, Inc.,
Company, Inc. and Donaldson, Minserco, Inc. and
Lufkin & Jenrette Securities Von's Welding, Inc.
Corporation. (SEC Registration
No. 333-39359)
10.4 Joint Prosecution Agreement Exhibit 9 to
dated as of August 21, 1997 Registrant's
by and among Registrant and Tender Offer
Jackson National Life Solicitation/
Insurance Company. Recommendation
Statement on
Schedule 14D-9
filed with the
Commission on
August 26, 1997.
10.5 Settlement Agreement dated Exhibit 10 to
as of August 21, 1997, by Registrant's
and between Jackson National Tender Offer
Life Insurance Company and Solicitation/
Registrant. Recommendation
Statement on
Schedule 14D-9
filed with the
Commission on
August 26, 1997.
10.6 Letter Agreement dated Exhibit 10.15
March 7, 1997 between to Registrant's
Jefferies & Company, Inc. Quarterly Report
and Registrant. on Form 10-Q for
the quarter ended
June 30, 1997.
10.7 Letter Agreement dated Exhibit 10.16
July 30, 1997 between to Registrant's
Jefferies & Company, Inc. Quarterly Report
and Registrant. on Form 10-Q for
the quarter ended
June 30, 1997.
10.8 Employment Agreement Exhibit 10.27 to
between Registrant and Registrant's
W. R. Hildebrand dated Annual Report on
as of March 11, 1996. Form 10-K for
the year ended
December 31, 1995.
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<PAGE>
Incorporated
Exhibit Herein By Filed
Number Description Reference Herewith
10.9 Employment Agreement Exhibit 10.38 to
between Registrant and Registrant's
D. J. Smoke dated as of Annual Report on
November 7, 1996. Form 10-K for
the year ended
December 31, 1996.
10.10 Employment Agreement Exhibit 10.17 to
between Registrant and Registrant's
C. R. Mackus dated as of Quarterly Report
May 21, 1997. on Form 10-Q for
the quarter ended
June 30, 1997.
10.11 Employment Agreement Exhibit 10.18 to
between Registrant and Registrant's
M. G. Onsager dated as of Quarterly Report
May 21, 1997. on Form 10-Q for
the quarter ended
June 30, 1997.
10.12 Employment Agreement Exhibit 10.19 to
between Registrant and Registrant's
T. B. Phillips dated as of Quarterly Report
May 21, 1997. on Form 10-Q for
the quarter ended
June 30, 1997.
10.13 Employment Agreement Exhibit 10.20 to
between Registrant and Registrant's
T. W. Sullivan dated as of Quarterly Report
May 21, 1997. on Form 10-Q for
the quarter ended
June 30, 1997.
10.14 Annual Management Incentive Exhibit 10.14 to
Plan for 1997, adopted by Registrant's
Board of Directors Annual Report on
February 5, 1997. Form 10-K for
year ended
December 31, 1997.
10.15 Amendment No. 1 dated Exhibit 10.15 to
March 5, 1998 to Employment Registrant's
Agreement dated March 11, Annual Report on
1996 between Registrant Form 10-K for
and W. R. Hildebrand. year ended
December 31, 1997.
10.16 Amendment No. 1 dated Exhibit 10.16 to
March 17, 1998 to Employment Registrant's
Agreement dated November 7, Annual Report on
1996 between Registrant Form 10-K for
and D. J. Smoke. year ended
December 31, 1997.
EI-5
<PAGE>
Incorporated
Exhibit Herein By Filed
Number Description Reference Herewith
10.17 1998 Management Stock Option Exhibit 10.17 to
Plan. Registrant's
Annual Report on
Form 10-K for
year ended
December 31, 1997.
10.18 Employment Agreement X
between Registrant and
F. P. Bruno dated as of
December 1, 1997.
10.19 Employment Agreement X
between Registrant and
S. R. Light dated as of
December 9, 1998.
10.20 Secured Promissory Note X
between Stephen R. Light
and the Registrant
dated December 18, 1998.
10.21 Pledge Agreement between X
Stephen R. Light and the
Registrant dated
December 18, 1998.
21.1 Subsidiaries of Registrant. Exhibit 21.1 to
Registration
Statement on
Form S-4 of
Registrant,
Boonville Mining
Services, Inc.,
Minserco, Inc. and
Von's Welding, Inc.
(SEC Registration
No. 333-39359)
24.1 Powers of Attorney X*
27.1 Financial Data Schedule X
(Edgar filing only.)
99.1 Management Agreement, Exhibit 99.2 to
dated July 21, 1995, Registrant's
between Registrant Current Report on
and Miller Associates. Form 8-K, dated
July 25, 1995.
99.2 Amendment dated Exhibit 99.2(a)
December 21, 1995 to to Registrant's
Management Agreement Annual Report on
with Miller Associates Form 10-K for
dated July 21, 1995. the year ended
December 31, 1995.
*Included as part of the signature pages to this Annual Report on Form 10-K.
EI-6
EXHIBIT 3.5
FORM 10-K
YEAR ENDED DECEMBER 31, 1998
BY-LAWS
OF
BUCYRUS INTERNATIONAL, INC.
(hereinafter called the "Corporation")
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the
Corporation shall be in the City of Wilmington, County of New Castle, State of
Delaware.
Section 2. Other Offices. The Corporation may also have offices
at such other places both within and without the State of Delaware as the
Board of Directors may from time to time determine.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Place of Meetings. Meetings of the stockholders for
the election of directors or for any other purpose shall be held at such time
and place, either within or without the State of Delaware as shall be
designated from time to time by the Board of Directors and stated in the
notice of the meeting or in a duly executed waiver of notice thereof.
Section 2. Annual Meetings. The annual meetings of stockholders
shall be held on such date and at such time as shall be designated from time
to time by the Board of Directors and stated in the notice of the meeting, at
which meetings the stockholders shall elect by a plurality vote a Board of
Directors, and transact such other business as may properly be brought before
the meeting. Written notice of the annual meeting stating the place, date and
hour of the meeting shall be given to each stockholder entitled to vote at
such meeting not less than 10 nor more than 60 days before the date of the
meeting.
Section 3. Special Meetings. Unless otherwise prescribed by law
or by the Certificate of Incorporation, special meetings of stockholders, for
any purpose or purposes, may be called by either (i) the Chairman, if there be
one, (ii) the President or (iii) the Secretary, and shall be called by any
such officer at the request in writing of a majority of the Board of
Directors. Such request shall state the purpose or purposes of the proposed
meeting. Written notice of a special meeting stating the place, date and hour
of the meeting and the purpose or purposes for which the meeting is called
shall be given not less than 10 nor more than 60 days before the date of the
meeting to each stockholder entitled to vote at such meeting.
Section 4. Quorum. Except as otherwise prescribed by law or by
the Certificate of Incorporation, the holders of a majority of the capital
stock issued and outstanding and entitled to vote thereat, present in person
or represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business. If, however, such quorum shall
not be present or represented at any meeting of the stockholders, the
stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present
or represented. At such adjourned meeting at which a quorum shall be present
or represented, any business may be transacted which might have been
transacted at the meeting as originally noticed. If the adjournment is for
more than thirty days, or if after the adjournment a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting shall be given to
each stockholder entitled to vote at the meeting in accordance with Section 2
or 3 above.
Section 5. Voting. Unless otherwise prescribed by law, the
Certificate of Incorporation or these By-laws, any question brought before any
meeting of stockholders shall be decided by the vote of the holders of a
majority of the stock represented and entitled to vote thereat. Unless
otherwise prescribed by law or the Certificate of Incorporation, each
stockholder represented at a meeting of stockholders shall be entitled to cast
one vote for each share of the capital stock entitled to vote thereat held by
such stockholder. Such votes may be cast in person or by proxy but no proxy
shall be voted on or after three years from its date, unless such proxy
provides for a longer period. The Board of Directors, in its discretion, or
the officer of the Corporation presiding at a meeting of stockholders, in his
or her discretion, may require that any votes cast at such meeting shall be
cast by written ballot.
Section 6. List of Stockholders Entitled to Vote. The officer of
the Corporation who has charge of the stock ledger of the Corporation shall
prepare and make, at least 10 days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open
to the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least 10 days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also
be produced and kept at the time and place of the meeting during the whole
time thereof, and may be inspected by any stockholder of the Corporation who
is present.
Section 7. Stock Ledger. The stock ledger of the Corporation
shall be the only evidence as to who are the stockholders entitled to examine
the stock ledger, the list required by Section 6 of this Article II or the
books of the Corporation, or to vote in person or by proxy at any meeting of
stockholders.
Section 8. Nomination of Directors. Only persons who are
nominated in accordance with the following procedures shall be eligible for
election as directors of the Corporation. Nominations of persons for election
to the Board of Directors may be made at any annual meeting of stockholders
(a) by or at the direction of the Board of Directors (or any duly authorized
committee thereof) or (b) by any stockholder of the Corporation (i) who is a
stockholder of record on the date of the giving of the notice provided for in
this Section 8 and on the record date for the determination of stockholders
entitled to vote at such annual meeting and (ii) who complies with the notice
procedures set forth in this Section 8.
In addition to any other applicable requirements, for a nomination
to be made by a stockholder, such stockholder must have given timely notice
thereof in proper written form to the Secretary of the Corporation.
To be timely, a stockholder's notice to the Secretary must be
delivered to or mailed and received at the principal executive offices of the
Corporation not less than 60 days nor more than 90 days prior to the date of
the annual meeting of stockholders; provided, however, that in the event that
less than 70 days' notice or prior public disclosure of the date of the
meeting is given or made, notice by the stockholder to be timely must be so
received not later than the close of business on the tenth (10th) day
following the day on which such notice of the date of the annual meeting was
mailed or such public disclosure of the date of the annual meeting was made,
whichever first occurs.
To be in proper written form, a stockholder's notice to the
Secretary must set forth (a) as to each person whom the stockholder proposes
to nominate for election as a director (i) the name, age, business address and
residence address of the person, (ii) the principal occupation or employment
of the person, (iii) the class or series and number of shares of capital stock
of the Corporation that are owned beneficially or of record by the person and
(iv) any other information relating to the person that would be required to be
disclosed in a proxy statement or other filings required to be made in
connection with solicitations of proxies for election of directors pursuant to
Section 14 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the rules and regulations promulgated thereunder; and (b) as to the
stockholder giving the notice (i) the name and record address of such
stockholder, (ii) the class or series and number of shares of capital stock of
the Corporation that are owned beneficially or of record by such stockholder,
(iii) a description of all arrangements or understandings between such
stockholder and each proposed nominee and any other person or persons
(including their names) pursuant to which the nomination(s) are to be made by
such stockholder, (iv) a representation that such stockholder intends to
appear in person or by proxy at the meeting to nominate the persons named in
its notice and (v) any other information relating to such stockholder that
would be required to be disclosed in a proxy statement or other filings
required to be made in connection with solicitations of proxies for election
of directors pursuant to Section 14 of the Exchange Act and the rules and
regulations promulgated thereunder. Such notice must be accompanied by a
written consent of each proposed nominee to being named as a nominee and to
serve as a director if elected.
No person shall be eligible for election as a director of the
Corporation unless nominated in accordance with the procedures set forth in
this Section 8. If the Chairman of the meeting determines that a nomination
was not made in accordance with the foregoing procedures, the Chairman shall
declare to the meeting that the nomination was defective and such defective
nomination shall be disregarded.
Section 9. Business at Annual Meetings. No business may be
transacted at an annual meeting of stockholders, other than business that is
either (a) specified in the notice of meeting (or any supplement thereto)
given by or at the direction of the Board of Directors (or any duly authorized
committee thereof), (b) otherwise properly brought before the annual meeting
by or at the direction of the Board of Directors (or any duly authorized
committee thereof) or (c) otherwise properly brought before the annual meeting
by any stockholder of the Corporation (i) who is a stockholder of record on
the date of the giving of the notice provided for in this Section 9 and on the
record date for the determination of stockholders entitled to vote at such
annual meeting and (ii) who complies with the notice procedures set forth in
this Section 9.
In addition to any other applicable requirements, for business to
be properly brought before an annual meeting by a stockholder, such
stockholder must have given timely notice thereof in proper written form to
the Secretary of the Corporation.
To be timely, a stockholder's notice to the Secretary must be
delivered to or mailed and received at the principal executive offices of the
Corporation not less than 60 days nor more than 90 days prior to the date of
the annual meeting of stockholders; provided, however, that in the event that
less than 70 days' notice or prior public disclosure of the date of the
meeting be given or made, notice by the stockholder to be timely must be so
received not later than the close of business on the tenth (10th) day
following the day on which such notice of the date of the annual meeting was
mailed or such public disclosure of the date of the annual meeting was made,
whichever first occurs.
To be in proper written form, a stockholder's notice to the
Secretary must set forth as to each matter such stockholder proposes to bring
before the annual meeting (i) a brief description of the business desired to
be brought before the annual meeting and the reasons for conducting such
business at the annual meeting, (ii) the name and record address of such
stockholder, (iii) the class or series and number of shares of capital stock
of the Corporation that are owned beneficially or of record by such
stockholder, (iv) a description of all arrangements or understandings between
such stockholder and any other person or persons (including their names) in
connection with the proposal of such business by such stockholder and any
material interest of such stockholder in such business and (v) a
representation that such stockholder intends to appear in person or by proxy
at the annual meeting to bring such business before the meeting.
No business shall be conducted at the annual meeting of
stockholders except business brought before the annual meeting in accordance
with the procedures set forth in this Section 9, provided, however, that, once
business has been properly brought before the annual meeting in accordance
with such procedures, nothing in this Section 9 shall be deemed to preclude
discussion by any stockholder of any such business. If the Chairman of an
annual meeting determines that business was not properly brought before the
annual meeting in accordance with the foregoing procedures, the Chairman shall
declare to the meeting that the business was not properly brought before the
meeting and such business shall not be transacted.
ARTICLE III
DIRECTORS
Section 1. Number and Election of Directors. The Board of
Directors shall consist of six (6) directors or such other greater or lesser
number as shall be fixed from time to time by further resolution of this Board
of Directors. Except as provided in Section 2 of this Article III, directors
shall be elected by a plurality of the votes cast at annual meetings of
stockholders, and each director so elected shall hold office until the next
annual meeting and until his or her successor is duly elected and qualified,
or until his or her earlier death, resignation or removal. Any director may
resign at any time upon notice to the Corporation. Directors need not be
stockholders.
Section 2. Vacancies. Any vacancy on the Board of Directors that
results from an increase in the number of directors may be filled by a
majority of the Board of Directors then in office, provided that a quorum is
present, and any other vacancy occurring in the Board of Directors may be
filled by a majority of the directors then in office, even if less than a
quorum, or by a sole remaining director. Any director of any class elected to
fill a vacancy resulting from an increase in such class shall hold office for
a term that shall coincide with the remaining term of that class. Any
director elected to fill a vacancy not resulting from an increase in the
number of directors shall have the same remaining term as his or her
predecessor. Directors of the Corporation may be removed by the stockholders
of the Corporation only for cause.
Section 3. Duties and Powers. The business of the Corporation
shall be managed by or under the direction of the Board of Directors which may
exercise all such powers of the Corporation and do all such lawful acts and
things as are not by statute or by the Certificate of Incorporation or by
these By-laws directed or required to be exercised or done by the
stockholders.
Section 4. Meetings. The Board of Directors of the Corporation
may hold meetings, both regular and special, either within or without the
State of Delaware. Regular meetings of the Board of Directors may be held
without notice at such time and at such place as may from time to time be
determined by the Board of Directors. Special meetings of the Board of
Directors may be called by the Chairman, if there be one, the President, or by
a majority of the directors then in office. Notice thereof stating the place,
date and hour of the meeting shall be given to each director either by mail
not less than forty-eight (48) hours before the date of the meeting, by
telephone or telegram on twenty-four (24) hours' notice, or on such shorter
notice as the person or persons calling such meeting may deem necessary or
appropriate in the circumstances.
Section 5. Quorum. Except as otherwise prescribed by law, the
Certificate of Incorporation or these By-laws, at all meetings of the Board of
Directors, a majority of the entire Board of Directors shall constitute a
quorum for the transaction of business and the act of a majority of the
directors present at any meeting at which there is a quorum shall be the act
of the Board of Directors. If a quorum shall not be present at any meeting of
the Board of Directors, the directors present thereat may adjourn the meeting
from time to time, without notice other than announcement at the meeting,
until a quorum shall be present.
Section 6. Actions of Board. Unless otherwise prescribed by the
Certificate of Incorporation or these By-laws, any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting, if all the members of the
Board of Directors or committee, as the case may be, consent thereto in
writing, and the writing or writings are filed with the minutes of proceedings
of the Board of Directors or committee.
Section 7. Meetings by Means of Conference Telephone. Unless
otherwise prescribed by the Certificate of Incorporation or these By-laws,
members of the Board of Directors of the Corporation, or any committee
designated by the Board of Directors, may participate in a meeting of the
Board of Directors or such committee by means of a conference telephone or
similar communications equipment by means of which all persons participating
in the meeting can hear each other, and participation in a meeting pursuant to
this Section 7 shall constitute presence in person at such meeting.
Section 8. Compensation. The directors may be paid their
expenses, if any, of attendance at each meeting of the Board of Directors and
may be paid, in cash or stock of the Corporation, a fixed sum for attendance
at each meeting of the Board of Directors or a stated salary as a director.
No such payment shall preclude any director from serving the Corporation in
any other capacity and receiving compensation therefor. Members of special or
standing committees may be allowed like compensation for attending committee
meetings.
Section 9. Interested Directors. No contract or transaction
between the Corporation and one or more of its directors or officers, or
between the Corporation and any other corporation, partnership, association,
or other organization in which one or more of its directors or officers are
directors or officers, or have a financial interest, shall be void or voidable
solely for this reason, or solely because the director or officer is present
at or participates in the meeting of the Board of Directors or committee
thereof which authorizes the contract or transaction, or solely because his or
their votes are counted for such purpose if (i) the material facts as to his
or their relationship or interest and as to the contract or transaction are
disclosed or are known to the Board of Directors or the committee, and the
Board of Directors or committee in good faith authorizes the contract or
transaction by the affirmative votes of a majority of the disinterested
directors, even though the disinterested directors be less than a quorum; or
(ii) the material facts as to his or their relationship or interest and as to
the contract or transaction are disclosed or are known to the stockholders
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by vote of the stockholders; or (iii) the contract or
transaction is fair as to the Corporation as of the time it is authorized,
approved or ratified, by the Board of Directors, a committee thereof or the
stockholders. Common or interested directors may be counted in determining
the presence of a quorum at a meeting of the Board of Directors or of a
committee which authorizes the contract or transaction.
ARTICLE IV
OFFICERS
Section 1. General. The officers of the Corporation shall be
chosen by the Board of Directors and shall be a President, a Secretary and a
Treasurer. The Board of Directors, in its discretion, may also choose a
Chairman of the Board of Directors (who must be a director) and one or more
Vice Presidents, Assistant Secretaries, Assistant Treasurers and other
officers. Any number of offices may be held by the same person, unless
otherwise prohibited by law, the Certificate of Incorporation or these By-
laws. The officers of the Corporation need not be stockholders of the
Corporation nor, except in the case of the Chairman of the Board of Directors,
need such officers be directors of the Corporation.
Section 2. Election. The Board of Directors at its first meeting
held after each annual meeting of stockholders shall elect the officers of the
Corporation who shall hold their offices for such terms and shall exercise
such powers and perform such duties as shall be determined from time to time
by the Board of Directors; and all officers of the Corporation shall hold
office until their successors are chosen and qualified, or until their earlier
death, resignation or removal. Any officer elected by the Board of Directors
may be removed at any time by the affirmative vote of a majority of the Board
of Directors. Any vacancy occurring in any office of the Corporation shall be
filled by the Board of Directors. The salaries of all officers of the
Corporation shall be fixed by the Board of Directors.
Section 3. Voting Securities Owned by the Corporation. Powers of
attorney, proxies, waivers of notice of meeting, consents and other
instruments relating to securities owned by the Corporation may be executed in
the name of and on behalf of the Corporation by the President or any Vice
President and any such officer may, in the name of and on behalf of the
Corporation, take all such action as any such officer may deem advisable to
vote in person or by proxy at any meeting of security holders of any
corporation in which the Corporation may own securities and at any such
meeting shall possess and may exercise any and all rights and power incident
to the ownership of such securities and which, as the owner thereof, the
Corporation might have exercised and possessed if present. The Board of
Directors may, by resolution, from time to time confer like powers upon any
other person or persons.
Section 4. Chairman of the Board of Directors. The Chairman of
the Board of Directors, if there be one, shall preside at all meetings of the
stockholders and of the Board of Directors. The Chairman of the Board of
Directors shall be the Chief Executive Officer of the Corporation, and except
where by law the signature of the President is required, the Chairman of the
Board of Directors shall possess the same power as the President to sign all
contracts, certificates and other instruments of the Corporation which may be
authorized by the Board of Directors. During the absence or disability of the
President, the Chairman of the Board of Directors shall exercise all the
powers and discharge all the duties of the President. The Chairman of the
Board of Directors shall also perform such other duties and may exercise such
other powers as from time to time may be assigned to him or her by these By-
laws or by the Board of Directors.
Section 5. President. The President shall, subject to the
control of the Board of Directors and, if there be one, the Chairman of the
Board of Directors, have general supervision of the business of the
Corporation and shall see that all orders and resolutions of the Board of
Directors are carried into effect. The President shall execute all bonds,
mortgages, contracts and other instruments of the Corporation requiring a
seal, under the seal of the Corporation, except where required or permitted by
law to be otherwise signed and executed and except that the other officers of
the Corporation may sign and execute documents when so authorized by these By-
laws, the Board of Directors or the President. In the absence or disability
of the Chairman of the Board of Directors, or if there be none, the President
shall preside at all meetings of the stockholders and the Board of Directors.
If there be no Chairman of the Board of Directors, the President shall be the
Chief Executive Officer of the Corporation. The President shall also perform
such other duties and may exercise such other powers as from time to time may
be assigned to him or her by these By-laws or by the Board of Directors.
Section 6. Vice Presidents. At the request of the President or
in the President's absence or in the event of the President's inability or
refusal to act (and if there be no Chairman of the Board of Directors), the
Vice President or the Vice Presidents if there is more than one (in the order
designated by the Board of Directors) shall perform the duties of the
President, and when so acting, shall have all the powers of and be subject to
all the restrictions upon the President. Each Vice President shall perform
such other duties and have such other powers as the Board of Directors from
time to time may prescribe. If there be no Chairman of the Board of Directors
and no Vice President, the Board of Directors shall designate the officer of
the Corporation who, in the absence of the President or in the event of the
inability or refusal of the President to act, shall perform the duties of the
President, and when so acting, shall have all the powers of and be subject to
all the restrictions upon the President.
Section 7. Secretary. The Secretary shall attend all meetings of
the Board of Directors and all meetings of stockholders and record all the
proceedings thereat in a book or books to be kept for that purpose; the
Secretary shall also perform like duties for the standing committees when
required. The Secretary shall give, or cause to be given, notice of all
meetings of the stockholders and special meetings of the Board of Directors,
and shall perform such other duties as may be prescribed by the Board of
Directors or the President, under whose supervision the Secretary shall be.
If the Secretary shall be unable or shall refuse to cause to be given notice
of all meetings of the stockholders and special meetings of the Board of
Directors, and if there be no Assistant Secretary, then either the Board of
Directors or the President may choose another officer to cause such notice to
be given. The Secretary shall have custody of the seal of the Corporation and
the Secretary or any Assistant Secretary, if there be one, shall have
authority to affix the same to any instrument requiring it and when so
affixed, it may be attested by the signature of the Secretary or by the
signature of any such Assistant Secretary. The Board of Directors may give
general authority to any other officer to affix the seal of the Corporation
and to attest the affixing by his signature. The Secretary shall see that all
books, reports, statements, certificates and other documents and records
required by law to be kept or filed are properly kept or filed, as the case
may be.
Section 8. Treasurer. The Treasurer shall have the custody of
the corporate funds and securities and shall keep full and accurate accounts
of receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. The Treasurer shall disburse the funds of the Corporation as may
be ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors,
at its regular meetings, or when the Board of Directors so requires, an
account of all transactions as Treasurer and of the financial condition of the
Corporation. If required by the Board of Directors, the Treasurer shall give
the Corporation a bond in such sum and with such surety or sureties as shall
be satisfactory to the Board of Directors for the faithful performance of the
duties of the office of the Treasurer and for the restoration to the
Corporation, in case of his or her death, resignation, retirement or removal
from office, of all books, papers, vouchers, money and other property of
whatever kind in his possession or under his or her control belonging to the
Corporation.
Section 9. Assistant Secretaries. Except as may be otherwise
provided in these By-laws, Assistant Secretaries, if there be any, shall
perform such duties and have such powers as from time to time may be assigned
to them by the Board of Directors, the President, any Vice President, if there
be one, or the Secretary, and in the absence of the Secretary or in the event
of his or her disability or refusal to act, shall perform the duties of the
Secretary, and when so acting, shall have all the powers of and be subject to
all the restrictions upon the Secretary.
Section 10. Assistant Treasurers. Assistant Treasurers, if there
be any, shall perform such duties and have such powers as from time to time
may be assigned to them by the Board of Directors, the President, any Vice
President, if there be one, or the Treasurer, and in the absence of the
Treasurer or in the event of his or her disability or refusal to act, shall
perform the duties of the Treasurer, and when so acting, shall have all the
powers of and be subject to all the restrictions upon the Treasurer. If
required by the Board of Directors, an Assistant Treasurer shall give the
Corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the Board of Directors for the faithful performance of the
duties of the office of Assistant Secretary and for the restoration to the
Corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his or her possession or under his or her control belonging to the
Corporation.
Section 11. Other Officers. Such other officers as the Board of
Directors may choose shall perform such duties and have such powers as from
time to time may be assigned to them by the Board of Directors. The Board of
Directors may delegate to any other officer of the Corporation the power to
choose such other officers and to prescribe their respective duties and
powers.
ARTICLE V
COMMITTEES
Section 1. Executive. The Board of Directors may, by resolution
passed by a majority of the entire Board of Directors, designate an Executive
Committee of the Board of Directors. The Executive Committee shall consist of
not less than three members of the Board, one of whom shall be the Chairman of
the Board. One member shall be designated as chairman by the Board. During
the intervals between meetings of the Board of Directors and subject to such
limitations as provided by law or by resolution of the Board, the Committee
shall possess and may exercise all powers and authority of the Board of
Directors in the management and direction of the affairs of the Corporation as
shall be permitted by applicable law. The Committee shall keep minutes of its
proceedings, and all action by the Committee shall be reported at the next
meeting of the Board of Directors.
Section 2. Audit Committee. The Board of Directors may, by
resolution passed by a majority of the entire Board of Directors, designate an
Audit Committee of the Board of Directors. The Audit Committee shall consist
of one or more members of the Board, none of whom shall be an officer of the
Corporation or any of its subsidiaries. One member shall be designated as
chairman by the Board. The Committee shall recommend to the Board the
conditions, compensation and term of appointment of independent certified
public accountants for the auditing of the books and accounts of the
Corporation and its subsidiaries. From time to time, as considered necessary
and desirable, the Committee shall confer with such accountants for the
exchanging of views relating to the scope and results of the auditing books
and accounts of the Corporation and its subsidiaries and shall provide to the
Board such assistance as may be required with respect to the corporate and
reporting practices of the Corporation. The Committee shall perform such
other duties as the Board may prescribe.
Section 3. Compensation Committee. The Board of Directors may,
by resolution passed by a majority of the entire Board of Directors, designate
a Compensation Committee of the Board of Directors. The Compensation
Committee shall consist of one or more members of the Board, none of whom
shall be an officer of the Corporation or any of its subsidiaries. No person
may be a member of this Committee who is, or within one year prior to his
appointment to the Committee was, eligible for selection as a person to whom
stock (or other "equity securities," as defined for purposes of Section 16(b)
of Exchange Act) may be allocated or to whom stock options or stock
appreciation rights may be granted pursuant to any such plan of the Company or
its "affiliates" (as defined for purposes of Section 16(b) of the Exchange
Act) entitling the participants therein to acquire stock, stock options or
stock appreciation rights (or other equity securities) of the issuer or any of
its affiliates (other than any plan which is treated as a "formula plan" under
Section 16(b) of the Exchange Act). Further, no person may be a member of
this Committee except individuals who are "outside directors" within the
meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended.
One member shall be designated as chairman by the Board. The Committee shall
determine the nature and amount of compensation of all senior officers of the
Corporation. As may be prescribed by the Board of Directors, the Committee
shall administer any stock option or other long term incentive plan of the
Corporation and perform other prescribed duties.
Section 4. Nominating Committee. The Board of Directors may, by
resolution passed by a majority of the entire Board of Directors, designate a
Nominating Committee of the Board of Directors. The Nominating Committee
shall consist of one or more members of the Board. One member shall be
designated as chairman by the Board. The Committee shall recommend to the
Board nominees for election as directors, and shall perform such other duties
as the Board may prescribe.
ARTICLE VI
STOCK
Section 1. Form of Certificates. Every holder of stock in the
Corporation shall be entitled to have a certificate signed, in the name of the
Corporation (i) by the Chairman of the Board of Directors, the President or a
Vice President and (ii) by the Treasurer or an Assistant Treasurer, or the
Secretary or an Assistant Secretary of the Corporation, certifying the number
of shares owned by such stockholder in the Corporation.
Section 2. Signatures. When a certificate is countersigned by
(i) a transfer agent other than the Corporation or its employees, or (ii) a
registrar other than the Corporation or its employees, any other signature on
a certificate may be a facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate is issued, it may be issued by the Corporation with
the same effect as if he were such officer, transfer agent or registrar at the
date of issue.
Section 3. Lost Certificates. The Board of Directors may direct
a new certificate to be issued in place of any certificate theretofore issued
by the Corporation alleged to have been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the person claiming the certificate of
stock to be lost, stolen or destroyed. When authorizing such issue of a new
certificate, the Board of Directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed certificate, or his legal representative, to advertise the same in
such manner as the Board of Directors shall require and/or to give the
Corporation a bond in such sum as it may direct as indemnity against any claim
that may be made against the Corporation with respect to the certificate
alleged to have been lost, stolen or destroyed.
Section 4. Transfers. Stock of the Corporation shall be
transferable in the manner prescribed by law and in these By-laws. Transfers
of stock shall be made on the books of the Corporation only by the person
named in the certificate or by his attorney lawfully constituted in writing
and upon the surrender of the certificate therefor, which shall be cancelled
before a new certificate shall be issued.
Section 5. Record Date. In order that the Corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or entitled to express consent to
corporate action in writing without a meeting, or entitled to receive payment
of any dividend or other distribution or allotment of any rights, or entitled
to exercise any rights in respect of any change, conversion or exchange of
stock, or for the purpose of any other lawful action, the Board of Directors
may fix, in advance, a record date, which shall not be more than 60 days nor
less than 10 days before the date of such meeting, nor more than 60 days prior
to any other action. A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the Board of Directors may
fix a new record date for the adjourned meeting.
Section 6. Beneficial Owners. The Corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, and shall not
be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise required by law.
ARTICLE VII
NOTICES
Section 1. Notices. Whenever written notice is required by law,
the Certificate of Incorporation or these By-laws, to be given to any
director, member of a committee or stockholder, such notice may be given by
mail, addressed to such director, member of a committee or stockholder, at
such person's address as it appears on the records of the Corporation, with
postage thereon prepaid, and such notice shall be deemed to be given at the
time when the same shall be deposited in the United States mail. Written
notice may also be given personally or by telegram, telex, cable or confirmed
facsimile.
Section 2. Waivers of Notice. Whenever any notice is required by
law, the Certificate of Incorporation or these By-laws, to be given to any
director, member of a committee or stockholder, a waiver thereof in writing,
signed, by the person or persons entitled to said notice, whether before or
after the time stated therein, shall be deemed equivalent thereto.
ARTICLE VIII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the
Corporation, subject to the provisions of the Certificate of Incorporation, if
any, may be declared by the Board of Directors at any regular or special
meeting, and may be paid in cash, in property, or in shares of capital stock.
Before payment of any dividend, there may be set aside out of any funds of the
Corporation available for dividends such sum or sums as the Board of Directors
from time to time, in its absolute discretion, deems proper as a reserve or
reserves to meet contingencies, or for equalizing dividends, or for repairing
or maintaining any property of the Corporation, or for any proper purpose, and
the Board of Directors may modify or abolish any such reserve.
Section 2. Disbursements. All checks or demands for money and
notes of the Corporation shall be signed by such officer or officers or such
other person or persons as the Board of Directors may from time to time
designate.
Section 3. Fiscal Year. The fiscal year of the Corporation shall
be fixed by resolution of the Board of Directors.
Section 4. Corporate Seal. The corporate seal shall have
inscribed thereon the name of the Corporation, the year of its organization
and the words "Corporate Seal, Delaware". The seal may be used by causing it
or a facsimile thereof to be impressed or affixed or reproduced or otherwise.
ARTICLE IX
AMENDMENTS
Section 1. These By-laws may be altered, amended or repealed, in
whole or in part, or new By-laws may be adopted by the stockholders or by the
Board of Directors, provided, however, that notice of such alteration,
amendment, repeal or adoption of new By-laws be contained in the notice of
such meeting of stockholders or Board of Directors as the case may be. All
such amendments must be approved by either the holders of a majority of the
outstanding capital stock entitled to vote thereon or by a majority of the
entire Board of Directors then in office.
Section 2. Entire Board of Directors. As used in this Article IX
and in these By-laws generally, the term "entire Board of Directors" means the
total number of directors which the Corporation would have if there were no
vacancies.
ARTICLE X
INDEMNIFICATION
Section 10.1 Indemnification and Insurance. (A) Each person who
was or is made a party or is threatened to be made a party to or is otherwise
involved in any action, suit or proceeding, whether civil, criminal,
administrative or investigative (hereinafter a "proceeding"), by reason of the
fact that he or she or a person of whom he or she is the legal representative
is or was a director or officer of the Corporation or is or was serving at the
request of the Corporation as a director, officer, employee or agent of any
other corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to any employee benefit plan
(hereinafter an "indemnitee"), whether the basis of such proceeding is alleged
action in an official capacity as a director, officer, employee or agent or in
any other capacity while serving as a director, officer, employee or agent,
shall be indemnified and held harmless by the Corporation to the fullest
extent authorized by the Delaware General Corporations Law (the "GCL") as the
same exists or may hereafter be amended (but, in the case of any such
amendment, only to the extent that such amendment permits the Corporation to
provide broader indemnification rights than said law permitted the Corporation
to provide prior to such amendment), against all expense, liability and loss
(including, without limitation, attorneys' fees, judgements, fines, excise
taxes or penalties under the Employee Retirement Income Security Act of 1974,
as amended, and amounts paid or to be paid in settlement) reasonably incurred
by such indemnitee in connection therewith; provided, however, that, except as
provided in paragraph (C) of this By-law with respect to proceedings seeking
to enforce rights to indemnification, the Corporation shall indemnify any such
indemnitee seeking indemnification in connection with a proceeding (or part
thereof) initiated by such indemnitee only if such proceeding (or part
thereof) was authorized by the Board of Directors.
(B) The right to indemnification conferred in paragraph (A) of this By-
law shall include the right to be paid by the Corporation the expenses
(including attorneys' fees) incurred in defending any such proceeding in
advance of its final disposition (hereinafter an "advancement of expenses");
provided, however, that, if the GCL requires, an advancement of expenses
incurred by an indemnitee in his or her capacity as a director or officer (and
not in any other capacity in which service was or is rendered by such
indemnitee, including, without limitation, service to an employee benefit
plan) shall be made only upon delivery to the Corporation of an undertaking
(hereinafter an "undertaking"), by or on behalf of such indemnitee, to repay
all amounts so advanced if it shall ultimately be determined by final judicial
decision from which there is no further right to appeal (hereinafter a "final
adjudication") that such indemnitee is not entitled to be indemnified for such
expenses under this paragraph (B) or otherwise.
(C) If a claim under paragraphs (A) or (B) of this By-law is not paid in
full by the Corporation within thirty days after a written claim has been
received by the Corporation, except in the case of a claim for an advancement
of expenses, in which case the applicable period shall be twenty days, the
indemnitee may at any time thereafter bring suit against the Corporation to
recover the unpaid amount of the claim. If successful in whole or in part in
any such suit, the indemnitee shall be entitled to be paid also the expense of
prosecuting or defending such suit. In (i) any suit brought by the indemnitee
to enforce a right to indemnification hereunder (but not in a suit brought by
the indemnitee to enforce a right of an advancement of expenses) it shall be a
defense that, and (ii) in any suit brought by the Corporation to recover an
advancement of expenses pursuant to the terms of an undertaking, the
Corporation shall be entitled to recover such expenses upon a final
adjudication that, the indemnitee has not met any applicable standard for
indemnification set forth in the GCL. Neither the failure of the Corporation
(including its Board of Directors, independent legal counsel or stockholders)
to have made a determination prior to the commencement of such action that
indemnification of the indemnitee is proper in the circumstances cause the
indemnitee has met the applicable standard of conduct set forth in the GCL,
nor an actual determination by the Corporation (including its Board of
Directors, independent legal counsel or stockholders) that the indemnitee has
not met such applicable standard of conduct shall create a presumption that
the indemnitee has not met the applicable standard of conduct or, in the case
of such a suit brought by the indemnitee, be a defense to such suit. In any
suit brought by the indemnitee to enforce a right to indemnification or to an
advancement of expenses hereunder, or brought by the Corporation to recover an
advancement of expenses pursuant to the terms of an undertaking, the burden of
proving that the indemnitee is not entitled to be indemnified, or to such
advancement of expenses, under this By-law or otherwise shall be on the
Corporation.
(D) The right to indemnification and the advancement of expenses
conferred in this By-law shall not be exclusive of any other right which any
person may have or hereafter acquire under any statute, provision of the
Certificate of Incorporation, provision of these By-laws, agreement, vote of
stockholders or disinterested directors or otherwise.
(E) The Corporation may maintain insurance, at its expense, to protect
itself and any director, officer, employee or agent of the Corporation or
another corporation, partnership, joint venture, trust or other enterprise
against any expense, liability or loss, whether or not the Corporation would
have the power to indemnify such person against such expense, liability or
loss under the GCL.
(F) The Corporation may, to the extent authorized from time to time by
the Board of directors, grant rights to indemnification, and rights to the
advancement of expenses, to any employee or agent of the Corporation to the
fullest extent of the provisions of this By-law with respect to the
indemnification and advancement of expenses of directors and officers of the
Corporation.
(G) The rights to indemnification and to the advancement of expenses
conferred in paragraphs (A) and (B) of this By-law shall be contract rights
and such rights shall continue as to an indemnitee who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
indemnitee's heirs, executors and administrators.
EXHIBIT 3.6
FORM 10-K
YEAR ENDED DECEMBER 31, 1998
BUCYRUS INTERNATIONAL, INC.
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
___________________________________________________________________
Pursuant to Section 242 of the
General Corporation Law of the State of Delaware
___________________________________________________________________
Bucyrus International, Inc., a Delaware corporation, (hereinafter,
the "Corporation), does hereby certify as follows:
FIRST: That the Board of Directors of said corporation
adopted a resolution by unanimous written consent of its directors, filed with
the minutes of the Board, proposing and declaring advisable the following
amendment to the Certificate of Incorporation of said corporation:
RESOLVED, that the Corporation's Certificate of Incorporation
shall be amended by striking out the existing Section (1) of
Article FOURTH thereof in its entirety, and substituting in lieu
thereof the following:
FOURTH: (1) The total number of shares of stock which
the Corporation shall have authority to issue is One Million Seven
Hundred Thousand (1,700,000) shares of Common Stock, par value
$0.01 per share.
SECOND: That in lieu of a meeting and vote of the
stockholders, the majority stockholder has given written consent to said
amendment in accordance with the provisions of section 228 of the General
Corporation Law of the State of Delaware.
THIRD: That the aforesaid amendment was duly adopted in
accordance with the applicable provisions of sections 242 and 228 of the
General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, Bucyrus International, Inc. has caused this
Certificate of Amendment of Restated Certificate of Incorporation to be signed
on its behalf by its undersigned President and Chief Financial Officer and
attested by its undersigned Secretary, as of this twenty-third day of December
1998.
BUCYRUS INTERNATIONAL, INC.
By: /s/Daniel J. Smoke
Daniel J. Smoke
Vice President and
Chief Financial Officer
ATTEST:
/s/Craig R. Mackus
Craig R. Mackus
Secretary
<PAGE>
RESTATED CERTIFICATE OF INCORPORATION
OF
BUCYRUS INTERNATIONAL, INC.
FIRST: The name of the Corporation is Bucyrus International,
Inc. (hereinafter the "Corporation").
SECOND: The address of the registered office of the
Corporation in the State of Delaware is 1209 Orange Street, in
the City of Wilmington, County of New Castle. The name of its
registered agent at that address is The Corporation Trust
Company.
THIRD: The purpose of the Corporation is to engage in any
lawful act or activity for which a corporation may be organized
under the General Corporation Law of the State of Delaware as set
forth in Title 8 of the Delaware Code (the "GCL").
FOURTH: (1) The total number of shares of stock which the
Corporation shall have authority to issue is One Million Seven
Hundred Thousand (1,700,000) shares of Common Stock, par value
$0.01 per share.
(2) Each share of Common Stock of the Corporation
held of record on the day preceding the filing date (within the
meaning of Section 103 of the General Corporation Law of the
State of Delaware) of this Amendment with the Secretary of State
of the State of Delaware shall be and hereby is automatically
reclassified and converted, without further action, into One
Thousand Six Hundred (1,600) shares of Common Stock of the
Corporation.
FIFTH: The following provisions are inserted for the
management of the business and the conduct of the affairs of the
Corporation, and for further definition, limitation and
regulation of the powers of the Corporation and of its directors
and stockholders:
(1) The business and affairs of the Corporation shall be
managed by or under the direction of the Board of Directors.
(2) The directors shall have concurrent power with the
stockholders to make, alter, amend, change, add to or repeal the
By-Laws of the Corporation.
(3) The number of directors of the Corporation shall be as
from time to time fixed by, or in the manner provided in, the By-
Laws of the Corporation. Election of officers need not be by
written ballot unless the By-Laws so provide.
(4) No director shall be personally liable to the
Corporation or any of its stockholders for monetary damages for
breach of fiduciary duty as a director, except for liability (i)
for any breach of the director's duty of loyalty to the
Corporation or its stockholders; (ii) for acts or omissions not
in good faith or which involved intentional misconduct or a
knowing violation of law, (iii) pursuant to Section 174 of the
GCL or (iv) for any transaction from which the director derived
an improper personal benefit. Any repeal or modification of this
Article FIFTH by the stockholders of the Corporation shall not
adversely affect any right or protection of a director of the
Corporation existing at the time of such repeal or modification
with respect to acts or omissions occurring prior to such repeal
or modification.
(5) In addition to the powers and authority hereinbefore or
by statute expressly conferred upon them, the directors are
hereby empowered to exercise all such powers and do all such acts
and things as may be exercised or done by the Corporation,
subject, nevertheless, to the provisions of the GCL, this
Restated Certificate of Incorporation, and any By-Laws adopted by
the stockholders; provided, however, that no By-Laws hereafter
adopted by the stockholders shall invalidate any prior act of the
directors which would have been valid if such By-Laws had not
been adopted.
SIXTH: Meetings of stockholders may be held within or
without the State of Delaware, as the By-Laws may provide. The
books of the Corporation may be kept (subject to any provision
contained in the GCL) outside the State of Delaware at such place
or places as may be designated from time to time by the Board of
Directors or in the By-Laws of the Corporation.
SEVENTH: The Corporation reserves the right to amend, alter,
change or repeal any provision contained in this Certificate of
Incorporation, in the manner now or hereafter prescribed by
statute, and all rights conferred upon stockholders herein are
granted subject to this reservation.
EXHIBIT 10.18
FORM 10-K
YEAR ENDED DECEMBER 31, 1998
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made this 1st day of December, 1997, by and
between BUCYRUS INTERNATIONAL, INC., a Delaware corporation (the "Company"),
and FRANK P. BRUNO ("Employee").
WHEREAS, the Company desires to employ Employee as Vice President -
Human Resources, and Employee desires to accept the employment offered by the
Company.
NOW, THEREFORE, in consideration of the premises and for the mutual
consideration hereinafter set forth, the parties agree as follows:
1. Position. Employee shall be employed by the Company as Vice
President - Human Resources upon the terms and conditions contained herein.
2. Salary. During the term of this Agreement, the Company shall pay
Employee an annual base salary of One Hundred Twenty Thousand Dollars
($120,000.00), minus applicable withholdings, in accordance with the Company's
normal payroll practices (the "Base Salary"). The Base Salary is subject to
merit increases in accordance with the Company's normal salary merit increase
review policy.
3. Benefit Plans. During the term of this Agreement, Employee shall
be entitled to participate in such employee benefit and fringe benefit plans
as the Company shall provide to other similarly situated management employees.
4. Duration and Termination.
(a) Duration. Subject to termination as provided below, this
Agreement and Employee's employment hereunder shall begin on the date hereof,
continue for a period of one (1) year, and automatically renew thereafter for
successive one year terms unless either party gives the other party sixty (60)
days written notice that this Agreement and Employee's employment shall
terminate on the last day of the original term or any renewal term, as the
case may be.
(b) Termination Without Cause. This Agreement and Employee's
employment may be terminated by either party without Cause (as defined in
Paragraph 4(c)) at any time by giving at least sixty (60) days' written notice
to the other party of the intent to do so.
(c) Termination by the Company for Cause. The Company shall
have the right to terminate this Agreement and Employee's employment hereunder
in the event of any of the following (which shall constitute "Cause"): (i)
fraud, dishonesty, or misconduct by Employee in connection with the business
of the Company; (ii) commission by Employee of a felony; or (iii) a material
breach by Employee of the terms of this Agreement.
(d) Termination Upon Death or Disability. This Agreement and
Employee's employment hereunder shall immediately terminate in the event of
Employee's death or Disability (as hereinafter defined). For purposes of this
Agreement, Employee shall be deemed to have suffered a "Disability" in the
event that a physician selected by the Company determines that Employee, due
to a physical or mental condition, is unable to substantially perform his
duties hereunder for a period of at least ninety (90) days.
5. Compensation upon Termination. Upon termination of Employee's
employment under this Agreement, all of the Company's obligation to pay
Employee compensation and provide benefits under this Agreement shall
terminate, except that in the event Employee's employment is terminated by the
Company based on notice provided by the Company pursuant to Paragraph 4(a) or
4(b), Employee shall be entitled to (1) continuation of his Base Salary and
health insurance and pension benefits (to the extent coverage terms permit)
for a period of one (1) year from the date of such termination (the "Severance
Period"), payable in accordance with the Company's normal payroll practices;
and (2) out-placement consulting services from a firm selected by the Company
at a total cost not to exceed Fifteen Thousand Dollars ($15,000). The Company
shall have the right to discontinue payments or other benefits hereunder in
the event Employee breaches the restrictions in Paragraph 7 or 8 or any such
restriction is determined to be unenforceable in any respect.
6. Change of Control.
(a) Definitions. For purposes of this Paragraph 6:
(i) "Act" shall mean the Securities Act of 1934.
(ii) A "Change of Control" of the Company shall be deemed
to have occurred when:
(A) Securities of the Company representing more than
50% of the combined voting power of the Company's then outstanding
voting securities are acquired, directly or indirectly, by any Person
who did not on the date of this Agreement own, directly or indirectly,
5% or more of the combined voting power of the Company's voting
securities outstanding on the date of this Agreement.
(B) A merger or consolidation of the Company with
any other corporation is completed as a result of which less than 50% of
the outstanding voting securities of the surviving or resulting entity
are owned by the former shareholders of the Company (other than a
shareholder who is an "affiliate," as defined in the Act, of any party
to such consolidation or merger).
(C) The sale of substantially all of the Company's
assets is completed to a corporation which is not a wholly-owned
subsidiary of the Company.
(iii) "Person" shall have the meaning used in Section
3(a)(9) of the Act.
(iv) "Effective Date" shall mean the date a Change of
Control becomes effective.
(v) "Good Reason" shall mean the occurrence of any one or
more of the following events without Employee's
express written consent:
(A) (1) The assignment of Employee to duties
materially inconsistent with Employee's authorities, duties,
responsibilities, and status (including offices, titles, and reporting
requirements) pursuant to Paragraph 1, or (2) relocation of Employee's
regular place of employment to a location more than fifty (50) miles
from the location as of the Effective Date.
(B) A reduction by the Company in Employee's Base
Salary as in effect on the Effective Date.
(C) A material reduction in Employee's level of
participation in any of the Company's short- and/or long-term incentive
compensation plans, or employee benefit or retirement plans, policies or
practices, in which Employee participates as of the Effective Date.
(vi) "Qualifying Termination" shall mean any termination of
Employee's employment other than: (A) by the Company
for Cause (as defined in Paragraph 4(c) hereof); (B)
by reason of death, Disability (as defined in
Paragraph 4(d) hereof), or Retirement (as such term is
then defined in the Company's tax qualified defined
benefit retirement plan); or (C) by Employee pursuant
to Paragraph 4(a) or 4(b) without Good Reason. In the
event Employee shall terminate this Agreement for Good
Reason, Employee's notice of termination pursuant to
Paragraph 4(a) or 4(b) shall set forth the facts and
circumstances claimed to provide a basis for such
termination.
(b) Employment Termination. In the event of a Qualifying
Termination on, or within twelve (12) months after, the Effective Date, then
in addition to the compensation and benefits provided to Employee under the
provisions of Paragraph 5 of this Agreement, the Company shall, at the
expiration of the Severance Period, as an additional severance benefit, make a
lump sum payment to Employee in an amount equal to one-half of Employee's
annual Base Salary.
(c) Vesting of Options. In the event of a Qualifying
Termination on, or within twelve (12) months after, the Effective Date,
Employee's unvested Stock Options shall automatically be fully vested and
exercisable as of the Effective Date.
7. Confidentiality. Employee shall keep confidential and not divulge
to any other person or entity, during the term of employment or thereafter,
any Confidential Information of the Company. For purposes hereof,
"Confidential Information" shall mean any of the business secrets, trade
secrets, drawings, engineering data, plans, strategies, policies, methods,
marketing plans, customer purchasing history, customer lists, cost structures,
vendor pricing, contemplated product improvements and developments, repair and
failure frequencies and information, computer software and programs, or other
confidential information regarding the Company. All papers, books and records
and other property of every kind and description relating to the business and
affairs of the Company, whether or not prepared by Employee, shall be the sole
and exclusive property of the Company, and Employee shall surrender them to
the Company, as applicable, at any time upon request by the Company.
8. Covenant Not to Compete. In order to induce the Company to enter
into this Agreement, Employee hereby agrees that during the term of this
Agreement and for a period of one (1) year thereafter (exclusive of any period
of breach), Employee will not, without the prior written consent of the
Company, work for, be employed by or otherwise provide services (which are
substantially the same or similar to the services provided by Employee to the
Company) to, Harnischfeger Industries, Inc., ("Harnischfeger") or any
affiliated entity of Harnischfeger that engages in the business of
manufacturing, marketing, distributing or selling any surface mining equipment
that the Company or any of its subsidiaries or affiliates manufactures,
markets, distributes or sells at the time Employee ceases to be employed by
the Company.
Employee agrees that such restriction is fair and reasonably necessary
to protect the legitimate business interests of the Company, and that the
Company would suffer irreparable harm in the event of breach by Employee. As
a result, Employee agrees that the Company shall, in addition to other
remedies provided by law, be entitled to injunctive relief in the event of
breach by Employee.
9. Assignability. This Agreement may not be assigned without the
prior written consent of the parties; provided, however, this Agreement may be
assigned without consent to a successor of the business of the Company.
10. Notices. All notices hereunder shall be in writing and delivered
by hand, mailed within the continental United States by first class certified
mail, return receipt requested, postage prepaid, or telecopied, to the other
party.
11. Severability. If any provision of this Agreement shall be
determined to be invalid or unenforceable for any reason, such determination
shall not affect, impair or invalidate the remainder of this Agreement.
12. Choice of Forum and Law. Jurisdiction over disputes with regard
to this Agreement shall be exclusively in the courts of the State of
Wisconsin. This Agreement shall be construed in accordance with and governed
by the laws of the State of Wisconsin.
13. Entire Agreement. This Agreement contains the entire agreement of
the parties hereto, and supersedes all other oral or written agreements or
understandings between them regarding the subject matter hereof. This
Agreement may not be modified except by written agreement of the parties.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
BUCYRUS INTERNATIONAL, INC.
By: /s/W. R. Hildebrand
W. R. Hildebrand
/s/F. Bruno
Frank P. Bruno, Employee
EXHIBIT 10.19
FORM 10-K
YEAR ENDED DECEMBER 31, 1998
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into as of
the 9th day of December, 1998 (the "Effective Date"), by and between BUCYRUS
INTERNATIONAL, INC., a Delaware corporation (the "Company"), and STEPHEN R.
LIGHT (the "Executive").
WHEREAS, Executive desires to provide the Company with his
services and the Company desires to employ Executive as its President and
Chief Executive Officer, on the terms and subject to the conditions set forth
herein.
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements set forth herein, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, agree as
follows:
1. Term Of Employment.
The term of Executive's employment hereunder (the "Term") shall
commence as soon as reasonably practicable after the Effective Date, but in no
event later than December 14, 1998 (the "Employment Commencement Date") and,
unless earlier terminated pursuant to Section 6 below, shall continue for a
period ending on December 31, 2000; provided, that on March 31, 2000 (and on
March 31 of each succeeding year during the Term) the Term shall automatically
be extended for an additional one year period unless the Executive or the
Company provides written notice on or prior to March 31, 2000 (or March 31 of
such succeeding year), stating an intention not to so extend the Term; and
provided, further, that in the event Executive shall be in breach of any of
the representations, warranties and covenants set forth in Sections 4.1 or
13.4 below, this Agreement shall be null and void ab initio and Executive
shall not be entitled to any of the benefits of this Agreement.
2. Position And Duties.
2.1 Position. During the Term, Executive shall be employed as
the President and Chief Executive Officer of the Company. In addition,
Executive shall be appointed as a member of the Board of Directors of the
Company (the "Board") effective as of the Effective Date, and Executive shall
be nominated for election to the Board, and the Company shall use its best
efforts to cause Executive to be elected to the Board, each year throughout
the Term. Notwithstanding the foregoing, Executive agrees that immediately
upon providing or receiving notice of termination of his employment with the
Company for any reason, he shall resign his position as a member of the Board.
2.2 Duties. Subject to the supervision and control of the Board,
Executive shall do and perform all services and acts necessary or advisable to
fulfill the duties and responsibilities of his position as President and Chief
Executive Officer and shall render such services on the terms set forth
herein. In addition, Executive shall have such other executive and managerial
powers and duties with respect to the Company and its subsidiaries as may
reasonably be assigned to him by the Board, consistent with his duties and
responsibilities as President and Chief Executive Officer. Except for sick
leave, reasonable vacations, and excused leaves of absence, Executive shall,
throughout the Term, devote substantially all his working time, attention,
knowledge and skills faithfully and to the best of his ability, to the duties
and responsibilities of his position in furtherance of the business affairs
and activities of the Company and its subsidiaries and affiliates. Executive
shall perform his duties at the Company's headquarters in Milwaukee,
Wisconsin, and, other than for purposes of reasonable business travel
consistent with his position, shall not be required to temporarily or
permanently relocate more than fifty (50) miles from the Milwaukee
metropolitan area during the Term. Executive shall at all times be subject
to, observe and carry out such rules, regulations, policies, directions, and
restrictions, in each case consistent with his position as President and Chief
Executive Officer, as the Board may from time to time establish for senior
executive officers of the Company.
3. Compensation.
3.1 Base Salary. During the Term, as compensation for his
services hereunder, Executive shall receive a salary at the annualized rate of
at least Four Hundred Fifty Thousand Dollars ($450,000) per year ("Base
Salary"), which shall be paid in accordance with the Company's normal payroll
practices and procedures, less such deductions or offsets required by
applicable law or otherwise authorized by Executive. The Base Salary may be
increased from time to time at the discretion of the Board and, if so
increased, shall not thereafter during the Term be decreased.
3.2 Annual Performance Bonus. Executive shall also be eligible
to participate in an annual performance bonus plan, with performance targets
to be based on the Company's existing financial plan, and otherwise on terms
to be mutually agreed upon by Executive and the Company (the "Annual Bonus
Plan"); provided, that the terms of the Annual Bonus Plan shall provide that
the amount of the annual bonus payable to Executive (the "Annual Bonus") shall
be equal to 50% of Executive's Base Salary upon the achievement of the
targeted performance goals for the relevant fiscal year of the Company, with
the potential for an Annual Bonus of up to 100% of Base Salary in the event of
exceptional performance; and provided, further, that Executive's Annual Bonus
with respect to fiscal 1999 shall not be less than $112,500.
4. Stock; Stock Options.
4.1 Purchase of Shares of Company Common Stock. As a condition
of the effectiveness of this Agreement, no later than December 18, 1998, the
Executive shall purchase 5,000 shares of the Company's common stock, par value
$0.01 per share ("Common Stock"), at a price of $100 per share (the "Purchased
Shares"). The Company shall accept payment for a portion of the purchase
price of the Purchased Shares in the form of Executive's promissory note
substantially in the form attached hereto as Annex A (the "Note"), in the
maximum principal amount of $400,000, subject to Executive's pledge of all the
Purchased Shares to secure the Note pursuant to a pledge agreement (the
"Pledge Agreement") executed by the parties substantially in the form attached
hereto as Annex B. As a condition of such purchase, Executive shall become a
party to that certain Stockholders Agreement, dated as of March 17, 1998,
among the Company and its Stockholders (the "Stockholders Agreement"), by
executing a Joinder Agreement thereto generally in the form attached as
Exhibit A to the Stockholders Agreement; provided, that the terms of Section 4
of the Stockholders Agreement (and any other terms of the Stockholders
Agreement otherwise relating to the exercise upon termination of employment of
a "put" right with respect to the Purchased Shares or any other shares of
Common Stock acquired by Executive) shall not apply to Executive; and
provided, further, that the Stockholders Agreement shall be interpreted (and,
as necessary, deemed amended) so as to be consistent with the terms of the
Pledge Agreement. Executive acknowledges receipt of a copy of the
Stockholders Agreement and the opportunity to have carefully reviewed the
Stockholders Agreement with counsel prior to executing this Agreement.
4.2 Grant of Stock Options. Subject to Executive's compliance
with the provisions of Section 4.1, the Executive shall be granted options
("Options") under the Company's 1998 Management Stock Option Plan (the "Stock
Option Plan") to purchase that number of additional shares of Common Stock
sufficient to provide the Executive with a total equity stake in the Company
of 4% of the outstanding Common Stock on a fully diluted basis as of the
Employment Commencement Date; provided, that notwithstanding the terms of the
Stock Option Plan and Schedule 1 to the form of stock option agreement annexed
thereto, (i) the normal vesting period of such options shall be the three year
period from January 1, 1999 to December 31, 2001, (ii) the Company is
currently in the process of reassessing the EBITDA target for 1999 for all
management option holders, and any such reassessment shall apply to
Executive's Options, and (iii) additional changes to the terms of the Options
may be made by the Company as shall be reasonably necessary and appropriate to
conform the Options to the aforesaid three year vesting schedule. Executive
acknowledges receipt of a copy of the Stock Option Plan (together with the
annexes thereto) and the opportunity to have carefully reviewed the Stock
Option Plan with counsel prior to executing this Agreement.
4.3 Availability of Shares. The Company shall provide that, as
of and at all times following the Employment Commencement Date, a sufficient
number of shares of Common Stock will remain authorized and reserved for
issuance under the Stock Option Plan to provide for the grant and exercise of
the Options to be granted pursuant to Section 4.2 hereof.
5. Additional Benefits.
5.1 Employee Benefits. During the Term, Executive shall be
entitled to participate in all employee welfare benefit plans and programs
generally made available from time to time to the Company's senior executives,
including without limitation any major medical, dental, retirement and life
insurance plans, subject to any eligibility requirements and the other
generally applicable terms of such plans. Without limitation, Executive shall
be entitled to use of a Company-provided automobile, the value of which shall
not exceed $50,000, in accordance with the Company's policies applicable to
its senior executives.
5.2 Expenses. During the Term, the Company shall reimburse
Executive for any expenses reasonably incurred by him in furtherance of his
duties hereunder, including without limitation travel, meals, and
accommodations, upon submission by him of vouchers or receipts and in
compliance with such rules and policies relating thereto as the Company may
from time to time adopt or as may be required in order to permit such payments
to be taken as proper deductions by the Company or any subsidiary under the
Internal Revenue Code of 1986, as amended, and the rules and regulations
adopted pursuant thereto now or hereafter in effect. The Company shall also
reimburse Executive for reasonable spousal travel expenses to customer or
industry events to the extent consistent with Company policy.
5.3 Vacation. During the Term, Executive shall be entitled to
such number of paid vacation days each calendar year as provided pursuant to
the Company's vacation policy from time to time in effect, but in no event
less than four (4) weeks per year. Executive shall also be entitled to such
paid holidays and personal days provided generally by the Company to its
senior executives.
5.4 Club Memberships. During the Term, the Company shall
reimburse Executive for (i) the cost of a non-refundable initiation fee in one
city club in the Milwaukee, Wisconsin area in the maximum amount of $2,000,
(ii) the annual dues for one country club in the Milwaukee, Wisconsin area and
such city club (but not in excess of $7,500 per annum with respect to such
country club and $2,750 per annum with respect to such city club), and (iii)
to the extent provided under Section 5.2 hereof, the reasonable and necessary
business-related use by Executive of such country club and city club.
5.5 Attorney's Fees. The Company shall reimburse Executive for
reasonable attorney's fees incurred by Executive in connection with the
negotiation and preparation of this Agreement and related transactions, in an
amount not to exceed $20,000.
5.6 Supplemental Retirement Plan. If the Company adopts a
supplemental retirement plan for its senior executive officers, Executive
shall be entitled to participate in such plan on terms applicable to such
officers generally.
5.7 Supplemental Long-Term Disability. During the Term, the
Company shall provide Executive with a supplemental long-term disability
policy such that, together with coverage under the Company's general long-term
disability plan or plans in which Executive otherwise participates, Executive
shall be entitled to receive an aggregate benefit of no less than $12,500 per
month. Such disability policy shall contain such other terms and conditions
as shall be mutually agreed upon by the Company and Executive negotiating in
good faith.
5.8 International Emergency Rescue. During the Term, the Company
shall provide Executive with membership in an international emergency rescue
program for Executive's protection related to international travel.
6. Termination.
6.1 Termination of Executive's Employment by the Company for
Cause. The Company may terminate Executive's employment hereunder for Cause
(as defined below). Such termination shall be effected by written notice
thereof delivered by the Company to Executive, indicating in reasonable detail
the facts and circumstances alleged to provide a basis for such termination,
and shall be effective as of the date of such notice in accordance with
Section 12 hereof. "Cause" shall mean (a) Executive's (i) willful failure to
timely comply in all material respects with the lawful directives of the Board
(as set at a meeting of the Board in accordance with the Company's bylaws),
except to the extent such directives (x) are inconsistent with Executive's
position with the Company or (y) would constitute a violation of the
Harnischfeger Confidentiality Agreement (as defined in Section 13.4 below) or
(ii) gross negligence or willful misconduct in the performance of the material
duties or responsibilities of Executive's position with the Company or any
subsidiary; (b) Executive's conviction of (i) any felony or (ii) any act of
fraud, embezzlement, misappropriation or other criminal misconduct against or
otherwise involving the Company; or (c) Executive's breach of the provisions
of Sections 7 or 8 of this Agreement or any other agreements relating to
confidentiality, trade secrets or competition with the Company; provided,
however, that with respect to any notice of termination for Cause relating to
clause (a) of this Section 6.1, Executive shall have a period of 15 days
following such notice in which to cure such conduct or failure to act.
6.2 Compensation upon Termination for Cause. In the event of
Executive's termination for Cause, he shall be entitled to receive (a) all
amounts of accrued but unpaid Base Salary through the effective date of such
termination; (b) reimbursement for reasonable and necessary expenses incurred
by Executive through the date of notice of such termination, to the extent
otherwise provided under Section 5.2 above; (c) any and all other cash earned
through the effective date of such termination and deferred at the election of
Executive or pursuant to any deferred compensation plan then in effect,
subject, however, to the terms of any such plan or arrangement; and (d) all
other payments and benefits to which Executive may be entitled through the
effective date of such termination. All other rights of Executive (and,
except as provided in Section 6.6 below, all obligations of the Company)
hereunder shall terminate effective as of the date of such termination.
6.3 Compensation upon Termination of Executive's Employment by
the Company Other Than for Cause or by Executive for Good Reason. In the
event that Executive's employment hereunder is terminated by the Company other
than for Cause or by Executive for Good Reason (in either such case
specifically excluding, without limitation, any expiration of the Term by
reason of either party's providing notice pursuant to Section 1hereof of its
intent not to extend the Term), Executive shall be entitled to receive (a)
continuation of Executive's Base Salary (including the benefits set forth in
Section 5 hereof) for a period equal to the greater of (i) the remainder of
the then Term or (ii) one (1) year; and (b) the Annual Bonus otherwise payable
to Executive under the Annual Bonus Plan for the fiscal year in which such
termination of employment occurs, determined and paid at the same time and in
the same manner as annual bonuses are determined for members of the Company's
senior management generally. In addition, all Options held by Executive at
the time of such termination that would have vested based upon the Company's
actual performance in the fiscal year of such termination of employment, as
determined at the same time and in the same manner as such vesting is
determined for participants in the Stock Option Plan generally (the "Post-
Termination Vested Options"), shall be deemed to vest as of the date of such
determination, and the provisions of Section 7.3 of the Stock Option Plan
shall apply to any Post-Termination Vested Options as of such date. All other
rights of Executive (and, except as provided in Section 6.6 below, all
obligations of the Company) hereunder shall terminate as of the date of such
termination.
6.4 Compensation upon Termination of Executive's Employment by
Reason Of Executive's Voluntary Resignation other than for Good Reason, Death
or Total Disability. In the event that (a) Executive voluntarily terminates
his employment hereunder (other than for Good Reason) or (b) Executive's
employment is terminated by reason of his death or Total Disability (as
defined below), Executive or Executive's estate, as the case may be, shall be
entitled to receive (i) all amounts of Base Salary and benefits accrued but
unpaid through the date of such termination, and (ii) in the case of
Executive's death or Total Disability only, any other benefits payable under
the Company's then current disability and/or death benefit policies. All
other rights of Executive (and, except as provided in Section 6.6 below, all
obligations of the Company) hereunder shall terminate as of the date of such
termination. "Total Disability" shall mean any physical or mental disability
that prevents Executive from performing one or more of the essential functions
of his position for a period of not less than ninety days in any 12-month
period and/or which is expected to be of permanent duration.
6.5 Compensation upon Termination of Executive's Employment by
Reason of Legal Action Pursuant to Harnischfeger Agreement.
(a) If (x) Executive shall be unable to timely assume or
continue or is otherwise prevented from performing his duties under this
Agreement as a result of an effective, court-ordered preliminary or final
injunction or other equitable relief arising from any Harnischfeger Claim (as
defined in Section 13.4(d) below) as to which Executive shall have a right of
indemnification against the Company pursuant to Section 13.4(c) below or (y)
the circumstances described in the proviso to Section 6.5(c) shall have
occurred with respect to any such Harnischfeger Claim, then the Company shall
have the right to terminate Executive's employment hereunder, in which event
Executive shall be entitled to receive (i) a salary continuation benefit in
the amount of $37,500 per month for a period of 12 months following the
effective date of such injunction, and (ii) continuation of the benefits set
forth in Section 5 hereof during such period; provided, that Executive's right
to receive such salary and benefit continuation shall be subject to offset on
a dollar-for-dollar basis against any compensation and benefits earned
(whether as an employee or consultant or in any other capacity, and whether or
not deferred) by Executive with respect to such period, and Executive shall be
obligated to provide the Company prompt notice of any such compensation and
benefits. In addition, each of Executive and the Company shall have the
right, exercisable within ten (10) business days following the date of such
termination of employment, to rescind Executive's purchase of the Purchased
Shares as described in Section 4.1, in which event the Note would be
cancelled, the amount of Executive's principal investment would be returned by
the Company to him and the Purchased Shares forfeited by Executive to the
Company.
(b) If (x) Executive shall be unable to timely assume or
continue or is otherwise prevented from performing his duties under this
Agreement as a result of an effective, court-ordered preliminary or final
injunction or other equitable relief arising from any Harnischfeger Claim (as
defined in Section 13.4(d) below) as to which Executive shall not have a right
of indemnification against the Company pursuant to Section 13.4(c) below or
(y) the circumstances described in the proviso to Section 6.5(c) shall have
occurred with respect to any such Harnischfeger Claim, the Company shall have
the right to terminate Executive's employment hereunder, in which event
Executive shall be entitled to receive only the benefits which Executive would
receive in the event of a termination of his employment for Cause, as set
forth in Section 6.2 above. In addition, each of Executive and the Company
shall have the right, exercisable within ten (10) business days following the
date of such termination of employment, to rescind Executive's purchase of the
Purchased Shares as described in Section 4.1, in which event the Note would be
cancelled, the amount of Executive's principal investment would be returned by
the Company to him and the Purchased Shares forfeited by Executive to the
Company.
(c) During the period of any temporary restraining order
arising from any Harnischfeger Claim and pending judicial determination of any
action for a preliminary or final injunction, Executive shall receive his
regular compensation hereunder; provided, that if such injunction shall not be
either granted or denied prior to the end of the 45th day following the
issuance of any such temporary restraining order, the Company shall have the
right to terminate Executive's employment hereunder, in which event Executive
would receive the compensation and Executive and the Company would have such
rights and obligations as are set forth in Section 6.5(a) or Section 6.5(b)
above, respectively, depending on whether such temporary restraining order
arose from a Harnischfeger Claim as to which Executive would or would not have
an indemnification right against the Company pursuant to Section 13.4(c)
below.
(d) Notwithstanding anything to the contrary in this
Section 6.5, in the event that the terms of any such temporary restraining
order or preliminary or final injunction would permit Executive to continue
employment hereunder subject to the establishment of a limited "ethical wall"
or similar restrictions that would not prevent Executive from substantially
performing the duties of his position as President and Chief Executive Officer
hereunder, such order or injunction shall not constitute grounds for
termination of Executive's employment under this Section 6.5. Without
limiting the generality of the foregoing, Executive's being barred by the
terms of any such order or injunction from the bid process in connection with
the "Jordanian Dragline" shall not alone constitute grounds for termination of
Executive's employment under this Section 6.5.
(e) In the event of any termination of employment described
in Section 6.5(a), (b) or (c), all other rights of Executive (and, except as
provided in Section 6.6 below, all obligations of the Company) hereunder shall
terminate as of the date of such termination.
(f) Executive acknowledges and agrees that the provisions
of Sections 7 through 10 shall apply regardless of any termination of his
employment under this Section 6.5 and regardless of the period of time, if
any, during which he actually performs services for the Company hereunder.
6.6 Survival. In the event of any termination of Executive's
employment for any reason, Executive and the Company nevertheless shall
continue to be bound by the terms and conditions set forth in Sections 7
through 10 below.
6.7 Certain Definitions. For purposes of this Agreement:
(a) "Change of Control of the Company" shall mean the
closing of a transaction involving one or more independent third parties
(excluding, without limitation, American Industrial Partners Capital Fund II,
L.P. or any affiliate) pursuant to which such party or parties (i) acquire
(whether by merger, consolidation or transfer or issuance of capital stock)
capital stock of the Company (or any surviving or resulting corporation)
possessing the voting power to elect a majority of the board of directors of
the Company (or such surviving or resulting corporation) or (b) acquire all or
substantially all of the Company's assets determined on a consolidated basis.
(b) Executive shall be entitled to terminate this Agreement
for "Good Reason" if, following a Change of Control of the Company, without
Executive's consent, (i) Executive's duties, authorities, responsibilities or
status (including offices, titles and reporting requirements) shall be
materially reduced from those in effect immediately preceding such Change of
Control of the Company or (ii) the Company materially breaches its obligations
under this Agreement.
7. Protection Of Confidential Information.
Executive acknowledges that during the course of his employment
with the Company, its subsidiaries and affiliates, he will be exposed to
documents and other information regarding the confidential affairs of the
Company, its subsidiaries and affiliates, including without limitation
information about their past, present and future financial condition, the
markets for their products, key personnel, past, present or future actual or
threatened litigation, trade secrets, current and prospective customer lists,
operational methods, acquisition plans, prospects, plans for future
development and other business affairs and information about the Company and
its subsidiaries and affiliates not readily available to the public (the
"Confidential Information"). Executive further acknowledges that the services
to be performed under this Agreement are of a special, unique, unusual,
extraordinary and intellectual character. In recognition of the foregoing,
the Executive covenants and agrees as follows:
7.1 No Disclosure Or Use Of Confidential Information. At no time
shall Executive ever divulge, disclose, or otherwise use any Confidential
Information, unless and until such information is readily available in the
public domain by reason other than Executive's unauthorized disclosure or use
thereof, unless such disclosure or use is expressly authorized by the Board in
writing in advance of such disclosure or use.
7.2 Return of Company Property, Records and Files. Upon the
termination of Executive's employment at any time and for any reason, or at
any other time the Board may so direct, Executive shall promptly deliver to
the Company's offices in South Milwaukee, Wisconsin all of the property and
equipment of the Company, its subsidiaries and affiliates (including any cell
phones, pagers, credit cards, personal computers, etc.) and any and all
documents, records, and files, including any notes, memoranda, customer lists,
reports or any and all other documents, including any copies thereof, whether
in hard copy form or on a computer disk or hard drive, which relate to the
Company, its subsidiaries, affiliates, successors or assigns, and/or their
respective past and present officers, directors, employees or consultants
(collectively, the "Company Property, Records and Files"); it being expressly
understood that, upon termination of Executive's employment, Executive shall
not be authorized to retain any of the Company Property, Records and Files,
except to the extent expressly so authorized in writing by the Board.
8. Noncompetition and Other Matters.
8.1 Noncompetition. During the Term and for the two year period
immediately following the date of termination of Executive's employment at any
time and for any reason (the "Restricted Period"), Executive shall not in any
city, town, county, parish or other municipality in any state of the United
States (the names of each such city, town, parish, or other municipality,
including, without limitation, the name of each county in the State of
Wisconsin, being expressly incorporated by reference herein), or any other
place in the world, where the Company, or its subsidiaries, affiliates
(provided, that such term as used in this Section 8 shall not include entities
that are affiliates of the Company solely by reason of being affiliates of
American Industrial Partners Capital Fund II, L.P.), successors, or assigns,
engages in the Business (as defined below), directly or indirectly, (i) engage
in a competing business for Executive's own account; (ii) enter the employ of,
or render any consulting services to, any entity that competes with the
Company, or its subsidiaries, affiliates, successors, or assigns, in the
Business; or (iii) become interested in any such entity in any capacity,
including, without limitation, as an individual, partner, shareholder,
officer, director, principal, agent, trustee or consultant; provided, however,
Executive may own, directly or indirectly, solely as a passive investment,
securities of any entity traded on any national securities exchange if
Executive is not a controlling person of, or a member of a group which
controls, such entity and does not, directly or indirectly, own 5% or more of
any class of securities of such entity. For purposes of this Section 8.1, the
"Business" shall mean (x) the manufacture and sale of surface mining equipment
and spare parts of the kind manufactured, sold and provided by the Company or
any subsidiary, affiliate, successor or assign at any time during the Term;
(y) maintenance and service related to the equipment and spare parts
referenced in subsection (x) above; and (z) the manufacture and sale of, and
maintenance and service related to, any surface mining equipment with respect
to which, prior to the date of termination of Executive's employment
hereunder, the Company or any subsidiary, affiliate, successor or assign has
or shall have made a material financial investment in contemplation of
manufacturing, selling, maintaining or servicing.
8.2 Noninterference. During the Term and the Restricted Period,
Executive shall not, directly or indirectly, solicit, induce, or attempt to
solicit or induce any officer, director, employee, agent or consultant of the
Company or any of its subsidiaries, affiliates, successors or assigns to
terminate his, her or its employment or other relationship with the Company or
its subsidiaries, affiliates, successors or assigns for the purpose of
associating with any competitor of the Company or its subsidiaries,
affiliates, successors or assigns, or otherwise encourage any such person or
entity to leave or sever his, her or its employment or other relationship with
the Company or its subsidiaries, affiliates, successors or assigns for any
other reason, other than pursuant to the discharge of Executive's duties as
President and Chief Executive Officer hereunder.
8.3 Nonsolicitation. During the Restricted Period, Executive
shall not, directly or indirectly, solicit, induce, or attempt to solicit or
induce any customers, clients, vendors, suppliers or consultants then under
contract to the Company or its subsidiaries, affiliates, successors or
assigns, to terminate his, her or its relationship with the Company or its
subsidiaries, affiliates, successors or assigns, for the purpose of
associating with any competitor of the Company or its subsidiaries,
affiliates, successors or assigns, or otherwise encourage such customers,
clients, vendors, suppliers or consultants then under contract to terminate
his, her or its relationship with the Company or its subsidiaries, affiliates,
successors or assigns for any reason, other than pursuant to the discharge of
Executive's duties as President and Chief Executive Officer hereunder.
9. Rights and Remedies upon Breach.
If Executive breaches, or threatens to commit a breach of, any of
the provisions of Sections 7 or 8 above (the "Restrictive Covenants"), the
Company and its subsidiaries, affiliates, successors or assigns shall have the
following rights and remedies, each of which shall be independent of the
others and severally enforceable, and each of which shall be in addition to,
and not in lieu of, any other rights or remedies available to the Company or
its subsidiaries, affiliates, successors or assigns at law or in equity.
9.1 Specific Performance. The right and remedy to have the
Restrictive Covenants specifically enforced by any court of competent
jurisdiction by injunctive decree or otherwise, it being agreed that any
breach or threatened breach of the Restrictive Covenants would cause
irreparable injury to the Company or its subsidiaries, affiliates, successors
or assigns and that money damages would not provide an adequate remedy to the
Company or its subsidiaries, affiliates, successors or assigns.
9.2 Accounting. The right and remedy to require Executive to
account for and pay over to the Company or its subsidiaries, affiliates,
successors or assigns, as the case may be, all compensation, profits, monies,
accruals, increments or other benefits derived or received by Executive as a
result of any transaction or activity constituting a breach of any of the
Restrictive Covenants.
9.3 Severability of Covenants. Executive acknowledges and agrees
that the Restrictive Covenants are reasonable and valid in geographic and
temporal scope and in all other respects. If any court determines that any of
the Restrictive Covenants, or any part thereof, is invalid or unenforceable,
the remainder of the Restrictive Covenants shall not thereby be affected and
shall be given full force and effect without regard to the invalid portions.
9.4 Modification by the Court. If any court determines that any
of the Restrictive Covenants, or any part thereof, is unenforceable because of
the duration or scope of such provision, such court shall have the power to
reduce the duration or scope of such provision, as the case may be (it being
the intent of the parties that any such reduction be limited to the minimum
extent necessary to render such provision enforceable), and, in its reduced
form, such provision shall then be enforceable.
9.5 Enforceability in Jurisdictions. Executive intends to and
hereby confers jurisdiction to enforce the Restrictive Covenants upon the
courts of any jurisdiction within the geographic scope of such covenants. If
the courts of any one or more of such jurisdictions hold the Restrictive
Covenants unenforceable by reason of the breadth of such scope or otherwise,
it is the intention of Executive that such determination not bar or in any way
affect the right of the Company or its subsidiaries, affiliates, successors or
assigns to the relief provided herein in the courts of any other jurisdiction
within the geographic scope of such covenants, as to breaches of such
covenants in such other respective jurisdictions, such covenants as they
relate to each jurisdiction being, for this purpose, severable into diverse
and independent covenants.
10. Arbitration.
Except as necessary for the Company and its subsidiaries,
affiliates, successors or assigns or Executive to specifically enforce or
enjoin a breach of this Agreement (to the extent such remedies are otherwise
available), the parties agree that any and all disputes that may arise in
connection with, arising out of or relating to this Agreement, or any dispute
that relates in any way, in whole or in part, to Executive's employment with
the Company or any subsidiary, the termination of that employment or any other
dispute by and between the parties or their subsidiaries, affiliates,
successors or assigns, shall be submitted to binding arbitration in Milwaukee,
Wisconsin, according to the National Employment Dispute Resolution Rules and
procedures of the American Arbitration Association. The parties agree that
the parties shall each bear his or its own attorneys' fees and costs in
connection with any such arbitration. This arbitration obligation extends to
any and all claims that may arise by and between the parties or their
subsidiaries, affiliates, successors or assigns, and expressly extends to,
without limitation, claims or causes of action for wrongful termination,
impairment of ability to compete in the open labor market, breach of an
express or implied contract, breach of the covenant of good faith and fair
dealing, breach of fiduciary duty, fraud, misrepresentation, defamation,
slander, infliction of emotional distress, disability, loss of future
earnings, and claims under the Wisconsin constitution, the United States
Constitution, and applicable state and federal fair employment laws, federal
and state equal employment opportunity laws, and federal and state labor
statutes and regulations, including, but not limited to, the Civil Rights Act
of 1964, as amended, the Fair Labor Standards Act, as amended, the Americans
With Disabilities Act of 1990, as amended, the Rehabilitation Act of 1973, as
amended, the Employee Retirement Income Security Act of 1974, as amended, the
Age Discrimination in Employment Act of 1967, as amended, and any other state
or federal law.
11. Assignment.
Neither this Agreement, nor any of Executive's rights or
obligations hereunder, may be assigned or otherwise subject to hypothecation
by Executive. The Company may assign its rights and obligations hereunder, in
whole or in part, to any of the Company's subsidiaries, affiliates or parent
corporations, or to any other successor or assign, in each case in connection
with the sale of all or substantially all of the Company's assets or stock or
in connection with any merger, acquisition and/or reorganization involving the
Company.
12. Notices.
All notices and other communications under this Agreement shall be
in writing and shall be given by fax or first class mail, certified or
registered with return receipt requested, and shall be deemed to have been
duly given three (3) days after mailing or twenty-four (24) hours after
transmission of a fax to the respective persons named below:
If to the Company: Bucyrus International, Inc.
1100 Milwaukee Avenue
South Milwaukee, Wisconsin 53172
Attention: Frank Bruno
Fax: 414/768-4474
with a copies to: Skadden, Arps, Slate, Meagher & Flom LLP
Four Embarcadero Center
San Francisco, CA 94111
Attention: Kenton J. King, Esq.
Fax: 415/984-2698
and
American Industrial Partners
One Maritime Plaza, Suite 2525
San Francisco, California 94111
Attention: Lawrence W. Ward, Jr.
Fax: 415/788/5302
If to Executive: Stephen R. Light
4313 W. River Willows Court
Mequon, WI 53092
Fax: 414/512-1629
with a copy to: Foley & Lardner
777 E. Wisconsin Avenue
Milwaukee, Wisconsin 53202
Attention: Harry V. Carlson, Esq.
Fax: 414/297-4900
Any party may change such party's address for notices by notice duly given
pursuant hereto.
13. General.
13.1 Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Wisconsin,
without giving effect to conflicts of laws principles thereof which might
refer such interpretations to the laws of a different state or jurisdiction.
13.2 Entire Agreement. This Agreement sets forth the
understanding of the parties relating to Executive's employment with the
Company and cancels and supersedes all agreements, arrangements and
understandings relating thereto made prior to the date hereof, written or
oral, between the Executive and the Company and any subsidiary or affiliate.
13.3 Amendments; Waivers. This Agreement may be amended,
modified, superseded, cancelled, renewed or extended, and the terms or
covenants hereof may be waived, only by a written instrument executed by the
parties, or in the case of a waiver, by the party waiving compliance. The
failure of any party at any time or times to require performance of any
provision hereof shall in no manner affect the right of such party at a later
time to enforce the same. No waiver by any party of the breach of any term or
covenant contained in this Agreement, whether by conduct or otherwise, in any
one or more instances, shall be deemed to be, or construed as, a further or
continuing waiver of any such breach, or a waiver of the breach of any other
term or covenant contained in this Agreement.
13.4 No Conflict with Other Agreements. Subject to subparagraphs
(a)-(d) below, Executive represents and warrants that neither his execution of
this Agreement nor the full and complete performance of his obligations
hereunder will violate or conflict in any respect with any written or oral
agreement or understanding with any person or entity.
(a) Executive represents and warrants that: (i) during the
course of Executive's employment with P&H Mining Equipment Company ("P&H"), a
wholly-owned subsidiary of Harnco, Inc. ("Harnco"), a wholly-owned subsidiary
of Harnischfeger Industries, Inc. ("Harnischfeger Industries," and together
with P&H and Harnco, "Harnischfeger"), Executive has had access to or
otherwise has been exposed to certain information which Harnischfeger may
claim is confidential and proprietary or may constitute a trade secret under
the State of Wisconsin's version of the Uniform Trade Secrets Act (the
"Harnischfeger Confidential Information"); (ii) Executive has signed an
Employee Proprietary Rights and Confidentiality Agreement with Harnischfeger
(the "Harnischfeger Confidentiality Agreement"), pursuant to which Executive
has agreed, among other things, to maintain the confidentiality of the
Harnischfeger Confidential Information and not to disclose or use that
information for any purpose after Executive's employment with Harnischfeger
has terminated; and (iii) in accordance with subsection (b), Executive can and
will perform each and every one of his duties and responsibilities under this
Agreement and as the Company's President and Chief Executive Officer without
ever disclosing or using, or threatening to disclose or use, the Harnischfeger
Confidential Information or otherwise violating the Harnischfeger
Confidentiality Agreement.
(b) Executive covenants and agrees that, at all times
during Executive's employment with the Company and/or his service to the
Company in any other capacity, including, without limitation, as an officer,
director or consultant to the Company, Executive shall not (i) disclose or
use, or threaten to disclose or use, the Harnischfeger Confidential
Information; (ii) breach, or threaten to commit a breach of, the Harnischfeger
Confidentiality Agreement or any other agreement, pursuant to which Executive
has agreed to keep in confidence, or to refrain from using, the nonpublic
ideas, information or materials of a third party, including, but not limited
to, a former employer or client; or (iii) engage in any activity for or on
behalf of the Company which potentially or inevitably will lead to the actual
or threatened disclosure or use of Harnischfeger Confidential Information or
which potentially or inevitably will lead to an actual or threatened breach of
the Harnischfeger Confidentiality Agreement or any other agreement, pursuant
to which Executive has agreed to keep in confidence, or to refrain from using,
the nonpublic ideas, information or materials of a third party, including, but
not limited to, a former employer or client; provided, however, the parties
agree that Executive's mere negotiation and acceptance of this Agreement shall
not constitute a violation of this subsection 13(b). Executive further
covenants and agrees that he shall at all times during his employment or other
relationship with the Company exert his best efforts with advice of
independent counsel to comply fully with all applicable laws restricting
disclosure or use of nonpublic ideas, information or materials of a third
party, including, without limitation, the State of Wisconsin's version of the
Uniform Trade Secrets Act. If, at any time during Executive's employment with
or service to the Company in any capacity, Executive in his sole discretion
and with the advice of independent counsel believes that his performance of
any duty or engaging in any act for or on behalf of the Company potentially or
inevitably may lead to the disclosure or use, or the threatened disclosure or
use, of any Harnischfeger Confidential Information, Executive shall
immediately recuse himself and refrain from being involved with or retaining
any control or authority over the performance of any such duty or engaging in
any such act and he shall immediately establish an ethical wall which fully
and completely separates and disassociates Executive from having or retaining
any involvement whatsoever in the performance of any such duty or the engaging
in any such act. The Company agrees to reimburse Executive for the reasonable
attorney's fees he may incur in connection with complying with his obligations
under this subsection 13(b).
(c) The Company and Executive acknowledge that
notwithstanding Executive's full and complete compliance with the covenants
and agreements contained in subsection 13.4(b) and in the Harnischfeger
Confidentiality Agreement, P&H, Harnco, Harnischfeger Industries, or their
respective trustees, successors or assigns (collectively, "Harnischfeger
Claimant") nevertheless may seek to interfere with or preclude Executive's
employment with the Company by alleging that such employment threatens a
breach of the Harnischfeger Confidentiality Agreement or other alleged duties
and asserting claims or causes of action against Executive and/or the Company
based on such allegations. To the fullest extent permitted by, and in full
compliance with, applicable law, including, without limitation, the State of
Delaware's General Corporation Law section 145, and the Company's Articles of
Incorporation and By-laws (which shall be in addition to and not in lieu of
any indemnification rights Executive may have thereunder or otherwise), the
Company shall defend, indemnify and hold Executive harmless from any and all
claims, liabilities and expenses which Executive may incur as a result of a
Harnischfeger Claim (defined below), seeking damages for or injunctive or
declaratory relief arising out of Executive's negotiation, acceptance or
performance of employment with the Company ("Company Employment"), or any
alleged misappropriation of trade secrets or confidential information or other
alleged breach of duty (including, but not limited to, any alleged breach of
the Harnischfeger Confidentiality Agreement) arising out of any such Company
Employment; provided, however, that with respect only to claims of alleged
actual misappropriation of trade secrets or alleged actual breach of any
contract (including the Harnischfeger Confidentiality Agreement), duty, or
other legal obligation, the Company shall have no obligation to defend,
indemnify or hold Executive harmless pursuant to this subsection 13.4 (c) if
Executive knowingly and intentionally violates, or has violated, (i)
Executive's warranties or representations or covenants or agreements contained
herein and in the Harnischfeger Confidentiality Agreement, or (ii) Executive's
duties and obligations owed to Harnischfeger.
(d) Executive agrees to deliver prompt written notice to
the Company of the assertion of any claim or the commencement of any suit,
action or proceeding by a Harnischfeger Claimant (a "Harnischfeger Claim"), in
respect of which indemnity may be sought by Executive under this Section 13.4.
The Company shall have the right to control the defense of any such
Harnischfeger Claim. Executive shall have the right to participate in (but
not control) the defense of such Harnischfeger Claim and to retain his own
counsel in connection therewith, but the attorneys' fees and expenses of any
such counsel for Executive shall be borne by Executive unless there exists a
conflict between the Company and Executive as to their respective legal
defenses, in which case the reasonable attorneys' fees and expenses of any
such counsel shall be reimbursed by the Company. Except for claims for
indemnification which arise from acts of Executive committed during the
negotiation or acceptance of this Agreement and prior to expiration of the
Term, the Company's obligation to defend, indemnify and hold Executive
harmless pursuant to this Section 13.4 shall terminate immediately upon the
expiration of the Term, including without limitation by reason of the
termination of Executive's employment hereunder.
13.5 Successors and Assigns. This Agreement shall inure to the
benefit of and shall be binding upon the Company (and its successors and
assigns) and Executive and his heirs, executors and personal representatives.
13.6 Captions. The section headings contained herein are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
13.7 Counterparts. This Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original but all such counterparts together shall constitute one
and the same instrument.
IN WITNESS WHEREOF, Executive and the Company have executed this
Agreement as of the date first written above.
BUCYRUS INTERNATIONAL, INC.
/s/Robert L. Purdum
Robert L. Purdum
Chairman of the Board of Directors
EXECUTIVE
/s/Stephen R. Light
Stephen R. Light
EXHIBIT 10.20
FORM 10-K
YEAR ENDED DECEMBER 31, 1998
SECURED PROMISSORY NOTE
Milwaukee, Wisconsin December 18, 1998
$400,000
FOR VALUE RECEIVED, Stephen R. Light (the "Borrower") hereby
promises to pay to Bucyrus International, Inc., a Delaware corporation
("Payee") the principal sum of FOUR HUNDRED THOUSAND DOLLARS ($400,000) in
lawful money of the United States of America, on March 31, 2003 (the
"Repayment Date"), together with accrued and unpaid interest thereon from the
date hereof. Capitalized terms used herein and not otherwise defined shall
have the meanings set forth in the Employment Agreement, dated as of December
9, 1998 (the "Employment Agreement"), between Borrower and Payee. This Note
shall be full recourse to the Borrower.
1. Principal Payments. Subject to the provisions of
Section 3 below, payments of principal on the Note shall be made as follows:
(a) Principal payments in the amounts set forth herein
shall be due and payable hereunder on April 1 of each of 2000, 2001 and 2002
(the "Installment Dates"), with any remaining principal balance due in full on
the Repayment Date.
(b) The principal payment due and payable on each
Installment Date shall be in an amount not less than 50% of the Borrower's
pre-tax Annual Bonus earned with respect to the immediately preceding fiscal
year; provided, that no principal payment shall be due and payable on an
Installment Date if Borrower receives no Annual Bonus with respect to the
fiscal year ending immediately prior to the year in which such Installment
Date occurs; and provided, further, that except as provided in Section 3(b)
below, regardless of any failure of Executive to earn an Annual Bonus with
respect to any fiscal year of the Company, the entire unpaid principal balance
of this Note shall remain due and payable on the Repayment Date.
(c) Notwithstanding anything herein to the contrary, the
principal payment due and payable on April 1, 2000 shall be in an amount not
less than $100,000.
(d) The Borrower shall have the right to prepay the
principal amount hereof in full or in part, together with all accrued interest
on the amount prepaid to the date of such prepayment, at any time without
penalty.
2. Interest Payments. Except as provided in Section 3(b)
below, the Borrower also promises to pay interest on the unpaid principal
amount hereof, from the date hereof until paid in full, on April 1 of each
year, with the first such interest payment being due and payable on April 1,
2000, at a rate of 4.52% per annum, which interest rate is the minimum
applicable federal mid-term interest rate set forth under Section 1274 of the
Internal Revenue Code as of the date hereof.
3. Termination of Employment.
(a) If the Borrower's employment with Payee is terminated
for Cause, then the principal balance of this Note and all accrued interest
thereon shall be due and payable in full on the date which is ten (10) days
following the effective date of such termination.
(b) If the Borrower terminates his employment under the
Employment Agreement for Good Reason or is terminated by Payee without Cause,
then no further payments of interest or principal on this Note shall be due
and payable following the effective date of such termination of employment
except in connection with one or more Liquidating Events (as defined below)
with respect to the Purchased Shares. For purposes of this Note, a
"Liquidating Event" shall be defined as any event that results in liquidity
for the Common Stock such that the Borrower would have the ability to freely
sell all or any portion of the Purchased Shares, or any shares of capital
stock or other consideration received from another entity by holders of the
Payee's Common Stock as a result of a business combination or other
transaction involving the Payee, at fair market value, and shall include,
without limitation, (A) any sale of Common Stock by American Industrial
Partners Capital Fund II, L.P., which by operation of any other agreement
gives the Borrower the right to sell the Purchased Shares, and (B) an initial
public offering of Payee's Common Stock. In the event a Liquidating Event
occurs, the Borrower shall make a payment on the principal balance of this
Note and accrued interest thereon to the date of termination of employment in
an amount equal to the aggregate value of the Purchased Shares subject to such
sale by the Borrower as of the date of such Liquidating Event. Such amount
shall be applied first to accrued interest and then to principal, and shall
become due and payable on the date which is ten (10) days following such
Liquidating Event.
(c) In the event of the termination of Borrower's
employment with Payee by reason of Borrower's death or Total Disability, this
Note shall be cancelled in exchange for the return to the Company of that
number of Purchased Shares sufficient in value to pay off the then remaining
balance of this Note (or all of the Purchased Shares, if their aggregate value
is less than the then remaining balance of this Note).
4. Security. Pursuant to the Pledge Agreement, dated as of
the date hereof (the "Pledge Agreement"), by and between Payee and the
Borrower, the obligations of the Borrower hereunder are secured by the Pledged
Collateral (as defined in the Pledge Agreement), and the holder of this Note
is entitled to the benefits of such Pledged Collateral.
5. Events of Default. Each of the following events shall
constitute an "Event of Default" hereunder (whether it shall be voluntary or
involuntary or occur or be effected by operation of law or otherwise): (i) the
Borrower's failure to pay, within fifteen (15) days after the date when such
payment is due, any payment of principal or interest on this Note, (ii) the
Borrower's failure to observe or perform, within fifteen (15) days after
receipt of notice of default from Payee, any covenant or agreement contained
in this Note or the Pledge Agreement, (iii) if any representation, warranty,
certification or statement made by the Borrower in the Pledge Agreement or in
any certificate or other document delivered pursuant to the Pledge Agreement
shall prove to have been incorrect in any material respect when made or deemed
made, (iv) the appointment of a receiver or a trustee of all or part of the
Borrower's property, (v) an assignment for the benefit of the Borrower's
creditors, (vi) the commencement or filing of any voluntary proceeding or
petition by the Borrower under any bankruptcy or insolvency law or any law
relating to the relief of debtors or readjustment of indebtedness, (vii) the
commencement or filing of any involuntary proceeding or petition against the
Borrower under any bankruptcy or insolvency law or any law relating to the
relief of debtors or readjustment of indebtedness, which proceeding or
petition shall not have been dismissed within sixty (60) days after
commencement or filing thereof, (viii) the appointment of a receiver,
custodian, trustee or liquidator for any part of the assets or property of the
Borrower, (ix) the failure of the Borrower generally to pay his debts as they
become due, and (x) the failure of Payee to have a first priority security
interest in the Pledged Collateral (as defined in the Pledge Agreement).
6. Remedies.
(a) Upon the occurrence of any Event of Default, the
holder of this Note may, by notice in writing to the Borrower, declare this
Note and the principal of and accrued interest on this Note and all other
charges owing to Payee to be, and the same shall upon such notice forthwith
become, due and payable. Upon the occurrence of an Event of Default, the
holder of this Note may, in addition to all rights and remedies available to
it at law, exercise any or all of its rights under the Pledge Agreement.
(b) No failure or delay by the holder of this Note in
exercising any remedy, right, power or privilege under this Note or the Pledge
Agreement shall operate as a waiver of such remedy, right, power or privilege,
nor shall any single or partial exercise of such remedy, right, power or
privilege preclude any other or further exercise of such remedy, right, power
or privilege. No remedy, right, power or privilege conferred upon or reserved
to the holder of this Note by this Note or the Pledge Agreement is intended to
be exclusive of any other remedy, right, power or privilege provided or
permitted by this Note, the Pledge Agreement or by law, but each shall be
cumulative and in addition to every other remedy, right, power or privilege so
provided or permitted and each may be exercised concurrently or independently
from time to time and as often as may be deemed expedient by the holder of
this Note. Any provision of this Note which is prohibited or unenforceable
shall be ineffective to the extent of such prohibition or unenforceability
without invalidating the remaining provisions of this Note.
(c) The holder of this Note shall have the right, at its
option, to declare the entire unpaid principal balance of this Note, irrespec-
tive of the Repayment Date set forth above, immediately due and payable,
together with accrued interest thereon, if the Borrower (or any affiliate of
the Borrower) sells, transfers or disposes of any portion of the Pledged
Collateral (as defined in the Pledge Agreement).
7. Costs of Collection. Upon the failure of the Borrower to
pay any amount due hereunder as and when due, the Borrower shall pay on demand
any and all costs and expenses (including, without limitation, all court costs
and attorneys' fees) incurred by the holder hereof in connection with the
collection of any outstanding principal balance and interest accrued hereunder
(whether or not suit is filed to enforce the terms hereof), and in connection
with the enforcement of any rights or remedies provided for pursuant to this
Note and the Pledge Agreement. If not paid on demand, all such costs and
expenses automatically shall be added to the remaining principal balance
hereunder as of the date immediately following the date of such demand.
8. Method of Payment, etc. All payments of principal and
interest in respect of this Note shall be made in lawful money of the United
States of America in same day funds at such place as shall be designated in
writing for such purpose by the Payee. Whenever any payment on this Note
shall be stated to be due on a day which is not a business day, such payment
shall be made on the next succeeding business day and such extension of time
shall be included in the computation of the payment of interest on this Note.
The Payee hereby agrees, by its acceptance hereof, that it will make a
notation hereon of all principal payments previously made hereunder and of the
date to which interest hereon has been paid; provided, however, that the
failure to make a notation of any payment made on this Note shall not limit or
otherwise affect the obligations of the Borrower hereunder with respect to
payments of principal of or interest on this Note.
9. Governing Law. THIS NOTE SHALL BE GOVERNED BY, AND SHALL
BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
WISCONSIN.
10. Waiver. The Borrower hereby waives any right it might
otherwise have to require notice or acceptance by any other person of its
obligations or liabilities under this Note which are unconditional and
absolute and waives diligence, presentment, demand of payment, protest and
notice with respect to all of the obligations of the Borrower under this Note
and with respect to any action under this Note and all other notices and
demands whatsoever, except as specifically provided for in this Note. This
Note may be amended, and the observance of any term of this Note may be
waived, with (and only with) the written consent of Payee.
11. Assignment or Pledge of Note. This Note and Payee's rights
hereunder may not be assigned or otherwise transferred by Payee to any person
or entity (other than to an affiliate of Payee), in whole or in part, without
giving prior written notice to the Borrower of such assignment, pledge or
other transfer.
12. Loss, Mutilation, Etc. Upon notice from the holder of this
Note to the Borrower of the loss, theft, destruction or mutilation of this
Note, and upon receipt of an indemnity reasonably satisfactory to the Borrower
from the holder of this Note or, in the case of mutilation hereof, upon
surrender of the mutilated Note, the Borrower will make and deliver a new note
of like tenor in lieu of this Note.
13. Notices. All notices and other communications required or
permitted under this Note shall be in writing and shall be personally
delivered or sent by certified first class United States mail, postage
prepaid, return receipt requested, and if mailed and shall be deemed to have
been received on the third business day after deposit in the mail, addressed
to Payee or to the Borrower at the addresses set forth in Section 12 of the
Employment Agreement. Notice of any change of either party's address shall be
given by written notice in the manner set forth in Section 12 of the
Employment Agreement.
IN WITNESS WHEREOF, the Borrower has caused this Note to be duly
executed and delivered as of the date and at the place first written above.
STEPHEN R. LIGHT
/s/Stephen R. Light
<PAGE>
TRANSACTIONS
ON
NOTE
Outstanding
Amount of Amount of Principal
Interest Paid Principal Paid Balance Notation
Date This Date This Date This Date Made By
EXHIBIT 10.21
FORM 10-K
YEAR ENDED DECEMBER 31, 1998
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (this "Agreement"), dated as of December 18, 1998,
is entered into by Stephen R. Light ("Pledgor"), in favor of Bucyrus
International, Inc., a Delaware corporation (together with its successors and
assigns, "Pledgee").
RECITALS
WHEREAS, (i) Pledgor and Pledgee have entered into the Employment
Agreement, dated as of December 9, 1998 (the "Employment Agreement"),
providing for, among other things, the terms of Pledgor's employment with
Pledgee and the sale of the Purchased Shares by the Pledgee to the Pledgor,
and (ii) in connection with the sale and purchase of the Purchased Shares,
Pledgor has executed a promissory note, dated as of the date hereof (the
"Note"), in favor of Pledgee;
WHEREAS, it is a condition precedent to the sale of the Purchased
Shares under the Employment Agreement that Pledgor shall have entered into
this Agreement and granted the pledges provided herein;
WHEREAS, Pledgor will derive substantial benefit from the loan
evidenced by the Note and wishes to grant a security interest in favor of
Pledgee as set forth herein; and
WHEREAS, Pledgor is the legal and beneficial owner of the shares
of capital stock listed opposite the name of Pledgor on Schedule I hereto
(collectively, the "Pledged Shares");
NOW, THEREFORE, in consideration of the foregoing premises and for
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, Pledgor hereby agrees with Pledgee as follows:
SECTION 1. Certain Defined Terms. Capitalized terms used herein
and not otherwise defined shall have the meanings assigned in the Employment
Agreement. The following terms as used herein shall have the following
meanings:
"Agreement" means this Pledge Agreement, as amended, restated or
supplemented or otherwise modified from time to time in accordance with its
terms.
"Employment Agreement" shall have the meaning set forth in the
recitals to this Agreement.
"Event of Default" shall have the meaning specified in Section 8
hereof.
"Indemnitee" shall have the meaning set forth in Section 15
hereof.
"Note" shall have the meaning set forth in the recitals to this
Agreement.
"Pledge Amendment" shall have the meaning set forth in Section
7(b) hereof.
"Pledged Collateral" means:
(a) the Pledged Shares and the certificates representing the
Pledged Shares and any interest of Pledgor in the entries on the books of any
financial intermediary pertaining to the Pledged Shares, and, subject to
Section 8, all dividends, cash, warrants, rights, instruments and other
property or proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of the Pledged Shares;
(b) all additional shares of, and all securities convertible
into and warrants, options and other rights to purchase, stock (whether
certificated or uncertificated and now existing or hereafter created) of any
Pledgee of the Pledged Shares from time to time acquired by Pledgor in any
manner (which shares shall be deemed to be part of the Pledged Shares), the
certificates or other instruments representing such additional shares,
securities, warrants, options or other rights and any interest of Pledgor in
the entries on the books of any financial intermediary pertaining to such
additional shares, and, subject to Section 8, all dividends, cash, warrants,
rights, instruments and other property or proceeds from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or
all of such additional shares, securities, warrants, options or other rights;
and
(c) to the extent not covered above, all Proceeds of the Pledged
Collateral described in clauses (a) and (b).
"Pledged Shares" shall have the meaning set forth in the recitals
to this Agreement.
"Pledgee" shall have the meaning set forth in the introductory
paragraph of this Agreement.
"Pledgor" shall have the meaning set forth in the introductory
paragraph of this Agreement.
"Proceeds" shall have the meaning assigned that term under the
Uniform Commercial Code (the "Code") as in effect in any relevant jurisdiction
or under relevant law and, in any event, shall include, but not be limited to,
any and all (i) proceeds of any indemnity or guaranty payable to Pledgor from
time to time with respect to any of the Pledged Collateral, and (ii) any other
amounts from time to time paid or payable under or in connection with any of
the Pledged Collateral or otherwise receivable or received when the Pledged
Collateral is or proceeds thereof are sold, collected, exchanged or otherwise
disposed of, whether such disposition is voluntary or involuntary.
"Secured Obligations" shall have the meaning set forth in Section
3 hereof.
"Securities Act" means the Securities Act of 1933, as from time to
time amended.
"Underlying Debt" shall have the meaning set forth in Section 3
hereof.
SECTION 2. Pledge of Security. Pledgor hereby pledges to Pledgee
and grants to Pledgee a first priority security interest in all of the Pledged
Collateral.
SECTION 3. Security for Obligations. This Agreement secures, and
the Pledged Collateral is collateral security for, (i) the prompt payment and
performance in full when due, whether at stated maturity, by acceleration or
otherwise (including the payment of amounts that would become due but for the
operation of the automatic stay under Section 362(a) of the Bankruptcy Code
and the operation of Sections 502(b) and 506(b) of the Bankruptcy Code or any
successor provision thereto, and all interest accruing on the payment
obligations set forth in the Note after the filing of a petition by or against
the Pledgor under the Bankruptcy Code, in accordance with the Note whether or
not the claim for such interest is allowed as a claim after such filing in any
proceeding under the Bankruptcy Code), of all obligations of Pledgor under the
Note, whether now existing or hereafter arising, voluntary or involuntary,
whether or not jointly owed with others, direct or indirect, absolute or
contingent, liquidated or unliquidated, and whether or not from time to time
decreased or extinguished and later increased, created or incurred and all or
any portion of such obligations that are paid to the extent all or any part of
such payment is avoided or recovered directly or indirectly from Pledgee as a
preference, fraudulent transfer or otherwise (all such obligations being the
"Underlying Debt"), and (ii) all obligations or liabilities of every nature of
Pledgor now or hereafter existing under this Agreement (all such obligations
of Pledgor, together with the Underlying Debt, being the "Secured
Obligations").
SECTION 4. Delivery of Pledged Collateral. All certificates or
instruments representing or evidencing the Pledged Collateral shall be
delivered to and held by or on behalf of Pledgee pursuant hereto and shall be
in suitable form for transfer by delivery, or, as applicable, shall be
accompanied by Pledgor's endorsement, where necessary, of duly executed
instruments of transfer or assignment in blank, all in form and substance
satisfactory to Pledgee. If an Event of Default shall have occurred and be
continuing, Pledgee shall have the right, at any time in its discretion and
without notice to Pledgor, to transfer to or to register in the name of
Pledgee or any of its nominees any or all of the Pledged Collateral, subject
only to the revocable rights specified in Section 8(a) hereof. In addition,
if an Event of Default shall have occurred and be continuing, Pledgee shall
have the right at any time to exchange certificates or instruments
representing or evidencing Pledged Collateral for certificates or instruments
of smaller or larger denominations.
SECTION 5. Representations and Warranties. Pledgor hereby
represents and warrants to Pledgee as follows:
(a) Pledged Collateral. There are no outstanding options,
warrants, rights to subscribe, stock purchase rights or other agreements
granted or entered into by Pledgor outstanding with respect to, or property
that is now or hereafter convertible into, or that requires the issuance or
sale of, any Pledged Shares.
(b) Ownership of Pledged Collateral. Pledgor is the sole legal,
record and beneficial owner of the Pledged Collateral pledged by Pledgor free
and clear of any lien except for the security interest created by this
Agreement.
(c) Consents. No consent of any other party (including, without
limitation, stockholders or creditors of Pledgor or any Person under any
contractual obligation of Pledgor) and no consent, authorization, approval or
other action by, and no notice to or filing with, any governmental authority
or regulatory body is required either (i) for the pledge by Pledgor of the
Pledged Collateral pursuant to this Agreement and the grant by Pledgor of the
security interest granted hereby or for the execution, delivery or performance
of this Agreement by Pledgor, or (ii) for the exercise by Pledgee of the
voting or other rights provided for in this Agreement or the remedies in
respect of the Pledged Collateral pursuant to this Agreement (except (A) those
which have been obtained or made, and (B) as may be required in connection
with a disposition of Pledged Collateral by laws affecting the offering and
sale of securities generally or the disposition of collateral generally).
(d) Neither the execution and delivery of this Agreement by the
Pledgor nor the consummation of the transactions herein contemplated nor the
fulfillment of the terms hereof (i) violate the terms of any agreement,
indenture, mortgage, deed of trust, equipment lease, instrument or other
document to which the Pledgor is a party or by which it may be bound or to
which any of its properties or assets may be subject, which violation or
conflict would have a material adverse effect on the financial condition of
the Pledgor or on the value of the Pledged Collateral, or a material adverse
effect on the security interests hereunder, (ii) conflict with any law, order,
rule or regulation applicable to the Pledgor, of any court or any government,
regulatory body or administrative agency or other governmental body having
jurisdiction over the Pledgor or its properties, or (iii) result in or require
the creation or imposition of any lien (other than the lien contemplated
hereby in favor of Pledgee), upon or with respect to any of the property now
owned or hereafter acquired by the Pledgor or the Pledgee, which violation or
conflict would have a material adverse effect on the financial condition,
business, assets or liabilities of the Pledgor and the Pledgee taken as a
whole, or on the value of the Pledged Collateral or a material adverse effect
on the security interests hereunder.
(e) Perfection. The pledge and delivery to Pledgee of the
Pledged Collateral pursuant to this Agreement creates a valid and perfected
first priority security interest of Pledgee in the Pledged Collateral of
Pledgor, securing the payment and performance of the Secured Obligations,
subject to no liens, and all actions necessary or desirable to perfect and
protect such security interest have been duly taken.
SECTION 6. Certain Covenants. Pledgor hereby covenants that,
until the Secured Obligations have been indefeasibly paid in full and the Note
has been extinguished and cancelled, Pledgor will:
(a) not (i) sell, assign (by operation of law or otherwise) or
otherwise dispose of, or grant any option with respect to, any of the Pledged
Collateral pledged hereunder by Pledgor, or (ii) create or permit to exist any
lien upon or with respect to any of the Pledged Collateral, except for the
security interest under this Agreement;
(b) (i) at any time and from time to time, upon request of the
Pledgee, to give, execute, file and/or record any notice, financing statement,
continuation statement, instrument, document or agreement that the Pledgee
shall consider reasonably necessary or desirable to create, preserve,
continue, perfect or validate any security interest granted hereunder or which
the Pledgee may consider reasonably necessary or desirable to exercise or
enforce its rights hereunder with respect to such security interest, (ii) to
give the Pledgee notice of any litigation filed or claim asserted against the
Pledgor relating to or potentially affecting the Pledged Collateral, (iii) if
requested by the Pledgee, to receive and collect the Proceeds, in trust and as
the property of the Pledgee, and to immediately endorse as appropriate and
deliver such Proceeds to the Pledgee when requested by the Pledgee in the
exact form in which they are received, (iv) not to commingle the Proceeds or
collections thereunder with other property, (v) to keep complete and accurate
records regarding all of the Proceeds, (vi) to provide any service and do
other acts or things necessary to keep the Pledged Collateral and the Proceeds
free and clear of all defenses, rights of offset and counterclaim, and (vii)
to pledge hereunder, immediately upon its acquisition (directly or indirectly)
thereof, any and all additional shares of Common Stock of Pledgee, or any
securities convertible into or exercisable for shares of Common Stock of
Pledgee.
(c) (i) pay promptly the obligations set forth under the Note
when due, (ii) indemnify the Pledgee against all loss, claims, demands and
liabilities of every kind arising from the Pledged Collateral and the
transactions and other agreements and undertakings contemplated hereby, and
(iii) pay all expenses, including reasonable attorneys' fees, incurred by the
Pledgee in the preservation, realization, enforcement and exercise of its
rights, powers and remedies hereunder.
SECTION 7. Further Assurances; Pledge Amendments.
(a) Pledgor agrees that at any time and from time to time, at
the expense of Pledgor, Pledgor shall promptly execute and deliver all further
instruments and documents, and take all further actions, that may be necessary
or appropriate, or that Pledgee may reasonably request, in order to perfect
and protect any security interest granted or purported to be granted hereby or
to enable Pledgee to exercise and enforce its rights and remedies hereunder
with respect to any Pledged Collateral.
(b) Pledgor further agrees that it will, upon obtaining any
additional shares of stock or other securities required to be pledged
hereunder, promptly (and in any event within ten (10) days) deliver to Pledgee
a Pledge Amendment, duly executed by Pledgor, in substantially the form of
Schedule II hereto (a "Pledge Amendment"), in respect of the additional shares
of stock or other securities to be pledged pursuant to this Agreement.
Pledgor hereby authorizes Pledgee to attach each Pledge Amendment to this
Agreement and agrees that all Pledged Shares listed on any Pledge Amendment
delivered to Pledgee shall for all purposes hereunder be considered Pledged
Collateral.
SECTION 8. Voting Rights; Dividends; Etc.
(a) So long as no Event of Default (as defined below) shall have
occurred and be continuing:
(i) Pledgor shall be entitled to exercise any and all
voting and other consensual rights pertaining to the Pledged Collateral
or any part thereof for any purpose not in violation of the terms of the
Employment Agreement or the Note. It is understood, however, that
neither (A) the voting by Pledgor of any Pledged Shares for or Pledgor's
consent to the election of directors at a regularly scheduled annual or
other meeting of stockholders or with respect to incidental matters at
any such meeting, nor (B) Pledgor's consent to or approval of any action
otherwise permitted under the terms of the Employment Agreement or the
Note shall be deemed inconsistent with the terms of any of such
documents within the meaning of this Section 8(a)(i), and no notice of
any such voting or consent need be given to Pledgee.
(ii) Pledgor shall be entitled to receive and retain, and
to utilize free and clear of the lien of this Agreement, any and all
dividends and other distributions paid in respect of the Pledged
Collateral; provided, however, that any and all dividends, interest and
other distributions paid or payable in additional equity securities, or
warrants, options or similar rights to acquire additional equity
securities shall be, and shall forthwith be delivered to Pledgee to hold
as, Pledged Collateral and shall, if received by Pledgor, be received in
trust for the benefit of Pledgee, be segregated from the other property
or funds of Pledgor and be forthwith delivered to Pledgee as Pledged
Collateral in the same form as so received (with all necessary
endorsements).
(iii) Pledgee shall promptly execute and deliver (or cause
to be executed and delivered) to Pledgor all such proxies, dividend
payment orders and other instruments as Pledgor may from time to time
reasonably request for the purpose of enabling Pledgor to exercise the
voting and other consensual rights which it is entitled to exercise
pursuant to paragraph (i) above and to receive the dividends, principal
or interest payments which it is authorized to receive and retain
pursuant to paragraph (ii) above.
(b) Upon the occurrence and during the continuance of an Event
of Default (as defined below):
(i) Upon written notice from Pledgee to Pledgor, all
rights of Pledgor to exercise the voting and other consensual rights
which it would otherwise be entitled to exercise pursuant to Section
8(a)(i) shall cease, and all such rights shall thereupon become vested
in Pledgee who shall thereupon have the right to exercise such voting
and other consensual rights.
(ii) All rights of Pledgor to receive the dividends,
interest and other payments which it would otherwise be authorized to
receive and retain pursuant to Section 8(a)(ii) shall cease, and all
such rights shall thereupon become vested in Pledgee who shall thereupon
have the right to receive and hold as Pledged Collateral such dividends,
interest and other payments which shall, upon written notice from
Pledgee, be paid to Pledgee.
(iii) All dividends, interest and other payments which are
received by Pledgor contrary to the provisions of paragraph (ii) of this
Section 8(b) shall be received in trust for the benefit of Pledgee,
shall be segregated from other funds of Pledgor and shall forthwith be
paid over to Pledgee as Pledged Collateral in the same form as so
received (with any necessary endorsements).
(c) In order to permit Pledgee to exercise the voting and other
consensual rights which it may be entitled to exercise pursuant to Section
8(b)(i) hereof and to receive all dividends and other distributions which it
may be entitled to receive under Section 8(a)(ii) hereof or Section 8(b)(ii)
hereof, Pledgor shall promptly execute and deliver (or cause to be executed
and delivered) to Pledgee all such proxies, dividend payment orders and other
instruments as Pledgee may from time to time reasonably request.
(d) Each of the following shall constitute an event of default
(an "Event of Default") hereunder: (i) Pledgor's failure to pay, within
fifteen (15) days after the date when such payment is due, any payment of
principal or interest on the Note, (ii) Pledgor's failure to observe or
perform, within fifteen (15) days after receipt of notice of default from
Pledgee, any covenant or agreement contained in this Agreement or in the Note,
(iii) if any representation, warranty, certification or statement made by the
Pledgor in this Agreement or in any certificate or other document delivered
pursuant to the Note or this Agreement shall prove to have been incorrect in
any material respect when made or deemed made, (iv) the appointment of a
receiver or a trustee of all or part of the Pledgor's property, (v) an
assignment for the benefit of the Pledgor's creditors, (vi) the commencement
or filing of any voluntary proceeding or petition by the Pledgor under any
bankruptcy or insolvency law or any law relating to the relief of debtors or
readjustment of indebtedness, (vii) the commencement or filing of any
involuntary proceeding or petition against the Pledgor under any bankruptcy or
insolvency law or any law relating to the relief of debtors or readjustment of
indebtedness, which proceeding or petition has not been dismissed within sixty
(60) days after the commencement or filing thereof, (viii) the appointment of
a receiver, custodian, trustee or liquidator for any part of the assets or
property of the Pledgor, (ix) the failure of the Pledgor generally to pay his
debts as they become due, and (x) the failure of the Pledgee to have a first
priority security interest in the Pledged Collateral.
SECTION 9. Remedies upon Default. If any Event of Default shall
have occurred and be continuing:
(a) Pledgee may exercise in respect of the Pledged Collateral,
in addition to other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party on default
under the Uniform Commercial Code as in effect in the State of Wisconsin (or
any other state with jurisdiction over the Pledged Collateral) at that time,
and Pledgee may also in its sole discretion, without notice (except as
specified below), sell the Pledged Collateral or any part thereof in one or
more parcels at public or private sale, at any exchange, broker's board or at
any of Pledgee's offices or elsewhere, for cash, on credit or for future
delivery, at such time or times and at such price or prices and upon such
other terms as are commercially reasonable, irrespective of the impact of any
such sales on the market price of the Pledged Collateral. Pledgee may be the
purchaser of any or all of the Pledged Collateral at any such sale and shall
be entitled, for the purpose of bidding and making settlement or payment of
the purchase price for all or any portion of the Pledged Collateral sold at
any such public sale, to use and apply any of the Secured Obligations as a
credit on account of the purchase price of any Pledged Collateral payable by
Pledgee at such sale. Each purchaser at any such sale shall hold the property
sold absolutely free from any claim or right on the part of Pledgor, and
Pledgor hereby waives (to the extent permitted by law) all rights of
redemption, stay and/or appraisal which it now has or may at any time in the
future have under any rule of law or statute now existing or hereafter
enacted. Pledgor agrees that, to the extent notice of sale shall be required
by law, at least ten (10) days' notice to Pledgor of the time and place of any
public sale or the time after which any private sale is to be made shall
constitute reasonable notification. Pledgee shall not be obligated to make
any sale of Pledged Collateral regardless of notice of sale having been given.
Pledgee may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned.
Pledgor hereby waives any claims against Pledgee arising by reason of the fact
that the price at which any Pledged Collateral may have been sold at such a
private sale was less than the price which might have been obtained at a
public sale, even if Pledgee accepts the first offer received and does not
offer such Pledged Collateral to more than one offeree. If the proceeds of
any sale or other disposition of the Pledged Collateral are insufficient to
pay all the Secured Obligations, Pledgor shall be liable for the deficiency
and the fees of any attorneys employed by Pledgee to collect such deficiency.
(b) If Pledgee determines to exercise its right to sell any or
all of the Pledged Collateral, upon written request, Pledgor shall furnish to
Pledgee all such information as Pledgee may reasonably request in order to
facilitate such sale.
SECTION 10. Pledgee May Perform. If Pledgor fails to perform any
agreement contained herein, then, during an Event of Default, Pledgee may
itself perform, or cause performance of, such agreement, and the expenses of
Pledgee incurred in connection therewith shall be payable by Pledgor under
Section 15(b) hereof.
SECTION 11. Pledgee Appointed Attorney-in-Fact. Pledgor hereby
irrevocably appoints Pledgee as Pledgor's attorney-in-fact, with full
authority in the place and stead of Pledgor and in the name of Pledgor or
otherwise, from time to time, during the continuation of an Event of Default,
in Pledgee's reasonable discretion to take any action and to execute any
instrument, including but not limited to financing and continuation
statements, which Pledgee may deem necessary or advisable, subject to the
terms and conditions of this Agreement, to accomplish the purposes of this
Agreement, including, without limitation, (a) to receive, endorse and collect
all instruments made payable to Pledgor representing any dividend, principal
or interest payment or other distribution in respect of the Pledged Collateral
or any part thereof and to give full discharge for the same, and (b) to ask,
demand, collect, sue for, recover, compound, receive and give acquittance and
receipts for moneys due and to become due under or in respect of any of the
Pledged Collateral, and to file any claims or take any action or institute any
proceedings which Pledgee may deem necessary or desirable for the collection
of any of the Pledged Collateral or to enforce the rights of Pledgee with
respect to any of the Pledged Collateral.
SECTION 12. Standard of Care. The powers conferred on Pledgee
hereunder are solely to protect its interest in the Pledged Collateral and
shall not impose on it any duty to exercise such powers. Pledgee shall be
deemed to have exercised reasonable care in the custody and preservation of
the Pledged Collateral in its possession if the Pledged Collateral is accorded
treatment substantially equivalent to that which Pledgee accords its own
property consisting of negotiable securities, it being understood that Pledgee
shall have no responsibility for (a) ascertaining or taking action with
respect to calls, conversions, exchanges, maturities, tenders or other matters
relating to any Pledged Collateral, whether or not Pledgee has or is deemed to
have knowledge of such matters, (b) taking any necessary steps (other than
steps taken in accordance with the standard of care set forth above to
maintain possession of the Pledged Collateral) to preserve rights against any
parties with respect to any Pledged Collateral, (c) taking any necessary steps
to collect or realize upon the Secured Obligations or any guarantee therefor,
or any part thereof, or any of the Pledged Collateral, or (d) initiating any
action to protect the Pledged Collateral against the possibility of a decline
in market value.
SECTION 13. Application of Proceeds. All Proceeds received by
Pledgee in respect of any sale of, collection from, or other realization upon
all or any part of the Pledged Collateral may, in the discretion of Pledgee,
be held by Pledgee as Pledged Collateral for, and/or then or at any time
thereafter applied in whole or in part by Pledgee against the Secured
Obligations in the following order of priority:
FIRST: To the payment of all costs and expenses of such sale,
collection or other realization, and all expenses, liabilities and
advances made or incurred by Pledgee in connection therewith and all
amounts for which Pledgee is entitled to indemnification and
reimbursement hereunder and all advances made by Pledgee hereunder for
the account of the Pledgor or for the payment of all costs and expenses
paid or incurred by Pledgee in connection with the exercise of any right
or remedy hereunder, all in accordance with Section 15 hereof;
SECOND: To the payment in full of all Secured Obligations,
including those obligations set forth in the Note; and
THIRD: To the payment to or upon the order of Pledgor, or to
whosoever may be lawfully entitled to receive the same or as a court of
competent jurisdiction may direct, of any surplus then remaining from
such proceeds.
SECTION 14. Actions by Pledgee. During the continuation of an
Event of Default, Pledgee shall have the right hereunder, in its sole
discretion, to make demands, to give notices, to exercise or refrain from
exercising any rights, and to take or refrain from taking any action with
respect to the Pledged Collateral (including, without limitation, the release
or substitution of Pledged Collateral).
SECTION 15. Indemnity and Expenses.
(a) Pledgor agrees to indemnify Pledgee and each of the
officers, directors, agents, employees and affiliates of Pledgee (each an
"Indemnitee"), from and against any and all claims, losses and liabilities in
any way relating to, growing out of or resulting from this Agreement and the
transactions contemplated hereby (including, without limitation, enforcement
of this Agreement), except claims, losses or liabilities resulting from the
gross negligence or willful misconduct of the Indemnitee seeking
indemnification.
(b) Pledgor will upon demand pay to Pledgee the amount of any
and all reasonable costs and expenses, including the reasonable fees and
expenses of its counsel and of any experts and agents, which Pledgee may incur
in connection with (i) the administration of this Agreement, (ii) the custody
or preservation of, or the sale of, collection from, or other realization
upon, any of the Pledged Collateral, (iii) the exercise or enforcement of any
of the rights of Pledgee hereunder, or (iv) the failure by Pledgor to perform
or observe any of the provisions hereof.
SECTION 16. Waivers of Pledgor.
(a) Pledgor hereby waives any right to require Pledgee to:
(i) proceed against Pledgor, any guarantor of any of the Secured Obligations
or any other person or entity, (ii) proceed against or exhaust any other
security held from Pledgor or any other person or entity, (iii) give notice to
Pledgor of the terms, time and place of any public or private sale of the
Pledged Collateral or any other security, or otherwise comply with Section
9504 of the Uniform Commercial Code (except as set forth in this Agreement),
(iv) pursue any other remedy in Pledgee's power, or (v) make or give any
presentments, demands for performance, notices of nonperformance, protests,
notices of protest or notices of dishonor in connection with any obligations
or evidences of indebtedness which constitute in whole or in part the Secured
Obligations or in connection with the creation of new or additional Secured
Obligations;
(b) Pledgor waives any defense arising by reason of: (i) any
disability or other defense of Pledgor or any other entity, including, without
limitation, any defense based on or arising out of the unenforceability of any
of the Secured Obligations, legal or equitable discharge of the Secured
Obligations or this Agreement or any statute of limitations affecting
Pledgor's liability hereunder, (ii) the cessation from any cause whatsoever,
other than payment in full, of the Secured Obligations or the release or
substitution of any sureties or guarantors of the Secured Obligations, (iii)
any act or omission (other than as a result of the gross negligence or willful
misconduct of the Pledgee) by Pledgee which directly or indirectly results in
or aids the discharge of Pledgor or any of the Secured Obligations by
operation of law or otherwise, (iv) the release of any other collateral
securing the Secured Obligations or the failure by Pledgee to perfect or
maintain the perfection of any such other collateral, (v) any modification of
the Secured Obligations, in any form whatsoever, including, but not limited to
the renewal, extension, acceleration or other change in the time for payment
of the Secured Obligations, and any change in the terms of the Secured
Obligations, including, but not limited to, any increase or decrease of the
rate of interest on the Secured Obligations, and (vi) any law limiting the
liability of or exonerating guarantors or sureties; and
(c) until all the Secured Obligations shall have been paid in
full, Pledgor waives any right to enforce any remedy which Pledgee now has or
may hereafter have against any person or entity guaranteeing or securing the
Secured Obligations, and waives any benefit of, or any right to participate in
any security whatsoever now or hereafter held by Pledgee for the Secured
Obligations.
SECTION 17. Continuing Security Interest; Transfer of
Indebtedness. This Agreement shall create a continuing security interest in
the Pledged Collateral and shall, unless released and/or terminated,
(a) remain in full force and effect until indefeasible payment in full of all
Secured Obligations, (b) be binding upon Pledgor, its successors and assigns,
and (c) inure, together with the rights and remedies of Pledgee hereunder, to
the benefit of Pledgee and its successors, and permitted transferees and
assigns. Without limiting the generality of the foregoing clause (c), upon
any assignment by Pledgee of any Underlying Debt of the Borrower held by it to
any other person or entity, such other person or entity shall thereupon become
vested with all the benefits in respect thereof granted to Pledgee herein or
otherwise. Upon the date upon which the Secured Obligations have been
indefeasibly paid and performed in full and the Note has been extinguished and
cancelled, this Agreement shall automatically terminate, and (i) Pledgor shall
be entitled to the return, upon its request and at its expense, against
receipt and without recourse to Pledgee, of such of the Pledged Collateral
pledged by Pledgor hereunder as shall not have been sold or otherwise applied
pursuant to the terms hereof prior to such request, (ii) Pledgee's security
interest in and lien on such Pledged Collateral shall be simultaneously
released upon the making of such request, and (iii) Pledgee shall, at
Pledgor's expense, execute and/or deliver such documents as Pledgor shall
reasonably request to evidence such release.
SECTION 18. No Waiver by Pledgee; Authority of Pledgor. No
failure on the part of Pledgee to exercise, and no course of dealing with
respect to, and no delay in exercising, any right, power or remedy hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise by
Pledgee of any right, power or remedy hereunder preclude any other or further
exercise thereof or the exercise of any other right, power or remedy. The
remedies herein provided are cumulative to the fullest extent permitted by law
and are not exclusive of any remedies provided by law. It is not necessary
for Pledgee to inquire into the powers of Pledgor or the officers, directors
or agents acting or purporting to act on behalf of Pledgor.
SECTION 19. Amendment, Etc. No amendment or waiver of any
provision of this Agreement, nor consent to any departure by Pledgor herefrom,
shall in any event be effective unless the same shall be in writing and signed
by Pledgee, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
SECTION 20. Addresses for Notices. Unless otherwise specifically
provided herein, any notice or other communication herein required or
permitted to be given shall be given as provided under Section 12 of the
Employment Agreement.
SECTION 21. Governing Law; Terms. THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF WISCONSIN, EXCEPT AS REQUIRED BY MANDATORY PROVISIONS OF LAW AND
EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST
GRANTED HEREUNDER, OR ANY REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR
PLEDGED COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE
STATE OF WISCONSIN. Unless otherwise defined herein, terms defined in Article
9 of the Code are used herein as therein defined.
SECTION 22. Severability. Any provisions of this Agreement which
are prohibited or unenforceable in any jurisdiction shall, as to such
jurisdictions, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction.
SECTION 23. Consent to Jurisdiction and Service of Process. (a)
Any legal action or proceeding with respect to this Agreement and any action
for enforcement of any judgment in respect thereof may be brought in the
courts of the State of Wisconsin or of the United States of America for the
Eastern District of Wisconsin, and, by execution and delivery of this
Agreement, each of Pledgor and Pledgee hereby accepts for itself and in
respect of its property, generally and unconditionally, the non-exclusive
jurisdiction of the aforesaid courts and any appellate courts from any
thereof. Each of the parties hereto agrees that a final judgment in any such
action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this Agreement shall affect any right that Pledgee may otherwise
have to bring any action or proceeding relating to this Agreement against
Pledgor or its properties in the courts of any jurisdiction.
(b) Pledgor hereby irrevocably and unconditionally waives, to
the fullest extent it may legally and effectively do so, any objection which
it may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement in any court referred
to in paragraph (a) of this Section. Each of the parties hereto hereby
irrevocably waives, to the fullest extent permitted by law, the defense of an
inconvenient forum to the maintenance of such action or proceeding in any such
court.
(c) Each party to this Agreement irrevocably consents to service
of process in the manner provided for notices in Section 20 hereof. Nothing in
this Agreement will affect the right of any party to this Agreement to serve
process in any other manner permitted by law.
SECTION 24. Marshaling; Payments Set Aside. Pledgee shall not be
under any obligation to marshal any assets in favor of Pledgor or any other
party or against or in payment of any or all of the Secured Obligations. To
the extent that Pledgor makes a payment or payments to Pledgee or Pledgee
enforces its security interests or exercises its rights of setoff, and such
payment or payments or proceeds of such enforcement or setoff or any part
thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside and/or required to be repaid to a trustee, receiver or
any other party under any bankruptcy law, state or federal law, common law or
equitable cause, then to the extent of such recovery, the obligation or part
thereof originally intended to be satisfied, and all Liens, rights and
remedies therefor, shall be revived and continued in full force and effect as
if such payment had not been made or such enforcement or setoff had not
occurred.
SECTION 25. Headings. Section and subsection headings in this
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement or be given any substantive effect.
SECTION 26. Counterparts. This Agreement and any amendments,
waivers, consents or supplements may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, and all of which together shall constitute one and the same
Agreement.
IN WITNESS WHEREOF, Pledgor has caused this Pledge Agreement to be
duly executed and delivered as of the date first above written.
PLEDGOR:
STEPHEN R. LIGHT
/s/Stephen R. Light
PLEDGEE:
BUCYRUS INTERNATIONAL, LTD.
By: /s/Robert L. Purdum
Name: Robert L. Purdum
Title: Chairman of the Board
<PAGE>
SCHEDULE I
to the Pledge Agreement
Attached to and forming a part of the Pledge Agreement, dated as
of December 18, 1998, between Pledgor and Pledgee.
Pledgor: Stephen R. Light
Percent of
Shares Issued
Class Stock Number and
Stock Pledgee of Stock Certificate Nos. of Shares Outstanding
Bucyrus Common 11 5,000 .3%
International,
Ltd.
I-1
<PAGE>
SCHEDULE II
to the Pledge Agreement
[FORM OF PLEDGE AMENDMENT]
This Pledge Amendment, dated [_______ __, ____], is delivered
pursuant to Section 7 of the Pledge Agreement referred to below. The
undersigned hereby agrees that this Pledge Amendment may be attached to the
Pledge Agreement, dated as of December 18, 1998, between Stephen R. Light and
Pledgee (the "Pledge Agreement"; capitalized terms defined therein being used
herein as therein defined), and that the Pledged Shares listed on this Pledge
Amendment shall be deemed to be part of the Pledged Shares and shall become
part of the Pledged Collateral and shall secure the Secured Obligations as
provided in the Pledge Agreement.
STEPHEN R. LIGHT
______________________________
Percent of
Shares Issued
Class Stock Number and
Stock Issuer of Stock Certificate Nos. of Shares Outstanding
II-1
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0
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