SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
/X/ Annual report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the fiscal year ended
October 31, 1994.
/ / Transition report pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934 for the transition
period from to .
Commission file number 1-9299
HARNISCHFEGER INDUSTRIES, INC.
(Exact Name of Registrant as Specified in Its Charter)
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Delaware 39-1566457
(State of (I.R.S. Employer
Jurisdiction of Identification No.)
Incorporation or
Organization)
13400 Bishops Lane, Brookfield, Wisconsin 53005
(Address of Principal Executive Office)
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Registrant's Telephone Number, Including Area Code:
(414) 671-4400
Securities registered pursuant to Section 12(b) of the
Act:
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Name of Each Exchange On
Title of Each Class Which Registered
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Common Stock, $1 Par Value New York and Pacific Stock
Exchanges
Preferred Stock Purchase Rights New York and Pacific
Stock Exchanges
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, 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/
The aggregate market value of Registrant's Common
Stock held by non-affiliates, as of January 25, 1995,
based on a closing price of $ 27.88, was approximately
$1,308.0 million.
The number of shares outstanding of Registrant's
Common Stock, as of January 25, 1995, was 47,671,432.
DOCUMENTS INCORPORATED BY REFERENCE
1994 Annual Report to Shareholders (Parts I, II and IV).
Proxy statement for the 1995 annual meeting of
stockholders to be filed within 120 days of the end of the
Company's fiscal year (Part III).
HARNISCHFEGER INDUSTRIES, INC.
INDEX TO
ANNUAL REPORT ON FORM 10-K
For The Year Ended October 31, 1994
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Part I
Item 1. Business................................................. 3
Item 2. Properties............................................... 11
Item 3. Legal Proceedings........................................ 14
Item 4. Submission of Matters to a Vote of Security Holders...... 14
Part II
Item 5. Market for the Registrant's Common Stock and Related
Stockholder Matters...................................... 15
Item 6. Selected Financial Data for the Registrant for Each of the
Last Five Fiscal Years................................... 15
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................ 15
Item 8. Financial Statements and Supplementary Data.............. 15
Item 9. Disagreements on Accounting and Financial Disclosure..... 15
Part III
Item 10. Directors and Executive Officers of the Registrant....... 16
Item 11. Executive Compensation................................... 16
Item 12. Security Ownership of Certain Beneficial Owners and
Management............................................... 16
Item 13. Certain Relationships and Related Transactions........... 16
Part IV
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K.............................................. 16
Signatures ......................................................... 21
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PART I
Item 1. Business
SEGMENTS OF BUSINESS
Harnischfeger Industries, Inc. ("Harnischfeger
Industries" or the "Company") is a holding company for
subsidiaries involved in the worldwide manufacture and
distribution of: paper machinery (Beloit Corporation);
surface mining and material handling equipment
(Harnischfeger Corporation); underground mining equipment
(Joy Technologies Inc.); and systems integration services
(Syscon Corporation). The Company expects that Syscon
Corporation, the remaining unit in the Systems Group, will
be divested in the first half of 1995. See Part IV Item
14(b)(6). The operating results of the Systems Group
have therefore been reclassified as discontinued
operations in the Company's Consolidated Statement of
Income for each year presented. The Company completed
its acquisition of Joy Technologies Inc.("Joy"), a world
leader in underground mining equipment and environmental
products, in an exchange of common stock on November 29,
1994. Harnischfeger Industries is the direct successor to
a business begun over 100 years ago which, at October 31,
1994, through its subsidiaries, manufactures and markets
products classified into three industry segments:
Papermaking Machinery and Systems, Mining Equipment, and
Material Handling Equipment. A fourth segment, the
Environmental Group, was added in fiscal 1995 as a result
of the acquisition of Joy.
PAPERMAKING MACHINERY AND SYSTEMS
The Papermaking Machinery and Systems Group is
comprised of the Company's 80% interest in Beloit
Corporation ("Beloit") and the Company's interest in
Measurex Corporation ("Measurex"). On December 29, 1994,
Measurex repurchased 2,026,900 shares of its stock held by
the Company, reducing the Company's ownership interest
from 20% to 10%. Beloit is consolidated, while Measurex
is accounted for on the equity basis (cost basis
subsequent to December 29, 1994). Mitsubishi Heavy
Industries, Ltd. ("Mitsubishi") is the owner of the other
20% interest in Beloit. The Company and Mitsubishi have
entered into certain agreements that provide Mitsubishi
with the right to designate one of Beloit's five
directors. These agreements also place certain
restrictions on the transfer of Beloit stock. In the event
of a change in control of the Company, Mitsubishi has the
right to sell its 20% interest back to the Company for the
greater of $60 million or the book value of its equity
interest.
Beloit is a leader in the design and manufacture of
papermaking machinery and related products used in the
pulp and paper industries. Beloit operates on a global
basis with major manufacturing facilities in six countries
and sales and service offices located throughout the
world. In addition, licensing arrangements exist with
several major foreign companies.
Beloit's activities are divided into the following
categories: complete installations involving the design,
manufacture and installation of equipment and systems;
major rebuilds and servicing of existing systems; and the
sale of ancillary equipment and replacement parts. This
machinery is custom designed to meet the specific needs of
each customer. In 1994, Beloit expanded its service
business through the acquisition of OASIS (Optical
Alignment Systems and Inspection Services, Inc.), the
leading supplier of in-mill optical alignment services.
Beloit is known for the quality and dependability of
its products and is a leader in product innovation and
development. Beloit has made a continuous commitment to
research and development activities, and has been granted
numerous patents on its designs. Beloit systems and
equipment are used by a substantial number of paper
producers, both domestic and foreign, and Beloit's
installed base of equipment exceeds that of any of its
competitors.
A major factor in Beloit's success in the paper
machinery industry has been its international
manufacturing operations. Beloit's overseas facilities
have been used to support both domestic and foreign sales
and have provided Beloit with the flexibility to shift its
manufacturing to more favorable locations as appropriate.
In addition, Beloit has been able to take advantage of
favorable export financing provided by certain foreign
governments. Beloit's manufacturing facilities are
supported by a domestic and international marketing
network staffed by experienced sales engineers.
Measurex provides its customers with
computer-integrated manufacturing through design,
production, marketing and servicing of sensor-based
information and control systems. Measurex products provide
improved results for customers by increasing productivity,
reducing raw material usage and energy consumption, and
improving product quality and uniformity.
Measurex's primary marketplace is within the
manufacturing industries that produce products by
continuous or batch processes. Over 79% of Measurex's
business is with the pulp and paper industry, with the
remaining business being with the plastic, metal, rubber,
chemicals, glass and pharmaceutical industries.
Beloit has entered into an agreement with Jagenberg
Papiertechnik, GmbH, a German paper finishing and coating
equipment manufacturer. Under the Jagenberg agreement,
Beloit's Lenox Division will become the major supplier of
parts and service for all winder products in the Americas.
The agreement is currently being reviewed by regulatory
authorities with final approval expected to be received in
the first half of 1995.
MINING EQUIPMENT
Harnischfeger Corporation, through its Mining
Equipment Division, is the world's largest producer of
electric mining shovels and is a significant producer of
electric and diesel-electric crawler and walking
draglines, hydraulic mining excavators, blasthole drills,
and electric, dredge and dragline bucket products.
Electric mining shovels range in capacity from 18 to 80
cubic yards, crawler draglines from 10 to 20 cubic yards,
and hydraulic mining excavators from 12 to 27 cubic yards.
Capacities for the walking draglines range from 20 to 150
cubic yards.
In 1991, Harnischfeger Corporation expanded its
product lines by acquiring the large rotary blasthole
drill product line from the Gardner-Denver Mining and
Construction Division of Cooper Industries, Inc. There
are three drill models currently in the active product
line, with drilling diameters ranging from 9 to 22 inches
and bit load capacities from 70,000 to 150,000 pounds.
The products of the Mining Equipment segment are used
in mines, quarries and earth-moving operations in the
digging and loading of such minerals and other ores as
coal, copper, gold, iron ore, lead, zinc, bauxite,
uranium, phosphate, stone and clay.
Harnischfeger Corporation has a significant
relationship in the mining shovel business with Kobe
Steel, Ltd. ("Kobe") pursuant to which Harnischfeger
Corporation licenses Kobe to manufacture certain electric
mining shovels and related replacement parts in Japan.
Harnischfeger Corporation has the exclusive right to
market Kobe-manufactured mining shovels and parts outside
Japan (except in the case of certain government sales).
In addition, Harnischfeger Corporation is party to an
agreement, through 1996, with a corporate unit of the
People's Republic of China, licensing the manufacture and
sale of two models of electric mining shovels and related
components. This relationship provides Harnischfeger
Corporation with an opportunity to sell component parts
for shovels built in China.
On November 29, 1994, the Company completed its
acquisition of Joy, a world leader in underground mining
equipment and environmental products, in an exchange of
common stock. Joy manufactures and services mining
equipment for the underground extraction of coal and other
bedded deposits and has facilities in Australia, South
Africa, the United Kingdom and the United States, as well
as sales offices in both Poland and the People's Republic
of China. Joy's Mining Machinery Group designs,
manufactures and distributes continuous miners, entry
drivers and sump shearers; long-wall shearers; shuttle
cars; and continuous haulage systems for use in
underground mining. The Mining Machinery Group's products
are used to extract bedded materials from underground
deposits. They are not sold into the general construction
industry, and demand for them is not tied to cycles in
that industry. Joy also maintains an extensive network of
service and spare parts distribution centers to rebuild
and service equipment and sell spare parts in support of
its installed base. This network includes six service
centers in the United States and four outside of the
United States, all of which are strategically located in
major underground mining regions. Joy's Mining Machinery
Group accounts for approximately 74% of total Joy sales.
The financial position and results of operations of
Harnischfeger Industries and Joy will be combined in
fiscal 1995 retroactive to November 1, 1994. Financial
information with respect to the acquisition of Joy is
presented in Note 17 to the Financial Statements, on Page
43 of the 1994 Annual Report to Shareholders and is
incorporated herein by reference.
MATERIAL HANDLING EQUIPMENT
The Material Handling Equipment Division of
Harnischfeger Corporation produces lines of
through-the-air material handling equipment designed for a
variety of users as well as container handling cranes for
use in ports. The Division is comprised of six business
groups: P&H(TM) Equipment, Product Support, PHoenix(TM),
Distribution and Service, Morris - Engineered Products
Division and Morris - Standard Products Division.
P&H(TM) Equipment
The P&H(TM) Equipment group is comprised of the
overhead crane, hoist and electrical product lines in the
United States. It was formed from the core of what made up
the Material Handling Equipment Division in prior years.
The new crane portion of the group is comprised of
several product lines: engineered cranes, standard cranes,
portal cranes and crane components. Cranes are designed
for installation in a wide range of industrial settings.
Each crane is engineered to the customer's specifications,
using standard components wherever possible. Engineered
cranes are marketed for moderate to severe duty cycle
applications in capacities from 3 to 800 tons.
Standard overhead cranes are available in capacities
from 5 to 100 tons. Stacker cranes, ranging in capacities
from 2 to 50 tons, are particularly suitable for factory
automation projects. Portal cranes range in lifting
capacities from 5 to 100 tons and are used outdoors to load
and unload materials.
The large installed base of cranes and increasing
sensitivity of customers to opportunities for improved
manufacturing efficiency from upgrading their material
handling equipment provides this product line an
opportunity for growth.
The component products portion of this group consists
of electric wire rope and chain hoists, manual chain
hoists, ratchet lever hoists, and electrical products.
Hoists range in capacities from 1/8 ton to 60 tons. These
hoists use state-of-the-art materials and manufacturing
techniques and feature a wide variety of controls.
Product Support
The Product Support group markets replacement products
and parts through Material Handling Centers, both
independent and company owned, in domestic markets and
through licensees or agents in international markets. This
group differentiates itself from the competition through
reliable and responsive delivery performance.
PHoenix(TM)
The PHoenix group markets pre-owned cranes under the
PHoenix trademark which have been remanufactured and
modernized to meet customer requirements. It also markets
pre-owned parts to its customers. The PHoenix group
provides a cost effective solution with reduced lead times
to customers. The group's products are marketed direct and
through both independent and company owned Material
Handling Centers.
Distribution and Service
This group provides installation, erection and repair
and maintenance services under the ProCare(TM) trademark
through the growing network of company owned Material
Handling Centers. The group responds to customers'
increased desire to outsource the repair and maintenance of
overhead cranes and hoists.
Morris - Engineered Products Division
The Morris - Engineered Products Division is the
larger portion of the recently acquired Morris Mechanical
Handling business based in the United Kingdom. It
manufactures high integrity special purpose heavy lifting
equipment, principally container handling cranes. In
addition, its operations in South Africa are involved in
the manufacture and service of cranes and other lifting
equipment.
Morris - Standard Products Division
The Morris - Standard Products Division manufactures
hoists, cranes, linear motors, and controls. The hoist
division manufactures a range of electric wire rope hoists
and both electric and hand chain hoists. The industrial
cranes division manufactures electric overhead cranes all
to standardized designs. Linear Motors manufactures crane
and general industrial controls and linear motors for
special and general application.
ENVIRONMENTAL GROUP
Joy's Environmental Group supplies flue gas
desulfurization systems for reducing levels of sulfur
dioxide in smokestack emissions which otherwise might react
with other chemicals in the atmosphere to form acid rain.
The Environmental Group also designs, fabricates, and
installs systems for the collection and removal of ash
accumulated at the bottom of coalburning boilers and ash
carried up the exhaust flues of these boilers. These
products and services are used worldwide by various
electric utilities and industrial companies. The
Environmental Group accounts for approximately 26% of total
Joy sales.
SYSTEMS
The Systems Group consists of Syscon Corporation
("Syscon").
Syscon is engaged principally in providing systems
development, systems integration and systems services to
the United States Government, government agencies and
commercial enterprises.
The Company expects that Syscon will be divested in
the first half of 1995. Syscon has been presented as a
discontinued operation in the Company's Consolidated
Financial Statements.
Syscon develops complex systems for the federal
government, including the Department of Defense and federal
civil agencies. As a software engineering firm, Syscon
provides sophisticated computer programs used by the
military in their mission critical systems, training,
logistics and business management systems. In addition,
Syscon develops application-specific management information
systems software for other federal departments and agencies
and for commercial clients.
Syscon develops, integrates and supports
business/resource management information systems for
defense and federal agencies and the commercial sector.
Syscon provides cost-effective solutions to a particular
client's needs using commercial off-the-shelf computer
hardware and software to meet systems requirements. Syscon
also performs a wide range of engineering and management
services to assist clients responsible for projects that
field complex military and space systems, and business
management systems.
INTERNATIONAL OPERATIONS
Export sales from the United States were approximately
15% of net sales in 1994, 15% in 1993 and 15% in 1992.
Typically, the profit margin on export sales does not
differ substantially from the profit margin on domestic
sales.
In 1994, 1993 and 1992, Beloit's manufacturing
subsidiaries outside the United States (principally in the
United Kingdom, Italy, Canada, Brazil and Poland) generated
approximately 12%, 17% and 29%, respectively, of
Harnischfeger Industries' consolidated net sales.
Harnischfeger Corporation's manufacturing subsidiaries
outside the United States (principally in Australia, South
Africa, Brazil, Canada, United Kingdom, Mexico and Germany)
generated approximately 11% of Harnischfeger Industries'
consolidated net sales in 1994, 9% in 1993 and 12% in 1992.
Joy's Mining Machinery Group has been active in major
coal mining markets outside the United States with
development, manufacturing, distribution and service
facilities in Australia, South Africa and the United
Kingdom. More than 30% of Joy's mining revenues are
derived from countries outside the United States.
Joy's Environmental Group has been increasing its
participation in global markets such as the Far East.
Appoximately 40% of the Groups revenues are derived from
sources outside of the United States.
Beloit has granted licensing agreements to serve
certain foreign markets to companies located in Australia,
France, India, Italy, Japan, China and Spain. The licensing
agreement with Mitsubishi in Japan represents the majority
of Beloit's license income. Beloit maintains sales and
service offices throughout the world to remain competitive
in foreign markets.
In general, sales of licensed mining products are
managed within the country of manufacture by the foreign
licensee. Licensee exports, together with exports from the
United States, are sold through Harnischfeger Corporation's
subsidiaries, which directly or through subsidiaries or
affiliates maintain regional sales offices in: Brisbane,
Melbourne and Perth, Australia; Toronto and Vancouver,
Canada; Mexico City, Mexico; Belo Horizonte and Sao Paulo,
Brazil; Antofagasta, Chile; Lima, Peru; Weiterstadt,
Germany; Aylesbury, United Kingdom; Johannesburg, South
Africa; Caracas and Maracaibo, Venezuela; and Beijing,
China.
Harnischfeger Industries' international operations are
subject to certain risks not generally applicable to its
domestic businesses, including currency fluctuations,
changes in tariff restrictions, restrictive regulations of
foreign governments (including price and exchange
controls), and other governmental actions. Harnischfeger
Industries has entered into various foreign currency
exchange contracts with major international financial
institutions designed to minimize its exposure to exchange
rate fluctuations on foreign currrency transactions.
GENERAL
Seasonality
No significant portion of Harnischfeger Industries'
business is subject to or influenced by seasonal factors;
however, Harnischfeger Industries' business is influenced
by the cyclical nature of the paper machinery, mining, and
capital goods industries, and for Syscon, the federal
spending programs of the U.S. Government, particularly the
Department of Defense.
Distribution
Sales of Beloit products are principally made directly
to the end user. On a worldwide basis, each manufacturing
facility is responsible for a designated market area.
Beloit also maintains a worldwide marketing group to
coordinate and support worldwide facilities in marketing
strategies, technical sales support and participation in
major projects including interface with engineering firms
and financial institutions. Beloit offers systems and
turnkey alternatives to assist in related business
development throughout the world. Agents are used in
certain foreign countries to augment Beloit's sales force
stationed in the segment's manufacturing facilities and in
sales offices worldwide.
In the United States, mining equipment, overhead
cranes and certain electrical products are marketed
directly from Harnischfeger Corporation's headquarters and
regional sales offices. Electric wire rope and chain hoists
and crane modernizations are sold through dealers and
distributors, assisted and coordinated by corporate and
regional office personnel. The Material Handling Equipment
Division has a dealer network of regional distributorships
(referred to as Material Handling Centers).
Joy's mining machinery sales are made mostly through
sales offices located in major coal-producing areas. Joy's
worldwide sales force has marketing responsibility for new
machine sales, as well as for parts, components and rebuild
services provided to customers. A segment of the sales
force in the United States is dedicated to manning a truck
fleet which visits customer sites on a regular basis in
order to deliver components and parts. Joy's environmental
sales are handled by direct sales contacts with the
customer by employees as well as manufacturers'
representatives.
The manufacture and sale of repair and replacement
parts and the servicing of equipment are important aspects
of Harnischfeger Corporation operations. Harnischfeger
Corporation maintains mining parts warehouses in Arizona,
Minnesota, Nevada, Wisconsin, West Virginia and Wyoming and
in Australia, Brazil, Canada, Chile, Germany, South Africa
and Venezuela. These warehouses facilitate shipment of
customers' orders for parts, and some also function as
regional service centers.
A majority of Syscon's business currently is performed
under contracts obtained through negotiated procurement. To
obtain a contract through negotiated procurement, Syscon
typically submits a proposal for the production of a
certain system, performance of a particular task or
rendering of a particular service. If the proposal is
accepted, Syscon and its customer enter into a contract for
payment on a cost-plus-fee or fixed-price basis.
Government contracts may be terminated for convenience
at the Government's option at any time, in which event the
Government would reimburse all allowable costs to the date
of termination and those profits relating to work performed
to such date.
Competition
Harnischfeger Industries conducts its domestic and
foreign operations under highly competitive market
conditions, requiring that its products and services be
competitive in price, quality, service and delivery.
The pulp and paper capital machinery market is
globally competitive; Beloit's two major competitors are
foreign-owned companies. The principal competitors are
Valmet Paper Machinery, Inc., with controlling interest
held by Valmet Corporation, Finland, and J. M. Voith GmbH,
with headquarters in Germany.
The Mining Equipment Division's principal competitors
in electric mining shovels are B-E Holdings, Inc. and
Marion, a division of Indresco, Inc. Harnischfeger
Industries believes its Mining Equipment Division is the
leading participant in this market. The Mining Equipment
Division is committed to continue in its leadership
position in providing surface mining equipment by competing
aggressively against the other principal participants in
the hydraulic mining excavator market: Orenstein & Koppel,
Demag, Hitachi and Caterpillar. In draglines, the main
competitors are B-E Holdings, Inc. and Marion. The
Division's main competitors in drills are Ingersoll-Rand
and B-E Holdings, Inc.
In the underground coal mining industry, Joy competes
primarily on the basis of the quality and reliability of
its products and its ability to provide rapid, extensive
and cost-effective repair and rebuild services and delivery
of spare parts. Joy's primary competitors in the
continuous mining machinery industry are EIMCO(a Tampella
Tamrock Company), the Jeffrey division of Indresco Inc.,
Simmons-Rand Company(a subsidiary of Long Airdox Company),
and Voest Alpine. In the longwall shearer new equipment
market, Joy competes primarily with Anderson Longwall PLC,
Eickhoff Corporation, and Mitsui Miike Machinery Company,
Ltd. In the continuous haulage market, Joy competes with
Long Airdox, Fairchild International, and Jeffrey. In the
sale of spare parts for Joy's equipment, Joy competes with
EIMCO and various small suppliers.
Joy's competition in the environmental industry can be
divided into two markets: wet scrubber and dry scrubber.
In the wet scrubber market, Joy competes against ABB
Environmental Systems Inc. (a subsidiary of Asea Brown
Boveri Inc. which now includes ABB Flakt Inc.); G.E.
Environmental (a subsidiary of General Electric Co.); and
the Babcock & Wilcox Company (a subsidiary of McDermott
Incorporated). In the dry scrubber market, Joy has the
largest installed base of dry scrubbers at United States
electric utilities. The primary competitors in this market
are: ABB Environmental Systems Inc.; Research-Cottrell;
Environmental Elements Corporation; and Wheelabrator
Technologies, Inc. Joy Environmental Group's primary
competitors in electrostatic precipitators (ESP's) and
baghouses are G.E. Environmental; Research-Cottrell; ABB
Environmental Systems Inc.; and Environmental Elements
Corporation. In the ash handling business, the
Environmental Group has competed mainly with United
Conveyor Corp. and Fuller Company.
There are more than 50 manufacturers of overhead and
portal cranes in the United States, although many tend to
specialize in certain products or regional segments of the
market. There are approximately ten major United States
manufacturers of electric wire rope and chain hoists.
Syscon has numerous competitors in all areas of its
business. Its principal competitors are those companies
with significant engineering and computer hardware/software
development capabilities. Additionally, numerous agencies
of the Government maintain their own internal computer
systems and engineering staffs.
Customers
Sales of services and equipment to agencies of the
United States Government approximated $128.3 million,
$185.2 million and $179.7 million in 1994, 1993 and 1992,
respectively. The sales of services and equipment relate
primarily to Syscon which is reported as a discontinued
operation in the consolidated financial statements for
1994, 1993 and 1992, respectively.
Backlog
Backlog by business segment for the Company's
continuing operations (in thousands of dollars) as of the
end of fiscal years 1994 and 1993 was as follows:
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October 31,
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1994 1993
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Papermaking Machinery and Systems.................... $ 633,770 $ 550,660
Mining Equipment..................................... 70,880 102,165
Material Handling Equipment.......................... 107,112 43,112
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$ 811,762 $ 695,937
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Supply of Materials and Purchased Components
The Papermaking Machinery and Systems Group purchases
raw materials used in its products which include: plates,
sheets, shapes, carbon and alloy steel, stainless steel,
brass and bronze, nickel alloy, and aluminum. Purchases of
semi-processed and component parts include: castings,
valves, filters, pumps, dryers, electrical equipment, and
various vacuum, drying, hydraulic, combustion,
material-handling and temperature control systems. Beloit
has approximately 4,700 suppliers of which approximately
1,000 are most commonly used. No single source is dominant.
The Mining and Material Handling Equipment Divisions
manufacture machines and heat-treated gears, pinions,
shafts, structural fabrications, electrical motors,
generators, and other electrical parts. They purchase raw
and semi-processed steel, castings, forgings, copper and
other materials for these parts and components from
approximately 400 suppliers. In addition, component parts,
such as engines, bearings, controls, hydraulic components,
and a wide variety of mechanical and electrical items are
purchased from approximately 1,500 suppliers. Purchases of
materials and components are made on a competitive basis
with no single source being dominant.
Joy purchases electric motors, gears, hydraulic
parts, electronic components, forgings, steel, clutches and
other components and raw materials from outside suppliers.
Although Joy purchases certain components and raw materials
from a single supplier, alternative sources of supply are
available for all such quantities. Joy believes that it
has adequate sources of supplies of component parts and raw
materials for its manufacturing requirements.
Patents and Licenses
Patents are quite important in the papermaking
industry. All major machinery manufacturers use patents
extensively to protect the technology base that results
from research and development. Beloit has been granted
numerous patents on its designs and more are pending. Most
are registered in all of the major countries into which
Beloit and its licensees sell.
On May 21, 1993, a Federal court jury in Madison,
Wisconsin awarded Beloit $17.2 million following a patent
infringement trial against J.M. Voith GmbH of Germany and
its subsidiary, Voith, Inc. The jury determined that
Beloit's patents on its new Bel-Champ(TM) technology for
the drying section of large paper manufacturing machines
were valid and infringed by Voith in connection with
Voith's sale of a paper machine dryer section. The verdict
of this patent infringement trial has been appealed by
Voith. The award has not been recorded in the Company's
financial statements.
In addition, on November 23, 1994, a Federal court
jury, in Madison, Wisconsin, returned a verdict finding
Valmet Corporation of Finland guilty of infringing a key
patent held by Beloit Corporation on the same Bel-Champ
paper machine drying technology. In connection with this
suit, the jury awarded Beloit $7.9 million in damages. It
is expected that the verdict in this case will be appealed
by Valmet and the award has not been recorded in the
Company's financial statements.
The Mining and Material Handling Equipment Divisions
have numerous domestic and foreign patents, patent
applications and patent licensing agreements. Harnischfeger
Corporation does not consider these businesses materially
dependent upon any patent or patent license agreement.
Joy and its subsidiaries own numerous patents and
trademarks and have patent licenses from others relating to
its products and manufacturing methods. Also, patent and
trademark licenses are granted to others throughout the
world and royalties are received under most of these
licenses. While Joy does not consider any particular
patent or license or group of patents or licenses to be
essential to its business as a whole, Joy considers its
patents and licenses significant to the conduct of its
business in certain product areas.
The Systems Group does not consider its business
materially dependent upon any patent or patent license
agreement.
Research and Development
Harnischfeger Industries maintains a strong commitment
to research and development with engineering staffs that
are engaged in full-time research and development of new,
and improvement of existing, products. Beloit maintains
research and development facilities in Rockton, Illinois,
Pittsfield, Massachusetts, Bolton, United Kingdom, Clarks
Summit, Pennsylvania, Portland, Oregon and Waukesha,
Wisconsin. Harnischfeger Corporation maintains research and
development facilities in Milwaukee, Wisconsin. Joy pursues
technological development through the engineering of new
products, systems and applications; the improvement and
enhancement of licensed technology; and synergistic
acquisitions of technology. Syscon conducts research and
development activities on a decentralized basis, thereby
effectively utilizing the technology base that resides
within the operating units. Research and development
expenses were $25.0 million in 1994, $24.2 million in 1993,
and $25.1 million in 1992.
Environmental and Health and Safety Matters
The activities of the Company are regulated by
federal, state and local statutes, regulations and
ordinances relating to both environmental protection and
worker health and safety. These laws govern current
operations, require remediation of environmental impacts
associated with past or current operations, and under
certain circumstances provide for civil and criminal
penalties and fines, as well as injunctive and remedial
relief. The Company's foreign operations are subject to
similar requirements as established by their respective
countries.
The Company has expended substantial managerial and
financial resources in developing and implementing actions
for continued compliance with these requirements. The
Company believes that it has substantially satisfied these
diverse requirements. However, because these requirements
are complex and, in many areas, rapidly evolving, there can
be no guarantee against the possibility of sizeable
additional costs for compliance in the future. These same
requirements must also be met by the Company's competitors
and, therefore, the costs for present and future compliance
with these laws should not create a competitive
disadvantage. Further, these laws have not had, and are not
presently expected to have, a material adverse effect on
the Company.
The Company's operations or facilities have been and
may become the subject of formal or informal enforcement
actions or proceedings for alleged noncompliance with
either environmental or worker health and safety laws or
regulations. Such matters have typically been resolved
through direct negotiations with the regulatory agency and
have typically resulted in corrective actions or abatement
programs. However, in some cases, fines or other penalties
have been paid. Historically, neither such commitments nor
such penalties have been material.
Employees
As of October 31, 1994, Harnischfeger Industries
employed approximately 11,200 persons, of which
approximately 7,400 were employed in the United States.
Approximately 2,375 of the United States employees are
represented by local unions under collective bargaining
agreements with expiration dates from September 1, 1995 to
April, 1996. Harnischfeger Industries believes that it
maintains generally good relationships with its employees.
Financial Information about Industry Segments
The financial information on industry segments
presented in Note 15 to the Financial Statements, on pages
40 through 42 of the 1994 Annual Report to Shareholders, is
incorporated herein by reference.
Item 2. Properties
As of October 31, 1994, the following principal
properties were owned, except as indicated. All of these
plants are generally suitable for operations.
Harnischfeger Industries owns a 120,000 square foot
office building in Brookfield, Wisconsin, which is used as
its worldwide corporate headquarters. The Company leases
more than half of this building to Harnischfeger Engineers,
Inc. and will continue to do so through October 1995.
Syscon has 25 offices located in 12 states and
currently leases all the principal facilities used in its
business except that it owns an engineering development
facility of 11,000 square feet in Virginia Beach, Virginia
and a building of 20,000 square feet that houses its
product development operations in Middletown, Rhode Island.
Syscon leases facilities containing 80,000 square feet of
space for its headquarters and principal computer
installation in Falls Church, Virginia. Syscon also
maintains major computer installations at offices in
Middletown, Rhode Island and San Diego, California
containing an aggregate of 77,000 square feet.
MINING EQUIPMENT LOCATIONS
<TABLE>
<CAPTION>
Floor Space Land Area
Plant and Location (Sq. Ft.) (Acres) Principal Operations
- ------------------------- ----------- --------- ----------------------------
<S> <C> <C> <C>
Milwaukee, Wisconsin..... 1,067,000 46 Electric mining shovels,
hydraulic mining excavators,
electric and diesel-electric
draglines and large rotary
blasthole drills. Crane
welding.
Milwaukee, Wisconsin..... 180,000 13 Electrical products, heavy
duty overhead and portal crane
components and service parts
warehouse. Crane assembly.
Bassendean, Australia.... 75,500 5 Components and parts for
mining shovels.
Mt. Thorley, Australia... 20,000 6 Components and parts for
mining shovels.
Johannesburg, So.
Africa................. 103,000 6 Components and parts for
mining shovels.
Johannesburg, So.
Africa................. 27,000(1) 1 Electrical products and
components for mining shovels.
Belo Horizonte, Brazil... 37,700 1 Components and parts for
mining shovels.
Weiterstadt, Germany..... 31,200(1) 1 Components and parts for
mining shovels.
</TABLE>
- -------------------------
(1) Under a lease expiring in 1995.
This division operates warehouses in Casper, Wyoming;
Hibbing, Minnesota; Charleston, West Virginia; Milwaukee,
Wisconsin; Phoenix, Arizona; Reno, Nevada; Hinton,
Sparwood, Toronto and Vancouver, Canada; Bayswater and Mt.
Thorley, Australia; Belo Horizonte, Brazil; Weiterstadt,
Germany; Johannesburg, South Africa; Stobswood, United
Kingdom and Maracaibo, Venezuela. The warehouses in Casper,
Hibbing, Milwaukee, Mt. Thorley, Belo Horizonte and
Johannesburg are owned; the others are leased. In addition,
the division leases sales offices throughout the United
States and in principal locations in foreign countries.
MATERIAL HANDLING EQUIPMENT LOCATIONS
<TABLE>
<CAPTION>
Floor Space Land Area
Plant and Location (Sq. Ft.) (Acres) Principal Operations
- ------------------------- ----------- --------- --------------------------
<S> <C> <C> <C>
Milwaukee, Wisconsin..... 130,000 (1) 8 Remanufacture of overhead
cranes, hoists and material
handling equipment.
Oak Creek, Wisconsin..... 277,000 36 Standard overhead cranes,
hoists and material handling
equipment.
Loughborough, UK......... 420,000 36 Engineered and standard overhead
cranes, hoists, controls and
material handling equipment.
Johannesburg, S. Africa.. 124,000 7 Standard overhead cranes, hoists
and material handling
equipment.
Mexico City, Mexico...... 65,000 3 Standard overhead cranes,
hoists and
material handling
equipment.
</TABLE>
(1) Under a lease expiring in 1995.
This division has leased facilities for its company
owned Material Handling Centers in San Leandro, California;
Pittsburg, California; Portland, Oregon; Reno, Nevada;
Dallas, Texas; Houston, Texas; New Orleans, Louisiana;
Chicago, Illinois; Detroit, Michigan; Pittsburgh,
Pennsylvania; and Cleveland, Ohio. In addition, the
division leases sales offices throughout the United States
and in principal locations in foreign countries.
PAPERMAKING MACHINERY AND SYSTEMS LOCATIONS
<TABLE>
<CAPTION>
Floor Space Land Area
Plant and Location (Sq. Ft.) (Acres) Principal Operations
- -------------------------- ----------- --------- --------------------------------------
<S> <C> <C> <C>
Beloit, Wisconsin......... 928,000 40 Papermaking machinery and
finished product processing
equipment.
Beloit, Wisconsin......... 230,000 15 Castings, pattern shop.
Waukesha, Wisconsin....... 57,000 10 Castings, pattern shop and
finished product processing.
Waukesha, Wisconsin....... 76,000(1) 13 Refiner plate machining, finished
product processing and warehousing.
Rockton, Illinois......... 469,000 203 Papermaking machinery, finished
product processing equipment and
R&D center.
South Beloit, Illinois.... 163,000 11 Castings.
Dalton, Massachusetts..... 277,000 55 Stock and pulp preparation
equipment and specialized processing
systems.
Lenox, Massachusetts...... 127,000 19 Winders.
Pittsfield,
Massachusetts........... 36,000 30 Research and development
facility and pilot
plant for process simulation.
Aiken, South Carolina..... 92,000 17
Columbus, Mississippi..... 133,000 22 Rubber and polymeric covers for rolls;
Federal Way, Washington... 55,000 3 rubber blankets; rubber linings and
Neenah, Wisconsin......... 77,000 10 metal roll repairs.
Clarks Summit, PA......... 88,000 10
Renfrew, Canada........... 145,000 22
Kalamazoo, Michigan....... 23,500 1 Filled rolls for supercalenders and
specialty rolls.
Portland, Oregon.......... 41,000 5 Bulk materials handling and drying
systems.
Rochester, New Hampshire.. 15,650 5 Specialty services provided
principally to the paper industry.
Pensacola, Florida........ 7,250 2 Specialty services provide
principally to the paper industry.
Sandusky, Ohio............ 254,000 13 Centrifugal castings.
Glenrothes, United Kingdom 56,000 8 Centrifugal castings.
Campinas, Brazil.......... 202,000 33 Papermaking machinery and finished
product processing equipment;
stock and pulp preparation equipment;
woodyard and pulp plant equipment.
Bolton, United Kingdom.... 465,400 73 Papermaking machinery and finished
product processing equipment; stock
and pulp preparation equipment.
Pinerolo, Italy........... 517,400 18 Papermaking machinery and finished
product processing equipment; stock
and pulp preparation equipment.
Jelenia Gora, Poland...... 650,000 40 Papermaking machinery and finished
product processing equipment; stock
and pulp preparation equipment.
Swiecie, Poland........... 37,000 (2) 4 Components and parts for papermaking
machinery equipment.
</TABLE>
- -------------------------
(1) Under a lease expiring in 2007.
(2) Under a lease expiring in 2019.
The papermaking machinery and systems business has
warehouse space at the above facilities and in addition
maintains leased facilities in Memphis, Tennessee; Swiecie,
Poland; and Montreal, Canada. Sales offices are also
maintained at various locations throughout the world.
Information relating to lease commitments is presented
in Note 11 to the Financial Statements on page 38 of the
1994 Annual Report to Shareholders, which is incorporated
herein by reference.
Item 3. Legal Proceedings
The Company is a party to litigation matters and
claims which are normal in the course of its operations
and, while the results of litigation and claims cannot be
predicted with certainty, management believes that the
final outcome of such matters will not have a materially
adverse effect on the Company's consolidated financial
position or results of operations.
The Company is also involved in a number of
proceedings and potential proceedings relating to
environmental matters. Although it is difficult to estimate
the potential exposure to the Company related to these
environmental matters, the Company believes that these
matters will not have a materially adverse effect on its
consolidated financial position or results of operations.
As a prime contractor and subcontractor with various
agencies of the U.S. Government, principally the Department
of Defense, Syscon is subject to strict procurement
regulations, with non-compliance found by any one agency
possibly resulting in fines, penalties, debarment or
suspension from receiving additional contracts with all
agencies. In July, 1993, the U.S. Air Force rescinded a
contract with Syscon following a post-award protest of the
contract by another bidder. As a result of internal
reviews, Syscon determined that evidence exists to indicate
that an inaccurate certificate of compliance may have been
submitted in connection with the contract. The outcome of
the government investigation of this matter is not
presently determinable. Management believes that the final
outcome will not have a significant future effect on the
Company's consolidated financial position or results of
operations.
Item 4. Submission of Matters to a Vote of Security-Holders
No matters were submitted to a vote of security-
holders during the fourth quarter of fiscal 1994. The
following two matters were submitted to a vote of security-
holders at a special meeting held November 29, 1994:
1. Approval of the acquisition of Joy Technologies
Inc. through a stock-for-stock merger, and
2. Approval of an amendment to the Company's
Restated Certificate of Incorporation increasing the number
of authorized shares from 50,000,000 to 100,000,000.
In the vote to approve the merger, the following
number of shares of Common Stock were voted.
<TABLE>
<C> <C>
23,788,845 For
92,680 Against
63,089 Abstained
917,270 Non-Votes
</TABLE>
In the vote to approve the amendment to the
Certificate of Incorporation, the following number of
shares of Common Stock were voted:
<TABLE>
<C> <C>
24,419,225 For
369,619 Against
73,040 Abstained
-- Non-Votes
</TABLE>
Executive Officers of the Registrant
The following table sets forth, through the date of
filing this 10-K report, the executive officers of
Harnischfeger Industries and its major subsidiaries, their
ages, their offices with Harnischfeger Industries and the
period during which they have held such offices.
<TABLE>
<CAPTION>
Number
of Years
Name Age Current Office and Principle Occupation as Officer
- ---------------------------- --- ---------------------------------------- ----------
<S> <C> <C> <C>
Jeffery T. Grade............ 51 Chairman of the Board and Chief Executive 12
Officer since 1993; Chief Executive Officer
since 1992; President and Chief Operating
Officer since 1986; Director since 1983;
Senior Vice President, Finance and
Administration and Chief Financial Officer
from 1983 to 1986.
John A. McKay............... 61 President and Chief Operating Officer since 9
1993; Senior Vice President and Chief
Operating Officer from 1992 to 1993.
Chief Executive Officer, Beloit Corporation
since 1986. President, Beloit Corporation,
from 1986 to 1992.
Francis M. Corby, Jr........ 50 Executive Vice President for Finance and 9
Administration since December 1994; Senior
Vice President, Finance and Chief Financial
Officer from 1986 to December 1994.
K. Thor Lundgren............ 47 Executive Vice President for Law and 3
Government Affairs since December 1994;
Senior Vice President and General Counsel
from 1991 to December 1994.
Richard W. Schulze.......... 57 Senior Vice President and Special 13
Assistant to the Chairman and CEO since
December 1994; Senior Vice President,
Human Resources and Public Relations from
1982 to December 1994.
James C. Benjamin........... 42 Vice President and Controller since 1986. 9
Ian Lambert................. 48 Vice President and Treasurer since 1989. 5
</TABLE>
Mr. Lundgren joined the Company in September, 1991.
Prior to joining the Company, Mr. Lundgren was a partner
with the law firm of Michael, Best & Friedrich.
The business address of each such person is 13400
Bishops Lane, Brookfield, Wisconsin 53005. All officers
listed above are citizens of the United States of America
except for Mr. Lambert who is a citizen of the United
Kingdom. Officers are elected annually but may be removed
at any time at the discretion of the Board of Directors.
There are no family relationships between the foregoing
officers.
PART II
The information required by Items 5 through 8 is
incorporated by reference from the 1994 Annual Report to
Shareholders. The following is a cross reference guide to
the incorporated information:
<TABLE>
<CAPTION>
Form 10-K Applicable Page(s)
Item Number in Annual Report
- ----------- ------------------
<S> <C> <C>
Item 5. Market for the Registrant's Common Stock and Related Stockholder
Matters........................................................... 49
Item 6. Selected Financial Data for the Registrant for Each of the Last
Five Fiscal Years...................................................... 45-46
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................. 17-25
Item 8. Financial Statements and Supplementary Data....................... 26-44,47
Item 9. Disagreements on Accounting and Financial Disclosure: None
</TABLE>
PART III
All information required by Items 10 through 13 of
Part III, with the exception of information on the
Executive Officers which appears on page 15 of Part I of
this report, is incorporated by reference to the Company's
Proxy Statement for its 1995 Annual Meeting of Shareholders
to be filed with the Securities and Exchange Commission
within 120 days after the close of the fiscal year.
PART IV
<TABLE>
<CAPTION>
Applicable Page(s)
in Annual Report*
-------------------
<S> <C>
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) The following documents are filed as part of this report:
(1) Financial Statements
Statement of Income for the years ended October 31, 1994, 1993 and
1992............................................................... 26
Balance Sheet at October 31, 1994 and 1993.............................. 27
Statement of Cash Flows for the years ended October 31, 1994, 1993 and
1992............................................................... 28
Statement of Shareholders' Equity for the years ended October 31, 1994,
1993 and 1992...................................................... 29
Notes to Consolidated Financial Statements.............................. 30-44
Report of Independent Accountants....................................... 47
</TABLE>
- -------------------------
* Incorporated by reference from the indicated pages of the 1994 Annual Report
to Shareholders.
<TABLE>
<captions>
Applicable Page
in Form 10-K
--------------
<C> <C>
(2) Financial Statement Schedules
Report of Independent Accountants on Financial Statement Schedule........ 20
For the Years Ended October 31, 1994, 1993 and 1992:
Schedule VIII. Valuation and Qualifying Accounts......................... 23
</TABLE>
All other schedules are omitted because they are either not applicable or
the required information is shown in the financial statements or notes
thereto.
Financial statements of 50% or less-owned companies have been omitted
because the proportionate share of their profit before income taxes and total
assets are less than 20% of the respective consolidated amounts and
investments in such companies are less than 20% of consolidated total assets.
(3) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
------- -------------------------------------------------------------------
<C> <C>
3(a) Certificate of Incorporation of Harnischfeger Industries, Inc. (incorporated
by reference to Exhibit 3(a) of the Registration Statement on Form S-4, File
No. 33-8821).
(b) Bylaws of Harnischfeger Industries, Inc., as amended on December 5, 1994
(incorporated by reference to Exhibit 4.3 to Registration Statement
on Form S-8, File No. 33-57209).
(c) Certificate of Designations of Preferred Stock, Series D (incorporated by
reference to Exhibit 28.1(b) to Registrant's Current Report on Form 8-K dated
March 25, 1992).
(d) Amendment to Certificate of Incorporation of Harnischfeger Industries, Inc.
dated November 29, 1994 (incorporated by reference to Exhibit 4.1(c) to
Registration Statement on Form S-8, File No. 33-57209).
4(a) Revolving Credit Facility dated as of November 18, 1993 among Harnischfeger
Industries, Inc. as borrower, Chemical Bank as Agent, First National Bank of
Chicago and Royal Bank of Canada as Co-Agents and certain financial
institutions (incorporated by reference to Exhibit 4(a) to Report of
Harnischfeger Industries, Inc on Form 10-K for the year ended October 31,
1993, File No. 1-9299).
(b) 9.1% Series A Senior Note Agreement dated as of September 15, 1989
(incorporated by reference to Exhibit 4(b) to Report of Harnischfeger
Industries, Inc. on Form 10-K for the year ended October 31, 1991, File No.
1-9299).
(c) 9.1% Series B Senior Note Agreement dated as of October 15, 1989
(incorporated by reference to Exhibit 4(c) to Report of Harnischfeger
Industries, Inc. on Form 10-K for the year ended October 31, 1991, File No.
1-9299).
(d) 8.95% Series C Senior Note Agreement dated as of February 15, 1991
(incorporated by reference to Exhibit 4(d) to Report of Harnischfeger
Industries, Inc. on Form 10-K for the year ended October 31, 1991, File No.
1-9299).
(e) 8.9% Series D Senior Note Agreement dated as of October 1, 1991 (incorporated
by reference to Exhibit 4(e) to Report of Harnischfeger Industries, Inc. on
Form 10-K for the year ended October 31, 1991, File No. 1-9299).
(f) Indenture for Debentures issued March 3, 1992 between Harnischfeger
Industries, Inc. and Continental Bank, National Association, Trustee, dated
March 1, 1992 (incorporated by reference to Exhibit 4(f) to Report of
Harnischfeger Industries, Inc. on Form 10-K for the year ended October 31,
1992, File No. 1-9299).
(g) First Supplemental Indenture for Debentures issued June 22, 1992 between
Harnischfeger Industries, Inc. and Continental Bank, National Association,
Trustee, dated June 12, 1992 (incorporated by reference to Exhibit 4(g) to
Report of Harnischfeger Industries, Inc. on Form 10-K for the year ended
October 31, 1992, File No. 1-9299).
(h) Registration Statement filed on Form S-3, for issuance of Debt Securities of
up to $150,000,000 dated August 22, 1992, File No. 33-51436 (incorporated by
reference to Exhibit 4(h) to Report of Harnischfeger Industries, Inc. on Form
10-K for the year ended October 31, 1992, File No. 1-9299).
(i) Rights Agreement dated as of February 8, 1989 between the Registrant and the
First National Bank of Boston, as Rights Agent, which includes as Exhibit A
the Certificate of Designations of Preferred Stock, Series D, setting forth
the terms of the Preferred Stock, Series D; as Exhibit B the Form of Rights
Certificate; and as Exhibit C the Summary of Rights to Purchase Preferred
Stock, Series D (Incorporated by reference to Exhibit 1 to Registrant's
Registration Statement on Form 8-A filed on February 9, 1989).
(j) Harnischfeger Industries, Inc. Stock Employee Compensation Trust Agreement
effective as of March 23, 1993 (incorporated by reference to Exhibit 4(k) to
Report of Harnischfeger Industries, Inc. on Form 10-K for the year ended
October 31, 1993, File No.1-9299).*
(k) $240,000,000 Amended and Restated Credit Agreement dated as of November 25,
1994 among Harnischfeger Industries Inc. as borrower and the financial
institutions from time to time thereto as lenders, the First National Bank of
Chicago and Royal Bank of Canada, as co-agents and Chemical Bank as Agent.
(l) Form of Indenture, dated as of September 1, 1993, between Joy Technologies
Inc. and The Bank of Montreal Trust Company, as Trustee for Joy Technologies
Inc.'s 10 1/4% Senior Notes due 2002 (incorporated by reference to Exhibit 4.1
to Joy Technologies Inc.'s Report on Form 10-Q for the quarter ended August
27, 1993, filed October 7, 1993).
10(a) Harnischfeger Industries, Inc. 1988 Incentive Stock Plan, as amended on
February 3, 1992.*
(b) Harnischfeger Industries Deferred Compensation Trust dated November 1, 1988
(incorporated by reference to Exhibit 10(d) to Report of Harnischfeger
Industries, Inc. on Form 10-K for the year ended October 31, 1988, File No.
01-9299).*
(c) First Amendment of the Deferred Compensation Trust dated December 19, 1990.*
(d) Harnischfeger Industries, Inc. Executive Incentive Plan, as amended as of
January 17, 1992 (incorporated by reference to Exhibit 10(d) to Report of
Harnischfeger Industries, Inc. on Form 10-K for the year ended October 31,
1991, File No. 1-9299).*
(e) Harnischfeger Industries, Inc. Supplemental Retirement and Stock Funding
Plan, as amended as of January 17, 1992 (incorporated by reference to Exhibit
10(e) to Report of Harnischfeger Industries, Inc. on Form 10-K for the year
ended October 31, 1991, File No. 1-9299).*
(f) Directors Stock Compensation Plan effective as of March 2, 1992 (incorporated
by reference to Exhibit 10(f) to Report of Harnischfeger Industries, Inc. on
Form 10-K for the year ended October 31, 1991, File No. 1-9299).*
(g) Service Compensation Agreement for Directors effective as of June 1, 1992
(incorporated by reference to Exhibit 10(g) to Report of Harnischfeger
Industries, Inc. on Form 10-K for the year ended October 31, 1992, File No.
1-9299).*
(h) Key Executive Employment and Severance Agreement (Restated), entered into as
of January 31, 1992, between Harnischfeger Industries, Inc. and Jeffery T.
Grade (incorporated by reference to Exhibit 10(h) to Report of Harnischfeger
Industries, Inc. on Form 10-K for the year ended October 31, 1992, File No.
1-9299).*
(i) Key Executive Employment and Severance Agreement (Restated), entered into as
of January 31, 1992, between Harnischfeger Industries and John R. Teitgen
(incorporated by reference to Exhibit 10(i) to Report of Harnischfeger
Industries, Inc. on Form 10-K for the year ended October 31, 1992, File No.
1-9299).*
(j) Key Executive Employment and Severance Agreement (Restated), entered into as
of March 2, 1992, between Harnischfeger Industries, Inc. and John A. McKay
(incorporated by reference to Exhibit 10(j) to Report of Harnischfeger
Industries, Inc. on Form 10-K for the year ended October 31, 1992, File No.
1-9299).*
(k) Supplement to and Modification of Key Executive Employment and Severance
Agreement (Restated) effective as of November 6, 1992 between Harnischfeger
Industries, Inc. and John A. McKay (incorporated by reference to Exhibit
10(k) to Report of Harnischfeger Industries, Inc. on Form 10-K for the year
ended October 31, 1992, File No. 1-9299).*
(l) Key Executive Employment and Severence Agreement (Restated), entered into as
of March 2, 1992, between Harnischfeger Industries, Inc. and Francis M.
Corby, Jr. (incorporated by reference to Exhibit 10(m) to Report of
Harnischfeger Industries, Inc. on Form 10-K for the year ended October
31,1992, File No. 1-9299).*
(m) Key Executive Employment and Severence Agreement, entered into as of
March 2, 1992, between Harnischfeger Industries, Inc. and K. Thor Lundgren.*
(n) Purchase and Sale Agreement by and among HEI Systems, Inc. and HEI
Acquisition, Inc. and Harnischfeger Industries, Inc., dated as of October 28,
1993 (incorporated by reference to Exhibit 10(p) to Report of Harnischfeger
Industries, Inc. on Form 10-K for the year ended October 31, 1993, File No. 1-
9299).
(o) Agreement and Plan of Merger, dated as of August 17, 1994 among Harnischfeger
Industries, Inc., Harnischfeger Acquisition Corporation and Joy Technologies
Inc. (incorporated by reference to Exhibit 2.1 to Registration Statement on
Form S-4, File No.1-9299).
(p) Joy Technologies Inc. 1991 Stock Option and Equity Incentive Plan dated
November 12, 1991 (incorporated by reference to Exhibit 99.1 to
Registration Statement on For S-8, File No. 33-57209).*
(q) Amendment to Joy Technologies Inc. 1991 Stock Option and Equity Incentive
Plan dated November 29, 1994 (incorporated by reference to Exhibit 99.2
to Registration Statement on Form S-8, File No. 33-57209).*
11 Statement Re Computation of Earnings Per Share.
13 1994 Annual Report to Shareholders, filed solely to the extent portions are
incorporated herein by reference.
21 Subsidiaries of the Registrant.
23 Consent of Independent Accountants.
24 Powers of Attorney.
27 Financial Data Schedule
</TABLE>
- -------------------------
* Represents a management contract or compensatory plan
or arrangement required to be filed as an exhibit pursuant
to Item 14(c) of Form 10-K.
(b) Reports on Form 8-K
(1)Current Report on Form 8-K dated August 18, 1994
relating to the announcement of the signing of the
definitive agreement with Joy Technologies
Inc.("Joy") pursuant to which Harnischfeger
Industries, Inc. will acquire Joy in a stock-for-
stock merger.
(2)Current Report on Form 8-K dated September 8, 1994
relating to the announcement of the private sale of
2,000,000 shares of common stock.
(3)Current Report on Form 8-K dated September 12, 1994
relating to the announcement that Harnischfeger
Industries, Inc. has entered into an agreement in
principle to acquire all of the outstanding shares of
MMH(Holdings) Limited.
(4)Current Report on Form 8-K dated November 29, 1994
relating to the announcement of the completion of
Harnischfeger Industries, Inc.'s previously announced
acquisition of Joy Technologies Inc. through a stock-
for-stock merger.
(5)Current Report on Form 8-K dated January 16, 1995
relating to the announcement of financial information
on combined sales and net income of Harnischfeger
Industries, Inc. and Joy Technologies Inc. for more
than thirty(30) days of post-merger combined
operations for purposes of complying with pooling
accounting requirements.
(6)Current Report on Form 8-K/A dated January 26, 1995
relating to the announcement by Harnischfeger
Industries, Inc. that it has entered into an
agreement (subject to closing conditions and
regulatory approval) providing for the sale of Syscon
Corporation to Logicon, Inc.
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Directors and Shareholders
of Harnischfeger Industries, Inc.
Our audits of the consolidated financial statements
referred to in our report dated December 5, 1994 appearing
on page 47 of the 1994 Annual Report to Shareholders of
Harnischfeger Industries, Inc. (which report and
consolidated financial statements are incorporated by
reference in this Annual Report on Form 10-K) also included
an audit of the Financial Statement Schedule listed in Item
14(a) of this Form 10-K. In our opinion, this Financial
Statement Schedule presents fairly, in all material
respects, the information set forth therein when read in
conjunction with the related consolidated financial
statements.
As discussed in Note 6 to the consolidated financial
statements, the Company changed its method of accounting
for income taxes effective November 1, 1993. The
consolidated financial statements and the Financial
Statement Schedule referred to above have been restated to
reflect the retroactive application of the change.
PRICE WATERHOUSE LLP
Milwaukee, Wisconsin
December 5, 1994
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, in the City of
Brookfield, Wisconsin, on the 27th day of January, 1995.
HARNISCHFEGER INDUSTRIES, INC.
(Registrant)
/s/FRANCIS M. CORBY, JR.
Francis M. Corby, Jr.
Executive Vice President for
Finance and Administration
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 indicated on January 27, 1995.
<TABLE>
<CAPTION>
Signature Title
- ------------------------------------------ ------------------------------------------
<S> <C> <C>
/s/JEFFERY T. GRADE Chairman and Chief Executive
Jeffery T. Grade Officer
/s/FRANCIS M. CORBY, JR. Executive Vice President for
Francis M. Corby, Jr. Finance and Administration
(Chief Financial Officer)
/s/JAMES C. BENJAMIN Vice President and Controller
James C. Benjamin (Chief Accounting Officer)
(1) Director
Donna M. Alvarado
(1) Director
John D. Correnti
(1) Director
Don H. Davis, Jr.
(1) Director
Harry L. Davis
(1) Director
Robert M. Gerrity
(1) Director
Robert B. Hoffman
(1) Director
Ralph C. Joynes
(1) Director
Herbert V. Kohler, Jr.
(1) Director
Jean-Pierre Labruyere
(1) Director
Robert F. Schnoes
(1) Director
Donald Taylor
(1) Director
C.R. Whitney
</TABLE>
- -------------------------
(1) Jeffery T. Grade, by signing his name hereto, does hereby sign and execute
this report on behalf of each of the above-named Directors of
Harnischfeger Industries, Inc. pursuant to powers of attorney executed by
each of such Directors and filed with the Securities and Exchange
Commission as an exhibit to this report.
January 27, 1995
By: /s/JEFFERY T. GRADE
Jeffery T. Grade,
Attorney-in-fact
HARNISCHFEGER INDUSTRIES, INC.
SCHEDULE VIII
VALUATION AND QUALIFYING ACCOUNTS
(Thousands of Dollars)
<TABLE>
<CAPTION>
Balance at Additions Additions
Beginning by Charged
Classification of Year Acquisition to Expense Deductions(1)
- ------------------------------ ---------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Allowances Deducted in Balance Sheet
from Accounts Receivable:
For the year ended October 31, 1994
Doubtful accounts $ 8,624 $ 532 $ 474 $ (4,656)
Possible contract losses 2,687 - - -
------ ------ ------ -------
$11,311 $ 532 $ 474 $ (4,656)
====== ====== ====== =======
For the year ended October 31, 1993
Doubtful accounts $ 4,986 - $ 7,017 $(3,101)
Possible contract losses 2,890 -
------ ------ ------ -------
$ 7,876 - $ 7,017 $(3,101)
====== ====== ====== =======
For the year ended October 31, 1992
Doubtful accounts $ 6,298 - $ 2,171 $(3,504)
Possible contract losses 2,774 - - -
------ ------ ------ -------
$ 9,072 - $ 2,171 $(3,504)
====== ====== ====== =======
<CAPTION>
Transactions
Currency of Balance
Translation Discontinued at End
Classification Effects Operations of Year
- ------------------------------ ---------- ----------- -----------
<S> <C> <C> <C>
Allowances Deducted in Balance Sheet
from Accounts Receivable:
For the year ended October 31, 1994
Doubtful accounts $ 235 - $ 5,209
Possible contract losses - (2,687) -
------ ------ ------
$ 235 $(2,687) $ 5,209
====== ======= =======
For the year ended October 31, 1993
Doubtful accounts $ (224) $ (54) $ 8,624
Possible contract losses (203) 2,687
------ ------- ------
$ (224) $ (257) $11,311
====== ======= =======
For the year ended October 31, 1992
Doubtful accounts $ 17 $ 4 $ 4,986
Possible contract losses - 116 2,890
------ ------- -------
$ 17 $ 120 $ 7,876
====== ======= =======
</TABLE>
(1) Represents write-off of bad debts, net of recoveries.
<TABLE>
Allowance Deducted in Balance Sheet from Deferred Tax Assets:
<CAPTION>
Balance at Additions Balance
Beginning Charged at end
of Year to Expense of Year
---------- ---------- --------
<S> <C> <C> <C>
For the year ended October 31, 1994 $ 12,371 $ 1,763 $ 14,134
For the year ended October 31, 1993 $ 7,566 $ 4,805 $ 12,371
For the year ended October 31, 1992 $ - $ 7,566 $ 7,566
</TABLE>
Exhibit 4(k)
$240,000,000
AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of November 25, 1994
among
HARNISCHFEGER INDUSTRIES, INC.
as Borrower,
and
THE FINANCIAL INSTITUTIONS
FROM TIME TO TIME PARTY HERETO,
as Lenders,
THE FIRST NATIONAL BANK OF CHICAGO
and
ROYAL BANK OF CANADA,
as Co-Agents,
and
CHEMICAL BANK,
as Agent
<PAGE>
TABLE OF CONTENTS
-----------------
Section Page
- ------- ----
ARTICLE I
DEFINITIONS
1.01. Certain Defined Terms . . . . . . . . . . . 1
1.02. Computation of Time Periods . . . . . . . . 15
1.03. Accounting Terms. . . . . . . . . . . . . . 15
1.04. Other Definitional Provisions . . . . . . . 15
1.05. Amendment and Restatement . . . . . . . . . 15
ARTICLE II
AMOUNTS AND TERMS OF THE REVOLVING CREDIT FACILITY
2.01. The Revolving Credit Facility . . . . . . . 16
2.02. Loan Facility Mechanics . . . . . . . . . . 17
2.03. Competitive Bid Procedures. . . . . . . . . 20
2.04. Notes . . . . . . . . . . . . . . . . . . . 22
2.05. Interest on the Loans . . . . . . . . . . . 23
2.06. Fees. . . . . . . . . . . . . . . . . . . . 26
2.07. Payments. . . . . . . . . . . . . . . . . . 27
2.08. Interest Periods. . . . . . . . . . . . . . 29
2.09. Special Provisions Governing Eurodollar Rate Loans 29
2.10. Taxes . . . . . . . . . . . . . . . . . . . 32
2.11. Increased Costs . . . . . . . . . . . . . . 35
2.12. Authorized Officers of Borrower . . . . . . 36
2.13. Replacement of Certain Lenders. . . . . . . 36
ARTICLE III
CONDITIONS TO LOANS
3.01. Conditions Precedent to Effectiveness . . . 37
3.02. Conditions Precedent to all Loans . . . . . 38
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.01. Representations and Warranties. . . . . . . 39
ARTICLE V
COVENANTS
5.01. Affirmative Covenants of the Borrower . . . 42
5.02. Financial and Negative Covenants. . . . . . 46
5.03. Changes in GAAP and Borrower's Fiscal Year. 52
ARTICLE VI
EVENTS OF DEFAULT; RIGHTS AND REMEDIES
6.01. Events of Default . . . . . . . . . . . . . 53
6.02. Remedies. . . . . . . . . . . . . . . . . . 55
6.03. Setoff Rights . . . . . . . . . . . . . . . 56
ARTICLE VII
THE AGENT
7.01. Appointment . . . . . . . . . . . . . . . . 56
7.02. Nature of Duties. . . . . . . . . . . . . . 56
7.03. Rights, Exculpation, Etc. . . . . . . . . . 57
7.04. Reliance. . . . . . . . . . . . . . . . . . 58
7.05. Indemnification . . . . . . . . . . . . . . 58
7.06. The Agent Individually. . . . . . . . . . . 58
7.07. Successor Agent; Resignation of Agent . . . 59
ARTICLE VIII
MISCELLANEOUS
8.01. Entire Agreement. . . . . . . . . . . . . . 59
8.02. Assignments and Participations. . . . . . . 59
8.03. Expenses. . . . . . . . . . . . . . . . . . 63
8.04. Indemnification . . . . . . . . . . . . . . 64
8.05. Ratable Sharing; Defaulting Lender. . . . . 65
8.06. Amendments and Waivers. . . . . . . . . . . 67
8.07. Notices . . . . . . . . . . . . . . . . . . 68
8.08. Failure or Indulgence Not Waiver; Remedies
Cumulative. . . . . . . . . . . . . . . . . . 68
8.09. Termination . . . . . . . . . . . . . . . . 68
8.10. Marshalling; Payments Set Aside . . . . . . 68
8.11. Severability. . . . . . . . . . . . . . . . 69
8.12. Headings. . . . . . . . . . . . . . . . . . 69
8.13. GOVERNING LAW . . . . . . . . . . . . . . . 69
8.14. Successors and Assigns; Subsequent Holders of Notes 69
8.15. CONSENT TO JURISDICTION; SERVICE OF PROCESS 70
8.16. Counterparts; Effectiveness; Inconsistencies 70
EXHIBITS
--------
Exhibit 1 -- Assignment and Acceptance (Sec.
8.02(d))
Exhibit 2 -- Competitive Bid Accept/Reject
Letter (Sec. 1.01)
Exhibit 3 -- Notice of Conversion/Continuation
(Sec. 2.05(c))
Exhibit 4 -- Notice of Revolving Borrowing (Sec.
2.02(a))
Exhibit 5 -- Notice of Competitive Bid Borrowing
(Sec. 2.03(a))
Exhibit 6 -- Notice of Competitive Bid Request
(Sec. 2.03(a))
Exhibit 7 -- Competitive Bid (Sec. 2.03(b))
Exhibit 8 -- Form of Revolving Loan Note (Sec.
2.04)
Exhibit 9 -- Form of Competitive Bid Note (Sec.
2.04)
Exhibit 10 -- Lender Information (Sec. 8.07)
<page<
SCHEDULES
Schedule A -- List of Lenders, Domestic and
Eurodollar Lending Offices
and Commitments (Sec. 1.01,
8.02(c), 8.07)
Schedule 4.01(h) -- Pending or Threatened
Litigation (Sec. 4.01(h))
Schedule 5.02(a)(i)(A) -- Funded Debt (Sec.
5.02(a)(i)(A))
Schedule 5.02(e) -- Existing Indebtedness and
Guarantees (Sec. 5.02(e))
Schedule 5.02(f) -- Existing Liens (Sec. 5.02(f))
<PAGE>
AMENDED AND RESTATED
CREDIT AGREEMENT
This Amended and Restated Credit Agreement
dated as of November 25, 1994 (the "Closing Date") (as
amended, supplemented, modified or restated from time to
time, the "Agreement") is entered into among HARNISCHFEGER
INDUSTRIES, INC., a Delaware corporation (the "Borrower"),
THE FINANCIAL INSTITUTIONS LISTED ON THE SIGNATURE PAGES
HEREOF and each other financial institution which from time
to time becomes a party hereto in accordance with
Section 8.02(a) (together with their respective successors
and assigns, individually, a "Lender" and, collectively,
the "Lenders"), and CHEMICAL BANK, a New York banking
corporation, in its separate capacity as agent for the
Lenders hereunder (in such capacity, the "Agent").
The Borrower, certain of the Lenders and the
Agent were parties to that certain Credit Agreement dated
November 18, 1993 (the "Original Credit Agreement"). The
Borrower has requested that the Lenders agree to amend and
restate the Original Credit Agreement in its entirety to
enable the Borrower, on the terms and subject to the
conditions set forth in this Agreement, to borrow on a
revolving basis, at any time and from time to time from and
including the Effective Date, an aggregate principal amount
at any time outstanding not in excess of the Commitments
which aggregate $240,000,000 on the Effective Date.
ARTICLE I
DEFINITIONS
1.01. Certain Defined Terms.
The following terms used in this Agreement
shall have the following meanings (such meanings to be
applicable, except to the extent otherwise indicated in a
definition of a particular term, both to the singular and
the plural forms of the terms defined):
"Affiliate," as applied to any Person, shall
mean any other Person directly or indirectly controlling,
controlled by, or under common control with, that Person.
For purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling," "controlled
by" and "under common control with"), as applied to any
Person, means the possession, directly or indirectly, of
the power to vote 10% or more of the securities having
voting power for the election of directors of such Person
or otherwise to direct or cause the direction of the
management and policies of that Person, whether through the
ownership of voting securities or by contract or otherwise.
"Agent" shall have the meaning ascribed to such
term in the preamble hereto and shall include any successor
Agent appointed pursuant to Section 7.07.
"Aggregate Commitments" shall mean the
aggregate amount of the Commitments of all Lenders, from
time to time, which on the Effective Date is $240,000,000.
"Agreement" shall have the meaning ascribed to
such term in the preamble hereto.
"Alternate Base Rate" shall mean, for any day,
a fluctuating interest rate per annum (rounded upwards, if
necessary, to the next 1/16 of 1%) as shall be in effect
from time to time, which rate per annum shall at all times
be equal to the greatest of (a) the Prime Rate in effect on
such day; (b) the sum of one-half of one percent (0.50%)
and the Federal Funds Effective Rate in effect on such day;
and (c) the sum of (1) one percent (1.0%) and (2) the
product of (x) the Three-Month Secondary CD Rate in effect
on such day and (y) Statutory Reserves and (3) the
Assessment Rate. For purposes hereof, "Prime Rate" shall
mean the rate of interest per annum publicly announced from
time to time by Chemical Bank as its prime rate in effect
at its principal office in New York City; each change in
the Prime Rate shall be effective on the date such change
is publicly announced as being effective. "Three-Month
Secondary CD Rate" shall mean, for any day, the secondary
market rate for three-month certificates of deposit
reported as being in effect on such day (or, if such day
shall not be a Business Day, the next preceding Business
Day) by the Federal Reserve Board through the public
information telephone line of the Federal Reserve Bank of
New York (which rate will, under the current practices of
the Federal Reserve Board, be published in Federal Reserve
Statistical Release H.15(519) during the week following
such day), or, if such rate shall not be so reported on
such day or such next preceding Business Day, the average
of the secondary market quotations for three-month
certificates of deposit of major money center banks in New
York City received at approximately 10:00 a.m., New York
City time, on such day (or, if such day shall not be a
Business Day, on the next preceding Business Day) by
Chemical Bank from three New York City negotiable
certificate of deposit dealers of recognized standing
selected by the Agent. "Federal Funds Effective Rate"
shall mean, for any day, a fluctuating interest rate per
annum equal to the weighted average of the rates on
overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers,
as published on the next succeeding Business Day by the
Federal Reserve Bank of New York, or, if such rate is not
so published for any day which is a Business Day, the
average of the quotations for such day on such transactions
received by Chemical Bank from three Federal funds brokers
of recognized standing selected by the Agent. "Assessment
Rate" shall mean for any day the annual rate (rounded
upwards, if necessary, to the next 1/100 of 1%) most
recently estimated by the Agent as the then-current net
annual assessment rate that will be employed in determining
amounts payable by Chemical or any other Lender to the FDIC
(or any successor) for insurance by the FDIC (or such
successor) of time deposits made in dollars at Chemical's
or such Lender's domestic offices. If the Agent shall have
determined that it is unable to ascertain the Three-Month
Secondary CD Rate or the Federal Funds Effective Rate or
both, including the inability or failure of the Agent to
obtain sufficient quotations in accordance with the terms
hereof, the Alternate Base Rate shall be determined without
regard to clause (b) or (c), or both, of the first sentence
of this definition, as appropriate, until the circumstances
giving rise to such inability no longer exist. Any change
in the Alternate Base Rate due to a change in the Prime
Rate, the Three-Month Secondary CD Rate or the Federal
Funds Effective Rate shall be effective on the effective
date of such change.
"Applicable Lending Office" shall mean, with
respect to each Lender, such Lender's Domestic Lending
Office, in the case of a Base Rate Loan and such Lender's
Eurodollar Lending Office, in the case of a Eurodollar Rate
Loan or, if different in the case of a Competitive Bid
Loan, the office of such Lender notified by such Lender to
the Agent as its Applicable Lending Office with respect to
such Competitive Bid Loan.
"Assignment and Acceptance" shall mean an
Assignment and Acceptance in the form of Exhibit 1
delivered to the Agent in connection with an assignment of
all or a portion of a Lender's interest under this
Agreement pursuant to Section 8.02.
"Base Rate Loans" shall mean all Loans
outstanding which bear interest at a rate determined by
reference to the Alternate Base Rate, as provided in
Section 2.05(a)(i).
"Borrower" shall have the meaning ascribed to
such term in the preamble hereto.
"Borrowing" shall mean a borrowing consisting
of Loans of the same Type, having the same Interest Period
and made on the same day by the Lenders (or, with respect
to Competitive Bid Loan, by each of the Lenders whose offer
to make Competitive Bid Loans as part of such borrowing has
been accepted by the Borrower pursuant to Section 2.03).
"Business Day" shall mean (i) for all purposes
other than as described by clause (ii) below, any day
excluding Saturday, Sunday and any day which is a legal
holiday under the laws of the State of New York, or is a
day on which banking institutions located in New York are
required or authorized by law or other governmental action
to close and (ii) with respect to all notices,
determinations, fundings and payments in connection with
Eurodollar Rate Loans, any day which is a Business Day
described in clause (i) and which is also a day for trading
in dollar deposits by and between banks in the London
interbank Eurodollar market.
"Capital Lease," as applied to any Person,
shall mean any lease of any property (whether real,
personal, or mixed) by that Person as lessee which, in
conformity with GAAP, is or should be accounted for as a
capital lease on the balance sheet of that Person.
"Chemical" shall mean Chemical Bank, a New York
banking corporation, and any successor thereto.
"Closing Date" shall have the meaning ascribed
to that term in the preamble hereto.
"Commitment" shall mean, with respect to each
Lender, the principal amount set forth on Schedule A
opposite such Lender's name under the heading "Commitment"
or assigned to it in accordance with Section 8.02(a), as
such amount may be reduced or otherwise adjusted from time
to time pursuant to the terms of this Agreement.
"Competitive Bid" shall mean an offer by a
Lender to make a Competitive Bid Loan pursuant to Section
2.03.
"Competitive Bid Accept/Reject Letter" shall
mean a notification made by the Borrower pursuant to
Section 2.03 in the form of Exhibit 2.
"Competitive Bid Borrowing" shall mean a
borrowing consisting of a Competitive Bid Loan or
concurrent Competitive Bid Loans from the Lender or Lenders
whose Competitive Bids for such Borrowing have been
accepted by the Borrower under the bidding procedure
described in Section 2.03.
"Competitive Bid Loan" shall have the meaning
ascribed to such term in Section 2.01(a) . Each
Competitive Bid Loan shall be a Eurodollar Rate Loan
bearing interest at the LIBO Rate plus the Spread
applicable thereto or a Fixed Rate Loan.
"Competitive Bid Note" shall have the meaning
ascribed to such term in Section 2.04.
"Competitive Bid Rate" shall mean, as to any
Competitive Bid made by a Lender pursuant to Section 2.03
(i) in the case of a Eurodollar Rate Loan, the Spread, and
(ii) in the case of a Fixed Rate Loan, the fixed rate of
interest offered by the Lender making such Competitive Bid.
"Consolidated Net Income" (or as applicable,
Consolidated Net Loss) shall mean, for any period, the
gross revenues of the Borrower and its Consolidated
Subsidiaries for such period (i) less all expenses and
other proper charges (including taxes on income),
determined on a consolidated basis in accordance with GAAP,
after eliminating unremitted income or losses attributable
to Persons that are not Consolidated Subsidiaries, all
extraordinary items of gain or loss and all income or
losses attributable to Minority Interests and (ii) plus the
net charge recorded for postretirement benefits other than
pensions pursuant to Statement of Financial Accounting
Standards No. 106, determined in accordance with GAAP.
"Consolidated Net Worth" shall mean, as of the
date of any determination thereof, the amount of the
capital stock accounts, including the portion thereof
attributable to preferred stock which does not have
mandatory redemption provisions requiring redemption prior
to the Termination Date (net of any treasury stock, at
cost) plus (or minus in the case of a deficit) (i)
cumulative translation adjustments, (ii) the surplus and
retained earnings of the Borrower and its Consolidated
Subsidiaries, plus Minority Interests, (iii) the amount
deducted from shareholder's equity for the Borrower's
common stock held by the Harnischfeger Industries, Inc.
Stock Employee Compensation Trust and (iv) the net
liability recorded for postretirement benefits other than
pensions pursuant to Statement of Financial Accounting
Standards No. 106, all as determined in accordance with
GAAP.
"Consolidated Subsidiary" means any Person
which for accounting purposes would be consolidated with
the Borrower in accordance with GAAP.
"Consolidated Total Tangible Assets" means, as
of the date of any determination thereof, the total amount
of all assets of the Borrower and its Consolidated
Subsidiaries on a consolidated basis minus goodwill,
organization expenses, patents, trademarks, trade names,
copyrights, franchises and other like intangibles and
unamortized debt discount and expense, all as determined in
accordance with GAAP.
"Default Rate" shall have the meaning ascribed
to that term in Section 2.05(d).
"Disclosure Document" means, at any time, the
annual report of the Borrower on Form 10-K (or successor
forms) most recently filed by it with the United States
Securities and Exchange Commission (the "SEC") pursuant to
Section 13(a) or Section 15(d) of the United States
Securities Exchange Act of 1934, as amended, and the
quarterly and current reports of the Borrower on Form 10-Q
or Form 8-K (or successor forms), if any, so filed with the
SEC since the filing of such most recently filed annual
report.
"Dollars" and "$" shall mean the lawful money
of the United States of America.
"Domestic Lending Office" means, with respect
to any Lender, the office of such Lender specified as its
"Domestic Lending Office" under its name on Schedule A or
on the Assignment and Acceptance by which it became a
Lender or such other office of such Lender as such Lender
may from time to time specify by written notice to the
Borrower and the Agent.
"Effective Date" means the date on which all of
the conditions precedent described in Section 3.01 have
been satisfied; provided that such date occurs on or before
December 31, 1994.
"Environmental Legal Requirement" means any
applicable law, statute or ordinance relating to public
health, safety or the environment, including without
limitation any such applicable law, statute or ordinance
relating to releases, discharges or emissions to air,
water, land or groundwater, to the withdrawal or use of
groundwater, to the use and handling of polychlorinated
biphenyls or asbestos, to the disposal, transportation,
treatment, storage or management of solid or hazardous
wastes or to exposure to toxic or hazardous materials, to
the handling, transportation, discharge or release of
gaseous or liquid substances and any regulation, order,
notice or demand issued pursuant to any such law, statute
or ordinance, in each case applicable to the property of
the Borrower and its Subsidiaries or the operation,
construction or modification of any thereof, including
without limitation the following: the Clean Air Act, the
Federal Water Pollution Control Act, the Safe Drinking
Water Act, the Toxic Substances Control Act, the
Comprehensive Environmental Response Compensation and
Liability Act as amended by the Superfund Amendments and
Reauthorization Act of 1986, the Resource Conservation and
Recovery Act as amended by the Solid and Hazardous Waste
Amendments of 1984, the Occupational Safety and Health Act,
the Emergency Planning and Community Right-to-Know Act of
1986, and the Solid Waste Disposal Act, each as may be
amended from time to time, and any state statutes
addressing similar matters or providing for financial
responsibility for cleanup or other actions with respect to
the release or threatened release of hazardous substances
and any state nuisance statute.
"ERISA" shall mean the Employee Retirement
Income Security Act of 1974, as amended from time to time,
and any successor statute.
"Eurodollar Lending Office" means, with respect
to any Lender, the office of such Lender specified as its
"Eurodollar Lending Office" under its name on Schedule A or
on the Assignment and Acceptance by which it became a
Lender (or, if no such office is specified, its Domestic
Lending Office) or such other office of such Lender as such
Lender may from time to time specify by written notice to
the Borrower and the Agent.
"Eurodollar Rate Loans" shall mean those
Revolving Loans and Competitive Bid Loans outstanding which
bear interest at a rate determined by reference to the LIBO
Rate as provided in Section 2.05(a)(ii).
"Eurodollar Rate Margin" shall mean (i) .15%
per annum when the Borrower's Rating falls within (A) Level
I by either S&P or Moody's and (B) Level III or higher by
the other rating agency, (ii) .20% per annum when the
Borrower's Rating falls within Level II by both S&P and
Moody's and (iii) .30% per annum when the Borrower's Rating
falls within (A) Level III by either S&P or Moody's and (B)
Level II or lower by the other rating agency. The
applicable percentage for determining the Eurodollar Rate
Margin shall change on the effective date of any change in
the Level of the Borrower's Rating.
"Event of Default" shall mean any of the occur-
rences set forth in Section 6.01 after the expiration of
any applicable grace period expressly provided therein.
"Excluded Taxes" shall have the meaning
ascribed to such term in Section 2.10(a).
"Facility Fee" shall have the meaning ascribed
to that term in Section 2.06(a).
"FDIC" shall mean the Federal Deposit Insurance
Corporation or any successor thereto.
"Federal Reserve Board" shall mean the Board of
Governors of the Federal Reserve System or any Governmental
Authority succeeding to its functions.
"Fixed Rate Loan" shall mean any Competitive
Bid Loan bearing interest at a fixed percentage rate per
annum (expressed in the form of a decimal to no more than
four decimal places) specified by the Lender making such
Loan in its Competitive Bid.
"Funded Debt" means, with respect to any
Person, all Indebtedness and Guarantees which have a final
maturity of one or more than one year from the date of
origin thereof (or which are renewable or extendible at the
option of the obligor for a period or periods more than one
year from the date of origin), excluding in each case the
current portion of such Indebtedness and Guarantees;
"Consolidated Funded Debt" shall mean the Funded Debt of
the Borrower and its Consolidated Subsidiaries determined
on a consolidated basis.
"Funding Date" shall mean, with respect to any
Loan, the date of the funding of such Loan.
"GAAP" shall mean United States generally
accepted accounting principles consistently applied and
maintained throughout the period indicated and consistent
with the prior financial practices of the Borrower except
for (i) changes mandated by the Financial Accounting
Standards Board or any similar accounting authority of
comparable standing and (ii) changes to any such principles
deemed by the Borrower to be preferable and the use of
which has been approved by the Borrower's independent
certified public accountants.
"Governmental Authority" shall mean any nation,
state, sovereign, or government, any federal, regional,
state, local or political subdivision and any entity exer-
cising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government
including, without limitation, any central bank.
"Guarantee" shall mean, with respect to any
Person, all items of Indebtedness of any other Person which
are guaranteed by such Person, directly or indirectly, in
any manner or are in effect guaranteed through any
agreement or other arrangement (even if not designated as a
guarantee) designed to provide funds for or to secure
payment or performance of such Indebtedness of such other
Person, and including any letter of credit issued to secure
Indebtedness of such other Person; provided, however, that
with respect to any receivable sold or discounted with
recourse only the amount of the recourse liability in
connection therewith shall be considered a Guarantee for
purposes of this definition.
"Indebtedness" shall mean, with respect to any
Person, (i) all obligations of such Person for borrowed
money, however evidenced, (ii) all obligations of such
Person to pay the deferred purchase price of property,
except trade accounts arising in the ordinary course of
business, (iii) all obligations of such Person as lessee
under Capital Leases, (iv) all obligations of such Person
to reimburse or indemnify the issuer of a letter of credit
or Guarantee for actual drawings or payments thereunder,
and (v) all Indebtedness of others secured by a Lien on any
asset of such Person, whether or not such Indebtedness is
assumed by such Person.
"Interest Payment Date" shall mean, with
respect to any Loan, (i) the last day of each Interest
Period applicable to such Loan, (ii) with respect to any
Eurodollar Rate Loan having an Interest Period in excess of
three (3) months, the last day of each three (3) month
interval during such Interest Period and (iii) with respect
to any Fixed Rate Loan having an Interest Period in excess
of 90 days, the last day of each 90 day interval during
such Interest Period and, in addition, the date of any
refinancing or conversion of such Loan with or to a Loan of
a different Type.
"Interest Period" shall mean (a) as to any
Borrowing consisting of Eurodollar Rate Loans, the period
commencing on the date of such Borrowing or on the last day
of the immediately preceding Interest Period applicable to
such Borrowing, as the case may be, and ending on the
numerically corresponding day (or, if there is no
numerically corresponding day, on the last day) in the
calendar month that is 1, 2, 3 or 6 months thereafter, as
the Borrower may elect, and (b) as to any Borrowing
consisting of Base Rate Loans, the period commencing on the
date of such Borrowing or on the last day of the
immediately preceding Interest Period applicable to such
Borrowing, as the case may be, and ending on the earliest
of (i) the next succeeding March 31, June 30, September 30
or December 31, (ii) the Termination Date, and (iii) the
date such Borrowing is converted to a Borrowing of a
different Type in accordance with Section 2.05(c) or repaid
or prepaid in accordance with Section 2.01(c) and Section
2.07 and (c) as to any Borrowing consisting of Fixed Rate
Loans, the period commencing on the date of such Borrowing
and ending on the date specified in the Competitive Bid in
which the offer to make such Fixed Rate Loans comprising
such Borrowing was extended and accepted pursuant to
Section 2.03, which shall not be earlier than 7 days after
the date of such Borrowing or later than 180 days after the
date of such Borrowing; provided, however, that if any
Interest Period would end on a day other than a Business
Day, such Interest Period shall be extended to the next
succeeding Business Day unless, in the case of a Borrowing
consisting of Eurodollar Rate Loans only, such next
succeeding Business Day would fall in the next calendar
month, in which case such Interest Period shall end on the
next preceding Business Day.
"Interest Rate Determination Date" shall mean
the date on which the Agent determines the LIBO Rate
applicable to a Borrowing, continuation or conversion of
Eurodollar Rate Loans. The Interest Rate Determination
Date shall be the second (2nd) Business Day prior to the
first day of the Interest Period applicable to such
Borrowing, continuation or conversion.
"IRC" shall mean the Internal Revenue Code of
1986, as amended from time to time, and any successor
statute.
"IRS" shall mean the Internal Revenue Service
of the United States or any Governmental Authority
succeeding to the functions thereof.
"Joy" shall mean Joy Technologies Inc., a
Delaware corporation.
"Joy Indenture" shall mean the Indenture dated
as of September 1, 1993 between Joy and the Bank of
Montreal Trust Company, as Trustee, pursuant to which Joy
issued 10 1/4% senior notes due 2003 as in effect on the
Closing Date.
"Lender" shall have the meaning ascribed to
such term in the preamble and shall include Chemical Bank,
in its individual capacity.
"Level" shall mean any of Level I, Level II and
Level III. "Level I" shall mean that the Borrower's Rating
is either (i) A- or higher by S&P or (ii) A3 or higher by
Moody's; "Level II" shall mean that the Borrower's Rating
is either (i) BBB+, BBB or BBB- by S&P or (ii) Baa1, Baa2
or Baa3 by Moody's; and "Level III" shall mean that the
Borrower's Rating is either (i) BB+ or lower by S&P or (ii)
Ba1 or lower by Moody's; provided, that for purposes of
determining the Level of the Borrower's Rating, if at any
time (A) neither S&P nor Moody's shall have in effect a
Rating for the Borrower's unsecured long term debt (other
than by reason of the circumstances referred to in the last
sentence of this definition), then both S&P and Moody's
shall be deemed to have established a Rating in Level III;
and (B) if any Rating established or deemed to have been
established by S&P or Moody's shall be changed (other than
as a result of a change in the rating system of S&P or
Moody's), such change shall be effective as of the date on
which such change is first announced by the applicable
rating agency. If the rating system of S&P or Moody's
shall change, or if either S&P or Moody's shall cease to be
in the business of rating corporate debt obligations, the
Borrower and the Agent (with the approval of the Requisite
Lenders) shall negotiate in good faith to amend the
references to specific ratings in this definition so that
the criteria for determining the Borrower's Level shall be
functionally the same after such changes in the rating
system or the nonavailability of ratings from the
applicable rating agency.
"LIBO Rate" shall mean, with respect to any
Interest Period applicable to a Borrowing of Eurodollar
Rate Loans, an interest rate per annum equal to the average
(rounded upwards, if necessary, to the next 1/16 of 1%) of
the respective rates notified to the Agent by each of the
Reference Banks as the rate per annum at which deposits in
Dollars are offered to such Reference Banks in immediately
available funds by prime banks in the London interbank
market at approximately 11:00 a.m. (London time) on the
Interest Rate Determination Date for such Interest Period,
in the approximate amount of the relevant Borrowing of
Eurodollar Rate Loans and having a maturity comparable to
such Interest Period.
"Lien" shall mean any mortgage, deed of trust,
pledge, hypothecation, assignment, security interest,
encumbrance (including, but not limited to, easements,
rights of way and the like), judgment, lien (statutory or
other), environmental lien, charge, security agreement or
transfer intended as security, including, without
limitation, any conditional sale or other title retention
agreement, the interest of a lessor under a Capital Lease,
any financing lease having substantially the same economic
effect as any of the foregoing and, in the case of
securities, any purchase option, call or similar right of a
third party with respect to such securities.
"Loan" shall mean a Revolving Loan or a
Competitive Bid Loan.
"Loan Account" shall have the meaning ascribed
to such term in Section 2.07(d).
"Loan Documents" shall mean this Agreement, the
Notes and all other agreements delivered to the Agent or
any Lender by or on behalf of the Borrower or any of its
Subsidiaries in satisfaction or furtherance of the
requirements of this Agreement or any other Loan Document.
"Minority Interests" shall mean any shares of
stock of any class of a Consolidated Subsidiary (other than
directors' qualifying shares if required by law) that are
not owned by the Borrower and/or one or more of its
Consolidated Subsidiaries; Minority Interests shall be
valued in accordance with GAAP.
"Moody's" shall mean Moody's Investors Service,
Inc. and its successors.
"Note" shall mean a Competitive Bid Note or a
Revolving Loan Note.
"Note Agreements" shall mean the Note Agreement
dated as of September 15, 1989 pursuant to which the
Borrower issued the Series A 9.10% notes due September 15,
1999, the Note Agreement dated as of October 15, 1989
pursuant to which the Borrower issued the Series B 9.10%
notes due September 15, 1999, the Note Agreement dated as
of February 15, 1991 pursuant to which the Borrower issued
the Series C 8.95% notes due March 15, 2001 and the Note
Agreement dated as of October 1, 1991 pursuant to which the
Borrower issued the Series D 8.90% notes due September 15,
2006.
"Notice of Competitive Bid Borrowing" shall
have the meaning provided in Section 2.03(a).
"Notice of Competitive Bid Request" shall have
the meaning provided in Section 2.03(a).
"Notice of Conversion/Continuation" shall mean,
with respect to a proposed conversion or continuation of a
Loan pursuant to Section 2.05(c), a notice substantially in
the form of Exhibit 3.
"Notice of Revolving Borrowing" shall mean,
with respect to a proposed Borrowing pursuant to
Section 2.02(a), a notice substantially in the form of
Exhibit 4.
"Obligations" shall mean the principal of and
all interest on all Loans, all fees, expense
reimbursements, taxes, compensation and indemnities payable
by the Borrower to the Agent or any Lender pursuant to this
Agreement and all other present and future Indebtedness and
other liabilities of the Borrower owing to the Agent, any
Lender or any Person entitled to indemnification pursuant
to Section 8.04, or any of their respective successors,
transferees or assigns, of every type and description,
whether or not evidenced by any note, guaranty or other
instrument, arising under or in connection with this
Agreement, any Note or any other Loan Document, whether or
not for the payment of money, whether direct or indirect
(including those acquired by assignment), absolute or
contingent, due or to become due, now existing or hereafter
arising and however arising.
"Original Credit Agreement" shall have the
meaning ascribed to such term in the preamble hereto.
"Outstandings" shall mean, at any given time,
the aggregate outstanding principal balance of Revolving
Loans and Competitive Bid Loans.
"Participant" shall have the meaning ascribed
to such term in Section 8.02(e).
"Performance Undertaking" shall have the
meaning ascribed to such term in Section 5.02(e)(ii).
"Person" shall mean any natural person,
corporation, limited partnership, general partnership,
joint stock company, joint venture, association, company,
trust, bank, trust company, land trust, business trust or
other organization, whether or not a legal entity, or any
other non-governmental entity, or any Governmental
Authority.
"Plan" means any employee pension benefit plan
maintained or contributed to (i) by the Borrower or any
Subsidiary of the Borrower or by any trade or business
(whether or not incorporated) under common control with the
Borrower or any such Subsidiary as defined in Section
4001(b) of ERISA and insured by the Pension Benefit
Guaranty Corporation under Title IV of ERISA, for employees
of such entity, or (ii) pursuant to a collective bargaining
agreement or any other arrangement under which more than
one employer makes contributions and to which any trade or
business under common control with the Borrower or any
Subsidiary of the Borrower is then making or accruing an
obligation to make contributions or has within the
preceding five Plan years made contributions.
"Potential Event of Default" shall mean an
event, condition or circumstance which, with the giving of
notice or the lapse of time, or both, would constitute an
Event of Default.
"Pro Rata Share" shall mean, at any particular
time and with respect to any Lender, a fraction (expressed
as a percentage), the numerator of which shall be the then
amount of such Lender's Commitment and the denominator of
which shall be the Aggregate Commitments, as adjusted from
time to time pursuant to the terms of this Agreement;
provided, that if all of the Commitments are terminated or
reduced to zero hereunder, the Pro Rata Share shall mean,
at any particular time and with respect to any Lender, a
fraction (expressed as a percentage), the numerator of
which shall be the then amount of such Lender's outstanding
Revolving Loans and the denominator of which shall be the
then aggregate amount of all Revolving Loans outstanding
hereunder.
"Rating" shall mean, at any particular time,
the Borrower's unsecured long term debt rating by S&P or
Moody's.
"Reference Banks" shall mean the principal
London offices of Chemical Bank, The First National Bank of
Chicago, and PNC Bank, National Association (or if such
Lender does not maintain a London office, the office from
which such Lender solicits offers for deposits in Dollars
in the London interbank market).
"Regulation D," "Regulation G," "Regulation T,"
"Regulation U" and "Regulation X" shall mean Regulation D,
Regulation G, Regulation T, Regulation U and Regulation X,
respectively, of the Federal Reserve Board as in effect
from time to time.
"Requisite Lenders" means, except as otherwise
provided in Section 8.05(b)(v), Lenders whose Pro Rata
Shares, in the aggregate, are greater than sixty percent
(60%); provided, however, that, in the event that all of
the Commitments have been terminated pursuant to the terms
of this Agreement, "Requisite Lenders" means Lenders
(without regard to such Lenders' performance of their
respective obligations hereunder) whose aggregate ratable
shares (stated as a percentage) of the aggregate
outstanding principal balance of all Revolving Loans and
Competitive Bid Loans are greater than sixty percent (60%).
"Responsible Financial Officer" shall mean the
Vice President and Treasurer of the Borrower, the Vice
President and Controller of the Borrower and any officer of
the Borrower to whom either thereof customarily reports.
"Restricted Subsidiary" shall mean at any time
each of (i) Beloit Corporation, (ii) Harnischfeger
Corporation, (iii) Joy, (iv) any Subsidiary of the Borrower
with revenues during the fiscal year of the Borrower most
recently ended greater than or equal to 30% of the total
revenues of the Borrower and its Consolidated Subsidiaries
during such year, (v) any Subsidiary of the Borrower with
assets as of the last day of the Borrower's most recently
ended fiscal year greater than or equal to 30% of the total
assets of the Borrower and its Consolidated Subsidiaries at
such date, in each case computed in accordance with GAAP
and (vi) any other Subsidiary of the Borrower that the
Borrower designates as a "Restricted Subsidiary" in a
written notice to the Agent; provided, that,
notwithstanding the foregoing, Syscon Corporation shall not
be a Restricted Subsidiary.
"Revolving Credit Availability" shall mean, as
at any particular date of determination, the amount by
which Aggregate Commitments exceed Outstandings. For
purposes of calculating Revolving Credit Availability as at
any date, all Revolving Loans requested but not yet
advanced and Competitive Bid Loans accepted but not yet
advanced will be treated as advanced in calculating
Outstandings unless the Borrower has directed that the
requested advance be disbursed to repay Loans.
"Revolving Credit Facility" shall mean the
revolving credit facility established for Revolving Loans
pursuant to Section 2.01.
"Revolving Loan" shall have the meaning
ascribed to such term in Section 2.01(a).
"Revolving Loan Note" shall have the meaning
ascribed to such term in Section 2.04.
"S&P" shall mean Standard and Poor's
Corporation and its successors.
"Scheduled Expiration Date" shall mean November
17, 1998 or such other date as may be agreed to by a Lender
pursuant to Section 2.02(f).
"Spread" shall mean, as to any Competitive Bid
Loan bearing interest at the LIBO Rate, the margin
(expressed as a percentage rate per annum in the form of a
decimal to no more than four decimal places) to be added or
subtracted from the LIBO Rate in order to determine the
interest rate applicable to such Competitive Bid Loan, as
specified in the Competitive Bid relating to such
Competitive Bid Loan.
"Statutory Reserves" shall mean a fraction
(expressed as a decimal), the numerator of which is the
number one and the denominator of which is the number one
minus the aggregate of the maximum applicable reserve
percentages (including any marginal, special, emergency or
supplemental reserves) expressed as a decimal established
by the Federal Reserve Board and any other banking
authority to which the Agent or any Lender is subject (a)
with respect to the Three-Month Secondary CD Rate (as such
term is used in the definition of "Alternate Base Rate"),
for new negotiable nonpersonal time deposits in Dollars of
over $100,000 with maturities approximately equal to three
months or (b) with respect to the LIBO Rate, for
Eurocurrency Liabilities (as defined in Regulation D of the
Federal Reserve Board). Such reserve percentages shall
include those imposed pursuant to such Regulation D.
Eurodollar Rate Loans shall be deemed to constitute
Eurocurrency Liabilities and to be subject to such reserve
requirements without benefit of or credit for proration,
exceptions or offsets which may be available from time to
time to any Lender under such Regulation D. Statutory
Reserves shall be adjusted automatically on and as of the
effective date of any change in any reserve percentage.
"Subsidiary" shall mean, with respect to any
Person, any corporation, partnership, trust or other entity
of which a majority of the stock (or equivalent ownership
or controlling interest) having voting power to elect a
majority of the Board of Directors (if a corporation) or to
select the trustee or equivalent controlling interest is
directly or indirectly owned or controlled by such Person
or one or more of the other Subsidiaries of such Person or
any combination thereof, provided, however, that a Person
shall only be a "Subsidiary" of the Borrower if (i) the net
worth of such Person is equal to or greater than $5,000,000
as of the end of the fiscal quarter immediately preceding
the most recent fiscal quarter or (ii) the revenues for
such Person during the fiscal year most recently ended were
equal to or greater than $20,000,000.
"Taxes" shall have the meaning ascribed to such
term in Section 2.10(a).
"Termination Date" shall mean the earlier of
(a) the Scheduled Expiration Date and (b) the date of
termination of the Commitments pursuant to Section 2.02(d)
or Section 6.02.
"Type" when used in respect of any Loan or
Borrowing, shall refer to the rate by reference to which
interest on such Loan or on the Loans comprising such
Borrowing is determined.
1.02. Computation of Time Periods. In this
Agreement, in the computation of periods of time from a
specified date to a later specified date, the word "from"
means "from and including" and the words "to" and "until"
each mean "to but excluding". Periods of days referred to
in this Agreement shall be counted in calendar days unless
Business Days are expressly prescribed.
1.03. Accounting Terms. For purposes of this
Agreement, all accounting terms not otherwise defined
herein shall have the meanings assigned to them in
conformity with GAAP.
1.04. Other Definitional Provisions. Whenever
the context may require, any pronoun shall include the
corresponding masculine, feminine and neuter forms. The
words "include", "includes" and "including" shall be deemed
to be followed by the phrase "without limitation".
References to "Articles," "Sections," "subsections,"
"Schedules," "Exhibits" and "the preamble" shall be to
Articles, Sections, subsections, Schedules, Exhibits and
the preamble, respectively, of this Agreement unless
otherwise specifically provided.
1.05. Amendment and Restatement.
(a) This Agreement amends and restates in its
entirety the Original Credit Agreement and, upon the
effectiveness of this Agreement, the terms and provisions
of the Original Credit Agreement shall, subject to Section
1.05(b) and (c), be superseded hereby.
(b) Notwithstanding the amendment and
restatement of the Original Credit Agreement by this
Agreement, the Borrower shall continue to be liable to the
"Lenders" and the "Agent" thereunder with respect to
agreements on the part of the Borrower under Sections 2.10
and 8.04 of the Original Credit Agreement and the "Lenders"
under the Original Credit Agreement shall continue to be
liable to the Agent with respect to the agreements on the
part of such Lenders under Section 7.05 of the Original
Credit Agreement.
(c) Notwithstanding the amendment and
restatement of the Original Credit Agreement by this
Agreement, all of the indebtedness, liabilities and
obligations owing to the "Lenders" by the Borrower under
the Original Credit Agreement which remain outstanding as
of the Effective Date, shall constitute Obligations
hereunder. This Agreement is given in substitution for the
Original Credit Agreement, and not as payment of the
obligations of the Borrower thereunder, and is in no way
intended to constitute a novation of the Original Credit
Agreement.
(d) Upon the effectiveness of this Agreement,
each reference to the Original Credit Agreement in any
other document, instrument or agreement executed and/or
delivered in connection therewith shall mean and be a
reference to this Agreement.
ARTICLE II
AMOUNTS AND TERMS OF THE REVOLVING CREDIT FACILITY
2.01. The Revolving Credit Facility.
(a) Availability. Subject to the terms and
conditions set forth in this Agreement, each Lender hereby
severally and not jointly agrees to make revolving loans,
in Dollars (each individually, a "Revolving Loan" and,
collectively, the "Revolving Loans") to the Borrower from
time to time during the period from the Effective Date to
the Business Day immediately preceding the Termination
Date, in an amount which shall not exceed such Lender's Pro
Rata Share of the Revolving Credit Availability at such
time. Subject to and upon the terms and conditions herein
set forth, each Lender severally agrees that the Borrower
may incur a loan or loans (each a "Competitive Bid Loan"
and collectively, the "Competitive Bid Loans") pursuant to
a Competitive Bid Borrowing from time to time during the
period from the Effective Date to the Business Day
immediately preceding the Termination Date, provided that
such Competitive Bid Borrowing shall not exceed the
Revolving Credit Availability at such time.
(b) Several Commitments. All Revolving Loans
comprising the same Borrowing under this Agreement shall be
made by the Lenders simultaneously and proportionately to
their respective Pro Rata Shares, it being understood that
no Lender shall be responsible for any failure by any other
Lender to perform its obligation to make a Revolving Loan
hereunder and that the Commitment of any Lender shall not
be increased or decreased without the prior written consent
of such Lender as a result of the failure by any other
Lender to perform its obligation to make a Revolving Loan.
The failure of any Lender to make available to the Agent
its Pro Rata Share of any Borrowing under the Aggregate
Commitments shall not relieve any other Lender of its
obligation hereunder to make available to the Agent such
other Lender's Pro Rata Share of any Borrowing under the
Aggregate Commitments on the date such funds are to be made
available pursuant to the terms of this Agreement.
(c) Repayments and Prepayments. Subject to
the payment of any breakage fees due pursuant to Section
2.09(d), Revolving Loans may be voluntarily prepaid at any
time and, subject to the provisions of this Agreement, any
amounts voluntarily prepaid in respect of Revolving Loans
may be reborrowed, up to the amount available under this
Section 2.01 at the time of such Borrowing, until the
Business Day immediately preceding the Termination Date.
The Borrower shall not have the right to voluntarily prepay
any Competitive Bid Loans. Each Lender's Commitment shall
expire, and each of the Revolving Loans and the Competitive
Bid Loans then outstanding shall mature and be repaid by
the Borrower, without further action on the part of the
Agent or the Lenders, on the Termination Date.
(d) Minimum Amounts. Any Borrowing made on
any Funding Date shall be in a minimum principal amount of
$10,000,000 and in integral multiples of $1,000,000 in
excess thereof.
2.02. Loan Facility Mechanics.
(a) Notice of Revolving Borrowing. Whenever
the Borrower desires to borrow under the first sentence of
Section 2.01(a), the Borrower shall deliver to the Agent a
Notice of Revolving Borrowing no later than 12:00 noon (New
York City time) (i) at least one (1) Business Day in
advance of the proposed Funding Date, in the case of a
Borrowing of Base Rate Loans, and (ii) at least three (3)
Business Days in advance of the proposed Funding Date, in
the case of a Borrowing of Eurodollar Rate Loans. The
Notice of Revolving Borrowing shall specify (A) the Funding
Date (which shall be a Business Day) in respect of the
Revolving Loans, (B) the amount of the proposed Borrowing,
(C) whether the proposed Borrowing will be of Base Rate
Loans or Eurodollar Rate Loans, and (D) in the case of
Eurodollar Rate Loans, the requested Interest Period. In
lieu of delivering the above-described Notice of Revolving
Borrowing, and only with the consent of the Agent in its
sole discretion at such time, the Borrower may give the
Agent telephonic notice of any such proposed Borrowing by
the time required under this Section 2.02(a); provided
that, in the event the Agent so consents, such notice shall
be confirmed in writing by delivery to the Agent promptly
(but in no event later than 12:00 noon (New York City time)
on the Funding Date of the requested Loans) of a Notice of
Revolving Borrowing. Any Notice of Revolving Borrowing (or
telephonic notice in lieu thereof) pursuant to this
Section 2.02(a) shall be irrevocable.
(b) Making of Loans. Promptly after receipt
of a Notice of Revolving Borrowing under Section 2.02(a)
(or telephonic notice in lieu thereof if the Agent consents
to such telephonic notice), the Agent shall notify each
Lender by telex or telecopy or other similar form of
teletransmission, of the Borrowing. Each Lender shall make
the amount of its Revolving Loan available to the Agent in
Dollars and in immediately available funds, not later than
11:00 a.m. (New York City time) on the Funding Date
specified in such Notice of Revolving Borrowing. After the
Agent's receipt of the proceeds of such Revolving Loans,
the Agent shall (unless it has learned that any of the
conditions precedent set forth in Section 3.01, with
respect to the Effective Date, or that any of the
conditions precedent set forth in Section 3.02, with
respect to any Funding Date, have not been satisfied) make
the proceeds of such Revolving Loans available to the
Borrower on such Funding Date and shall disburse such funds
in Dollars and in immediately available funds to an account
of the Borrower, designated in writing by the Borrower in
such Notice of Revolving Borrowing.
(c) Failure to Fund by Lender. Unless the
Agent shall have been notified by any Lender prior to any
Funding Date in respect of any Borrowing of Revolving Loans
that such Lender does not intend to make available to the
Agent such Lender's Revolving Loan on such Funding Date,
the Agent may assume that such Lender has made such amount
available to the Agent on such Funding Date and the Agent
in its sole discretion may, but shall not be obligated to,
make available to the Borrower a corresponding amount on
such Funding Date. If such corresponding amount is not in
fact made available to the Agent by such Lender on or prior
to 11:00 a.m. (New York City time) on a Funding Date, such
Lender agrees to pay and the Borrower agrees to repay to
the Agent forthwith on demand such corresponding amount
together with interest thereon, for each day from the date
such amount is made available to the Borrower until the
date such amount is paid or repaid to the Agent, at (i) in
the case of such Lender, the Federal Funds Effective Rate
(as such term is defined in the definition of Alternate
Base Rate) for the first three (3) Business Days and there-
after at the Alternate Base Rate, and (ii) in the case of
the Borrower, the interest rate which would be applicable
at the time to a Borrowing of Base Rate Loans. If such
Lender shall pay to the Agent such corresponding amount,
such amount so paid shall constitute such Lender's
Revolving Loan, and if both such Lender and the Borrower
shall have paid and repaid, respectively, such
corresponding amount, the Agent shall promptly pay over to
the Borrower such corresponding amount in same day funds,
but the Borrower shall remain obligated for all interest
thereon. Nothing in this Section 2.02(c) shall be deemed
to relieve any Lender of its obligation hereunder to make
its Revolving Loan on any Funding Date.
(d) Voluntary Reduction of Commitments. The
Borrower shall have the right, at any time and from time to
time, (i) to terminate the Commitments in whole, without
premium or penalty, if no Loans are then outstanding, and
no Loans have been requested but not yet advanced, or
(ii) subject to the second to last sentence of this
Section 2.02(d), permanently to reduce in part, without
premium or penalty, the Commitments up to the amount by
which the Aggregate Commitments exceed the sum of
(A) Outstandings and (B) the aggregate principal amount of
all Revolving Loans and Competitive Bid Loans requested
hereunder but not yet advanced. The Borrower shall give
not fewer than five (5) Business Days' prior written notice
to the Agent designating the date (which shall be a
Business Day) of such termination or reduction and the
amount of any partial reduction. Promptly after receipt of
a notice of such termination or reduction, the Agent shall
notify each Lender of the proposed termination or reduc-
tion. Such termination or partial reduction of the
Commitments shall be effective on the date specified in the
Borrower's notice and shall reduce the Commitment of each
Lender proportionately in accordance with its Pro Rata
Share. Any such partial reduction of the Commitments shall
be in integral multiples of $10,000,000. Any notice of
reduction or termination pursuant to this Section 2.02(d)
shall be irrevocable.
(e) Retention of Rights and Remedies. Not-
withstanding the termination of this Agreement on the
Termination Date, until all of the Obligations shall have
been fully and indefeasibly paid and satisfied and all
financing arrangements among the Borrower and the Lenders
pursuant to any Loan Document shall have been terminated,
all of the rights and remedies under this Agreement and the
other Loan Documents shall survive.
(f) Extension of Term. The Borrower may
request the extension of the Scheduled Expiration Date for
an additional successive one year period by delivery of a
written request to the Agent no later than 30 days before
November 18, 1995. The Agent shall promptly notify each
Lender of the Agent's receipt of such written request from
the Borrower. Each Lender shall have the right, but shall
not be obligated, to extend the Scheduled Expiration Date
with respect to its Commitment. Each Lender shall notify
the Agent in writing if it agrees to extend the Scheduled
Expiration Date pursuant to the Borrower's written request.
If the Agent shall not have received such written notice
from any Lender by November 13, 1995, such Lender will be
deemed to have declined the extension of the Scheduled
Expiration Date. If the Requisite Lenders have notified
the Agent by November 13, 1995 that such Lenders agree to
extend the Scheduled Expiration Date, the Scheduled
Expiration Date will be extended for one year with respect
to any Lenders so agreeing to such extension, provided that
the representations and warranties set out in Section 4.01
are true and correct as though made on and as of the date
the extended period begins and no event has occurred and is
continuing which is an Event of Default or a Potential
Event of Default. In the event that the Scheduled
Expiration Date is to be extended pursuant to the preceding
sentence, but not all of the Lenders have agreed to such
extension, then as of the then existing (prior to such
extension) Scheduled Expiration Date, each such non-
extending Lender's Commitment and its rights (other than
any rights that survive termination of this Agreement) and
obligations hereunder shall be cancelled, all Loans made by
such Lender shall be repaid and such Lender shall cease to
be a "Lender" and shall cease to be obligated to
participate in Loans hereunder.
2.03. Competitive Bid Procedures. (a)
Whenever the Borrower desires to incur a Competitive Bid
Borrowing, it shall give the Agent at least one Business
Day's prior written notice with respect to each proposed
Competitive Bid Borrowing of Fixed Rate Loans and at least
four Business Days' prior written notice of each proposed
Competitive Bid Borrowing of Eurodollar Rate Loans to be
made hereunder, provided that any such notice shall be
deemed to have been given on a certain day only if given
before 10:00 A.M. (New York City time) on such day. Each
such notice (a "Notice of Competitive Bid Borrowing") shall
be in the form of Exhibit 5 appropriately completed by the
Borrower to specify (i) the aggregate principal amount of
the proposed Competitive Bid Loans to be made pursuant to
such Borrowing, (ii) the date of such Borrowing (which
shall be a Business Day) and (iii) whether the Competitive
Bid Loans proposed to be made pursuant to such Borrowing
are to be Fixed Rate Loans or Eurodollar Rate Loans and
(iv) the Interest Period relating thereto. The maturity
date for repayment of each Competitive Bid Loan to be made
as part of such Competitive Bid Borrowing shall be the
earlier of (x) the last day of the Interest Period relating
thereto and (y) the Termination Date. A Notice of
Competitive Bid Borrowing that does not conform
substantially to the format of Exhibit 5 may be rejected in
the Agent's sole discretion, and the Agent shall promptly
notify the Borrower of such rejection. The Agent shall
promptly notify each Lender of each such request for a
Competitive Bid Borrowing received by it from the Borrower
and not rejected by it by telecopying such Lender a notice
in the form of Exhibit 6 hereto (a "Notice of Competitive
Bid Request").
(b) Each Lender may, in its sole discretion,
make one or more Competitive Bids to the Borrower
responsive to a Notice of Competitive Bid Request. Each
Competitive Bid by a Lender must be received by the Agent
via telecopier, in the form of Exhibit 7 hereto, (i) in the
case of a proposed Competitive Bid Borrowing of Eurodollar
Rate Loans, not later than 10:00 a.m., New York City time,
three Business Days before such proposed Competitive Bid
Borrowing and (ii) in the case of a proposed Competitive
Bid Borrowing of Fixed Rate Loans, not later than 10:00
a.m., New York City time, on the day of such proposed
Competitive Bid Borrowing. Multiple bids will be accepted
by the Agent. Competitive Bids that do not conform
substantially to the format of Exhibit 7 may be rejected by
the Agent after conferring with, and upon the instruction
of, the Borrower, and the Agent shall notify the Lender
making such nonconforming bid of such rejection as soon as
practicable. Each Competitive Bid shall refer to this
Agreement and specify (x) the principal amount (which shall
be in a minimum principal amount of $5,000,000 and in a
integral multiple of $1,000,000 in excess thereof and which
may equal the entire principal amount of the Competitive
Bid Borrowing requested by the Borrower) of the Competitive
Bid Loan or Loans that the Lender is willing to make to the
Borrower, (y) the Competitive Bid Rate or Rates at which
the Lender is prepared to make the Competitive Bid Loan or
Loans and (z) the Interest Period (which shall be the
Interest Period set forth in the applicable Competitive Bid
Request) and the last day thereof. If any Lender shall
elect not to make a Competitive Bid, such Lender shall so
notify the Agent via telecopier (I) in the case of
Eurodollar Rate Loans, not later than 10:00 a.m., New York
City time, three Business Days before a proposed
Competitive Bid Borrowing, and (II) in the case of Fixed
Rate Loans, not later than 10:00 a.m., New York City time,
on the day of a proposed Competitive Bid Borrowing;
provided, however, that failure by any Lender to give such
notice shall not cause such Lender to be obligated to make
any Competitive Bid Loan as part of such Competitive Bid
Borrowing. A Competitive Bid submitted by a Lender
pursuant to this Section 2.03(b) shall be irrevocable.
(c) The Agent shall promptly notify the
Borrower by telecopier of all the Competitive Bids made,
the Competitive Bid Rate and the principal amount of each
Competitive Bid Loan in respect of which a Competitive Bid
was made and the identity of the Lender that made each
Competitive Bid. The Agent shall send a copy of all
Competitive Bids to the Borrower for its records as soon as
practicable after completion of the bidding process set
forth in this Section 2.03.
(d) The Borrower may in its sole and absolute
discretion, subject only to the provisions of this Section
2.03(d), accept or reject any Competitive Bid referred to
in Section 2.03(c) above. The Borrower shall notify the
Agent by telephone, confirmed by telecopier in the form of
a Competitive Bid Accept/Reject Letter in the form of
Exhibit 2, whether and to what extent it has decided to
accept or reject any of or all the bids referred to in
Section 2.03(b) above, (x) in the case of a Borrowing of
Eurodollar Rate Loans, not later than 11:00 a.m., New York
City time, three Business Days before a proposed
Competitive Bid Borrowing, and (y) in the case of a
Borrowing of Fixed Rate Loans, not later than 11:00 a.m.,
New York City time, on the day of a proposed Competitive
Bid Borrowing; provided, however, that (i) the failure by
the Borrower to give such notice shall be deemed to be a
rejection of all the bids referred to in Section 2.03(b)
above, (ii) the Borrower shall not accept a bid made at a
particular Competitive Bid Rate if the Borrower has decided
to reject a bid made at a lower Competitive Bid Rate, (iii)
the aggregate amount of the Competitive Bids accepted by
the Borrower shall not exceed the principal amount
specified in the Notice of Competitive Bid Borrowing, (iv)
if the Borrower shall accept a bid or bids made at a
particular Competitive Bid Rate but the amount of such bid
or bids shall cause the total amount of bids to be accepted
by the Borrower to exceed the amount specified in the
Notice of Competitive Bid Borrowing, then the Borrower
shall accept a portion of such bid or bids in an amount
equal to the amount specified in the Competitive Bids
accepted with respect to such Notice of Competitive Bid
Borrowing, which acceptance, in the case of multiple bids
at such Competitive Bid Rate, shall be made pro rata in
accordance with the amount of each such bid at such
Competitive Bid Rate, and (v) except pursuant to clause
(iv) above, no bid shall be accepted for a Competitive Bid
Loan unless such Competitive Bid Loan is in a minimum
principal amount of
$5,000,000 and an integral multiple of $1,000,000; provided
further, however, that if a Competitive Bid Loan must be in
an amount less than $5,000,000 because of the provisions of
clause (iv) above, such Competitive Bid Loan may be for a
minimum of $1,000,000 or any integral multiple thereof, and
in calculating the pro rata allocation of acceptances of
portions of multiple bids at a particular Competitive Bid
Rate pursuant to clause (iv) the amounts shall be rounded
to integral multiples of $1,000,000 in a manner which shall
be in the discretion of the Borrower. A notice given by
the Borrower pursuant to this Section 2.03(d) shall be
irrevocable.
(e) The Agent shall promptly notify each
bidding Lender whether or not its Competitive Bid has been
accepted (and if so, in what amount and at what Competitive
Bid Rate) by telecopy sent by the Agent, and each
successful bidder will thereupon become bound, subject to
the other applicable conditions hereof, to make the
Competitive Bid Loan in respect of which its bid has been
accepted.
(f) If the Agent shall elect to submit a
Competitive Bid in its capacity as a Lender, it shall
submit such bid directly to the Borrower one quarter of an
hour earlier than the latest time at which the other
Lenders are required to submit their bids to the Agent
pursuant to Section 2.03(b) above.
(g) All notices required by this Section 2.03
shall be given in accordance with Section 8.07.
2.04. Notes. The Borrower shall execute
and deliver to each Lender (or to the Agent on behalf of
each Lender) on or before the Effective Date a promissory
note substantially in the form of Exhibit 8 hereto (each a
"Revolving Loan Note" and collectively, the "Revolving Loan
Notes") to evidence the aggregate amount of that Lender's
Revolving Loans and with other appropriate insertions. The
Revolving Loan Note delivered to each Lender shall (i) be
dated the Closing Date, (ii) be stated to mature on the
Termination Date, (iii) bear interest as provided in
Section 2.05(a) in respect of Base Rate Loans or Eurodollar
Rate Loans, as the case may be, evidenced thereby and (iv)
be entitled to the benefits of this Agreement and the other
Loan Documents. The Borrower's obligation to pay the
principal of and interest on all Competitive Bid Loans made
to it by a Lender shall be evidenced by its promissory note
substantially in the form of Exhibit 9 hereto (each a
"Competitive Bid Note" and collectively, the "Competitive
Bid Notes"). Each Competitive Bid Note issued to each
Lender shall (i) be payable to the order of such Lender and
be dated the Closing Date, (ii) be in a stated principal
amount equal to the Aggregate Commitments and be payable in
the outstanding principal amount of Competitive Bid Loans
evidenced thereby from time to time, (iii) mature with
respect to each Competitive Bid Loan evidenced thereby on
the earlier of (x) the last day of the Interest Period
applicable thereto and (y) the Termination Date, (iv) bear
interest as provided in Section 2.05(a) in respect of Fixed
Rate Loans or Eurodollar Rate Loans, as the case may be,
evidenced thereby and (v) be entitled to the benefits of
this Agreement and the other Loan Documents. Each Lender
is hereby authorized to, and prior to any transfer of any
Note issued to it, each Lender shall, endorse the date and
amount of each Loan made by such Lender and each payment or
prepayment of principal of the Loans evidenced thereby on
the schedule annexed to and constituting a part of such
Note, provided that failure by any such Lender to make such
endorsement shall not affect the obligations of the
Borrower hereunder or under such Note. In lieu of
endorsing such schedule as hereinabove provided, prior to
any transfer of such Note, each Lender is hereby
authorized, at its option, to record such Loans and such
payments or prepayments in its books and records; provided,
however, that if the Loan Account differs from the
information endorsed by a Lender on such Lender's Notes,
the Loan Account shall be rebuttably presumed to be
correct.
2.05. Interest on the Loans.
(a) Rate of Interest. All Revolving Loans
shall bear interest on the unpaid principal amount thereof
from the date made until paid in full at a rate determined
from time to time by reference to the Alternate Base Rate
or the LIBO Rate. The applicable basis for determining the
rate of interest shall be selected by the Borrower at the
time a Notice of Revolving Borrowing is given by the
Borrower pursuant to Section 2.02(a) or at the time a
Notice of Conversion/Continuation is delivered by the
Borrower pursuant to Section 2.05(c); provided, however,
that the Borrower may not select the LIBO Rate as the
applicable basis for determining the rate of interest on a
Loan (1) if at the time of such selection a Potential Event
of Default or Event of Default exists or (2) if such a
selection would be otherwise prohibited by the terms of
this Agreement. If on any day a Revolving Loan is out-
standing with respect to which a Notice of Revolving
Borrowing or a Notice of Conversion/Continuation has not
been delivered to the Agent in accordance with the terms of
this Agreement specifying the basis for determining the
rate of interest, then for each such day such Loan shall be
a Base Rate Loan. Revolving Loans shall bear interest,
subject to Section 2.05(d), at the following rates:
(i) if a Base Rate Loan, then at a rate
per annum equal to the Alternate Base Rate as
in effect from time to time as interest
accrues; and
(ii) if a Eurodollar Rate Loan, then at
a rate per annum equal to the sum of (A) the
Eurodollar Rate Margin and (B) the LIBO Rate
determined for the applicable Interest Period.
The Borrower agrees to pay interest in respect of the
unpaid principal amount of each Competitive Bid Loan made
to the Borrower from the date the proceeds are made
available to the Borrower until maturity thereof (whether
by acceleration or otherwise) at a rate per annum which
shall, during each Interest Period applicable thereto,
subject to Section 2.05(d), be (i) if such Competitive Bid
Loan is a Fixed Rate Loan, the fixed rate of interest
offered by the Lender making such Loan and accepted by the
Borrower pursuant to Section 2.03 and (ii) if such
Competitive Bid Loan is a Eurodollar Rate Loan, the LIBO
Rate plus or minus the applicable Spread offered by the
Lender making such Loan and accepted by the Borrower
pursuant to Section 2.03.
(b) Interest Payments. Subject to
Section 2.05(d), (i) interest accrued on each Loan shall be
payable in arrears (A) on each Interest Payment Date
applicable to such Loan, (B) upon the prepayment in full of
the Loans and the termination of all Commitments under this
Agreement, (C) upon the date any principal of the Loan is
due, with respect to the principal amount then due and (D)
on the Termination Date.
(c) Conversion or Continuation. (i) Subject
to the provisions of Sections 2.08 and 2.09, the Borrower
shall have the option (A) to convert at any time all or any
part of outstanding Revolving Loans which comprise part of
the same Borrowing and which, in the aggregate, equal or
exceed $10,000,000 from Base Rate Loans to Eurodollar Rate
Loans; or (B) to convert all or any part of outstanding
Revolving Loans which comprise part of the same Borrowing
and which, in the aggregate, equal or exceed $1,000,000
from Eurodollar Rate Loans to Base Rate Loans on the
expiration date of any Interest Period applicable thereto
or upon the payment of compensation payable pursuant to
Section 2.09(d); or (C) upon the expiration of any Interest
Period applicable to a Borrowing of Eurodollar Rate Loans
that are Revolving Loans, to continue all or any portion of
such Loans equal to or in excess of $10,000,000 as
Eurodollar Rate Loans, and the succeeding Interest Period
of such continued Loans shall commence on the expiration
date of the Interest Period applicable thereto; provided
that no outstanding Loan may be continued as, or be con-
verted into, a Eurodollar Rate Loan if any Potential Event
of Default or Event of Default exists or if such a
continuation or conversion would otherwise be prohibited by
the terms of this Agreement.
(ii) In the event the Borrower shall elect to
convert or continue a Revolving Loan under this
Section 2.05(c), the Borrower shall deliver a Notice of
Conversion/Continuation to the Agent no later than 12:00
noon (New York City time) (A) at least one (1) Business Day
in advance of the proposed conversion date in the case of a
conversion to a Base Rate Loan and (B) at least three (3)
Business Days in advance of the proposed conversion or
continuation date in the case of a conversion to, or a
continuation of, a Eurodollar Rate Loan. A Notice of
Conversion/Continuation shall specify (1) the proposed
conversion or continuation date (which shall be a Business
Day), (2) the amount of the Revolving Loan to be converted
or continued, (3) the nature of the proposed conversion or
continuation, and (4) in the case of a conversion to, or a
continuation of, a Eurodollar Rate Loan, the requested
Interest Period to be applicable thereto. If no Interest
Period is specified in any such Notice of
Conversion/Continuation with respect to a Eurodollar Rate
Loan, the Borrower shall be deemed to have selected an
Interest Period of one month's duration. In lieu of deliv-
ering the above-described Notice of Conversion/
Continuation, the Borrower may give the Agent telephonic
notice of any proposed conversion or continuation by the
time required under this Section 2.05(c); provided that
such notice shall be confirmed in writing by delivery to
the Agent promptly (but in no event later than 12:00 noon
(New York City time) on the proposed conversion or
continuation date) of a Notice of Conversion/Continuation.
Promptly after receipt of a Notice of Conversion/
Continuation under this Section 2.05(c) (or telephonic
notice in lieu thereof), the Agent shall notify each Lender
by telex, telecopy or other similar form of transmission,
of the proposed conversion or continuation.
(iii) Any Notice of Conversion/Continuation
for conversion to, or continuation of, a Revolving Loan (or
telephonic notice in lieu thereof) shall be irrevocable and
the Borrower shall be bound to convert or continue such
Revolving Loan in accordance therewith.
(d) Default Interest. Notwithstanding the
rates of interest specified in Section 2.05(a) and the
payment dates specified in Section 2.05(b), from and after
the later of (i) occurrence of a payment default by the
Borrower in the payment of the principal of or interest on
any Loan or any other amount becoming due hereunder, by
acceleration or otherwise, and (ii) notice from the Agent
or Requisite Lenders to the Borrower of such default, until
the past-due amount is paid, such amount not paid when due
shall bear interest payable upon demand at a rate per annum
(the "Default Rate") equal to the sum of (A) two percent
(2.0%) and (B) the Alternate Base Rate in effect from time
to time; provided, that, with respect to any Eurodollar
Rate Loan, the Default Rate shall be equal to (x) the rate
otherwise applicable to such Eurodollar Rate Loan under
Section 2.05(a) plus (y) two percent (2%) per annum until
the end of the Interest Period applicable to such
Eurodollar Rate Loan.
(e) Computation of Interest. Interest on all
Obligations (other than those on which the interest rate is
determined by reference to the Prime Rate component of the
Alternate Base Rate) shall be computed on the basis of the
actual number of days elapsed in the period during which
interest accrues and a year of 360 days. Interest on all
Obligations with respect to which the interest rate is
determined by reference to the Prime Rate component of the
Alternate Base Rate shall be computed on the basis of the
actual number of days elapsed in the period during which
interest accrues and a year of 365 or 366 days, as
applicable. In computing interest on any Loan, the date of
the making of the Loan or the first day of an Interest
Period, as the case may be, shall be included and the date
of payment or the expiration date of an Interest Period, as
the case may be, shall be excluded; provided that if a Loan
is repaid on the same day on which it is made, one (1)
day's interest shall be paid on that Loan.
2.06. Fees.
(a) Facility Fee. The Borrower shall pay to
the Agent, for the account of the Lenders in accordance
with their respective Pro Rata Shares, except as set forth
in Section 8.05(b)(vi), a fee (the "Facility Fee"),
accruing at (i) .10% per annum when the Borrower's Rating
falls within (A) Level I by either S&P or Moody's and (B)
Level III or higher by the other rating agency, (ii) .125%
per annum when the Borrower's Rating falls within Level II
by both S&P and Moody's and (iii) .20% per annum when the
Borrower's Rating falls within (A) Level III by either S&P
or Moody's and (B) Level II or lower by the other rating
agency, on the average daily aggregate amount of the
Aggregate Commitments (regardless of Outstandings) for the
period commencing on the Effective Date and ending on the
Termination Date, such Facility Fee being payable
quarterly, in arrears, on the last calendar day of each
calendar quarter occurring after the Effective Date and on
the Termination Date. The applicable percentage used in
calculating the Facility Fee shall change on the effective
date of any change in the Level of the Borrower's Rating.
(b) Payment of Fees. The fees described in
this Section 2.06 represent compensation for services
rendered and to be rendered separate and apart from the
lending of money or the provision of credit and do not
constitute compensation for the use, detention or
forbearance of money, and the obligation of the Borrower to
pay each fee described herein shall be in addition to, and
not in lieu of, the obligation of the Borrower to pay
interest, other fees and expenses otherwise described in
this Agreement. Fees and expenses shall be payable when
due in immediately available funds. All fees and expenses
shall be nonrefundable when paid. All fees and expenses
specified or referred to in this Agreement due to the Agent
or any Lender, including, without limitation, amounts
referred to in this Section 2.06 and in Section 8.03, shall
constitute Obligations. All fees described in this
Section 2.06 which are expressed as a per annum charge
shall be calculated on the basis of the actual number of
days elapsed in a 360 day year.
2.07. Payments.
(a) Manner and Time of Payment. Except as
otherwise expressly set forth herein, all payments of
principal of and interest on the Loans and other
Obligations (including, without limitation, fees and
expenses) payable to the Agent or the Lenders (or any of
them) shall be made without setoff, counterclaim, defense,
condition or reservation of right, in Dollars and in
immediately available funds, delivered to the Agent not
later than 12:00 noon (New York City time) on the date and
at the place due, to such account of the Agent as it may
designate, for the account of the Agent or the Lenders, as
the case may be; and funds received by the Agent after that
time and date shall be deemed to have been paid and
received by the Agent on the next succeeding Business Day.
Payments actually received by the Agent for the account of
the Agent or the Lenders, or any of them, shall be paid to
them promptly after receipt thereof by the Agent. All
payments of principal, interest and fees, and all
reimbursements for expenses pursuant to this Agreement and
the other Loan Documents, may, at the option of the Agent
(but without any obligation to do so) and upon reasonable
notice to the Borrower, be paid from the proceeds of
Revolving Loans made to the Borrower hereunder.
(b) Apportionment of Payments and Prepayments.
(i) Subject to the provisions of Section 8.05(b), all
payments and prepayments of principal and interest in
respect of outstanding Revolving Loans and all payments of
fees and all other payments in respect of any other
Obligations (other than with respect to payments of
Competitive Bid Loans) shall be allocated among such of the
Lenders as are entitled thereto, in proportion to their
respective Pro Rata Shares or otherwise as provided herein.
All payments of principal of any Competitive Bid Borrowing
shall be allocated pro rata among the Lenders participating
in such Borrowing in accordance with the respective
principal amounts of their outstanding Competitive Bid
Loans comprising such Borrowing. All payments of interest
on any Competitive Bid Borrowing shall be allocated pro
rata among the Lenders participating in such Borrowing in
accordance with the respective amounts of accrued and
unpaid interest on their outstanding Competitive Bid Loans
comprising such Borrowing.
(ii) Subject to the provisions of Section
8.05(b), after the occurrence of an Event of Default and
while the same is continuing, the Agent shall, unless
otherwise specified at the direction of the Requisite
Lenders, which direction shall be consistent with the last
sentence of this clause (ii), apply all payments and
prepayments in respect of any Obligations:
(A) first, to pay interest on and then
principal of any portion of the Loans which the Agent
may have advanced on behalf of any Lender for which
the Agent has not then been reimbursed by such Lender
or the Borrower;
(B) second, to pay Obligations in respect of
any fees, expense reimbursements or indemnities then
due to the Agent;
(C) third, to pay Obligations in respect of
any fees, expenses, reimbursements or indemnities
then due to the Lenders;
(D) fourth, to the ratable payment of interest
due in respect of Revolving Loans and Competitive Bid
Loans;
(E) fifth, to the ratable payment or
prepayment of principal outstanding on Revolving
Loans and Competitive Bid Loans; and
(F) sixth, to the ratable payment of all other
Obligations.
The order of priority set forth in this Section 2.07(b)(ii)
and the related provisions of this Agreement are set forth
solely to determine the rights and priorities of the Agent
and the Lenders as among themselves. The order of priority
set forth in clauses (C) through (F) of this Section
2.07(b)(ii) may at any time and from time to time be
changed by the Requisite Lenders without necessity of
notice to or consent of or approval by the Borrower, or any
other Person. The order of priority set forth in clauses
(A) and (B) of this Section 2.07(b)(ii) may be changed only
with the prior written consent of the Agent.
(iii) Subject to Section 8.05(b), the Agent
shall promptly distribute to each Lender at its primary
address set forth on the appropriate signature page hereof
or the signature page to the Assignment and Acceptance by
which it became a Lender, or at such other address as a
Lender may request in writing, such funds as such Person
may be entitled to receive; provided that the Agent shall
under no circumstances be bound to inquire into or
determine the validity, scope or priority of any interest
or entitlement of any Lender and may suspend all payments
or seek appropriate relief (including, without limitation,
instructions from the Requisite Lenders or an action in the
nature of interpleader) in the event of any doubt or
dispute as to any apportionment or distribution
contemplated hereby.
(c) Payments on Non-Business Days. Whenever
any payment to be made by the Borrower hereunder 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, if any, shall be included in
the computation of the payment of interest hereunder and of
any of the fees specified in Section 2.06, as the case may
be, unless, in the case of a payment with respect to a
Eurodollar Rate Loan, such Business Day occurs in the
succeeding month in which case such payment shall be made
on the immediately preceding Business Day.
(d) Agent's Accounting. The Agent shall
maintain accounts, books and records (a "Loan Account") in
which it shall record (i) the names and addresses of the
Lenders and the respective Commitments of, and principal
amount of Loans owing to, each Lender from time to time;
(ii) other appropriate debits and credits as provided in
this Agreement, including, without limitation, all interest
and fees constituting Obligations; and (iii) all payments
of such Obligations made by the Borrower or for the
Borrower's account. Each Lender shall maintain in
accordance with its usual practices an account or accounts
evidencing the indebtedness of the Borrower to such Lender
resulting from each Loan owing to such Lender from time to
time, including the amount of principal and interest
payable and paid to such Lender from time to time
hereunder. Entries in the Agent's Loan Account made in
accordance with the Agent's customary accounting practices
as in effect from time to time shall constitute, as between
the Agent and any Lender, prima facie evidence of the
accuracy of such entries.
2.08. Interest Periods. By giving notice as
set forth in Section 2.02(a), 2.03(a) or 2.05(c) with
respect to a Borrowing of, conversion into or continuation
of Loans, the Borrower shall have the option, subject to
the other provisions of this Section 2.08 and Section 2.09,
to specify an Interest Period to apply to the Borrowing
described in such notice. The determination of Interest
Periods shall be subject to the following provisions:
(a) The Borrower may not select an Interest
Period which terminates later than the Termination Date;
and
(b) Without the prior written consent of the
Agent (such consent not to be unreasonably withheld), there
shall be no more than five (5) Interest Periods with
respect to Eurodollar Rate Loans under this Agreement in
effect at any one time.
2.09. Special Provisions Governing Eurodollar
Rate Loans. Notwithstanding other provisions of this
Agreement, the following provisions shall govern with
respect to Eurodollar Rate Loans as to the matters covered:
(a) Determination of Interest Rate. As soon
as practicable after 11:00 a.m. (New York City time) on the
Interest Rate Determination Date, the Agent shall determine
the interest rate which shall apply to the Eurodollar Rate
Loans for which an interest rate is then being determined
for the applicable Interest Period and shall promptly give
notice thereof (in writing or by telephone confirmed in
writing) to the Borrower and to each Lender in the case of
Revolving Loans or, with respect to Eurodollar Rate Loans
which are Competitive Bid Loans, the Lenders whose bids
with respect to such Loans were accepted.
(b)
Interest Rate Unascertainable, Inadequate or Unfair. With
respect to any Interest Period, if deposits in Dollars (in
the applicable amount) are not being offered to the
Reference Banks in the London interbank Eurodollar market
for such Interest Period, if the Agent in good faith shall
have determined that the rates at which such Dollar
deposits are being offered will not adequately and fairly
reflect the cost to any Lender of making or maintaining its
Eurodollar Rate Loan during such Interest Period or if
adequate and fair means do not exist for ascertaining the
applicable interest rate on the basis provided for in the
definition of LIBO Rate, then the Agent shall forthwith
give notice thereof to the Borrower and each Lender,
whereupon until the Agent has determined that the
circumstances giving rise to such suspension no longer
exist, (a) the right of the Borrower to elect to have Loans
bear interest based upon the LIBO Rate shall be suspended,
and (b) each outstanding Eurodollar Rate Loan that is a
Revolving Loan shall be converted into a Base Rate Loan on
the last day of the then current Interest Period therefor,
notwithstanding any prior election by the Borrower to the
contrary.
(c) Illegality. (i) In the event that on any
date any Lender shall have determined in good faith that
the making or continuation of any Eurodollar Rate Loan has
become unlawful by compliance by that Lender in good faith
with any law, governmental rule, regulation or order of any
Governmental Authority (whether or not having the force of
law), then, and in any such event, such Lender shall
promptly give notice (by teletransmission or by telephone
promptly confirmed in writing) to the Borrower and the
Agent of that determination and the reasons therefor. The
Agent shall promptly forward any such notice it receives to
the other Lenders.
(ii) Upon the giving of the notice referred to
in Section 2.09(c)(i), (A) the Borrower's right to request
of such Lender and such Lender's obligation to make
Eurodollar Rate Loans with respect to the requested
Borrowing shall be immediately suspended, and such Lender
shall make a Loan, with respect to such requested Borrowing
of Eurodollar Rate Loans as a Base Rate Loan, which Base
Rate Loan shall, for all purposes, be considered a part of
such Borrowing and (B) if such Eurodollar Rate Loans that
are Revolving Loans are then outstanding, the Borrower
shall immediately (or, if permitted by applicable law, no
later than the last day of any applicable grace period
which such law permits, upon at least one (1) Business
Day's written notice to the Agent and the Lenders) convert
each such Loan into a Base Rate Loan.
(iii) In the event that a Lender determines at
any time following its giving of a notice referred to in
Section 2.09(c)(i) that such Lender may lawfully make Euro-
dollar Rate Loans, such Lender shall promptly give notice
(by teletransmission or by telephone promptly confirmed in
writing) to the Borrower and the Agent of that
determination, whereupon the Borrower's right to request of
such Lender and such Lender's obligation to make Eurodollar
Rate Loans that are Revolving Loans shall be restored. The
Agent shall promptly forward any such notice it receives to
the Lenders.
(d) Compensation. In addition to such amounts
as are required to be paid by the Borrower pursuant to
Sections 2.05(a), 2.05(d), 2.06, 2.11 and each other
provision of this Agreement requiring payment by the
Borrower, the Borrower shall compensate each Lender, upon
demand, for all losses (including lost profits), expenses
and liabilities (including, without limitation, any loss or
expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by such
Lender to fund or maintain such Lender's Eurodollar Rate
Loans to the Borrower) which such Lender may sustain (i)
if, as a result of the failure to satisfy the conditions
precedent set forth in Sections 3.01 and 3.02, as
applicable, a Borrowing of, conversion into or continuation
of Eurodollar Rate Loans does not occur on a date specified
therefor in a Notice of Revolving Borrowing or a Notice of
Conversion/Continuation or in a Competitive Bid
Accept/Reject Letter or in a telephonic request for
borrowing or conversion or continuation for a successive
Interest Period does not commence after notice therefor is
given pursuant to Section 2.05(c)(ii), (ii) if any
principal payment of any Eurodollar Rate Loan (including,
without limitation, any prepayment pursuant to Sec-
tion 2.01(c) but excluding any prepayment of any Eurodollar
Rate Loan in connection with the replacement of any Lender
under clause (i) of Section 2.13) occurs for any reason on
a date which is not the last day of the applicable Interest
Period, (iii) as a consequence of an acceleration of the
Obligations pursuant to Section 6.02 or (iv) as a
consequence of any other failure by the Borrower to repay
Eurodollar Rate Loans when required by the terms of this
Agreement. If as a consequence of any required conversion
of a Eurodollar Rate Loan to a Base Rate Loan as a result
of any of the events indicated in Section 2.09(c), a Lender
sustains lost profits, the Borrower shall compensate such
Lender (such compensation being in lieu of any compensation
that might otherwise be payable pursuant to the first
sentence of this clause (d) as a result of any of the
events indicated in Section 2.09(c)), upon demand, in an
amount equal to the amount (if any) by which (x) the
additional interest which would have been payable on the
amount of the Eurodollar Rate Loan so converted had such
Eurodollar Rate Loan been repaid on last day of the
applicable Interest Period exceeds (y) the amount of
interest which in the reasonable opinion of such Lender
would have been payable to such Lender for its account on
the last day of such Interest Period in respect of a
deposit equal to the amount of such Eurodollar Rate Loan
with a prime bank in London for a period starting on the
Business Day following the date of such conversion and
ending on the last day of such Interest Period. Such
Lender shall deliver to the Borrower, as a condition of the
Borrower's obligation to compensate such Lender, a written
statement as to such losses, expenses and liabilities.
(e) Booking of Eurodollar Rate Loans. Any
Lender may make, carry or transfer Eurodollar Rate Loans
at, to, or for the account of, any of its branch offices or
agencies or the office of an Affiliate of that Lender;
provided that no Lender shall be entitled to receive any
greater amount under Section 2.10 or Section 2.11 as a
result of the transfer of any such Loan than such Lender
would be entitled to immediately prior thereto unless (i)
such transfer occurred at a time when circumstances giving
rise to the claim for such greater amount did not exist and
were not reasonably foreseeable by such Lender, or (ii)
such claim would have arisen even if such transfer had not
occurred.
2.10. Taxes. (a) Any and all payments by the
Borrower hereunder shall be made, in accordance with
Section 2.07, free and clear of and without deduction for
any and all present or future taxes, levies, imposts,
deductions, charges, or withholdings, and all liabilities
with respect thereto including those arising after the
Closing Date as a result of the adoption of or any change
in any law, treaty, rule, regulation, guideline or
determination of a Governmental Authority or any change in
the interpretation or application thereof by a Governmental
Authority but excluding, in the case of each Lender and the
Agent, such taxes (collectively, "Excluded
Taxes")(including income taxes, franchise taxes and branch
profit taxes) as are imposed on or measured by such
Lender's or Agent's, as the case may be, income by the
United States of America or any Governmental Authority of
the jurisdiction under the laws of which such Lender or
Agent, as the case may be, is organized, maintains an
Applicable Lending Office or is deemed to be engaged in
trade or business other than by reason of this Agreement or
the transaction contemplated hereby (all such non-excluded
taxes, levies, imposts, deductions, charges, withholdings,
and liabilities applicable to this Agreement, the other
Loan Documents, the Commitments or the Loans being
hereinafter referred to as "Taxes"). If the Borrower shall
be required by law to deduct any Taxes from or in respect
of any sum payable hereunder or under the other Loan
Documents to any Lender or the Agent, (i) the sum payable
shall be increased as may be necessary so that after making
all required deductions (including deductions applicable to
additional sums payable under this Section 2.10) such
Lender or Agent receives an amount equal to the sum it
would have received had no such deductions been made, (ii)
the Borrower shall make such deductions, and (iii) the
Borrower shall pay the full amount deducted to the relevant
taxation authority or other authority in accordance with
applicable law. If a withholding tax of the United States
of America or any other Governmental Authority shall be or
become applicable (y) after the date of this Agreement, to
such payments by the Borrower made to the Applicable
Lending Office or any other office that a Lender may claim
as its Applicable Lending Office, or (z) after such
Lender's selection and designation of any other Applicable
Lending Office, to such payments made to such other
Applicable Lending Office, such Lender shall use reasonable
efforts to make, fund and maintain its Loans through
another Applicable Lending Office of such Lender in another
jurisdiction so as to reduce the Borrower's liability
hereunder, if the making, funding or maintenance of such
Loans through such other Applicable Lending Office of such
Lender does not, in the judgment of such Lender, otherwise
materially adversely affect such Loans, such Lender's
obligations under its Commitment or such Lender.
(b) In addition, the Borrower agrees to pay
any present or future stamp or documentary taxes or any
other excise or property taxes, charges, or similar levies
which arise from any payment made hereunder or from the
execution, delivery or registration of, or otherwise with
respect to, this Agreement, the other Loan Documents, the
Commitments or the Loans (hereinafter referred to as "Other
Taxes").
(c) The Borrower will indemnify each Lender
and the Agent for the full amount of Taxes and Other Taxes
(including, without limitation, any Taxes or Other Taxes
imposed by any Governmental Authority on amounts payable
under this Section 2.10) paid by such Lender or the Agent
(as the case may be) and any liability (including
penalties, interest, and expenses) arising therefrom or
with respect thereto. This indemnification shall be made
within thirty (30) days after the date such Lender or the
Agent (as the case may be) makes written demand therefor.
A certificate as to any additional amount payable to any
Lender or the Agent under this Section 2.10 submitted to
the Borrower and the Agent (if a Lender is so submitting)
by such Lender or the Agent shall show in reasonable detail
the amount payable and the calculations used to determine
such amount. With respect to such deduction or withholding
for or on account of any Taxes and to confirm that all such
Taxes have been paid to the appropriate Governmental
Authorities, the Borrower shall promptly (and in any event
not later than thirty (30) days after receipt) furnish to
each Lender and the Agent such certificates, receipts and
other documents as may be required (in the judgment of such
Lender or the Agent) to establish any tax credit to which
such Lender or the Agent may be entitled.
(d) Within thirty (30) days after the date of
any payment of Taxes or Other Taxes by the Borrower, the
Borrower will furnish to the Agent, at its address referred
to in Section 8.07, the original or a certified copy of a
receipt evidencing payment thereof.
(e) Without prejudice to the survival of any
other agreement of the Borrower hereunder, the agreements
and obligations of the Borrower contained in this
Section 2.10 shall survive the payment in full of principal
and interest hereunder and the termination of this Agree-
ment.
(f) Without limiting the obligations of the
Borrower under this Section 2.10, each Lender that is not
created or organized under the laws of the United States of
America or a political subdivision thereof shall deliver to
the Borrower and the Agent on or before the Closing Date,
or, if later, the date on which such Lender becomes a
Lender pursuant to Section 8.02 hereof, a true and accurate
certificate executed in duplicate by a duly authorized
officer of such Lender, in a form satisfactory to the
Borrower and the Agent, to the effect that such Lender is
capable under the provisions of an applicable tax treaty
concluded by the United States of America (in which case
the certificate shall be accompanied by two executed copies
of Form 1001 of the IRS) or under Section 1442 of the IRC
(in which case the certificate shall be accompanied by two
copies of Form 4224 of the IRS) of receiving payments of
interest hereunder without deduction or withholding of
United States federal income tax. Each such Lender further
agrees to deliver to the Borrower and the Agent from time
to time a true and accurate certificate executed in dup-
licate by a duly authorized officer of such Lender
substantially in a form satisfactory to the Borrower and
the Agent, before or promptly upon the occurrence of any
event requiring a change in the most recent certificate
previously delivered by it to the Borrower and the Agent
pursuant to this Section 2.10(f). Further, each Lender
which delivers a certificate accompanied by Form 1001 of
the IRS covenants and agrees to deliver to the Borrower and
the Agent within fifteen (15) days prior to January 1,
1995, and every third (3rd) anniversary of such date there-
after, on which this Agreement is still in effect, another
such certificate and two accurate and complete original
signed copies of Form 1001 (or any successor form or forms
required under the IRC or the applicable regulations
promulgated thereunder), and each Lender that delivers a
certificate accompanied by Form 4224 of the IRS covenants
and agrees to deliver to the Borrower and the Agent within
fifteen (15) days prior to the beginning of each subsequent
taxable year of such Lender during which this Agreement is
still in effect, another such certificate and two accurate
and complete original signed copies of IRS Form 4224 (or
any successor form or forms required under the IRC or the
applicable regulations promulgated thereunder). Each such
certificate shall certify as to one of the following:
(i) that such Lender is capable of receiving
payments of interest hereunder without deduction or
withholding of United States of America federal income tax;
(ii) that such Lender is not capable of receiving
payments of interest hereunder without deduction or
withholding of United States of America federal income tax
as specified therein but is capable of recovering the full
amount of any such deduction or withholding from a source
other than the Borrower and will not seek any such recovery
from the Borrower; or
(iii) that, as a result of the adoption of or any
change in any law, treaty, rule, regulation, guideline or
determination of a Governmental Authority or any change in
the interpretation or application thereof by a Governmental
Authority after the date such Lender became a party hereto,
such Lender is not capable of receiving payments of
interest hereunder without deduction or withholding of
United States of America federal income tax as specified
therein and that it is not capable of recovering the full
amount of the same from a source other than the Borrower.
Each Lender shall promptly furnish to the
Borrower and the Agent such additional documents as may be
reasonably required by the Borrower or the Agent to
establish any exemption from or reduction of any Taxes or
Other Taxes required to be deducted or withheld and which
may be obtained without undue expense to such Lender.
2.11. Increased Costs. If solely as a result
of (a) the introduction of or any change in any law, order
or regulation or in the interpretation or administration of
any law, order or regulation by any Governmental Authority
charged with the interpretation or administration thereof
after the Closing Date or (b) compliance with any guideline
or request issued or made after the Closing Date from any
central bank or other Governmental Authority (whether or
not having the force of law and including, without
limitation, imposition or application of Statutory Reserves
or any other reserve, special deposit, compulsory loan,
FDIC insurance, capital allocation or similar requirement):
(i) any Lender incurs a cost or increase in cost as a
result of its having entered into or performing its
obligations under this Agreement, including its making,
funding or maintaining all or any part of its Commitment or
any Loans, (ii) any Lender becomes liable to make any
payment (other than Excluded Taxes) on or calculated by
reference to the amount of Loans made or to be made by it
hereunder and/or any sum received or receivable by it
hereunder, or (iii) there is a reduction in the amount of
any sum received or receivable by any Lender hereunder,
then the Borrower shall from time to time upon demand by
such Lender pay to such Lender amounts sufficient to
indemnify such Lender against, as the case may be, (A) such
cost or increased cost (or such proportion of such cost or
increased cost which is in fact attributable to its making,
funding or maintaining its Commitment or any Loans), (B)
such liability or (C) such reduction. Such amounts may be
determined by using any reasonable averaging and
attribution methods. Each Lender shall notify the Borrower
(with a copy of such notice to the Agent) as soon as
possible after the incurrence of the cost, increased cost
or liability for which a claim is being made pursuant to
this Section 2.11, which notice shall specify the event by
reason of which it is entitled to make such claim and
setting out in reasonable detail the basis and computation
of such claim. On receipt of such notice, the Borrower
shall indemnify such Lender, in accordance with this
Section 2.11 from and as of the date such cost, increased
cost or liability is incurred or any payment made
(including, without limitation, where such cost, increased
cost or liability is retroactively applied).
Notwithstanding the foregoing, no Lender shall be entitled
to compensation under this Section 2.11 with respect to any
Competitive Bid Loan if it shall have been aware of the
change giving rise to such request and of the impact of
such change on the cost of making such Competitive Bid
Loans at the time of submission of the Competitive Bid
pursuant to which such Competitive Bid Loan shall have been
made.
2.12. Authorized Officers of Borrower. The
Borrower shall notify the Agent in writing of the names of
the officers and employees authorized to request Loans and
to request a conversion or continuation of any Loan and
shall provide the Agent with a specimen signature of each
such officer or employee. The Agent shall be entitled to
rely conclusively on such officer's or employee's authority
to request such Loan or such conversion or continuation
until the Agent receives written notice to the contrary.
The Agent shall have no duty to verify the authenticity of
the signature appearing on any written Notice of Revolving
Borrowing, Notice of Competitive Bid Borrowing, Notice of
Conversion/Continuation or Competitive Bid Accept/Reject
Letter and, with respect to an oral request for such a Loan
or such conversion or continuation, the Agent shall have no
duty to verify the identity of any person representing
himself as one of the officers or employees authorized to
make such request on behalf of the Borrower. Neither the
Agent nor any Lender shall incur any liability to the
Borrower in acting upon any telephonic notice referred to
above which the Agent believes to have been given by a duly
authorized officer or other person authorized to borrow or
give other notices hereunder on behalf of the Borrower.
2.13. Replacement of Certain Lenders. In the
event a Lender ("Affected Lender") shall have: (i) failed
to fund its Pro Rata Share of any Borrowing of Revolving
Loans requested by the Borrower which such Lender is
obligated to fund under the terms of this Agreement and
such failure has not been cured, (ii) requested
compensation from the Borrower under Section 2.10 or 2.11
to recover additional costs incurred by such Lender which
are not being incurred generally by the other Lenders, or
(iii) delivered a notice pursuant to Section 2.09(c)(i)
claiming that such Lender is unable to extend Eurodollar
Rate Loans to the Borrower for reasons not generally
applicable to the other Lenders, then, in any such case,
the Borrower or the Agent may make written demand on such
Affected Lender (with a copy to the Agent in the case of a
demand by the Borrower and a copy to the Borrower in the
case of a demand by the Agent) for the Affected Lender to
assign, and such Affected Lender shall assign pursuant to
one or more duly executed Assignment and Acceptances five
(5) Business Days after the date of such demand, to one or
more financial institutions which comply with the
provisions of Section 8.02 which the Borrower or the Agent,
as the case may be, shall have engaged for such purpose
("Replacement Lender"), all of such Affected Lender's
rights and obligations under this Agreement and the other
Loan Documents (including, without limitation, its
Commitment and all Loans owing to it) in accordance with
Section 8.02. Further, with respect to such assignment,
the Affected Lender shall have concurrently received, in
cash, all amounts due and owing to the Affected Lender
hereunder or under any other Loan Document, including,
without limitation, the aggregate outstanding principal
amount of the Loans owed to such Lender, together with
accrued interest thereon through the date of such
assignment and fees accrued for its account hereunder
through the date of such assignment and not yet paid,
amounts payable under Sections 2.10 and 2.11, and
compensation payable under Section 2.09(d) in the event of
any replacement of any Affected Lender under clause (ii) or
clause (iii) of this Section 2.13; provided, upon such
Affected Lender's replacement, such Affected Lender shall
cease to be a party hereto but shall continue to be
entitled to the benefits of Sections 2.09, 2.10, 2.11, 8.03
and 8.04.
Upon the replacement of any Affected Lender pursuant to
this Section 2.13, the provisions of Section 8.05(b) shall
continue to apply with respect to Borrowings which are then
outstanding with respect to which the Affected Lender
failed to fund its Pro Rata Share and which failure has not
been cured.
ARTICLE III
CONDITIONS TO LOANS
3.01. Conditions Precedent to Effectiveness.
The effectiveness of this Agreement shall be subject to the
satisfaction of all of the following conditions precedent:
(a) Documents. The Agent and the Lenders
shall have received each of the following documents: this
Agreement, the Notes, the Borrower's Certificate of the
Secretary or Assistant Secretary of the Borrower and an
opinion of counsel to the Borrower, each duly executed
where appropriate and in form and substance satisfactory to
the Agent and the Lenders, and such additional
documentation as the Agent or any Lender may reasonably
request.
(b) No Default. No Event of Default or
Potential Event of Default shall have occurred and be
continuing or would result from the making of the Loans.
(c) Representations and Warranties. All of
the representations and warranties contained in Section
4.01 shall be true and correct in all material respects.
(d) Fees and Expenses Paid. There shall have
been paid to the Agent, for the accounts of the Agent and
the Lenders under the Original Credit Agreement, as
applicable, all accrued fees payable under the Original
Credit Agreement.
(e) Joy Acquisition. The merger of
Harnischfeger Acquisition Corporation and Joy shall have
been effected and Joy shall have become a wholly-owned
Subsidiary of the Borrower as described in the Prospectus
and Joint Proxy Statement dated October 28, 1994 furnished
to the stockholders of the Borrower and Joy in connection
with the merger.
(f) Deadline for Effectiveness. The
conditions precedent described in clauses (a) through (e)
of this Section 3.01 shall have been satisfied on or before
December 31, 1994.
3.02. Conditions Precedent to all Loans. The
obligation of each Lender to make any Loan requested to be
made by it or to convert/continue any Revolving Loan
requested to be converted/continued on any date, is subject
to the satisfaction of the following conditions precedent
as of such date:
(a) Notice of Borrowing. The Agent shall have
received in accordance with the provisions of
Section 2.02(a), with respect to any Revolving Loan, an
original and duly executed Notice of Revolving Borrowing
or, in accordance with the provisions of Section 2.03(a)
with respect to any Competitive Bid Loan, a Notice of
Competitive Bid Borrowing or, in accordance with the
provisions of Section 2.05, with respect to a
conversion/continuation of any Revolving Loan, an original
and duly executed Notice of Conversion/Continuation.
(b) Additional Matters. As of the Funding
Date for any Loan or as of the proposed date for
continuation/conversion, as applicable:
(i) Representations and Warranties. All
of the representations and warranties of the
Borrower contained in or repeated pursuant to
Section 4.01 (other than representations and
warranties which expressly speak only as of a
different date) shall be true and complete in
all material respects on and as of such Funding
Date as though made on and as of such date both
before and after taking into account the
requested Loans to be made.
(ii) No Default. No Event of Default or Potential
Event of Default shall have occurred and be continuing or
would result from the making of the requested Loan.
(iii) No Injunction. No law or regulation shall
have been adopted, no order, judgment or decree of any
Governmental Authority shall have been issued, and no
litigation shall be pending or threatened (other than as a
result of any condition described in Section 2.09(d), 2.10
or 2.11), which in the reasonable judgment of the Requisite
Lenders, would enjoin, prohibit or restrain any Lender from
making the requested Loan.
(iv) Commercial Paper. The Revolving Credit
Availability shall not be less than the aggregate
face amount of the Borrower's interest bearing or
discounted short term unsecured debt obligations
having maturities of no more than 270 days
("Commercial Paper") then outstanding.
The request by the Borrower for any Loan made,
or to be made, on any Funding Date or delivery of any
Notice of Conversion/Continuation shall constitute a
representation and warranty by the Borrower as of such
Funding Date or as of such conversion/continuation date, as
applicable that all the conditions contained in this
Section 3.02 have been satisfied or waived in writing
pursuant to Section 8.06.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.01. Representations and Warranties. The
Borrower hereby represents and warrants to each Lender and
the Agent that the following statements are true and
correct (except that the representations and warranties
need not be true and correct to the extent that changes in
the facts and conditions on which such representations and
warranties are based are required or permitted under this
Agreement):
(a) Corporate Organization. The Borrower and
its Subsidiaries are duly organized, validly existing and
in good standing under the laws of the jurisdiction of
their incorporation, have the corporate power to own their
assets and to conduct their business as now being conducted
and are duly qualified, authorized and licensed to do
business and are in good standing under the laws of each
jurisdiction where their ownership or leasing of property
or the conduct of their business requires such
qualification, except for failures to be so qualified,
authorized or licensed that would not in the aggregate have
a material and adverse effect on the ability of the
Borrower and its Subsidiaries taken as a whole to do
business.
(b) Corporate Powers and Authority. The
Borrower has the corporate power, authority and legal right
to execute, deliver and perform (including, without
limitation, to borrow Loans pursuant to the terms of) this
Agreement and the other Loan Documents and each instrument
or obligation required of it hereunder or thereunder, and
has taken all necessary corporate action to authorize its
borrowing of Loans hereunder on the terms and subject to
the conditions hereof and its execution, delivery and
performance of this Agreement, the other Loan Documents and
each instrument or obligation required of it hereunder or
thereunder.
(c) Governmental Consents. No consent of any
other Person including, without limitation, stockholders
and creditors of the Borrower, and no license, permit,
approval or authorization of, exemption by, notice or
report to, or registration, filing or declaration with, any
Governmental Authority is required by the Borrower in
connection with the Loans hereunder or the execution,
delivery, performance, validity or enforceability of this
Agreement, the other Loan Documents and each instrument or
obligation required of it hereunder or thereunder, or if
required, has been received or made, as applicable.
(d) Enforceability. This Agreement has been,
and each instrument or document required by it hereunder
will be, executed and delivered in accordance with this
Agreement by a duly authorized officer of the Borrower, and
this Agreement constitutes, and each instrument or document
required of it hereunder when executed and delivered will
constitute the legal, valid and binding obligation of the
Borrower enforceable against the Borrower in accordance
with its terms (except to the extent limited by bankruptcy,
reorganization, insolvency, moratorium and other similar
laws of general application relating to or affecting the
enforcement of creditors' rights or by general equitable
principles).
(e) No Conflict. The execution and delivery by
the Borrower of this Agreement and the Notes and the
performance by the Borrower of its obligations under the
Loan Documents do not contravene the Borrower's Certificate
of Incorporation or By-laws or any indenture, agreement or
instrument to which the Borrower is a party or by which any
of its material assets or properties may be bound or
affected or any law, rule, statute, regulation, judgment,
decree or order of any court or Governmental Authority.
(f) Financial Position. The Borrower has
heretofore delivered to the Agent and the Lenders, its
audited consolidated balance sheet as of October 31, 1993
and its audited consolidated statements of income and cash
flows for the fiscal year ended October 31, 1993 and its
Form 10-Q Quarterly Report filed with the SEC for the
period ended July 31, 1994; such financial statements are
complete and correct and fairly present the position and
results of operations as of the dates and for the
respective periods covered; there are no additional
material liabilities, contingent or otherwise, of a type
normally shown on such financial statements or the
footnotes thereto; and since the date of the most recent
financial statements, there has been no change in the
Borrower's consolidated financial condition or results of
operations which could reasonably be expected to materially
impair the Borrower's ability to perform its obligations
hereunder.
(g) Assets and Properties. The properties and
assets of the Borrower and its Subsidiaries, real, personal
and mixed, are not subject to any Liens, except for Liens
permitted by this Agreement.
(h) Litigation. Except as set forth in the
Schedule 4.01(h), there are, to the knowledge of the
Borrower, no proceedings pending or threatened against or
affecting the Borrower or any of its Consolidated
Subsidiaries in any court or before any Governmental
Authority or arbitration board or tribunal the
determination of which, individually or in the aggregate,
is in the reasonable judgment of the Borrower likely to
materially and adversely affect the properties, business or
financial condition of the Borrower and its Consolidated
Subsidiaries considered as one enterprise.
(i) No Default. No event has occurred and is
continuing, or would result from the incurring of
obligations by the Borrower under this Agreement, which
constitutes or would constitute an Event of Default or
Potential Event of Default.
(j) Governmental Regulation. Neither the
Borrower nor any of its Consolidated Subsidiaries is an
"investment company" within the meaning of the Investment
Company Act of 1940 and, after giving effect to the use of
the proceeds of the Loans, margin stock (as defined in
Regulation U) constitutes less than 25% of the assets of
the Borrower and its Consolidated Subsidiaries on a
consolidated basis.
(k) Payment of Taxes. The Borrower and each
Subsidiary have filed all tax returns which to the
knowledge of the Borrower were required to be filed and
have paid all taxes shown thereon to be due, including
interest and penalties, or provided reserves reasonably
believed by the Borrower to be adequate for payment
thereof.
(l) Use of Proceeds. No part of the proceeds
of any Loan will be used in a manner which would violate,
or result in a violation of, Regulation G, T, U or X; the
Borrower is not engaged in the business of extending credit
for the purpose of purchasing or carrying margin stock
(within the meaning of Regulation U).
(m) Pari Passu Treatment. Under applicable laws
in force on the Effective Date, the claims and rights of
the Lenders against the Borrower under the Loan Documents
will not be subordinate to, and will rank at least pari
passu with, the claims and rights of each other unsecured
unsubordinated creditor of the Borrower.
(n) ERISA. No Plan had a material accumulated
funding deficiency (as such term is defined in Section 302
of ERISA) as of the last day of the most recent fiscal year
of such Plan ended prior to the Closing Date, for which the
actuarial analysis has been received, or would have had
such an accumulated funding deficiency on such day if such
year were the first year of such Plan to which Part 3 of
Subtitle B of Title 1 of ERISA applied, and no material
liability to the Pension Benefit Guaranty Corporation has
been incurred with respect to any such Plan by the Borrower
or any of its Subsidiaries. No employee pension benefit
plan (within the meaning of Section 3(2) of ERISA) to which
the Borrower or any Subsidiary contributes is a multi-
employer plan (within the meaning of Section 3(37) of
ERISA). Each Plan is and has been in all material respects
operated and administered in accordance with its provisions
and applicable law. No liability under ERISA or otherwise
exists with respect to any Plan which liability
individually or in the aggregate would have a material
adverse effect on the business, operations or financial
condition of the Borrower and its Subsidiaries (taken as a
whole). The execution, delivery and performance by the
Borrower of this Agreement will not involve any prohibited
transaction within the meaning of ERISA or Section 4975 of
the IRC. The aggregate present value of all accrued
benefits vested under all Plans (based on assumptions used
to fund such Plans) did not, as of the last annual
valuation date, which in the case of any one Plan was not
earlier than November 1, 1988, exceed the value of the
assets of such Plans allocable to such vested benefits by
more than 10% of Consolidated Total Tangible Assets.
(o) Performance. None of the Borrower or any
of its Subsidiaries is in default in the performance,
observance or fulfillment of any of the obligations,
covenants or conditions contained in any contractual
obligation applicable to it under any agreement or
instrument, and no condition exists which, with the giving
of notice or the lapse of time, or both, would constitute a
default under such agreement or instrument which default or
condition would have a material adverse effect (i) upon the
business, assets or other properties, liabilities or
condition (financial or otherwise), results of operations
or prospects of the Borrower and its Consolidated
Subsidiaries taken as a whole or (ii) upon the ability of
the Borrower to perform any of its Obligations under any
Loan Document in any material respect, including, without
limitation, payment of the Obligations.
(p) Funded Debt Documents. The Borrower has
delivered to the Agent a complete copy of each agreement or
indenture pursuant to which the Borrower or any Subsidiary
has incurred or may incur Funded Debt in excess of
$10,000,000 (including, without limitation, the Note
Agreements, the Joy Indenture and the Indentures executed
in connection with the Borrower's issuance of 8.90%
debentures due 3/1/2022 and 8.70% debentures due
6/15/2022), in each case together with any amendments
thereto.
ARTICLE V
COVENANTS
5.01. Affirmative Covenants of the Borrower.
The Borrower covenants and agrees that so long as the
Borrower shall have any outstanding Obligations or any
Lender shall have any Commitment hereunder:
(a) Payment of Taxes. The Borrower shall, and
shall cause its Subsidiaries to, pay all taxes, assessments
and governmental charges or levies when due, except such as
may be contested in good faith by appropriate proceedings
diligently pursued and, if and to the extent required by
GAAP, with respect to which the Borrower has set aside on
its books adequate reserves.
(b) Maintenance of Insurance. The Borrower
shall, and shall cause each Subsidiary to, maintain
insurance coverage by financially sound and reputable
insurers in such forms and amounts and against such risks
as are customary for corporations of established reputation
engaged in the same or similar businesses and owning and
operating similar properties.
(c) Notice of Defaults; ERISA Events. The
Borrower shall give prompt written notice to the Agent and
the Lenders (a) upon obtaining actual knowledge of the
occurrence or existence of any Event of Default or any
Potential Event of Default specifying the nature and the
period of existence thereof and what action the Borrower
has taken or proposes to take with respect thereto, or (b)
of any receipt of written notice of a default or event of
default under any agreement described in Section 6.01(h)
which would permit the holder or obligee of the
Indebtedness thereunder to accelerate such Indebtedness,
(c) any reportable event under Section 4043(b)(5), (6) or
(7) of ERISA with respect to any Plan, any decision to
terminate or withdraw from any Plan, any finding made with
respect to a Plan under Section 4041(c) or (e) of ERISA,
the commencement of any proceeding with respect to a Plan
under Section 4042 of ERISA, or any material increase in
the actuarial present value of unfunded vested benefits
under all Plans over the preceding year or (d) of any
demand for payment by the Borrower or any Subsidiary under
any Performance Undertaking in the aggregate amount of
$5,000,000 or more.
(d) Inspection of Property; Books and Records.
The Borrower shall, and shall cause its Consolidated
Subsidiaries to, at all times keep and maintain, full and
accurate accounts and records of its operations according
to GAAP and will permit the Agent and the Lenders, and
their respective designated officers, employees, agents and
representatives, to have access thereto and to make
examination thereof at all reasonable times.
(e) Reporting; Financial Statements. The
Borrower shall furnish to the Agent and each Lender:
(i) Quarterly Reports. As soon as available but
no later than sixty (60) days after the close of each
of the first three (3) quarters of each fiscal year,
the Borrower's consolidated balance sheet and
consolidated statement of cash flows as of the close
of such quarter and consolidated statement of income
and consolidated statement of shareholder's equity
for such quarter and that portion of the fiscal year
ending with such quarter, certified by the chief
financial officer of the Borrower as being complete
and correct and fairly presenting the financial
condition and results of operations of the Borrower
and its Consolidated Subsidiaries, accompanied by (A)
a certificate from a Responsible Financial Officer
(1) stating that as of the end of such quarter, no
Event of Default or Potential Event of Default
existed, or a statement of such Event of Default or
Potential Event of Default if any exists and what
action the Borrower has taken or proposes to take
with respect thereto, (2) stating that the Borrower
and its Consolidated Subsidiaries are in compliance
with the covenants contained in Sections 5.02(a) and
(b), together with the calculations showing how
compliance was determined with respect to such
Sections, or (3) if the Borrower and its Consolidated
Subsidiaries are not in compliance therewith, stating
each incidence of non-compliance and the amount
thereof and explaining the reason therefor together
with the calculations showing how such non-compliance
was determined and (B) a certificate from a
Responsible Financial Officer stating that the
schedule attached to such certificate sets forth the
amount of the maximum possible exposure of the
Borrower or any Subsidiary under, and a brief summary
of, each Performance Undertaking for which the
maximum possible exposure thereunder exceeds
$25,000,000 as at the end of such quarter.
(ii) Annual Reports. As soon as available but
no later than one hundred five (105) days after the
close of each of its fiscal years, a complete copy of
a report of the Borrower, which shall include the
Borrower's consolidated balance sheet and
consolidated statement of cash flows as of the close
of such year and consolidated statement of income and
consolidated statement of shareholder's equity for
such year, certified in accordance with GAAP by an
independent public accountant of national reputation
selected by the Borrower. Such report shall be
accompanied by (A) a certificate from a Responsible
Financial Officer (1) stating (x) that as of the end
of such fiscal year, no Event of Default or Potential
Event of Default exists or (y) if any Event of
Default or Potential Event of Default exists what
action the Borrower has taken or proposes to take
with respect thereto and (2) stating (x) that the
Borrower and its Consolidated Subsidiaries are in
compliance with the covenants contained in Sections
5.02(a) and (b), together with the calculations
showing how compliance was determined with respect to
such Sections, or (y) if the Borrower and its
Consolidated Subsidiaries are not in compliance
therewith, stating such incidence of non-compliance
and the amount thereof and explaining the reason
therefor together with the calculations showing how
such non-compliance was determined and (B) a
certificate from a Responsible Financial Officer
stating that the schedule attached to such
certificate sets forth the amount of the maximum
possible exposure of the Borrower or any Subsidiary
under, and a brief summary of, each Performance
Undertaking for which the maximum possible exposure
thereunder exceeds $25,000,000 as at the end of such
fiscal year.
(iii) Publicly Distributed Information.
Promptly after being filed with the SEC, a copy of
each Disclosure Document, Annual Report to
Shareholders, Proxy Statement and Registration
Statement and any other registration statements and
reports which it is required to file, or shall have
filed, with the SEC or with any other national or
international securities exchange.
(iv) Funded Debt Report. Not later than sixty
(60) days after the end of each fiscal quarter of the
Borrower, a statement describing the Funded Debt of
the Borrower and its Consolidated Subsidiaries in
excess of $5,000,000 incurred or created subsequent
to the Closing Date that has not been previously
disclosed to the Agent and the Lenders pursuant to
this Section.
(v) Other Information. Such other statements or
reports as the Agent may reasonably request in form
and detail satisfactory to the Agent and Requisite
Lenders.
(f) Disclosure Document Amendments. If on or
after the date of a Notice of Revolving Borrowing or Notice
of Competitive Bid Borrowing and until the Funding Date
with respect thereto, the Disclosure Documents as then
amended or supplemented would include an untrue statement
of a material fact or omit to state a material fact
necessary to make the statements therein, in the light of
the circumstances under which they were made, not
misleading, and if the Borrower is required to file any
amendment or supplement to the Disclosure Documents with
the SEC, then the Borrower shall: (a) prepare any such
amendment or supplement to the Disclosure Documents that is
required by the SEC; and (b) furnish copies of such
amendment or supplement to the Agent for distribution to
the Lenders, in such quantities as they may from time to
time reasonably request.
(g) Corporate Existence; Maintenance of
Property. Except as otherwise permitted hereunder, the
Borrower and each Restricted Subsidiary shall maintain and
preserve their corporate existence and all material rights,
permits, privileges and franchises now enjoyed and
necessary for the operation of their business and keep all
their properties in good working order and condition,
normal wear and tear excepted, except properties the
Borrower determines to be surplus, obsolete or otherwise
not useful in the conduct of their businesses.
(h) Compliance with Laws. The Borrower shall,
and shall cause each Subsidiary to, comply with the
requirements of all laws, rules, regulations, and orders of
any Governmental Authority (including all Environmental
Legal Requirements) the violation of which would materially
and adversely affect the properties, business or financial
condition of the Borrower and its Subsidiaries considered
as one enterprise or would result in any Lien or charge
upon any property of the Borrower or any Subsidiary, which
Lien or charge would materially and adversely affect the
properties, business or financial condition of the Borrower
and its Subsidiaries considered as one enterprise, except
where contested in good faith by appropriate proceedings
diligently pursued.
(i) ERISA. The Borrower shall, and shall cause
each Subsidiary to, make promptly payment of contributions
required to meet the minimum funding standards set forth in
ERISA, except to the extent waived or deferred by the
Pension Benefit Guaranty Corporation.
(j) Pari Passu Treatment. The Borrower shall
ensure that the claims and rights of the Lenders and the
other parties to the Loan Documents against the Borrower
under the Loan Documents will not be at any time
subordinate to, and will rank at all times at least pari
passu with, the claims and rights of each other unsecured
creditor of the Borrower.
(k) Funded Debt Documents. The Borrower
shall promptly furnish to the Agent and the Lenders a
complete copy of (i) each agreement or indenture entered
into after the Closing Date pursuant to which the Borrower
or any Subsidiary has incurred or may incur Funded Debt in
excess of $10,000,000 and (ii) any amendment entered into
after the Closing Date with respect to any agreement or
indenture pursuant to which the Borrower or any Subsidiary
has incurred or may incur Funded Debt in excess of
$10,000,000.
5.02. Financial and Negative Covenants. The
Borrower covenants and agrees that so long as the Borrower
shall have any outstanding Obligations or any Lender shall
have any Commitment hereunder:
(a) Funded Debt. (i) The Borrower shall not,
and shall not permit any Consolidated Subsidiary to,
create, issue, assume, guarantee or otherwise incur or in
any manner become liable or responsible in respect of any
Funded Debt, except:
(A) Funded Debt of the Borrower and its
Consolidated Subsidiaries described on
Schedule 5.02(a)(i)(A) and renewals,
extensions and refundings thereof
(without increase in principal amount
outstanding at the time of any such
renewal, extension or refunding);
(B) additional Funded Debt of the Borrower
and its Consolidated Subsidiaries
(including Funded Debt permitted under
Section 5.02(e)); provided, however, that
at the time of issuance thereof and after
giving effect thereto and to the
application of the proceeds thereof,
Consolidated Funded Debt (exclusive of
Funded Debt permitted under Section
5.02(a)(i)(E)) would not exceed 50% of
Consolidated Total Tangible Assets;
(C) Funded Debt of a Consolidated Subsidiary
owing to the Borrower or to a
Consolidated Subsidiary;
(D) Funded Debt of the Borrower owing to a
Consolidated Subsidiary; and
(E) Funded Debt of the Borrower incurred with
respect to guarantees of HEI Systems,
Inc. performance bonds pursuant to the
Purchase and Sale Agreement dated as of
October 29, 1993, provided that the
maximum levels of such guarantees that
are to be provided by the Borrower
pursuant to the Purchase and Sale
Agreement shall not exceed (1)
$90,000,000 during the period from
November 1, 1994 through and including
October 31, 1996, (2) $70,000,000 during
the period from November 1, 1996 through
and including October 31, 1997, (3)
$50,000,000 during the period from
November 1, 1997 through and including
October 31, 1998 and (4) $30,000,000
during the period from November 1, 1998
through and including October 31, 1999;
(ii) any Person which becomes a Consolidated
Subsidiary after the date of this Agreement shall for
all purposes of this Section 5.02(a) be deemed to
have created, assumed or incurred at the time it
becomes a Consolidated Subsidiary all Funded Debt of
such Person existing immediately after it becomes a
Consolidated Subsidiary; and
(iii) the renewal, extension or refunding of
any Funded Debt issued, incurred or outstanding
pursuant to Section 5.02(a)(i)(B) shall constitute
the issuance of additional Funded Debt, which is, in
turn, subject to the limitations of Section
5.02(a)(i)(B).
(b) Net Worth. The Borrower shall at all times
maintain Consolidated Net Worth of no less than
$516,236,000, which amount shall be increased as of the
date the annual consolidated financial statements are
furnished to the Agent pursuant to Section 5.01(e)(ii) for
fiscal year 1994 and each fiscal year thereafter by 25% of
the amount equal to Consolidated Net Income adjusted to
reflect expenses and other proper charges attributable to
Minority Interests as reflected on such financial
statements; provided, however, that in the event the
Consolidated Net Income as adjusted to reflect expenses and
other proper charges attributable to Minority Interests on
the balance sheet of the Borrower results in a Consolidated
Net Loss for any fiscal year, there shall be no increase
(nor any decrease) for such fiscal year in the above
referenced minimum amount of Consolidated Net Worth
required to be maintained.
(c) Restriction on Fundamental Changes. The
Borrower shall not, and shall not permit any of its
Restricted Subsidiaries to, liquidate or dissolve, or enter
into any consolidation, merger, partnership, joint venture
or other combination (other than in the ordinary course of
business) or dispose of (in one transaction or in a series
of transactions) its or their business or assets as a whole
or such portion thereof as in the good faith determination
of the Requisite Lenders constitutes a substantial portion
of the assets or business of the Borrower and its
Subsidiaries taken as a whole, whether pursuant to an asset
sale, sale of voting stock of a Subsidiary or otherwise;
provided, however, that (i) any Restricted Subsidiary may
merge into, consolidate with or transfer its business or
assets to the Borrower or to any other Restricted
Subsidiary, except that Joy shall not merge with (whether
or not Joy is the surviving corporation), consolidate with
or transfer its business or assets to any other Restricted
Subsidiary so long as Joy is subject to any restriction
pursuant to the Joy Indenture that would, but for the
effect of the exception thereto, violate Section 5.02(i)
and (ii) the Borrower may sell, for fair market value, up
to 25% of the voting stock of each of Harnischfeger
Corporation, Beloit Corporation and Joy to another Person.
Notwithstanding the foregoing, the Borrower shall not
permit any material portion of the business or assets of
any Restricted Subsidiary to be transferred to Joy so long
as Joy is subject to any restriction pursuant to the Joy
Indenture that would, but for the effect of the exception
thereto, violate Section 5.02(i).
(d) Conduct of Business. The Borrower shall not
permit Harnischfeger Corporation or Beloit Corporation or
Joy to engage in any business activities or operations
substantially different from and unrelated to its present
business activities and operations.
(e) Indebtedness of Subsidiaries. The Borrower
shall not permit any Subsidiary to create or incur any
Indebtedness or become liable as a surety, guarantor,
accommodation endorser, or otherwise for or upon the
obligation of any other Person, or sell or discount with
recourse any receivables or any debt instruments owned by
it, or enter into any other arrangement which has the
effect of assuring a creditor of such Person against loss;
provided, however, that this Section 5.02(e) shall not be
deemed to prohibit:
(i) the acquisition of goods, supplies or
merchandise in the ordinary course of business;
(ii) surety bonds, standby letters of credit,
contingent liabilities, guarantees and similar
undertakings, including, without limitation,
undertakings of credit support (each a "Performance
Undertaking"), entered into or provided by the
Borrower or any Subsidiary in the ordinary course of
business, as the same is or may in the future be
conducted, relating to the performance of contractual
obligations arising in connection with its sale of
goods or services;
(iii) the endorsement of instruments for
deposit and collection in the ordinary course of
business;
(iv) Indebtedness incurred by foreign
Subsidiaries in the ordinary course of their business
in an aggregate amount not to exceed $130,000,000 or
20% of Consolidated Net Worth, whichever is greater,
at any time;
(v) industrial revenue bonds in an aggregate
amount not to exceed $32,500,000 or 5% of
Consolidated Net Worth, whichever is greater, at any
time;
(vi) the existing Indebtedness and Guarantees
of the Borrower and its Subsidiaries listed on
Schedule 5.02(e) and any renewals, extensions,
refundings or replacements thereof (without increase
in principal amount outstanding at the time of any
such renewal, extension or refunding) on terms no
less favorable than terms then current in the market;
(vii) obligations of Subsidiaries under all
Capital Leases not to exceed in the aggregate at any
time $26,000,000 or 4% of Consolidated Net Worth,
whichever is greater, together with renewals of such
Capital Leases on terms no less favorable than the
terms that could be obtained in the prevailing debt
market;
(viii) Indebtedness of Subsidiaries to the
Borrower or other Subsidiaries and Indebtedness of
the Borrower to Subsidiaries;
(ix) Indebtedness of each of Joy, Beloit
Corporation, Syscon Corporation, and Harnischfeger
Corporation which does not exceed in the aggregate
$6,500,000 or 1% of Consolidated Net Worth, whichever
is greater, in each case at any time;
(x) Guarantees with respect to receivables sold
or discounted to, or originated by, a third-party
finance company with recourse and Indebtedness of any
captive-finance Subsidiary which do not exceed in the
aggregate $150,000,000 or 25% of Consolidated Net
Worth, whichever is greater, at any time;
(xi) Indebtedness of Syscon Corporation which
does not exceed $40,000,000, the proceeds of which
will be used to pay a dividend to the Borrower in
connection with the spin-off of Syscon Corporation to
the shareholders of the Borrower; or
(xii) Indebtedness of any Person that becomes a
Subsidiary after the Effective Date to the extent
such Indebtedness was outstanding on the date such
Person becomes a Subsidiary and was not created in
contemplation thereof, together with any renewals,
extensions or refundings of such Indebtedness
(without increase in principal amount outstanding at
the time of any such renewal, extension or
refunding).
(f) Liens. The Borrower shall not, and shall
not permit any Subsidiary to, create, assume or suffer to
exist any Liens on any of its property, real or personal or
mixed, whether now owned or hereafter acquired, or on the
income or profits therefrom, without equally and ratably
securing the Loans and other Obligations hereunder, except:
(i) Liens for taxes, assessments or
governmental charges which are not yet delinquent, or
are being diligently contested in good faith and by
appropriate proceedings;
(ii) Liens imposed by law, such as carriers',
warehousemen's, mechanics', materialmen's and
vendors' liens for sums not yet due or which are
being diligently contested in good faith and by
appropriate proceedings;
(iii) Liens not otherwise covered in (i)
through (xv) of this Section 5.02(f) existing as of
the date of this Agreement and described in Schedule
5.02(f) which Liens do not secure obligations in an
amount exceeding 10% of Consolidated Total Tangible
Assets in aggregate;
(iv) any Lien on any property acquired,
constructed or improved by the Borrower or any
Subsidiary after the Closing Date and created
contemporaneously with or within twelve (12) months
of such acquisition, construction or improvement to
secure or provide for all or a portion of the
purchase price of such property or for such
construction or improvement;
(v) Liens in connection with industrial revenue
bonds, pollution control bonds or similar secured
financings, to the extent such financings are
permitted hereunder;
(vi) Liens securing the performance of bids,
tenders, contracts (other than for the repayment of
borrowed money), leases or surety bonds, performance
bonds or letters of credit issued in connection with
the foregoing or for purposes of like general nature
in the ordinary course of the Borrower's business as
conducted as of the Effective Date;
(vii) Liens (A) in connection with asset based
financing arranged by any captive finance Subsidiary;
or (B) securing letters of credit obtained in the
ordinary course of business by any foreign Subsidiary
so long as such Liens cover only properties of such
foreign Subsidiary; provided that the sum of the
obligations secured by Liens described in sub-clauses
(A) and (B) above shall not exceed $130,000,000 or
20% of Consolidated Net Worth, whichever is greater;
(viii) pledges of deposits to secure (x) public
or statutory obligations, including workers'
compensation, unemployment insurance and similar
obligations and (y) surety, stay, appeal or customs
bonds which, with respect to stay and appeal bonds,
do not exceed an aggregate amount of $200,000,000;
(ix) Liens in favor of any customer to secure
partial, progress, advance or other payments for
goods produced or services rendered to such customer
in the ordinary course of the Borrower's or any
Subsidiary's business;
(x) attachment, judgment and other similar
Liens arising in connection with court proceedings,
provided the execution or other enforcement of such
Liens is effectively stayed within thirty (30) days
after the Borrower or a Subsidiary receives notice
thereof and the claims secured thereby are being
actively contested in good faith by appropriate
proceedings and against which an adequate reserve has
been established;
(xi) any Lien existing on the property, shares
of stock or Indebtedness of a Person at the time such
Person becomes a Subsidiary of the Borrower or is
merged into or consolidated with the Borrower or a
Subsidiary or at the time of a sale, lease or other
disposition of the properties of any Person as an
entirety or substantially as an entirety to the
Borrower or a Subsidiary and, in each case, not
created in contemplation of such event;
(xii) Liens on the property of a Subsidiary to
secure Indebtedness owed to the Borrower or another
Subsidiary;
(xiii) in the case of leased properties, the
terms and conditions of leases or subleases creating
the leasehold estate and, in the case of all real
properties, title exceptions affecting the underlying
fee simple estate;
(xiv) precautionary filings of Uniform
Commercial Code financing statements or the taking
possession of chattel paper by purchasers of accounts
or notes receivables from the Borrower or any
Subsidiary, without recourse, in the ordinary course
of business; and
(xv) Liens created in connection with the
extension or renewal of any secured Indebtedness or
other obligations permitted under the terms of this
Agreement; provided, however, that the principal
amount of the Indebtedness or other obligations
secured thereby shall not exceed the principal amount
of Indebtedness or other obligations so secured at
the time of such extension or renewal and that any
Lien granted in connection with such extension or
renewal shall be limited to the same property that
secured the Indebtedness or other obligations so
extended or renewed.
(g) Usage of Proceeds. The proceeds of any
Loans shall not be used, directly or indirectly, whether
immediate, incidental or ultimate, (a) in a manner which
would violate, or result in a violation of, Regulation G,
T, U or X, or (b) to finance or participate in a tender
offer for the takeover or acquisition of all or part of any
Person unless the board of directors of such Person has
approved such tender offer, or (c) to purchase or
repurchase any stock of the Borrower in an amount exceeding
$25,000,000 in aggregate.
(h) Note Agreement Amendments. The Borrower
shall not, and shall not agree to, amend, modify or
otherwise change any covenant in any Note Agreement so as
to make the provisions thereof more restrictive than the
corresponding provisions of this Agreement unless such
corresponding provision herein shall simultaneously be
amended in a like manner.
(i) Dividend Restrictions. The Borrower shall
not, and shall not permit any of its Restricted
Subsidiaries, to permit or place or agree to permit or
place, any restriction, directly or indirectly, on (i) the
payment of dividends or other distributions by any
Restricted Subsidiary to the Borrower or (ii) the making of
advances or other cash payments by any Restricted
Subsidiary to the Borrower, except for any such restriction
on Joy pursuant to the Joy Indenture.
(j) Joy Indenture Amendments. The Borrower
shall not, and shall not permit Joy to, agree to or amend,
modify or otherwise change the Joy Indenture so as to make
the provisions thereof more restrictive.
5.03. Changes in GAAP and Borrower's Fiscal
Year. If, after the Closing Date, any changes in GAAP are
required or permitted and are adopted by the Borrower with
the agreement of its independent certified public
accountants or the Borrower changes its fiscal year and any
such changes in GAAP or its fiscal year result in a
material change in the calculation of any of the financial
covenants, restrictions or standards herein or in the
related definitions or terms used therein ("Material
Accounting Changes"), the parties hereto agree to enter
into negotiations, in good faith, in order to amend such
provisions in a credit neutral manner so as to reflect
equitably such changes with the desired result that the
criteria for evaluating the Borrower's financial condition
shall be the same after such changes as if such changes had
not been made; provided, however, that no Material
Accounting Change shall be given effect in such
calculations until such provisions are amended, in a manner
reasonably satisfactory to the Requisite Lenders.
ARTICLE VI
EVENTS OF DEFAULT; RIGHTS AND REMEDIES
6.01. Events of Default. Each of the
following occurrences shall constitute an Event of Default
under this Agreement:
(a) Failure to Make Payments When Due. The
Borrower shall fail to pay, in the manner specified in the
Loan Documents, (i) any principal of, or interest on, any
Loan when and as the same shall become due and payable
hereunder, or (ii) any fee provided for in Section 2.06
within ten (10) days after its due date hereunder, or (iii)
any other amount due from the Borrower hereunder or under
any other Loan Document within thirty (30) days after its
due date.
(b) Breach of Certain Covenants. The Borrower
shall fail to perform or observe any of the terms,
provisions, covenants, conditions, agreements or
obligations contained in Section 5.02(a), (b), (c), (d),
(e)(x) or (g).
(c) Breach of Other Covenants. The Borrower
shall fail to perform or observe any of the terms,
provisions, covenants, conditions, agreements or
obligations contained in this Agreement (other than Section
5.02(a), (b), (c), (d), (e)(x) or (g)) and such failure
shall continue for more than, and shall not have been
remedied to the satisfaction of the Requisite Lenders
within thirty (30) days after the Agent, or any Lender
through the Agent, has given notice to the Borrower that
such default has occurred, which notice shall specify the
default to be remedied and state that it is a notice
hereunder, provided, that, with respect to any breach of
Section 5.01(c), such 30-day grace period shall commence
without the giving of such notice by the Agent or any
Lender.
(d) Bankruptcy. (i) The Borrower or any
Subsidiary shall become insolvent, or be unable, or admit
in writing its inability, to pay its debts as they become
due; or (ii) the Borrower or any Subsidiary shall make an
assignment for the benefit of creditors or to an agent
authorized to liquidate any substantial amount of its
properties or assets; or (iii) the Borrower or any
Subsidiary shall file or have filed against it a petition
in bankruptcy or seeking reorganization or to effect a plan
or other arrangement with creditors or winding up or
dissolution and any such filing against it shall not be
dismissed within sixty (60) days after the date of such
filing; or (iv) the Borrower or any Subsidiary shall apply
for or consent to the appointment of or consent that an
order be made appointing any receiver, custodian, trustee
or similar officer for any of its or their properties,
assets or business, or if a receiver, custodian, trustee or
similar officer shall be appointed for all or a substantial
part of its or their properties, assets or business; or (v)
an order for relief shall be entered against the Borrower
or any Subsidiary under the United States federal
bankruptcy laws as now or hereafter in effect; or (vi) the
Borrower or any Subsidiary shall take any action indicating
its consent to, approval of or acquiescence in, any of the
foregoing.
(e) Breach of Representation or Warranty. Any
representation or warranty made by the Borrower herein or
in any certificate or financial statement heretofore or
hereafter furnished by the Borrower or any of its
respective officers in connection with this Agreement or
the other Loan Documents shall prove to have been in any
material respect false or misleading when made or when
deemed to have been made.
(f) Appropriation of Property. All, or
substantially all, of the property of the Borrower and its
Consolidated Subsidiaries taken as a whole shall be
condemned, seized, or otherwise appropriated.
(g) Suspension of Business. The Borrower or any
Restricted Subsidiary shall voluntarily suspend its
business for more than thirty (30) days in any fiscal year.
(h) Defaults as to Other Indebtedness. (i) Any
breach or default shall occur under any other agreement
involving Indebtedness or the extension of credit under
which the Borrower or any Subsidiary may be obligated as
borrower or guarantor, if (A) such default consists of the
failure to pay principal of or interest on any Indebtedness
when due in the aggregate amount of $5,000,000 or more, or
(B) the Indebtedness due thereunder in the aggregate amount
of $5,000,000 or more shall have been declared to be due
and payable immediately and such acceleration shall not
have been rescinded or annulled; or (ii) any breach or
default shall occur under any other agreement involving
Indebtedness or the extension of credit in the aggregate
amount greater than $25,000,000 under which the Borrower or
any of its Subsidiaries may be obligated as borrower or
guarantor if such default permits the holder or obligee
thereof to accelerate such Indebtedness or other extensions
of credit and such default continues unremedied in excess
of thirty (30) days.
(i) ERISA. Any Plan of the Borrower or any of
its Subsidiaries shall be terminated within the meaning of
Title IV of ERISA except as permitted by Section 4044(d) of
ERISA, or a trustee shall be appointed by the appropriate
United States District Court to administer any such Plan of
the Borrower or any of its Subsidiaries, or the Pension
Benefit Guaranty Corporation shall institute proceedings to
terminate any Plan of the Borrower or any of its
Subsidiaries or to appoint a trustee to administer any such
Plan and, upon the occurrence of any of the foregoing, the
then current value of vested benefits owing under any such
Plan guaranteed under Title IV of ERISA (determined upon
the basis of assumptions prescribed by the Pension Benefit
Guaranty Corporation) exceeds the then current value of the
assets allocable to such benefits by more than $500,000.
(j) Change of Control. Any Person or Persons
acting as a partnership, limited partnership, syndicate or
other group for the purpose of acquiring an interest in the
Borrower shall acquire a controlling interest in the
Borrower such that it or they could elect a majority of the
board of directors of the Borrower.
(k) Judgments. There shall be entered against
the Borrower or any of its Subsidiaries one or more
judgments, writs or decrees which (after taking into
account the application of any insurance proceeds) in the
aggregate exceed the Dollar amount of $5,000,000 and all
such judgments, writs or decrees shall not have been
satisfied, vacated, discharged, stayed or appealed within
the applicable period for appeal from the date of entry
thereof.
6.02. Remedies. (a) Automatically upon the
occurrence of an Event of Default under Section 6.01(d),
the Commitments shall immediately terminate, and all Loans
and other Obligations outstanding under this Agreement and
the other Loan Documents shall, without presentment,
demand, protest, or notice of any kind, all of which are
hereby expressly waived, be forthwith due and payable, if
not herein otherwise then due and payable, together with
all costs and expenses (including break and funding costs
determined in accordance with Section 2.09(d)) incurred by
the Lenders as a result thereof, anything herein or in any
agreement, contract, indenture, document or instrument to
the contrary notwithstanding; and
(b) at any time after the occurrence of an
Event of Default other than under Section 6.01(d), and in
each and every such case, unless such Event of Default
shall have been remedied or cured by the Borrower to the
satisfaction of the Requisite Lenders or waived in writing
by the Requisite Lenders (except in the case of an Event of
Default under Section 6.01(a), the waiver of which shall
require the consent of all Lenders), the Agent shall, upon
the direction of the Requisite Lenders, immediately
terminate the Commitments, whereupon the same shall be
cancelled and reduced to zero and all Loans and all accrued
interest thereon and all other liabilities and Obligations
outstanding under this Agreement and the other Loan
Documents shall, thereupon, without presentment, demand,
protest, or notice of any kind, all of which are hereby
expressly waived, be forthwith due and payable, if not
otherwise then due and payable, together with all costs and
expenses (including break and funding costs determined in
accordance with Section 2.09(d)) incurred by the Lenders as
a result thereof, anything herein or in any other
agreement, contract, indenture, document or instrument to
the contrary notwithstanding.
(c) For purposes of this Agreement and each of
the other Loan Documents, an Event of Default shall be
deemed "continuing" until cured or waived in writing in
accordance with Section 8.06.
6.03. Setoff Rights. If any amount payable
hereunder or under the Notes is not paid as and when due,
the Borrower hereby authorizes the Agent, each Lender, each
Participant and each of their respective Affiliates to
proceed, after acceleration upon default by the Borrower
hereunder, to the fullest extent permitted by applicable
law, without prior notice, by right of set-off, banker's
lien or counterclaim, against any moneys or other assets of
the Borrower in any currency that may at any time be in the
possession of any such Person, at any branch or office
thereof, to the full extent of all amounts due and owing to
the Agent or such Lender hereunder. Any Lender or
Participant that so proceeds or that has an Affiliate that
so proceeds shall forthwith give notice to the Agent of any
action taken by such Lender, Participant or Affiliate
pursuant to this Section 6.03.
ARTICLE VII
THE AGENT
7.01. Appointment. (a) Each of the Lenders
hereby designates and appoints Chemical Bank as the Agent
of such Lender under this Agreement and the other Loan
Documents, and each of the Lenders hereby irrevocably
authorizes the Agent to take such action on its behalf
under the provisions of this Agreement and the other Loan
Documents and to exercise such powers as are set forth
herein or therein, together with such other powers as are
incidental thereto. The Agent agrees to act as such on the
express conditions contained in this Article VII.
(b) The provisions of this Article VII are
solely for the benefit of the Agent and the Lenders, and
the Borrower shall have no right to rely on or enforce any
of the provisions hereof (other than as expressly set forth
in Section 7.07). In performing its functions and duties
under this Agreement and the other Loan Documents, the
Agent shall act solely as agent for the Lenders and does
not assume and shall not be deemed to have assumed any
obligation toward or relationship of agency or trust with
or for the Borrower or any of its Affiliates.
7.02. Nature of Duties. The Agent shall not
have any duties or responsibilities except those expressly
set forth in this Agreement or in the other Loan Documents.
The duties of the Agent shall be mechanical and
administrative in nature. The Agent shall not have by
reason of this Agreement a fiduciary relationship in
respect of any Lender. Nothing in this Agreement or any of
the other Loan Documents, expressed or implied, is intended
to or shall be construed to impose upon the Agent any
obligations in respect of this Agreement or any of the
other Loan Documents except as expressly set forth herein
or therein. Each Lender shall make its own independent
investigation of the financial condition and affairs of the
Borrower and its Subsidiaries in connection with the making
and the continuance of the Loans hereunder and shall make
its own appraisal of the creditworthiness of the Borrower
and its Subsidiaries, and the Agent shall not have any duty
or responsibility, either initially or on a continuing
basis, to provide any Lender with any credit or other
information with respect thereto, whether coming into its
possession before the Closing Date or at any time or times
thereafter. If the Agent seeks the consent or approval of
the Requisite Lenders to the taking or refraining from
taking any action hereunder, the Agent shall send notice
thereof to each Lender. The Agent shall promptly notify
each Lender at any time that the Requisite Lenders or,
where expressly required, all of the Lenders, have
instructed the Agent to act or refrain from acting pursuant
hereto.
7.03. Rights, Exculpation, Etc. Neither the
Agent nor any of its Affiliates nor any of its officers,
directors, employees, agents, attorneys or consultants
shall be liable to any Lender for any action taken or
omitted by it or such Person hereunder or under any of the
other Loan Documents, or in connection herewith or there-
with, except that (i) the Agent shall be obligated on the
terms set forth herein for performance of its express
obligations hereunder, and (ii) no Person shall be relieved
of any liability imposed by law for its gross negligence or
willful misconduct (as determined by the final judgment of
a court of competent jurisdiction). The Agent shall not be
liable for any apportionment or distribution of payments
made by it in good faith pursuant to the terms of this
Agreement and if any such apportionment or distribution is
subsequently determined to have been made in error the sole
recourse of any Lender to whom payment was due, but not
made, shall be to recover from other Lenders any payment in
excess of the amount to which they are determined to have
been entitled. The Agent shall not be responsible to any
Lender for any recitals, statements, representations or
warranties herein or for the execution, effectiveness,
genuineness, validity, enforceability, collectibility, or
sufficiency of this Agreement or any of the other Loan
Documents, or any of the transactions contemplated hereby
and thereby, or of any of the other Loan Documents or any
of the transactions contemplated thereby, or for the
financial condition of the Borrower or any of its
Subsidiaries. The Agent shall not be required to make any
inquiry concerning either the performance or observance of
any of the terms, provisions or conditions of this
Agreement or any of the Loan Documents or the financial
condition of the Borrower or any of its Subsidiaries or the
existence or possible existence of any Potential Event of
Default or Event of Default. The Agent may at any time
request instructions from the Lenders with respect to any
actions or approvals which by the terms of this Agreement
or of any of the other Loan Documents the Agent is
permitted or required to take or to grant, and if such
instructions are promptly requested, the Agent shall be
absolutely entitled to refrain from taking any action or to
withhold any approval and shall not be under any liability
whatsoever to any Person for refraining from any action or
withholding any approval under any of the Loan Documents
until it shall have received such instructions from the
Requisite Lenders or, where expressly required, all of the
Lenders. Without limiting the foregoing, no Lender shall
have any right of action whatsoever against the Agent as a
result of the Agent acting or refraining from acting under
this Agreement or any of the other Loan Documents in
accordance with the instructions of the Requisite Lenders
or, where expressly required, all of the Lenders.
7.04. Reliance. The Agent shall be entitled
to rely upon any written notices, statements, certificates,
orders or other documents or any telephone message believed
by it in good faith to be genuine and correct and to have
been signed, or made by the proper Person, and with respect
to all matters pertaining to this Agreement or any of the
other Loan Documents and its duties hereunder or
thereunder, upon advice of legal counsel (including counsel
for the Borrower), independent public accountants and other
experts selected by it in good faith.
7.05. Indemnification. To the extent that the
Agent is not reimbursed and indemnified by the Borrower or
the Borrower fails upon demand by the Agent to perform its
obligations to reimburse or indemnify the Agent, the
Lenders will severally reimburse and indemnify the Agent
for and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by, or
asserted against the Agent in any way relating to or
arising out of this Agreement or any of the other Loan
Documents or any action taken or omitted by the Agent under
this Agreement or any of the other Loan Documents, in
proportion to each Lender's Pro Rata Share; provided that
no Lender shall be liable for (i) any portion of such
liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements
resulting from the Agent's gross negligence or willful
misconduct, as determined by the final judgment of a court
of competent jurisdiction, (ii) routine administrative
costs described in Section 8.03(a)(ii) or (iii) the legal
fees and expenses incurred by the Agent in connection with
the execution and delivery of this Agreement and the other
Loan Documents. The obligations of the Lenders under this
Section 7.05 shall survive the payment in full of the Loans
and the termination of this Agreement.
7.06. The Agent Individually. With respect to
its Pro Rata Share hereunder and the Loans made by it, the
Agent shall have and may exercise the same rights and
powers hereunder and is subject to the same obligations and
liabilities as and to the extent set forth herein for any
other Lender. The terms "Lenders", "Requisite Lenders" or
any similar terms shall, unless the context clearly
otherwise indicates, include the Agent in its individual
capacity as a Lender or one of the Requisite Lenders. The
Agent may accept deposits from, lend money to, and
generally engage in any kind of banking, trust or other
business with the Borrower as if it were not acting as
Agent pursuant hereto.
7.07. Successor Agent; Resignation of Agent.
(a) The Agent may resign from the performance of its func-
tions and duties hereunder at any time by giving at least
thirty (30) days' prior written notice to the Lenders and
the Borrower. In the event that the Agent gives notice of
its desire to resign from the performance of its functions
and duties as Agent, any such resignation shall take effect
only upon the acceptance by a successor Agent of
appointment pursuant to clauses (b) and (c) below.
(b) The Requisite Lenders shall appoint a
successor Agent.
(c) If a successor Agent shall not have been
so appointed within said thirty (30) day period, the
retiring Agent shall then appoint a successor Agent who
shall serve as Agent until such time, if any, as the
Requisite Lenders appoint a successor Agent as provided
above.
(d) Upon the appointment of a successor Agent,
the term "Agent" shall, for all purposes of this Agreement
and the other Loan Documents, thereafter include such
successor, except that the retiring Agent shall reserve all
rights as to Obligations accrued or due to it, in its
capacity as such, at the time of such succession and all
rights (whenever arising) under Section 8.04.
(e) Notwithstanding anything in this Section
7.07 to the contrary, no Person shall serve as an Agent
unless such Person is a Lender.
ARTICLE VIII
MISCELLANEOUS
8.01. Entire Agreement. This written Credit
Agreement, together with the letter agreement between the
Borrower and the Agent dated as of September 16, 1993
(which letter agreement relates solely to matters between
the Borrower and the Agent), represents the final agreement
among the parties as to its subject matter and may not be
contradicted by evidence of prior, contemporaneous, or
subsequent oral agreements among the parties. There are no
oral agreements among the parties.
8.02. Assignments and Participations.
(a) Subject to the limitations and requirements
hereinafter set forth, each Lender may assign to one or
more financial institutions all or a portion of its rights
and obligations under this Agreement (including, without
limitation, all or a portion of its Commitment and Loans);
provided, however, that (i) each such assignment shall be
of a constant, and not a varying, percentage of the
assigning Lender's rights and obligations under this
Agreement (other than any Competitive Bid Loans or
Competitive Bid Notes) and the assignment shall transfer
the same percentage of such Lender's Commitment, Revolving
Loans and other interests hereunder, (ii) unless the Agent
and the Borrower otherwise consent, the aggregate amount of
the Commitments of the assigning Lender being assigned
pursuant to each such assignment (determined as of the date
of the Assignment and Acceptance with respect to such
assignment) shall in no event be less than $5,000,000
(provided that assignments between Lenders shall have no
minimum amount), (iii) except in the case of an assignment
to a Lender or an Affiliate of such Lender (so long as at
the time of such assignment to a Lender or an Affiliate it
is not reasonably foreseeable by the assigning Lender that
such assignment would increase the amounts payable by the
Borrower pursuant to the cost protection provisions con-
tained in Sections 2.09, 2.10 and 2.11), the Borrower and
Agent must give their consent (which consent shall not
unreasonably be withheld or delayed) to each such
assignment and (iv) the parties to each such assignment
(other than the Borrower) shall execute and deliver to the
Agent an Assignment and Acceptance, together with a
processing and recordation fee of $3,500;
Upon the execution, delivery, approval, acceptance and
recording of an Assignment and Acceptance, from and after
the effective date specified in such Assignment and Accept-
ance, which effective date shall be at least five (5)
Business Days after the execution date thereof (unless the
Borrower and the Agent otherwise agree), (x) the assignee
thereunder shall be a party hereto and, to the extent that
rights and obligations hereunder have been assigned or
negotiated to it pursuant to such Assignment and Accep-
tance, have the rights and obligations of a Lender
hereunder and (y) the Lender assignor thereunder shall, to
the extent that rights and obligations hereunder have been
assigned or negotiated by it pursuant to such Assignment
and Acceptance, relinquish its rights and be released from
its obligations under this Agreement and, in the case of an
Assignment and Acceptance covering all or the remaining
portion of an assigning Lender's rights and obligations
under this Agreement, such Lender shall cease to be a party
hereto but shall continue to be entitled to the benefits of
Sections 2.09, 2.10, 2.11, 8.03 and 8.04, as well as to any
fees accrued for its account hereunder and not yet paid.
Notwithstanding the foregoing, any Lender
assigning rights and obligations under this Agreement may
retain any Competitive Bid Loans made by it outstanding at
such time and in such case shall retain its rights
hereunder in respect of any Loans so retained until such
Loans have been repaid in full in accordance with this
Agreement.
(b) By executing and delivering an Assignment
and Acceptance, the assigning Lender thereunder and the as-
signee thereunder confirm to and agree with each other and
the other parties hereto as follows: (i) the assignment
made under such Assignment and Acceptance is made without
recourse and, other than as provided in such Assignment and
Acceptance, such assigning Lender makes no representation
or warranty and assumes no responsibility with respect to
any statements, warranties or representations made in or in
connection with this Agreement or any other Loan Document
or any other document, instrument or agreement executed or
delivered in connection herewith or therewith or the
execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or any other Loan
Document or any other instrument or document furnished
pursuant hereto or thereto; (ii) such assigning Lender
makes no representation or warranty and assumes no respon-
sibility with respect to the financial condition of the
Borrower or any of its Subsidiaries or the performance or
observance by the Borrower of any of its obligations under
any Loan Document or any other instrument or document fur-
nished pursuant hereto; (iii) such assignee confirms that
it has received a copy of this Agreement, together with
copies of the financial statements most recently delivered
pursuant to Section 5.01 and such other Loan Documents and
other documents and information as it has deemed
appropriate to make its own credit analysis and decision to
enter into such Assignment and Acceptance; (iv) such
assignee will, independently and without reliance upon the
Agent, such assigning Lender or any other Lender and based
on such documents and information as it shall deem
appropriate at the time, continue to make its own credit
decisions in taking or not taking action under this
Agreement; (v) such assignee appoints and authorizes the
Agent to take such action as an Agent on its behalf and to
exercise such powers under this Agreement and the other
Loan Documents as are delegated to the Agent by the terms
hereof and thereof, together with such powers as are
reasonably incidental thereto; and (vi) such assignee
agrees that it will perform in accordance with their terms
all of the obligations which by the terms of this Agreement
and the other Loan Documents are required to be performed
by it as a Lender.
(c) The Agent shall maintain at its address
referred to on Schedule A a copy of each Assignment and
Acceptance delivered to and accepted by it and shall record
in the Agent's Loan Account the names and addresses of each
Lender and the Commitment of, and principal amount of the
Loans owing to, such Lender from time to time. The
Borrower, the Agent and the Lenders may treat each Person
whose name is recorded in the Loan Account as a Lender
hereunder for all purposes of this Agreement.
(d) Upon its receipt of an Assignment and
Acceptance executed by an assigning Lender and the
assignee, the Agent shall, if such Assignment and
Acceptance has been properly completed and is in
substantially the form of Exhibit 1 and if the conditions
for the assignment referred to in the Assignment and
Acceptance and set forth in Section 8.02(a) have been met,
(i) accept such Assignment and Acceptance, (ii) record the
information contained therein in the Agent's Loan Account
and (iii) give prompt notice thereof to the Borrower.
(e) Each Lender may sell to one or more banks
or other entities (each a "Participant") participations in
all or a portion of its rights and obligations under this
Agreement and the other Loan Documents (including, without
limitation, all or a portion of its Commitment and Loans;
provided, that (i) notice thereof is given to the Agent
and, except in the case of a participation to a Lender or
an Affiliate of such Lender, the Borrower shall have
consented to such sale of a participation (which consent
shall not be unreasonably withheld or delayed), (ii) such
Lender's obligations under this Agreement and the other
Loan Documents (including, without limitation, its
Commitment to the Borrower hereunder) shall remain
unchanged, (iii) such Lender shall remain solely respon-
sible to the other parties hereto for the performance of
such obligations, (iv) any Participant shall be entitled to
the benefit of the cost protection provisions contained in
Sections 2.09, 2.10 and 2.11 to the same extent as if it
were a Lender; provided, however, that no such Participant
shall be entitled to receive any greater amount pursuant to
such Sections than the Lender from which it purchased its
participation would have been entitled to receive in
respect of the amount of the participation transferred by
such Lender to such Participant had no transfer occurred,
(v) the Borrower, the Agent and the other Lenders shall
continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under
this Agreement and the other Loan Documents and with regard
to any and all payments to be made under this Agreement and
the Notes, and (vi) a Participant shall not be entitled to
voting rights under this Agreement; provided, that the
participation agreement between a Lender and its
Participant may provide that such Lender will obtain the
approval of such Participant prior to any amendment or
waiver of any provisions of this Agreement which would
decrease any fees payable hereunder or the amount of
principal of, or the rate at which interest is payable on,
the Loans, extend the final maturity of the Loans or any
date fixed for the payment of interest on the Loans or any
fees or extend or increase the Commitment of such Lender.
(f) Upon the acceptance by the Agent of any
Assignment and Acceptance, the parties to such Assignment
and Acceptance may at any time request that new Notes be
issued to the Lender assignor and the Lender assignee by
(i) providing written notice of such request to the Agent
and the Borrower and (ii) delivering to the Borrower such
assigning Lender's Revolving Loan Note and, if applicable,
Competitive Bid Note for cancellation and substitution.
Promptly following receipt by the Borrower of any such
notice, and verification from the Agent that the applicable
Assignment and Acceptance shall have been accepted by the
Agent, the Borrower forthwith shall cause to be executed,
and shall deliver to the Lender assignee, new Notes to the
order of the assignee and, if applicable, a replacement
Revolving Loan Note to the order of the Lender assignor,
and such Revolving Loan Notes shall equal the aggregate
principal amount of such assigning Lender's Revolving Loan
Note issued by the Borrower immediately prior to the
acceptance by the Agent of the applicable Assignment and
Acceptance. The Borrower shall immediately upon delivery
of such new Notes, cancel the original Note(s) delivered by
the Lender assignor to the Borrower.
(g) Notwithstanding anything herein to the
contrary, each Lender may assign all or any portion of its
rights under this Agreement as collateral security to any
Federal Reserve Bank or any Governmental Authority
succeeding to its functions.
8.03. Expenses.
(a) Generally. The Borrower agrees upon
demand to pay, or reimburse the Agent for, any and all
reasonable and necessary out-of-pocket costs incurred by
the Agent or its Affiliates in connection with (i) the
negotiation, preparation and execution of this Agreement
and the other Loan Documents or in connection with any
amendments, modifications or waivers of the provisions
hereof and thereof (including legal fees and out-of-pocket
expenses of Agent's counsel, subject to the letter
agreement between the Agent and the Borrower dated as of
September 16, 1993); (ii) the administration of this
Agreement, the Loan Documents and the Loans; and (iii) the
enforcement of any of the Obligations. In addition, the
Borrower shall pay, or reimburse the Agent for, all out-of-
pocket costs and expenses, including, without limitation,
reasonable and necessary attorneys' and legal assistants'
fees (including allocated costs of internal counsel)
incurred by the Agent prior to the occurrence of an Event
of Default in commencing, defending or intervening in any
litigation or in filing a petition, complaint, answer,
motion or other pleading in any legal proceeding relating
to the Borrower, or any of its Subsidiaries, and arising
out of or in connection with the Loan Documents, subject to
any limitations with respect thereto set forth in Section
8.04.
(b) After Default. The Borrower further
agrees to pay, or reimburse the Agent and the Lenders for
all out-of-pocket costs and expenses, including, without
limitation, reasonable and necessary attorneys' and legal
assistants' fees, expenses and disbursements (including
allocated costs of internal counsel and costs of
settlement) incurred by the Agent or any Lender after the
occurrence of an Event of Default (i) in enforcing any of
the Obligations or exercising or enforcing any other right
or remedy available by reason of such Event of Default;
(ii) in connection with any refinancing or restructuring of
the credit arrangements provided under this Agreement in
the nature of a "work-out" or in any insolvency or
bankruptcy proceeding; or (iii) in commencing, defending or
intervening in any litigation or in filing a petition,
complaint, answer, motion or other pleading in any legal
proceeding relating to the Borrower or any of its
Subsidiaries and related to or arising out of the transac-
tions contemplated hereby or by any of the Loan Documents.
Any payments made by the Borrower or received by the Agent
and applied as reimbursements for costs and expenses under
this Section 8.03(b) shall be apportioned among the Agent
and the Lenders in the order of priority set forth in
Section 2.07.
8.04. Indemnification. (a) The Borrower agrees
to indemnify and hold harmless the Agent, each and all of
the Lenders, each of the Affiliates of Chemical and each of
the Lenders' respective Affiliates that have funded or
maintained any Loan hereunder and each of the respective
officers, directors, employees and agents of each of the
foregoing (collectively called the "Indemnitees") from and
against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs and
expenses to which any Indemnitee may become subject by
virtue of any breach by the Borrower of any of its
agreements or obligations under this Agreement or any of
the other Loan Documents or by virtue of any wrongful or
negligent action or inaction by the Borrower or any
litigation, investigation or proceeding arising as a result
of such breach or wrongful or negligent action or inaction
by the Borrower and to reimburse each Indemnitee upon
demand for any legal or other expenses incurred in
connection with investigating or defending any of the
foregoing (collectively, the "Indemnified Matters");
provided, that the Borrower shall have no obligation to an
Indemnitee hereunder with respect to (i) matters for which
such Indemnitee has been compensated pursuant to or for
which an exemption is provided in Section 2.09(d) or 2.11
or any other provision of this Agreement and (ii)
Indemnified Matters to the extent the same are found by a
final decision of a court of competent jurisdiction to have
resulted from the gross negligence or willful misconduct of
that Indemnitee.
b) The Indemnitee shall promptly upon
receipt of notice of the making of any claim or the
initiation of any action, suit, or proceeding, if a claim
in respect thereof is to be made against the Borrower
hereunder, notify the Borrower in writing of the
commencement thereof. The Borrower shall have the right,
but not the obligation, at its expense, to provide and to
control the defense of any such claim, action, suit or
proceeding, provided that the Borrower shall agree that any
judgment, settlement or other amounts payable as a result
of such claim, action, suit or proceeding shall be subject
to the foregoing indemnity and provided further that the
Borrower must keep such indemnified party appraised of the
progress of any such claim, action, suit or proceeding, and
provided further that if such indemnified party reasonably
believes that its failure to participate will adversely
affect its interests or that there is a conflict of
interest which makes it inadvisable for the Borrower's
attorney to represent such party, it shall notify the
Borrower of such conclusion in writing and may, at its
election, participate in such claim, action, suit or
proceeding (the legal fees incurred by such indemnified
party as a result of such anticipation to be reimbursed by
the Borrower to such party). If more than one Indemnitee
shall elect to participate in such claim, action, suit or
proceeding pursuant to the preceding sentence, the Borrower
shall only be obligated to reimburse such Indemnitees for
the legal fees of one counsel unless such Indemnitees
inform the Borrower that they reasonably believe that there
is a conflict of interest which makes it inadvisable for
one counsel to represent all such Indemnitees, provided,
that in the event one or more Indemnitees retain additional
counsel over the Borrower's objection, the Borrower retains
the right to challenge, in court or otherwise, such
decision and any alleged payment obligation of such legal
fees. Any such claim, action, suit or proceeding shall not
be settled, if any indemnification is claimed hereunder
with respect thereto, without the prior written approval of
the Borrower which shall not be unreasonably withheld or
delayed. Without prejudice to the survival of any other
agreement of the Borrower hereunder, the agreements and
obligations of the Borrower contained in this Section 8.04
shall survive the payment in full of principal and interest
hereunder and the termination of this Agreement.
8.05. Ratable Sharing; Defaulting Lender.
(a) Subject to Sections 2.07 and 8.05(b), the
Lenders agree among themselves that (i) with respect to all
amounts received by them which are applicable to the
payment of the Obligations (excluding amounts payable under
this Agreement which are determined on a non-pro-rata
basis, including, without limitation, amounts payable
pursuant to Competitive Bid Loans and under Sections
2.02(c), 2.02(f), 2.05(b), 2.09(d), 2.10, 2.11, 2.13, 8.03
and 8.04), equitable adjustment will be made so that, in
effect, all such amounts will be shared among them ratably
in accordance with their Pro Rata Shares, whether received
by voluntary payment, by the exercise of the right of set-
off or banker's lien, by counterclaim or cross action or by
the enforcement of any or all of the Obligations (excluding
the above described amounts payable under this Agreement
which are determined on a non-pro-rata basis), (ii) if any
of them shall by voluntary payment or by the exercise of
any right of counterclaim, setoff, banker's lien or
otherwise, receive payment of a proportion of the aggregate
amount of the Obligations described in clause (i) above
held by it which is greater than its Pro Rata Share of the
payments on account of such Obligations, the one receiving
such excess payment shall purchase, without recourse or
warranty, an undivided interest and participation (which it
shall be deemed to have been done simultaneously upon the
receipt of such payment) in such Obligations owed to the
others so that all such recoveries with respect to such
Obligations shall be applied ratably in accordance with
their Pro Rata Shares; provided, that if all or part of
such excess payment received by the purchasing party is
thereafter recovered from it, those purchases shall be re-
scinded and the purchase prices paid for such participa-
tions shall be returned to that party to the extent
necessary to adjust for such recovery, but without interest
except to the extent the purchasing party is required to
pay interest in connection with such recovery. The
Borrower agrees that any Lender so purchasing a participa-
tion from another Lender pursuant to this Section 8.05(a)
may, to the fullest extent permitted by law, exercise all
its rights of banker's lien, setoff or counterclaim with
respect to such participation as fully as if such Lender
were the direct creditor of the Borrower in the amount of
such participation.
(b) In the event that the FDIC is appointed as
conservator or receiver of any Lender and thereafter such
Lender fails to fund its Pro Rata Share of any Borrowing
requested or deemed requested by the Borrower which such
Lender is obligated to fund under the terms of this
Agreement (the funded portion of such Borrowing being
hereinafter referred to as a "Non Pro Rata Loan"), until
the earlier of such Lender's cure of such failure and the
termination of the Commitments, the proceeds of all amounts
thereafter repaid to the Agent by the Borrower and
otherwise required to be applied to such Lender's share of
all other Obligations pursuant to the terms of this
Agreement shall be advanced to the Borrower by the Agent on
behalf of such Lender to cure, in full or in part, such
failure by such Lender, but shall nevertheless be deemed to
have been paid to such Lender in satisfaction of such other
Obligations. Notwithstanding anything in this Agreement to
the contrary:
(i) the foregoing provisions of this Section 8.05(b)
shall apply only with respect to the proceeds of payments
of Obligations and shall not affect the conversion or
continuation of Loans pursuant to Section 2.05(c);
(ii) any such Lender shall be deemed to have cured
its failure to fund its Pro Rata Share of any Borrowing at
such time as an amount equal to such Lender's original Pro
Rata Share of the requested principal portion of such
Borrowing is fully funded to the Borrower, whether made by
such Lender itself or by operation of the terms of this
Section 8.05(b), and whether or not the Non Pro Rata Loan
with respect thereto has been repaid, converted or
continued;
(iii) amounts advanced to the Borrower to cure, in
full or in part, any such Lender's failure to fund its Pro
Rata Share of any Borrowing ("Cure Loans") shall bear
interest at the rate applicable to Base Rate Loans under
Section 2.05 in effect from time to time, and for all other
purposes of this Agreement shall be treated as if they were
Base Rate Loans;
(iv) regardless of whether or not an Event of
Default has occurred or is continuing, and notwithstanding
the instructions of the Borrower as to its desired
application, all repayments of principal which, in
accordance with the terms of Section 2.07, would be applied
to the outstanding Base Rate Loans shall be applied first,
ratably to all Base Rate Loans constituting Non Pro Rata
Loans, second, ratably to Base Rate Loans other than those
constituting Non Pro Rata Loans or Cure Loans and, third,
ratably to Base Rate Loans constituting Cure Loans;
(v) for so long as and until the earlier of any such
Lender's cure of the failure to fund its Pro Rata Share of
any Borrowing and the termination of the Commitments, the
term "Requisite Lenders" for purposes of this Agreement
shall mean Lenders (excluding all Lenders whose failure to
fund their respective Pro Rata Shares of such Borrowing
have not been so cured) whose Pro Rata Shares represent
more than sixty percent (60%) of the aggregate Pro Rata
Shares of such Lenders; and
(vi) for so long as and until any such Lender's
failure to fund its Pro Rata Share of any Borrowing is
cured in accordance with Section 8.05(b)(ii), (A) such
Lender shall not be entitled to any Facility Fees with
respect to its Commitment and (B) the Facility Fee shall
accrue in favor of the Lenders which have funded their
respective Pro Rata Shares of such requested Borrowing,
shall be allocated among such performing Lenders ratably
based upon their relative Commitments, and shall be
calculated based upon the aggregate Commitments of such
performing Lenders.
8.06. Amendments and Waivers. Subject to the
provisions of Section 2.07(b)(ii), no amendment or modi-
fication of any provision of this Agreement shall be
effective without the written agreement of the Requisite
Lenders and the Borrower, and no termination or waiver of
any provision of this Agreement, or consent to any
departure by the Borrower therefrom, shall in any event be
effective without the written concurrence of the Requisite
Lenders, which the Requisite Lenders shall have the right
to grant or withhold at their sole discretion; except that
any amendment, modification, or waiver of any provision of
this Agreement which would (i) decrease the principal
amount of, or extend the maturity of or any scheduled
principal payment date or date for the payment of any
interest on any Loan, or waive or excuse any such payment
or any part thereof, or decrease the rate of interest on
any Loan, shall not be effective without the prior written
consent of each Lender affected thereby, (ii) change or
extend any Commitment or decrease the Facility Fees of any
Lender shall not be effective without the prior written
consent of such Lender, (iii) amend the definition of
"Requisite Lenders" or the provisions contained in this
Section 8.06 or in the third sentence of Section 8.14, or
(iv) waive or amend the condition precedent set forth in
clause (iv) of Section 3.02(b), shall not be effective
without the prior written consent of each Lender. No
amendment, modification, termination, or waiver of any
provision of Article VII or any other provision referring
to the Agent shall be effective without the written concur-
rence of the Agent. The Agent may, but shall have no
obligation to, with the concurrence of any Lender, execute
amendments, modifications, waivers or consents on behalf of
such Lender. Any waiver or consent shall be effective only
in the specific instance and for the specific purpose for
which it was given. No notice to or demand on the Borrower
in any case shall entitle the Borrower to any other or
further notice or demand in similar or other circumstances.
Any amendment, modification, termination, waiver or consent
effected in accordance with this Section 8.06 shall be
binding on each assignee, transferee or recipient of a
Lender's Commitment or Loans, each future assignee,
transferee, recipient of a Lender's Commitment or Loans,
and, if signed by the Borrower (when required), on the
Borrower.
8.07. Notices. Unless otherwise specifically
provided herein, any notice or other communication herein
required or permitted to be given shall be in writing and
may be personally served, telecopied, telexed or sent by
courier service or United States mail and shall be deemed
to have been given when delivered in person or by courier
service, upon receipt of a telecopy or telex or four (4)
Business Days after deposit in the United States mail
(registered or certified, with postage prepaid and properly
addressed). Notices to the Agent shall not be effective
until received by the Agent. For the purposes hereof, the
addresses of the parties hereto (until notice of a change
thereof is delivered as provided in this Section 8.07)
shall be as set forth in Schedule A or on the applicable
Assignment and Acceptance, as to each party, at such other
address as may be designated by such party in a written
notice to all of the other parties. In addition, each
Lender shall provide the Agent with the information
requested on Exhibit 10 with respect to such Lender as such
information changes from time to time.
8.08.
Failure or Indulgence Not Waiver; Remedies Cumulative. No
failure or delay on the part of the Agent, the Borrower or
any Lender in the exercise of any power, right or privilege
under any of the Loan Documents shall impair such power,
right or privilege or be construed to be a waiver of any
default or acquiescence therein, nor shall any single or
partial exercise of any such power, right or privilege
preclude other or further exercise thereof or of any other
right, power or privilege. All rights and remedies exist-
ing under the Loan Documents are cumulative to and not
exclusive of any rights or remedies otherwise available.
8.09. Termination. Upon the termination in
whole of the Commitments pursuant to the terms of this
Agreement, the Borrower shall pay to the Agent for the
benefit of the Lenders an amount equal to any and all
Obligations then outstanding.
8.10. Marshalling; Payments Set Aside.
Neither any Lender nor the Agent shall be under any
obligation to marshal any assets in favor of the Borrower
or any other party or against or in payment of any or all
of the Obligations. To the extent that the Borrower makes
a payment or payments to the Agent or the Lenders, or the
Agent or the Lenders enforce their rights or exercise their
rights of setoff, and such payment or payments or the
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,
right 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.
8.11. Severability. In case any provision in
or obligation under this Agreement or the other Loan
Documents shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of
the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby.
8.12. Headings. Article and Section headings
in this Agreement and in the Table of Contents hereto are
included herein for convenience of reference only and shall
not constitute a part of this Agreement for any other
purpose or be given any substantive effect.
8.13. GOVERNING LAW. THE AGENT HEREBY ACCEPTS
THIS AGREEMENT, ON BEHALF OF ITSELF AND THE LENDERS, AT NEW
YORK, NEW YORK BY ACKNOWLEDGING AND AGREEING TO IT THERE.
THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE
CONSTRUED IN ACCORDANCE WITH AND SHALL BE GOVERNED BY THE
LAWS OF THE STATE OF NEW YORK.
8.14.
Successors and Assigns; Subsequent Holders of Notes. This
Agreement and the other Loan Documents shall be binding
upon the parties hereto and their respective successors and
assigns and shall inure to the benefit of the parties
hereto and the successors and permitted assigns of the
Lenders. The terms and provisions of this Agreement shall
inure to the benefit of any assignee or transferee of the
Loans and the Commitment of any Lender (to the extent such
assignment or transfer is effected in accordance with
Section 8.02), and in the event of such transfer or assign-
ment, the rights and privileges herein conferred upon
Lenders shall automatically extend to and be vested in such
transferee or assignee, all subject to the terms and condi-
tions hereof. The Borrower's rights or any interest
therein hereunder, and the Borrower's duties and
Obligations hereunder, may not be assigned without the
written consent of all of the Lenders. All of the Borrow-
er's obligations and duties under this Agreement and under
each of the other Loan Documents shall be binding upon each
of the Borrower's successors and assigns, including,
without limitation, any receiver, trustee or debtor-in-
possession of or for the Borrower.
8.15. CONSENT TO JURISDICTION; SERVICE OF
PROCESS. Each of the parties hereto agrees that all
disputes among them arising out of, connected with, related
to, or incidental to the relationship established among
them in connection with, this Agreement or any of the other
Loan Documents whether arising in contract, tort, equity,
or otherwise, shall be subject to the non-exclusive
jurisdiction of any state or federal court located in New
York, New York, but the parties hereto acknowledge that any
appeals from those courts may have to be heard by a court
located outside of New York, New York. Each of the parties
hereto waives in all disputes brought pursuant to this
Section 8.15 any objection that it may have to the location
of the court considering the dispute. The Borrower agrees
that the Agent or any Lender shall have the right to
proceed against the Borrower in a court in any location to
enable such Person to (1) obtain personal jurisdiction over
the Borrower or (2) enforce a judgment or other court order
entered in favor of such Person. The Borrower irrevocably
waives any objection (including, without limitation, any
objection of the laying of venue or based on the grounds of
forum non conveniens) which it may now or hereafter have to
the bringing of any such action or proceeding with respect
to this Agreement or any other Loan Document or instrument,
document or agreement executed or delivered in connection
herewith in any jurisdiction set forth above.
8.16.
Counterparts; Effectiveness; Inconsistencies. This
Agreement and any amendments, waivers, consents, or
supplements may be executed in counterparts, each of which
when so executed and delivered shall be deemed an original,
but all such counterparts together shall constitute but one
and the same instrument. This Agreement shall become
effective against each of the Borrower, each Lender and the
Agent on the date when all of such parties have duly
executed and delivered this Agreement to each other
(delivery by the Borrower to the Lenders and by any Lender
to the Borrower and any other Lender being deemed to have
been made by delivery to the Agent). This Agreement and
each of the other Loan Documents shall be construed to the
extent reasonable to be consistent one with the other, but
to the extent that the terms and conditions of this
Agreement are actually inconsistent with the terms and
conditions of any other Loan Document, this Agreement shall
govern.
IN WITNESS WHEREOF, this Agreement has been
duly executed on the date set forth above.
HARNISCHFEGER INDUSTRIES,
INC.,
as the Borrower
By:
----------------------
Name:
Title:
CHEMICAL BANK,
as Agent and as a
Lender
By:
----------------------
Name:
Title:
THIS PAGE INTENTIONALLY LEFT BLANK
THE FIRST NATIONAL BANK OF
CHICAGO,
as a Lender
By:
----------------------
Name:
Title:
ROYAL BANK OF CANADA,
as a Lender
By:
----------------------
Name:
Title:
BANCA COMMERCIALE ITALIANA
- CHICAGO BRANCH,
as a Lender
By:
----------------------
Name:
Title:
By:
----------------------
Name:
Title:
BANCA NAZIONALE DEL LAVORO
SPA
- NEW YORK BRANCH,
as a Lender
By:
----------------------
Name:
Title:
ABN AMRO BANK N.V.,
as a Lender
By:
----------------------
Name:
Title:
COMMERZBANK
AKTIENGESELLSCHAFT,
GRAND CAYMAN BRANCH,
as a Lender
By:
----------------------
Name:
Title:
FIRST BANK NATIONAL
ASSOCIATION,
as a Lender
By:
----------------------
Name:
Title:
THE FIRST NATIONAL BANK OF
BOSTON,
as a Lender
By:
---------------------
Name:
Title:
NBD BANK, N.A.,
as a Lender
By:
----------------------
Name:
Title:
PNC BANK, NATIONAL
ASSOCIATION,
as a Lender
By:
----------------------
Name:
Title:
ISTITUTO BANCARIO SAN PAOLO
DI TORINO S.p.A., as a Lender
By:
----------------------
Name:
Title:
FIRSTAR BANK MILWAUKEE, N.A.
as a Lender
By:
----------------------
Name:
Title:
M & I MARSHALL & ILSLEY BANK,
as a Lender
By:
----------------------
Name:
Title:
THE CHASE MANHATTAN BANK
N.A.,
as a Lender
By:
----------------------
Name:
Title:
EXHIBIT 10(a)
HARNISCHFEGER INDUSTRIES, INC. 1988 INCENTIVE STOCK PLAN
(as amended February 3, 1992)
HARNISCHFEGER INDUSTRIES, INC. I988 INCENTIVE STOCK PLAN
Table of Contents
Article Page
1 Introduction 1
1.1 Plan Name, Effective Date 1
1.2 Purpose 1
1.3 Plan Administrator 2
1.4 Company Shares Reserved for
the Plan 2
2 Administration of the Plan 3
2.1 Plan Administrator 3
2.2 Plan Administrator's Powers 3
2.3 Actions by Plan
Administrator 5
3 Plan Participants 5
3.1 Eligibility 5
3.2 Participation 6
3.3 Grant Date 7
4 Terms and Conditions of Options and
Stock Appreciation Rights 7
4.1 Terms and Conditions of
Options 7
4.2 Terms and Conditions of
Stock Appreciation
Rights 10
4.3 Method of Exercising Options
and Stock Appreciation
Rights 12
5 Terms and Conditions of Restricted
Company Shares 13
5.1 Terms and Conditions of
Restricted Company
Shares 13
5.2 Vesting 14
5.3 Forfeitures 14
5.4 Issuance of Share
Certificates 14
6 General Provisions 15
6.1 Stockholder Rights 15
6.2 Listing, Registration and
Compliance with Laws
and Regulations 15
6.3 Non-Transferability of
Options, Stock
Appreciation Rights,
and Restricted
Company Shares 16
6.4 Adjustments for Changes in
Company Shares 17
6.5 Loan Agreement Restrictions 17
6.6 Indemnification 17
6.7 Withholding of Taxes 18
6.8 No Employment Rights
Conferred 19
6.9 Notice of Early Disposition
of Company Shares 19
6.10 Cancellation of Options 19
6.11 Continued Availability of
Company Shares Under
Unexercised Options and
Forfeited Restricted
Stock Grants 19
6.12 No Strict Construction 20
6.13 Choice of Law 20
6.14 Successors 21
6.15 Severability 21
7 Amendment and Termination 21
7.1 Amendment 21
7.2 Termination 21
HARNISCHFEGER INDUSTRIES, INC. 1988 INCENTIVE STOCK PLAN
ARTICLE 1
Introduction
1.1 Plan Name, Effective Date. Harnischfeger
Industries, Inc. 1988 Incentive Stock Plan (the "Plan") is
established effective February 8, 1988 by Harnischfeger
Industries, Inc. (the "Company").
1.2 Purpose. The purpose of the Plan is to
provide key employees of the Company and its subsidiaries
with additional incentive to increase their efforts on the
Company's behalf and to remain in or enter into the employ
of the Company and its subsidiaries by granting to such
employees from time to time, at the discretion of the plan
administrator:
(a) incentive stock options (within the
meaning of Section 422(b) of the Internal
Revenue Code of 1986, as amended (the "Code"))
to purchase shares of common stock of the
Company ("Company Shares"),
(b) nonqualified stock options (meaning
all options granted under the Plan which are
not designated by the plan administrator at the
time of grant as incentive stock options) to
purchase Company Shares,
(c) stock appreciation rights, but only
in connection with incentive stock options and
nonqualified stock options granted under the
Plan, and
(d) restricted Company Shares, according
to the terms of
Article 5.
By virtue of the benefits available under the Plan,
employees who are responsible for the future growth and
continued success of the Company have an opportunity to
participate in the appreciation in the value of Company
Shares, which furnishes such employees with an additional
incentive to work for and contribute to such appreciation
through the growth and success of the Company.<PAGE>
1.3 Plan Administrator. As provided in Article
2, the Plan is administered by a committee of two or more
members of the Board of Directors of the Company (the "plan
administrator").
1.4 Company Shares Reserved for the Plan.
2,280,000 Company Shares (which may be authorized and
unissued shares or treasury shares and which number is
subject to adjustment as provided in Section 6.4) shall be
reserved for issuance under the Plan, reduced by the sum of
the following: (i) all Company Shares which are purchased
after 1987 upon the exercise of purchase options at any
time granted under the Harnischfeger Industries, Inc. 1978
Incentive Stock Plan (the "1978 Plan") or this Plan, (ii)
all Company Shares for which payment of incremental value
is made after 1987 by reason of the exercise of stock
appreciation rights at any time granted under the 1978 Plan
or this Plan to the extent of a) the Company Shares
received upon such exercise of stock appreciation rights
and b) the number of Company Shares subject to incentive
stock options granted in tandem with any such stock
appreciation rights, (iii) the number of Company Shares
determined by dividing the value of the cash or other
consideration issued by the Company by reason of a
surrender after 1987 of any option by the per share market
value on the surrender date (provided that if a new option
is substituted for a surrendered option, the new option
will (regardless of the exercise price prescribed therein)
be deemed to have a value of zero for purposes of this
clause (iii)) and (iv) the number of restricted Company
Shares granted and not forfeited.
ARTICLE 2
Administration of the Plan
2.1 Plan Administrator. The Plan is
administered by a committee consisting of two or more
directors of the Company appointed by the Board of
Directors of the Company, each of whom has not, during the
one year prior to or during service as an administrator of
the Plan, been granted or awarded equity securities of the
Company pursuant to the Plan or any other plan of the
Company other than a plan meeting the requirements of
paragraphs (c)(2)(i)(A)-(D) of Rule 16b-3 promulgated
pursuant to the Securities Exchange Act of 1934 as amended.
Subject to the foregoing, the Board of Directors of the
Company shall have the power to determine the number of
plan administrative committee members and to change such
number from time to time. The Board of Directors may from
time to time appoint members who qualify under the above
criteria to the plan administrative committee in
substitution for, or (where the number of members has been
increased) in addition to, members previously appointed and
may fill vacancies, however caused. Any plan
administrative committee member may be removed by the Board
of Directors at any time without cause. No individual may
be appointed as a committee member who shall not be a
director of the Company at the time of such appointment.
An individual shall automatically cease to be a plan
administrative committee member at the time such individual
ceases to be a director of the Company.
2.2 Plan Administrator's Powers. Except as
otherwise specifically provided and in addition to the
powers, rights and duties specifically given to the plan
administrator elsewhere in the Plan, the plan administrator
shall have the following powers, rights an duties:
(a) To determine (i) the key employees of
the Company and its subsidiaries to whom
restricted Company Shares, incentive stock
options, nonqualified stock options and stock
appreciation rights shall be granted (provided
that no restricted Company Shares, option or
stock appreciation rights may be granted to an
individual at a time when the individual owns,
or would own after the grant of such Company
Shares or the exercise of such option, stock
possessing more than 10 percent of the total
combined voting power of all classes of stock
of the Company), (ii) the time or times at
which such restricted Company Shares, options
and stock appreciation rights shall be granted
(provided that no restricted Company Shares,
options and no stock appreciation rights may be
granted after January 31, 1998), and (iii) the
number of Company Shares to be granted as
restricted Company Shares or to be covered
under each incentive stock option or
nonqualified stock option and any related stock
appreciation right granted under the Plan.
(b) To establish all of the terms and
conditions governing the rights and obligations
of a key employee with respect to any such
restricted Company Shares, incentive stock
option, nonqualified stock option or stock
appreciation right granted to such employee,
including but not limited to (i) the option
price of Company Shares covered under each such
option or stock appreciation right (which
option price shall not be less than 100 percent
of the fair market value of a Company Share on
the date the applicable option is granted) and
whether upon the exercise of an option such
price may be paid in cash or Company Shares, or
partially in each, (ii) the length of the
period during which an option or stock
appreciation right may be exercised, (iii) the
time or times during each such applicable
period when each option or stock appreciation
right may be partially or fully exercised,
including the power to accelerate the
exercisability of any previously granted option
or stock appreciation right, (iv) whether a
stock appreciation right which has been
exercised shall be partially or fully paid by
the issuance of Company Shares, (v) any
conditions precedent to be satisfied before an
option or a stock appreciation right may be
exercised, (vi) any restrictions on resale of
any Company Shares received as restricted
Company Shares or on exercise of an option or
stock appreciation right and whether the
Company shall have any repurchase rights with
respect to such Company Shares, (vii) the form
of the instruments evidencing any option or
stock appreciation right granted under the Plan
or effecting an exercise by a holder thereof of
any option or stock appreciation right, and the
form of the instruments evidencing the granting
of restricted Company Shares, and (viii) the
vesting schedule applicable to each grant of
restricted Company Shares and whether the
vesting schedule for a restricted Company Share
shall be accelerated at any time.
(c) To construe and interpret the Plan
and the terms of restricted Company Shares,
options and stock appreciation rights granted
under the Plan, to adopt, amend and rescind
such rules and regulations as may be necessary
for the efficient administration of the Plan
and as are consistent with its terms, and to
remedy ambiguities, inconsistencies or
omissions.
Each action taken and decision made by the plan
administrator within the scope of the authority delegated
to it by this Plan or by the Board of Directors shall be
binding and conclusive on all persons interested in the
Plan.
2.3 Actions by Plan Administrator. The plan
administrator shall hold its meetings at such times and
places as it may determine and may make such rules and
regulations for the conduct of its business as it considers
advisable. A majority of the members of the plan
administrative committee shall constitute a quorum and any
action taken by a majority of the members present at a
meeting at which a quorum of members is present shall be
considered an act of the plan administrator. The plan
administrator also may take fully effective actions by a
written instrument signed by a majority of the members of
the plan administrative committee. The plan administrative
committee may select one of its members as its chairman and
may appoint a secretary of the committee (who need not be a
member of the committee).
ARTICLE 3
Plan Participants
3.1 Eligibility. Each key employee of the
Company and its subsidiaries shall be eligible to be
designated by the plan administrator as the recipient of
restricted Company Shares, an incentive stock option or
nonqualified stock option and stock appreciation rights
under the Plan. In making determinations as to the
employees to be granted restricted Company Shares, options
and stock appreciation rights, the plan administrator may
take into account the nature of the services rendered or
expected to be rendered by the respective employees, their
present and potential contributions to the Company's
success, the anticipated number of years of service
remaining and such other factors as the plan administrator
in its discretion considers relevant. The term "key
employee" shall include officers as well as other employees
of the Company and its subsidiaries (including employees
who also are directors of the Company or one of its
subsidiaries) who have managerial, supervisory,
professional, engineering or similar responsibilities.
Neither any member of the plan administrative committee nor
any member of the Board of Directors who is not an employee
of the Company or its subsidiaries shall be eligible to be
granted an option, any stock appreciation rights or
restricted Company Shares under the Plan.
3.2 Participation. The plan administrator may
from time to time grant to key employees restricted Company
Shares, incentive stock options to purchase Company Shares,
nonqualified stock options to purchase Company Shares and,
in addition at its sole discretion, stock appreciation
rights in connection with such incentive stock options or
nonqualified stock options. The plan administrator may
grant more than one restricted Company Share, option or
stock appreciation right to the same key employee. Each
stock appreciation right granted under the Plan must be
granted in connection with all or a portion of an incentive
stock option or nonqualified stock option granted under the
Plan. However, a stock appreciation right may be granted
concurrently with the granting of an option or at any time
thereafter during the term of the option; provided that at
the time of such grant the individual to whom the stock
appreciation right is granted is a key employee of the
Company or of one of its subsidiaries. No restricted
Company Share, option or stock appreciation right may be
granted to any key employee who on the effective date of
the grant is not in the employ of the Company or one of its
subsidiaries. (Key employees who have received grants of
restricted Company Shares or options under the Plan are
sometimes referred to herein as "participants"). The
Company will from time to time grant to such key employees
as may be selected by the plan administrator the restricted
Company Shares, options and stock appreciation rights
designated to be granted by the plan administrator, subject
to the terms and conditions established by the plan
administrator and the terms and conditions herein provided.
3.3 Grant Date. The effective date of the
grant of a restricted Company Share, option or stock
appreciation right (the "grant date") shall be the date
specified by he plan administrator in its determination or
designation relating to the granting of such restricted
Company Shares, option or stock appreciation right:
provided that the plan administrator may not designate a
grant date with respect to any restricted Company Shares,
option or stock appreciation right which is earlier than
the date on which the granting of such share, option or
stock appreciation right is approved by the plan
administrator.
ARTICLE 4
Terms and Conditions of Options and Stock Appreciation
Rights
4.1 Terms and Conditions of Options. As
provided in Section 2.2, options granted under the Plan
shall be in such quantity, at such price, subject to such
terms and conditions and evidenced in such form as shall be
determined from time to time by the plan administrator;
provided that all options shall in any event be subject to
the following terms and conditions:
(a) Option Price. The option price per
Company Share, which may be different in each
case, shall be fixed by the plan administrator
at or before the time the plan administrator
approves the granting of the option.
However, no option shall have an option price
per Company Share of less than 100 percent of
the fair market value of a Company Share on the
grant date of the option. For this purpose
"fair market value" of a Company Share as of
any date shall be determined in such manner as
shall be prescribed in good faith by the plan
administrator; provided that in the absence of
specific instructions by the plan administrator
to the contrary, the fair market value of a
Company Share as of any date shall be equal to
the last per share sales price reported for a
Company Share for such date in The Wall Street
Journal or, if no sales of Company Shares are
reported for such date in The Wall Street
Journal, for the next succeeding date for which
sales of Company Shares are so reported in The
Wall Street Journal.
(b) Term and Exercisability of Options.
The term of each option granted under the Plan
shall be for a period not exceeding ten years
from the grant date, as established by the plan
administrator at or before the time the plan
administrator grants the option. No option
shall be exercisable (i) during the first six
full calendar months commencing on or after the
grant date, (ii) following the exercise of a
stock appreciation right related to such option
(but only to the extent the stock appreciation
right or portion thereof that has been
exercised covered the same Company Shares that
were covered by the option), or (iii) on or
following the tenth anniversary of the grant
date (or any earlier date which is the day
following the last day of the term of the
option). Unless the plan administrator
determines otherwise in the original terms of
an option, and subject to subsection (d) next
below and other applicable provisions of the
Plan, each option shall become exercisable in
accordance with the following table based upon
the number of full calendar months elapsed from
the grant date of the option:
If the Number of The Percentage of
Full Calendar Months Company Shares
Elapsed From the Covered By the
Grant Date Equals Option Shall Be
-------------------- ------------------
Less than 6 months 0
At least 6 months but
less than 18 months 25%
At least 18 months but
less than 30 months 50%
At least 30 months but
less than 42 months 75%
42 months or more 100%
Further, unless the plan administrator
determines otherwise, in the case of a
participant who will reach his "normal
retirement date" (as defined in Harnischfeger
Corporation Salaried Employees Retirement Plan)
less than 42 months from the grant date of an
option, the number of Company Shares which
shall become exercisable at the beginning of
each twelve calendar month period subsequent to
the initial six calendar month period
commencing on or following the grant date shall
be the total number of Company Shares specified
in the option multiplied by a fraction, the
numerator of which is 100% and the denominator
of which is the whole number (but not less than
one) of complete twelve month periods between
the date following such initial six calendar
month period and the participant's normal
retirement date.
(c) Special Incentive Stock Option Terms.
The terms of each incentive stock option
granted under the Plan shall include those
terms which are required by Section 422 of the
Code and such other terms not inconsistent
therewith as the plan administrator may
determine. Each option which is designated by
the plan administrator as an incentive stock
option shall be considered to have contained
from the outset such terms and provisions as
shall be necessary to entitle such intended
incentive stock option to the tax treatment
afforded by the Code to incentive stock options
under Section 422 of the Code. If any
agreement covering such an intended incentive
stock option granted under the Plan does not
explicitly include any terms required to
entitle such intended incentive stock option to
the tax treatment afforded by the Code to
incentive stock options, then all of such
required terms and provisions shall be
considered implicit in such agreement and such
intended incentive stock option shall be
considered to have been granted subject to such
required terms and conditions.
(d) Early Terminations of Options. If a
participant ceases to be employed by the
Company and all of its subsidiaries prior to
the end of the six full months commencing on
the grant date of an option, the option shall
terminate effective as of the date of the
participant's termination of employment and no
portion of the terminated option shall be
exercisable after that date. If a
participant's termination of employment occurs
following the six full months commencing on or
after the grant date of an option the following
shall apply with respect to such option:
(i) Except as provided in (iii) and
(iv) below, the participant shall, during
the three months commencing on his date
of termination of employment, have the
right at his discretion to partially or
fully exercise the unexercised portion of
the option which was exercisable at the
time of his termination of employment.
(ii) If a participant shall die
prior to his termination of employment or
following his termination of employment
but within the three month period
described in subparagraph (i) next above,
the unexercised portion of the option
which was exercisable at the time of the
participant's death may be partially or
fully exercised within the twelve month
period commencing on the date of the
participant's death by the participant's
estate or by any person who has acquired
the right to exercise such option by
bequest or inheritance or by reason of
the laws of descent and distribution.
(iii) If a participant's employment
is terminated by the Company or any of
its subsidiaries for cause, any
unexercised portion of an option granted
to the participant shall terminate
effective as of the participant's date of
termination of employment and no portion
thereof shall be exercisable thereafter.
For this purpose, termination "for cause"
means termination as a result of the
failure of the participant to carry out
the duties assigned to him as a result of
his incompetence, willful neglect or
willful serious misconduct, as determined
by the Company.
(iv) Notwithstanding the foregoing,
the unexercised portion of any option
shall, to the extent permitted by
applicable law, terminate immediately
upon the employment of a participant by a
competitor of the Company or of one of
its subsidiaries.
4.2 Terms and Conditions of Stock Appreciation
Rights. As provided in Section 2.2, stock appreciation
rights granted under the Plan shall be subject to such
terms and conditions and shall be evidenced by agreements
in such form as shall be determined from time to time by
the plan administrator. In general (i) stock appreciation
rights shall be exercisable at such time or times and to
the extent that the incentive stock option or nonqualified
stock option, or portion thereof, to which the stock
appreciation right is related is exercisable, and (ii) upon
the termination, exercise or expiration of an option or
portion thereof to which a stock appreciation right is
related, such stock appreciation right shall terminate and
shall not thereafter be exercisable. However,
notwithstanding that the option or portion thereof related
to a stock appreciation right may be exercisable, each
stock appreciation right may be exercised only during a
window period (as described below), a stock appreciation
right may not be exercised until after the end of the six
full calendar months commencing on or after the date such
stock appreciation right is granted (except that this
limitation shall not apply in the case of the death or
disability of a participant if the option or portion
thereof to which the stock appreciation right is related is
exercisable) and a stock appreciation right related to an
incentive stock option shall not be exercisable on any date
on which the fair market value of a Company Share is less
than the option price provided for in the related incentive
stock option. A stock appreciation right granted to a
participant shall entitle the participant upon his exercise
of such right to surrender the related option or portion
thereof and receive an amount (herein called the
"incremental value") equal to the excess of the fair market
value on the date of such exercise of the Company Shares
subject to such surrendered option or portion thereof over
the option price of such Company Shares as provided in such
option. The incremental value shall be paid by the Company
all in cash, all in Company Shares or in any combination of
cash and Company Shares, as the plan administrator shall
determine in its sole discretion, which determination shall
be made after considering any preference expressed by the
participant exercising the stock appreciation right. Any
participant who wishes to express such a preference shall
notify the plan administrator in writing of his preference
and, if such participant expresses a preference to receive
cash in whole or in part, such writing shall be delivered
to the Company, in care of the plan administrator, during
the period (hereinafter the "window period") beginning on
the third business day following the date of release for
publication of an annual or quarterly summary statement of
the sales and earnings of the Company and its consolidated
subsidiaries and ending on the twelfth business day
following such date. In the event a participant does not
duly notify the plan administrator of any preference, and
in the absence of any express determination by the plan
administrator to the contrary, each payment of incremental
value which shall become due by reason of any exercise of a
stock appreciation right shall be made in cash. In the
event any Company Shares shall be delivered to satisfy all
or any part of any incremental value obligation arising by
reason of any exercise of a stock appreciation right, the
dollar amount of such obligation satisfied by such delivery
of Company Shares shall be considered to be equal to the
fair market value of a Company Share as of the date of
exercise multiplied by the number of Company Shares
delivered. No fractional Company Shares shall be issued to
make any payment of incremental value, and the cash and
Company Shares payable in each case shall be adjusted in
such manner as shall be prescribed by the plan
administrator to avoid the issuance of any fractional
Company Shares. Upon exercise of a stock appreciation
right and surrender of the related option or portion
thereof, such option, to the extent surrendered, shall be
considered to have been exercised and shall not thereafter
be exercisable, and to the extent Company Shares covered
under the option have not been used to pay the incremental
value, such Company Shares shall no longer be reserved
under the Plan.
4.3 Method of Exercising Options and Stock
Appreciation Rights. An option shall be exercised by a
written notice to the plan administrator and payment of the
option price to the Company, in care of the plan
administrator. Payment of the option price may be made, at
the discretion of the optionee, (i) in cash (including
check, bank draft, or money order, (ii) by delivery of
Company Shares (valued at the fair market value thereof on
the date of exercise) or (iii) by delivery of a combination
of cash and common stock provided, however, that the plan
administration may, in any instance, in order to prevent
any possible violation of law, require the option price to
be paid in cash and further provided that the right to
deliver Company Shares in payment of the option price may
be limited or denied in any option agreement. A stock
appreciation right shall be exercised by written notice to
the plan administrator at such time as is permitted in
accordance with the provisions of Section 4.2 and by
surrender of the option or portion thereof to which the
stock appreciation right relates. At the time or exercise
of an option or stock appreciation right a participant may
request that Company Shares to be issued with respect to
the exercise of the option or which may be issued with
respect to the exercise of the stock appreciation right be
issued in the name of the participant and another person
jointly with right of survivorship.
ARTICLE 5
Terms and Conditions of Restricted Company Shares
5.1 Terms and Conditions of Restricted Company
Shares. As provided in Section 2.2, Company Shares granted
under the Plan shall be subject to such terms, conditions
and restrictions, and shall be evidenced by such agreements
as shall be determined from time to time by the plan
administrator. All grants of Company Shares shall in any
event be subject to the following terms, conditions and
restrictions:
(a) The purchase price, if any, will be
determined by the plan administrator.
(b) Restricted Company Shares may be
subject to restrictions on the sale or other
disposition thereof, rights of the Company to
reacquire such restricted Company Shares at the
purchase price, if any, originally paid
therefor upon termination of the employee's
employment within specified periods,
representation by the employee that he or she
intends to acquire restricted Company Shares
for investment and not for resale, and such
other restrictions, conditions and terms as the
plan administrator deems appropriate.
(c) The participant shall be entitled to
all dividends paid with respect to restricted
Company Shares during the period of restriction
and shall not be required to return any such
dividends to the Company in the event of the
forfeiture of the restricted Company Shares.
(d) The participant shall be entitled to
vote the restricted Company Shares during
the period of restriction.
(e) The plan administrator shall
determine whether restricted Company Shares are
to be delivered to the participant with an
appropriate legend imprinted on the certificate
or if the shares are to be deposited in escrow
pending removal of the restrictions.
5.2 Vesting. Each participant shall be vested
in the Company Shares granted under this Article 5
according to such schedule and such performance factors
affecting vesting as the plan administrator determines at
the time of grant. As provided in Section 2.2, the plan
administrator shall have the power to accelerate the
vesting schedule. Whenever the term "vested" or "fully
vested" are used in this Plan with reference to restricted
Company Shares, the meaning of those terms shall be
determined by reference to the vesting schedule.
5.3 Forfeitures. If a participant terminates
employment before his Company Shares are vested or before
fulfillment of the applicable performance factors, the
participant shall forfeit such Company Shares under terms
established by the plan administrator and they shall again
be available for issuance under Section 1.4.
5.4 Issuance of Share Certificates. Share
certificates for the number of restricted Company Shares
granted will be issued in the name of each participant at
the time of grant and shall be delivered pursuant to
subsection 5.1(e). A participant may request that Company
Shares be issued in the name of the participant and another
person jointly with right of survivorship.
ARTICLE 6
General Provisions
6.1 Stockholder Rights. A participant shall
not have any dividend, voting or other stockholder rights
by reason of a grant of an option or a grant of a stock
appreciation right prior to the issuance of any Company
Shares pursuant to the proper exercise of all or any
portion of such option or stock appreciation right. A
participant shall have dividend, voting and other
stockholder rights with respect to restricted Company
Shares except as provided in Section 6.3 or otherwise
provided at the time of grant.
6.2 Listing, Registration and Compliance with
Laws and Regulations. Each restricted Company Share,
option and stock appreciation right granted to a
participant shall be subject to the condition that the
Company shall not be obligated to issue any Company Shares
to the participant regardless of whether such participant
attempts to exercise or has exercised the option or stock
appreciation right, in whole or in part, if at any time the
Board of Directors shall determine, in its discretion, that
the listing, registration or qualification of Company
Shares subject to such grant, option or stock appreciation
right upon any securities exchange or under any state or
federal law, or the consent or approval of any governmental
regulatory body, is necessary or desirable as a condition
or, or in connection with, the granting of such restricted
Company Share, option or stock appreciation right or the
issue or purchase of Company Shares thereunder unless such
listing, registration, qualification, consent or approval
shall have been effected or obtained free of any conditions
not acceptable to the Board of Directors. The Company
shall not by reason of the granting of any restricted
Company Share, option or stock appreciation right under
this Plan have any obligation to register the Company
Shares subject to such option under the Securities Act of
1933, as amended, or to maintain in effect any registration
of such Company Shares which may be made at any time under
such Act. In this connection, the form of restricted
Company Share, stock option and stock appreciation right
agreements to be used under the Plan may provide, among
other things, that a participant shall represent that all
Company Shares are being purchased for investment and not
with a view to resale in connection with a distribution of
such Company Shares.
6.3 Non-transferability of Options, Stock
Appreciation Rights and Restricted Company Shares. During
a participant's lifetime any option or stock appreciation
right granted under the Plan shall be exercisable only by
the participant and shall not be transferred (except by
will or the laws of descent and distribution or pursuant to
a qualified domestic relations order as defined by the Code
or Title I of the Employee Retirement Income Security Act,
or the rules thereunder), pledged or hypothecated in any
way and shall not be subject to execution, attachment or
similar process. Upon any attempt to transfer, assign,
pledge, hypothecate or otherwise dispose of an option or
stock appreciation right, contrary to the provisions
hereof, or upon the levy of any attachment or similar
process upon the rights and privileges conferred hereby,
such option or stock appreciation right shall immediately
become null and void. Company Shares granted under the
provisions of Article 5 shall not be transferred until such
Shares have become fully vested and nonforfeitable, and any
attempt to sell, assign, pledge, hypothecate or otherwise
encumber such Shares shall result in their forfeiture
according to the terms of Section 5.3.
6.4 Adjustments for Changes in Company Shares.
In order to prevent dilution or enlargement of restricted
Company Shares, options or stock appreciation rights, in
the event of a reorganization, recapitalization, stock
split, stock dividend, combination of shares, merger,
consolidation or other change in Company Shares, the Board
of Directors shall make appropriate changes in the
aggregate number and type of Company Shares reserved for
grant as restricted Company Shares, options and stock
appreciation rights under this Plan, in the number and type
of Company Shares subject to grant as restricted Company
Shares and subject to unexercised options and stock
appreciation rights, in the option price per Company Share
specified in unexercised options and in stock appreciation
rights relating to unexercised options.
6.5 Loan Agreement Restrictions. Each option
and stock appreciation right shall be subject to the
condition that the Company shall not be obliged to (i)
issue any Company Shares to a participant, regardless of
whether such participant attempts to exercise or has
exercised an option or stock appreciation right, in whole
or in part, or (ii) make any payment to a participant upon
the surrender of a stock appreciation right, if at any time
the Board of Directors shall determine, in its discretion,
that the issuance of such Company Shares or the payment of
cash would be in violation of any covenant contained in any
of the Company's loan agreements or other contracts, as now
or from time to time hereafter in effect.
6.6 Indemnification. No member of the plan
administrative committee shall be liable, in the absence of
bad faith, for any act or omission with respect to his
service on the committee relating to the Plan. Service on
the plan administrative committee shall constitute service
as a director of the Company so that members of the plan
administrative committee shall be entitled to
indemnification and reimbursement as directors of the
Company to the full extent provided for at any time by law,
the Company's Certificate of Incorporation, the Company's
By-Laws and in any insurance policy or other agreement
intended for the benefit of the Company's directors.
6.7 Withholding of Taxes. The Company shall be
entitled, if the plan administrator considers it necessary
or desirable, to withhold (in cash or Company Shares), or
secure payment from the participant in lieu of withholding,
the amount of any withholding or other payment required of
the Company under the tax withholding provisions of the
Code, any state's income tax act or any other applicable
law with respect to any amount payable and Company Shares
issuable under such participant's exercised options or
stock appreciation rights or as restricted Company Shares,
provided, however, that with respect to any Section 16
Officer (as defined below) any decision by the Company to
withhold Company Shares and any withholding of Company
Shares by the Company from a Section 16 Officer shall only
be made during a window period and provided further that no
Company Shares shall be withheld under the provisions of
this Section 6.7 that are issuable under options, stock
appreciation rights or restricted stock granted to the
Section 16 Officer less than six months before the date
either the decision to withhold or the withholding is to
take place. A Section 16 Officer is a participant who is
or at any time during the prior six months has been
designated by the Company as a Section 16 Officer for
purposes of Section 16 of the Securities Exchange Act of
1934. Subject to the discretion of the Company, no
distribution will be made to the participant until all tax
withholding obligations have been satisfied and, if Company
Shares are withheld pursuant to this Section 6.7, until the
window period during which the Company Shares are withheld.
6.8 No Employment Rights Conferred. Nothing in
the Plan or in any option, stock appreciation right or
restricted Company Share granted under the Plan shall
confer any right on an employee to continue in the employ
of the Company or any subsidiary or shall interfere in any
way with the right of the Company or any subsidiary at any
time to terminate his employment with or without cause or
to adjust his compensation.
6.9 Notice of Early Disposition of Company
Shares. As a condition of participation in the Plan each
participant agrees that he will give prompt notice to the
plan administrator of any disposition of Company Shares
acquired upon the exercise of an incentive stock option if
such disposition occurs within either two years after the
grant date of an incentive stock option or one year after
the receipt of such Company Shares by the participant
following his exercise of the incentive stock option.
6.10 Cancellation of Options. By express
written agreement a participant and the plan administrator
may agree that any previously granted option is thereby
canceled as of the date of the agreement and, at its
discretion, the plan administrator may subsequently grant
to such a participant who has voluntarily surrendered and
canceled a prior option one or more new or substitute
similar or different options under the plan.
6.11 Continued Availability of Company Shares
Under Unexercised Options and Forfeited Restricted Stock
Grants. If an option granted under the Plan terminates or
expires without being wholly exercised, if Company Shares
as to which an option has been exercised shall for any
reason not be issued, or if restricted Company Shares are
forfeited, restricted Company Shares or a new option (and
at the discretion of the plan administrator a related stock
appreciation right) may be granted under the Plan covering
the number of Company Shares to which such termination,
expiration, forfeiture, failure to issue or reacquisition
relates; provided, however, that to the extent Company
Shares are issued in connection with the exercise of a
stock appreciation right or a stock appreciation right
granted in connection with an incentive stock option is
exercised, the related option shall, solely for purposes of
determining the total number of Company Shares available
for grant under the Plan, be deemed to have been exercised,
and the Company Shares issued upon the exercise of such
stock appreciation right or which otherwise would have been
issued upon the exercise of an incentive stock option
related to such stock appreciation right shall not
thereafter be available for any further grants under the
Plan.
6.12 No Strict Construction. No rule of strict
construction shall be applied against the Company, the plan
administrator or any other person in the interpretation of
any of the terms of the plan, any option agreement or stock
appreciation right agreement or restricted Company Share
agreement, any option or stock appreciation right or
restricted Company Share granted under the plan or any rule
or procedure established by the plan administrator.
6.13 Choice of Law. Each option, stock
appreciation right, and restricted Company Share granted
under the Plan shall be considered to be a contract under
the laws of the State of Wisconsin and, for all purposes,
the Plan and each option, stock appreciation right, and
restricted Company Share granted under the Plan shall be
construed in accordance with and governed by the laws of
the State of Wisconsin.
6.14 Successors. This Plan is binding on and
will inure to the benefit of any successor to the Company,
whether by way of merger, consolidation, purchase or
otherwise.
6.15 Severability. If any provision of the
Plan or an option or stock appreciation right or restricted
Company Share agreement shall be held illegal or invalid
for any reason, such illegality or invalidity shall not
affect the remaining provisions of the Plan or such
agreement, and the Plan and such agreement shall each be
construed and enforced as if the invalid provisions had
never been set forth therein.
ARTICLE 7
Amendment and Termination
7.1 Amendment. The Board of Directors may
amend the Plan from time to time, in its sole discretion,
but no amendment shall:
(a) without a participant's consent
impair his rights to any option or stock
appreciation right or restricted Company Share
theretofore granted; or
(b) without the authorization and
approval of the Company's stockholders (i)
increase the maximum number of Company Shares
which may be issued in the aggregate under the
Plan, except as provided in Section 6.4, (ii)
extend the termination date of the Plan or of
any option or stock appreciation right granted
under the Plan, or (iii) enlarge the class of
employees eligible to receive options or stock
appreciation rights or restricted Company
Shares under the Plan.
7.2 Termination. The Board of Directors may
terminate the Plan at any time with respect to Company
Shares which have not theretofore been granted or for which
options have not theretofore been granted. Unless earlier
terminated, the Pan will terminate at the close of business
on January 31, 1998. Following the termination of the
Plan, all options or stock appreciation rights which prior
to the Plan termination have not expired, terminated or
been exercised or surrendered may be exercised in
accordance with their terms and the terms hereof, all
restricted Company Shares which have been granted may vest
or be forfeited in accordance with the terms of their grant
and the terms hereof, and the plan administrator shall
continue to have its full powers under the Plan, except
with respect to the granting of restricted Company Shares,
options or stock appreciation rights under the Plan.
Exhibit 10(c)
FIRST AMENDMENT
OF
HARNISCHFEGER INDUSTRIES DEFERRED COMPENSATION TRUST
WHEREAS, Harnischfeger Industries, Inc. (the
"company") maintains Harnischfeger Industries Deferred
Compensation Trust (the "trust"); and
WHEREAS, amendment of the trust now is
considered desirable;
NOW, THEREFORE, by virtue and in exercise of
the power reserved to the company by paragraph 10.1 of the
trust, the trust be and hereby is amended, effective
December 19, 1990, in the following particulars:
1. By substituting for subparagraphs 1.1(f),
(g) and (h) of the trust the following:
"(f) 'Company Shares' means shares of
common stock of the Company.
(g) 'Government Securities' means
obligations of, or guaranteed as to principal
and interest by, the United State Government.
(h) 'Participant' means any participant
in a Plan.
(i) 'Permitted Investments' means:
Company Shares; Government Securities; taxable
corporate commercial paper, having at the date
of investment a rating of at least A1/P1 from
either Standard & Poor's Corporation or Moody's
Investors Service, Inc. (or, in either case,
its successor); certificates of deposit of
banks or trust companies having a long-term
debt rating of at least AA/Aa from either
Standard & Poor's or Moody's; money market
mutual funds or common trust funds or other
collective investment funds maintained by the
Trustee for trust investment purposes which are
invested entirely or substantially entirely in
investments of the foregoing kinds with average
daily maturities of less than forty-five days;
and such other investments, if any, as may
hereafter be approved from time to time by the
Committee as 'Permitted Investments'."
2. By substituting for subparagraph 2.2(b)
of the trust the following:
"(b) The Company shall transfer to the
Trustee from time to time cash or Company
shares in such amounts as it considers
desirable."
3. By adding the following two sentences at
the end of paragraph 4.1 of the Trust as a part thereof:
"Notwithstanding the foregoing, the Trustee
shall continue to invest in and hold Company Shares
which have been contributed to the Trust by the
Company until such time as the Trustee is directed by
the Committee to distribute or otherwise dispose of
such Company Shares. All dividends or other
distributions received by the Trustee with respect to
Company Shares shall be reinvested by the Trustee in
Company Shares unless otherwise directed by the
Committee."
4. By substituting for subparagraph 4.3(b)
of the trust the following:
"(b) To vote Company Shares personally
or by proxy in accordance with the directions
of Participants in the Plans who have benefits
under the Plans denominated in Company Shares,
and for this purpose each such Participant may
instruct the Trustee as to the voting of that
number of Company Shares reflected by the whole
number of Company Shares held by the Trustee
hereunder multiplied by a fraction, the
numerator of which is the total number of
Company Shares representing the Participant's
benefits under the Plans denominated in Company
Shares and the denominator of which is the
total number of Company Shares representing all
participant's benefits denominated in the
Company Shares under the Plans. All Company
Shares as to which the Trustee does not receive
voting instructions as specified above shall be
voted by the Trustee proportionately in the
same manner as it votes Company Shares as to
which the Trustee has received voting
instructions as specified above."
5. By substituting for subparagraph 5.2(b)
of the trust the following:
"(b) if at any time there shall be on
deposit with the Trustee Government Securities
and cash (which for this purpose includes money
market funds or certificates of deposit) which
the Committee certifies to the Trustee to be
sufficient, taking into account the respective
maturities of any such Government Securities
and assuming no reinvestment of any of the
proceeds thereof or of any such cash, to
provide for the payment of all amounts payable
under the Plans in cash at the times such
amounts are payable under the Plans plus
Company Shares which the Committee certifies to
the Trustee to be sufficient to provide for the
payment of all amounts payable under the Plans
in Company Shares, and the Committee so advises
the Trustee, the Trustee shall, if so directed
by the Committee, return all other assets of
the Trust Fund to the Company; and"
IN WITNESS WHEREOF, the company has caused this
amendment to be executed on its behalf by the undersigned
duly authorized members of its Management Policy Committee,
this 19th day of December, 1990.
HARNISCHFEGER INDUSTRIES, INC.
/s/ Jeffery T. Grade
--------------------------------
/s/ Francis M. Corby, Jr.
--------------------------------
/s/ John R. Teitgen
--------------------------------
As members of the Management
Policy Committee of
Harnischfeger Industries, Inc.
The undersigned, as Trustee under Harnischfeger
Industries Deferred Compensation Trust, hereby acknowledges
receipt of an executed copy of the foregoing amendment, and
consents thereto to the extent it applies to the
undersigned as Trustee, this 28th day of December, 1990.
MARSHALL AND ILSLEY TRUST COMPANY,
as Trustee
By /s/ James L. Neubauer
----------------------------------
Its Vice President
ATTEST:
/s/ Steven P. Palmer
- ------------------------
Its Vice President
Corporate Seal
Exhibit 10(m)
KEY EXECUTIVE
EMPLOYMENT AND SEVERANCE
AGREEMENT
(Restated)
This Agreement is made and entered into as of March
2, 1992 between K. Thor Lundgren ("Executive") and
Harnischfeger Industries, Inc., a Delaware Corporation
("Company").
W I T N E S S E T H :
WHEREAS, Executive possesses legal and business
acumen and experience which are deemed vital by the Company
and the Company desires to employ Executive as a member of
its senior management team and to ensure that Executive
will continue to make available his skills and experience
to the Company;
WHEREAS, Executive forfeited substantial current
benefits and future opportunities to accept the Company's
offer of employment;
WHEREAS, the Company has determined it is in the best
interests of the Company and its stockholders to assure
that Executive is in a position to objectively evaluate all
proposals for acquisition of the Company (recognizing that
no such proposal is pending) and has determined this
Agreement, including the severance provisions, will assure
such independent evaluation;
WHEREAS, the Company recognizes the need to provide a
level of compensation and relative security that is
competitive with that of other publicly held companies and
which provides the necessary economic and performance
incentives that will be of benefit to Company stockholders
in the long term; and
WHEREAS, in the event that Executive's position is
eliminated or his employment is terminated as a result of
an acquisition of the Company it would be difficult to
calculate the losses and detriment which would be incurred
by Executive in such circumstances:
In consideration of each of the specific premises set
forth above and in further consideration of the mutual
agreements set forth herein, the parties agree as follows:
1. Employment by the Company of Executive and
Acceptance by Executive. The Company hereby employs
Executive during the term of this Agreement in such
capacities and upon such conditions concerning rates of
compensation, benefits and other matters as are hereinafter
stated. Executive hereby accepts such employment and
agrees faithfully, diligently and to the best of his
ability to discharge the responsibilities of the offices
which he shall, as provided herein, occupy.
2. Capacity. Executive shall be employed by the
Company during the term of this Agreement as Senior Vice
President, Secretary and General Counsel, with such duties,
functions, responsibilities and authority which are
commensurate with and appropriate for such position and as
are from time-to-time set forth in the Bylaws of the
Company and otherwise delegated to Executive by the Chief
Executive Officer and the Board of Directors of the
Company; provided that such duties, functions and
responsibilities shall not be materially changed, without
Executive's consent, from such duties, functions and
responsibilities as are currently performed and enjoyed by
Executive. Executive shall be a full-time employee of the
Company and shall devote his best efforts to the
performance and fulfillment of such duties, functions and
responsibilities; provided that Executive shall be
permitted such vacations and other time off as are
consistent with his position and period of service and the
general rules and practices of the Company in that regard,
it being understood for this purpose that such rules and
practices shall not be materially less favorable to
Executive than those presently in effect.
3. Place of Employment; Moving. While it is
recognized that the performance of Executive's duties
hereunder will occasionally require Executive to travel on
behalf of the Company, the principal office of Executive
and the principal place for performance by him of his
services hereunder shall be in the Milwaukee, Wisconsin
metropolitan area, and Executive shall not, without his
consent, be required to perform the principal portion of
his services hereunder outside of such area. However, the
Company may require from time-to-time that Executive
perform such services outside the Milwaukee, Wisconsin
metropolitan area as are required for the proper
performance by him of his duties during any reasonable
period or periods, but, unless the consent of Executive is
obtained, such periods shall not exceed in the aggregate
two months during any twelve-month period. If Executive
shall consent to carry out his duties hereunder at some
place other than the Milwaukee, Wisconsin metropolitan
area, and, as a result thereof, it shall be or become
necessary for Executive to move his place of residence, the
Company shall reimburse Executive under the terms of the
Company's employee relocation assistance plan in effect as
of the date of this Agreement or, if more favorable to
Executive, under the terms of any such practice adopted by
the Company in the future.
4. Term. Subject to the other provisions of this
Agreement, the term of this Agreement and Executive's
employment hereunder shall be deemed to have commenced on
the date of this Agreement and shall continue for a period
of three years thereafter, or, if earlier, until Executive
reaches age 65 or until his death or Disability (as
hereafter defined), whichever occurs first. Subject to the
other provisions of this Agreement, commencing on the first
anniversary of this Agreement and on each anniversary
thereafter, the term of this Agreement and Executive's
employment hereunder shall, unless Executive has reached
age 62 or died or become "Disabled" (as hereinafter
defined) before such date, be automatically extended for a
period of one additional year unless at least thirty days
prior to such date Executive shall notify the Company in
writing that Executive does not extend the term of this
Agreement or the Company notifies Executive that, for Cause
(as hereafter defined), the Company does not extend the
term of this Agreement, which notice shall be in writing
and set forth the grounds for Cause. Notwithstanding the
foregoing but subject to Executive's right to terminate his
employment for Good Reason (as hereafter defined), in the
event of a Potential Change in Control (as hereafter
defined) or a Change in Control (as hereafter defined)
Executive will not terminate employment with the Company
until the earliest of (i) a date which is twelve months
from the occurrence of such Potential Change in Control,
(ii) the termination of Executive's employment due to
Disability or retirement at age 65 or (iii) a date which is
twelve months from the occurrence of such Change in
Control. In the event of a Change In Control, the term of
this Agreement shall be extended for three years from the
date of such Change In Control and there shall be no
further extension of the term. The provisions of this
Agreement, if extended, shall be identical to those of this
Agreement as in effect immediately prior to such extension
except that the annual base salary provided for herein
shall be equal to the annual rate of base salary currently
being paid to Executive immediately preceding the date on
which such extension becomes effective.
5. Change in Control. One or more of the following
shall constitute and be defined as a "Change In Control":
(a) a change in control or other transaction
or matters which are of a nature that any of them would be
required to be reported in response to subparagraphs (i),
(iv) or (v) of the first paragraph of Item 14 of Schedule
14A or Regulation 14a-101 (as now in effect or as amended)
promulgated under Section 14 of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), whether or not
the Company is then subject to such reporting requirement;
or
(b) a change in control or other transactions
or matters which are of a nature that any of them would be
required to be reported in response to Item 5 of Schedule
14D-1 of Regulation 14d-100 (as now in effect or as
amended) promulgated under Section 14 of the Exchange Act,
whether or not the Company is then subject to such a
reporting requirement; or
(c) if any Person (including a person as
defined in Section 3(a)(9), Section 13 (d) or Section 14(d)
of the Exchange Act) is or becomes the Beneficial Owner,
directly or indirectly, of securities of the Company
representing twenty-five percent (25%) or more of the
combined voting power of the Company's then outstanding
securities (the term Beneficial Owner as used herein shall
include but not be limited to any person with the
attributes or interests described in Rule 13d-3 (as now in
effect or as amended) promulgated under the Exchange Act);
or
(d) during any period of two (2) consecutive
years (not including any period prior to the execution of
this Agreement) there shall cease to be a majority of the
Company's Board of Directors comprised as follows:
individuals who at the beginning of such period constitute
the Board and any new director(s) whose election by the
Board or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds
( ) of the directors who either were directors at the
beginning of the period or whose election or nomination for
election was previously so approved; or
(e) (i) the shareholders of the Company
approve a merger, consolidation or other combination of the
Company with any other corporation or entity, other than a
merger, consolidation or other combination which would
result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either
by remaining outstanding or by being converted into voting
securities of the surviving entity) at least 80% of the
combined voting power of the voting securities of the
Company or such surviving entity outstanding immediately
after such merger, consolidation or combination or (ii) the
shareholders of the Company approve a plan of liquidation
of the Company or an agreement for the sale, disposition or
transfer by the Company of all or substantially all the
Company's assets.
6. Potential Change In Control. One or more of the
following shall constitute and be defined as a "Potential
Change In Control":
(a) the Company enters into an agreement, the
consummation of which would result in the occurrence of a
Change In Control; or
(b) any Person (other than a trustee or other
fiduciary holding securities under an employee benefit plan
of the Company or a corporation owned, directly or
indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of
stock of the Company) who is or becomes the Beneficial
Owner, directly or indirectly, of securities of the Company
representing 9.5% or more of the combined voting power of
the Company's then outstanding securities, increases his
beneficial ownership of such securities by 5% or more over
the percentage so owned by such Person; or
(c) the Board of Directors adopts a resolution
to the effect that, for purposes of this Agreement, a
Potential Change In Control has occurred.
For all purposes of this Agreement, if the facts
giving rise to a Potential Change in Control cease to exist
without any Change in Control having occurred, the
provisions of this Agreement which are triggered by such
Potential Change in Control shall no longer be effective
unless another Potential Change in Control or any Change in
Control occurs.
7. Salary Compensation. As salary compensation to
Executive for his performance of the services to be
rendered hereunder and for his acceptance of the
responsibilities described herein and for his performance
of all the usual obligations of employment, the Company
agrees to pay or cause to be paid to Executive, and
Executive agrees to accept, during the term of this
Agreement an annual base salary of not less than
$__________ per year or such greater amount as the Board of
Directors may from time-to-time determine, payable in equal
semi-monthly installments. At least annually the Board of
Directors of the Company or the Human Resources Committee
or such other committee to which the Company may have
delegated such authority, shall review such base salary to
determine whether it should be increased on the basis of
Executive's performance, that of the Company, or other
circumstances then prevailing. The results of each review
shall be communicated to and discussed with Executive by
the Board of Directors or such Committee.
8. Bonus and Incentive Compensation. In addition to
the salary compensation payable to Executive as provided in
par. 7 hereof, Executive shall be entitled during the term
of this Agreement to receive such bonus and incentive
compensation each year as may be awarded in the discretion
of the Human Resources Committee (or other appropriate
committee) of the Board of Directors of the Company
pursuant to the Company's bonus, incentive compensation and
similar plans as are presently in effect or as may
hereafter be adopted or amended.
8A. Salary, Bonus and Other Compensation Following a
Change in Control. Upon the occurrence of a Change in
Control Executive shall be entitled, at a minimum, to the
following in each year that Executive remains employed by
the Company: (a) an annual base salary of no less than
that paid immediately prior to such Change in Control plus
a minimum annual salary increase, on each anniversary of
this Agreement, equal to the cumulative change in the
Consumer Price Index; (b) bonus and incentive compensation
(including both cash and stock components) each year of no
less than the greater of (i) the amount of bonus and
incentive compensation received in the year immediately
prior to such Change in Control or (ii) in the event
Executive was promised or led to expect bonus and/or
incentive compensation under any plans based upon the
achievement of financial, operating or personal targets or
goals, the amount that would have been payable to Executive
as if such targets or goals were met for the year in
question ("Par Bonus"); (c) pension benefits, supplemental
retirement benefits, deferred compensation and salaried
continuation plans, incentive stock awards, stock option
plans, medical, health, life, accident and disability
insurance plans and programs, auto and business expense
reimbursements, vacations and other benefits of not less
than the type and amount paid or granted to Executive
immediately prior to such Change in Control; (d) office
space and secretarial services equivalent to those existing
immediately prior to such Change in Control.
9. Further Benefits. In addition to the
compensation provided in par. 7 and par. 8 hereof,
Executive shall, during the term of this Agreement (and
thereafter to the extent provided herein), be covered by
all applicable pension and retirement plans, insurance and
death benefits in effect for all salaried employees,
together with any future improvements in such plans and
benefits. In addition, Executive shall be entitled during
the term of this Agreement, and thereafter to the extent
provided for herein or in any such plan, to receive such
other and further benefits, including, without limitation,
benefits under stock option plans, supplemental retirement
plans, performance unit plans, deferred compensation and
salary continuation plans, medical, health, life, accident
and disability insurance programs, pension benefits,
vacations, expense reimbursements and any and all other
benefits as shall be generally made applicable to key
executive employees of the Company, and such additional
benefits, as may be granted to him from time-to-time by the
Board of Directors of the Company or the appropriate
committee thereof.
10. Covenant Against Competition. Executive agrees
that at all times during the term of this Agreement and for
a period of one year following the date on which
Executive's employment is terminated, Executive will not,
without the prior written approval of the Board of
Directors of the Company, directly or indirectly, as owner,
partner, officer or employee, engage in any business which
is substantially competitive with any business then
actively conducted by the Company or by any of its
subsidiaries, or undertake to consult with or advise any
such competitive business, or otherwise, directly or
indirectly, engage in any activity which is substantially
competitive with or in any way adversely and substantially
affecting any activity of the Company or any of its
subsidiaries, provided, however, that ownership by
Executive of not more than 5% of the outstanding shares of
stock of any such business listed on any national stock
exchange or quoted on an automated quotation system, or of
not more than 15% of the stock of any such business not so
listed or quoted, shall not be deemed a violation of this
covenant.
11. Confidentiality and Proprietary Information.
Executive agrees to be bound by the provisions of the
Employee Proprietary Rights and Confidentiality Agreement
attached hereto as Exhibit "A" and incorporated herein.
The provisions of such agreement supplement and are in
addition to Executive's obligations under this Agreement.
12. Certain Remedies. If Executive commits a
breach or threatens to commit a breach of any of the
provisions of par. 10 hereof or the agreement described in
par. 11, the Company shall have the right and remedy, in
addition to any other remedy that may be available, at law
or in equity, to have the provisions of par. 10 and the
agreement described in par. 11 specifically enforced by any
court having equity jurisdiction together with an
accounting for any damages sustained, it being acknowledged
and agreed that any such breach or threatened breach will
cause irreparable injury to the Company and that money
damages will not provide an adequate remedy to the Company.
Such an injunction shall be available without the posting
of any bond or other security, and Executive hereby
consents to the issuance of such injunction.
If any covenant contained in par. 10 or the agreement
described in par. 11 or any part thereof, is hereafter
construed to be invalid or unenforceable, the same shall
not affect the remainder of the covenant or covenants,
which shall be given full effect, without regard to the
invalid portions, and any court having jurisdiction shall
have the power to reduce the duration and/or area of such
covenant and, in its reduced form, said covenant shall then
be enforceable.
13. Disability. Employee shall be considered
"Disabled" (or a "Disability" shall have occurred) in the
event Executive is unable to perform his services under
this Agreement for a continuous period of six months by
reason of his physical or mental illness or incapacity. If
there is any dispute as to whether Executive is or was
physically or mentally unable to perform his duties under
this Agreement, such question shall be submitted to a
licensed physician agreed to by Executive (or any legal
guardian lawfully appointed) and the Company, or, if they
are unable to so agree, appointed by the President of the
Medical Society of Milwaukee County, Wisconsin at the
request of either Executive (or such guardian) or the
Company. Executive shall submit to such examinations and
provide such information as such physician may reasonably
request and the determination of such physician as to
Executive's physical or mental condition shall be binding
and conclusive upon Executive and the Company. If
Executive shall become Disabled, in lieu of any further
salary or other compensation provided for in par. 7 and
par. 8 hereof (except to the extent that such salary or
other compensation was earned but not paid prior to
Disability), the Company shall thereafter pay to Executive
the benefits under the Company's short-term disability plan
as long as applicable and then the Company's long-term
disability plan in effect at the date of this Agreement,
together with any improvements in said plans in the future
which provide additional or more favorable benefits to
Executive.
14. Prior Service Credit. [This paragraph left
blank].
15. Termination by Company.
(a) The Company shall have the right to
terminate this Agreement (and Executive's employment) only
upon the death or Disability of Executive or for Cause.
For purpose of this Agreement, "Cause" shall mean (i)
Executive's willful and continued failure to substantially
perform the reasonably assigned duties with the Company
which are consistent with Executive's position and job
description referred to in this Agreement and, in the event
of a Change in Control, those duties assigned prior to the
Change in Control, other than any such failure resulting
from incapacity due to physical or mental illness, after a
written demand for substantial performance is delivered to
Executive by the Board of Directors of the Company which
specifically identifies the manner in which Executive has
not substantially performed the assigned duties, or (ii)
Executive's willful engagement in illegal conduct which is
materially and demonstrably injurious to the Company. For
purposes of this paragraph, no act, or failure to act, on
Executive's part shall be considered "willful" unless done,
or omitted to be done, in knowing bad faith and without
reasonable belief that the action or omission was in, or
not opposed to, the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant
to a resolution duly adopted by the Board of Directors or
based upon the advise of counsel for the Company shall be
conclusively presumed to be done, or omitted to be done, in
good faith and in the best interests of the Company.
Notwithstanding the foregoing, Executive shall not be
deemed to have been terminated for Cause unless and until
there shall have been delivered to him a copy of a
resolution, duly adopted by the affirmative vote of not
less than three-quarters of the entire membership of the
Board of Directors at a meeting of the Board called and
held for such purpose (after reasonable notice to Executive
and an opportunity for Executive, together with his
counsel, to be heard before the Board), finding that in the
good faith opinion of the Board of Directors Executive was
guilty of the conduct set forth above in (i) or (ii) of
this paragraph and specifying the particulars thereof in
detail.
(b) Forfeiture. If Executive is terminated
for Cause pursuant to par. 15, Executive shall be entitled
to receive only the Accrued Benefits described in par.
16(c)(i).
16. Termination of this Agreement by Executive in
Certain Circumstances.
(a) Voluntary Termination. Subject to the
restrictions in par. 4, Executive may terminate this
Agreement other than for Good Reason (as hereinafter
defined) upon 30 days prior written notice to the Company.
Upon such termination, Executive shall be entitled to
receive only the Accrued Benefits described in par.
16(c)(i).
(b) Termination by Executive for Good Reason.
Executive may terminate his employment under this Agreement
for Good Reason at any time during the term hereof unless
this Agreement has previously expired or been terminated by
reason of (i) the death or Disability of Executive, (ii)
attainment by Executive of age 65 (iii) termination of this
Agreement by the Company for Cause, or (iv) voluntary
termination of this Agreement by Executive other than for
Good Reason. Termination by Executive for "Good Reason"
shall mean termination by Executive of his employment
hereunder (i) for any reason within the twelve (12) months
following the expiration of the committed employment period
specified in par. 4(i), (ii) or (iii) hereof (provided a
Change in Control has occurred), or because of:
(ii) the assignment to Executive without his
express written consent of any duties or
functions inconsistent with his present
positions, duties, responsibilities, authority
and status with the Company, or a change in his
present reporting responsibilities, titles or
offices, or any removal of Executive from, or
any failure to re-elect Executive to, any of
such positions; or
(iii) failure to provide Executive with the
bonus and incentive compensation required by
par. 8A(b) of this Agreement or the exclusion
of Executive from any management, incentive
compensation or bonus programs maintained by
the Company from time-to-time in its discretion
and of a type in which Executive participated
at the inception of this Agreement or in which
key executives in general participate; or
(iv) the failure by the Company to provide or
maintain the benefits described in par. 8A(c)
and (d) of this Agreement or the failure by the
Company to maintain the deferred compensation
plans, pension and retirement plans (including
supplemental retirement plans), life insurance
and other fringe benefit plans maintained by
the Company at the inception of this Agreement;
or
(v) the failure by the Company to obtain the
assumption of this Agreement by any successor
or assign of the Company; or
(vi) the failure by the Company to pay the
annual base salary and annual increases
required by par. 8(a) of this Agreement or any
reduction in the base salary currently being
paid to Executive; or
(vii) any other material breach by the Company
of any of the terms of this Agreement; or
(viii) any purported termination by the Company
of this Agreement or Executive's employment
hereunder which is not effected pursuant to a
Notice of Termination (as hereinafter defined)
and which does not satisfy the requirements of
par. 15 hereof.
(c) Termination Payments. Upon any
termination by Executive of his employment under this
Agreement pursuant to par. 16(b), or upon any termination
of Executive's employment by the Company during the term
hereof other than for Cause, Disability or death, the
Company shall forthwith:
(i) Pay to Executive in cash the following
accrued benefits ("Accrued Benefits") (a) all
salary earned or accrued through the
termination date; (b) reimburse Executive for
any and all monies advanced n connection with
Executive's employment for reasonable and
necessary expenses incurred by Executive
through the termination date; (c) pay any and
all bonus, cash and other benefits previously
earned through the termination date and
deferred at the election of Executive or
pursuant to any deferred compensation plans
then in effect; (d) make a pro rata (based upon
the portion of such fiscal year that Executive
was an employee of the Company) lump sum
payment of any bonus and incentive compensation
(including both cash and stock components)
otherwise payable to Executive with respect to
the year in which termination occurs under any
bonus and incentive plan(s) in which Executive
is a participant; and (e) pay all other amounts
and benefits to which Executive may be entitled
under the terms of any benefit plan of the
Company. Payment of amounts other than those
described in subsections (d) and (e) hereof
shall be made within 10 days after the
termination date. Payment of amounts under
subsections (d) and (e) hereof shall be made
pursuant to the terms of any such plans either
by the Company or a trust implementing such
plan; plus
(ii) Pay to Executive in cash in a lump sum an
amount equal to the product of three (3) (or,
if less, the whole number of years (rounded
upward) remaining, at the time of such
termination, until Executive would attain age
65) times the sum of (1) the annual base salary
payable to Executive hereunder immediately
prior to such termination plus (2) the greater
of the average annual amount to which Executive
became entitled (whether paid, payable or
deferred) under all bonus, incentive
compensation and other plan(s) of the Company
during the three years (or number of years that
Executive participated therein, if less)
preceding such termination or the Par Bonus;
and
(iii) repurchase all restricted stock, stock
options and any accompanying stock appreciation
rights ("SARs") issued by the Company at the
"Market Price" thereof, all of which shall, to
the extent permissible under the applicable
plans, automatically become vested and
exercisable upon such termination. If the
vesting or exercise date of any of the
foregoing may not be accelerated, the Company
shall pay to Executive, in exchange for the
cancellation of such rights, an amount equal to
the Market Price thereof. As used herein, the
Market Price of an option and any accompanying
SAR shall be equal to the difference between
the Market Price of the underlying stock and
the exercise price of such option. Underwater
options and SARs shall remain in existence in
accordance with their terms. The Market Price
of the underlying stock shall be equal to the
highest Market Price of the stock during the
one year period immediately preceding such
termination; plus
(iv) in addition to the retirement benefits to
which Executive is entitled under the Company's
retirement plan(s) or any successor plans
thereto, the Company shall pay to Executive not
later than the tenth day following the
termination date, a lump sum, in cash, equal to
the actuarial equivalent of the excess of (a)
the retirement pension (determined as a
straight life annuity commencing at age 65)
which Executive would have accrued under the
terms of the Company's retirement plan (without
regard to the limitations imposed by section
415 of the Internal Revenue Code of 1954, as
amended (the "Code"), or any amendment to the
retirement plan made subsequent to a Change in
Control of the Company and on or prior to the
termination date, which amendment adversely
affects in any manner the computation of
retirement benefits thereunder), determined as
if Executive had rendered (after the
termination date) three additional years of
credited service thereunder, and as if
Executive had accumulated three additional
calendar years of compensation (for purposes of
determining "Monthly Compensation" as defined
in the Company's retirement plan), each in an
amount equal to the amount for the highest
calendar year out of the final ten calendar
years preceding the termination date, but in no
event shall Executive be deemed to have
accumulated additional credited service after
Executive's 65th birthday, over (b) the
retirement pension (determined as a straight
life annuity commencing at age 65), which
Executive had then accrued pursuant to the
provisions of the Company's retirement plan(s).
For purposes of this Subsection, "actuarial
equivalent" shall be determined using the same
methods and assumptions utilized under the
Company's retirement plan(s) immediately prior
to the Change in Control of the Company.
Provided, however, that to the extent that all
or a portion of such amount is payable pursuant
to any other arrangement established by the
Company, the amount to which Executive shall be
entitled pursuant to this Subsection shall be
reduced by such amount; and
(v) pay Executive in cash for any vacation
time earned but not taken at the termination
date, at an hourly rate equal to the annual
base salary as in effect immediately prior to
the termination date divided by 2080.
Notwithstanding any other provisions of this
Agreement, for purposes of the Company's salaried pension
plan and its medical, health, life, accident and disability
insurance programs, Executive shall, in the event of any
termination which entitled Executive to the payments
described in par. 16(c) hereof, be considered and deemed,
for a period of 3 years following such termination or until
Executive attains the age of 65 or until reasonably
equivalent benefits are paid or extended by a new employer,
whichever first occurs, to be a full-time employee of the
Company and be entitled to all benefits, rights and
privileges thereunder. If at the end of three years
Executive has not attained the age of 65 or has not
previously received or is not then receiving equivalent
benefits from a new employer, the Company shall arrange, at
its sole cost and expense, to enable Executive to convert
the coverage under such policies to equivalent individual
policies. To the extent necessary for application of this
paragraph, Executive's annual compensation during the
aforesaid period shall be deemed to be equal to the amount
described in par. 16(c)(ii)(1) plus the amount described in
par. 16(c)(ii)(2).
17. Tax Protection. In the event that Executive
becomes entitled to any payments set forth in par.
16(c)(ii), (iii), (iv) or (v) of this Agreement ("Severance
Payments"), and if any of such Severance Payments will be
subject to the tax (the "Excise Tax") imposed by section
4999 of the Internal Revenue Code or any amendments thereof
(or any similar tax that may hereafter be imposed), the
Company shall reasonably estimate and pay to Executive upon
termination an additional amount (the "Gross-Up Payment")
such that the net amount retained by Executive, after
deduction of any Excise Tax on the Severance Payments and
any federal, state and local income taxes and Excise Tax
upon the payment provided for by this subsection, shall be
equal to the Severance Payments. For purpose of
determining whether any of the Severance Payments will be
subject to the Excise Tax and the amount of such Excise
Tax, (i) any other payments or benefits received or to be
received by Executive in connection with a Change in
Control of the Company or termination of employment
(whether pursuant to the terms of this Agreement or any
other plan, arrangement or agreement with the Company, any
person whose actions result in a Change in Control of the
Company or any person affiliated with the Company or such
person) shall be treated as "parachute payments" within the
meaning of section 280G(b)(2) of the Code, and all "excess
parachute payments" within the meaning of section
280G(b)(1) shall be treated as subject to the Excise Tax,
unless in the opinion of tax counsel selected by the
Company's independent auditors and acceptable to Executive
such other payments or benefits (in whole or in part) do
not constitute parachute payments, or such excess parachute
payments (in whole or in part) represent reasonable
compensation for services actually rendered within the
meaning of section 280G(b)(4) of the Code in excess of the
base amount within the meaning of section 280G(b)(3) of the
Code, or are otherwise not subject to the Excise Tax, (ii)
the amount of the Severance Payments which shall be treated
as subject to the Excise Tax shall be equal to the lesser
of (A) the total amount of the Severance Payments or (B)
the amount of excess parachute payments within the meaning
of section 280G(b)(1) (after applying clause (i), above),
and (iii) the value of any non-cash benefits or any
deferred payment or benefit shall be determined by the
Company's independent auditors in accordance with the
principles of sections 280G(d)(3) and (4) of the Code. For
purpose of determining the amount of the Gross-Up Payment,
Executive shall be deemed to pay federal income taxes at
the highest marginal rate of federal income taxation in the
calendar year in which the Gross-Up Payment is to be made
and state and local income taxes at the highest marginal
rate of taxation in the state and locality of Executive's
residence on the termination date, net of maximum reduction
in federal income taxes which could be obtained from
deduction of such state and local taxes. In the event that
the Excise Tax is subsequently determined to be less than
the amount taken into account hereunder at the time of
termination of employment, Executive shall repay to the
Company, at the time that the amount of such reduction in
Excise Tax is finally determined, the portion of the Gross-
Up Payment attributable to such reduction (plus the portion
of the Gross-Up Payment attributable to the Excise Tax and
federal and state and local income tax imposed on the
Gross-Up Payment being repaid by Executive if such
repayment results in a reduction in Excise Tax and/or a
federal and state and local income tax deduction) plus
interest on the amount of such repayment at the rate
provided in section 1274(b)(2)(B) of the Code. In the
event that the Excise Tax is determined to exceed the
amount taken into account hereunder at the time of the
termination of employment (including by reason of any
payment the existence or amount of which cannot be
determined at the time of the Gross-Up Payment), the
Company shall make an additional Gross-Up Payment in
respect of such excess (plus any interest payable with
respect to such excess) at the time that the amount of such
excess is finally determined. All reasonable fees and
expenses incurred by the Executive to compute the Excise
Tax or to litigate or otherwise defend the calculation,
regardless of the outcome of any litigation, shall be paid
by the Company. It is the intent of this provision to
avoid any diminution in payments to which Executive is
entitled under this Agreement by virtue of the imposition
of any "excise" or similar taxes (excluding income taxes)
and to make Executive whole should any such taxes be
imposed.
18. No Diminution of Payments. Executive shall not
be required to mitigate the amount of any payment provided
for in par. 16, par. 17 or any other provision of this
Agreement, and no such payment shall be reduced by any
present value factor or any other compensation or amount
payable to Executive by the Company or any other employer
or source, or for any other reason. The payments provided
by par. 16 and par. 17 are in addition to, and not in lieu
of, any other rights, benefits or entitlements Executive
may have under the provisions of any other plan. It is the
expectation and agreement of the parties, in consideration
of the mutual promises herein, that no amount payable
hereunder shall be reduced by any court or arbitrator,
regardless of the legal theory advanced.
19. Notice of Termination; Effect.
(a) Notice. Any purported termination of this
Agreement by the Company for Cause or Disability or by
Executive pursuant to par. 16(b) hereof shall be
communicated by written Notice of Termination to the other
party hereto. For purposes of this Agreement, a "Notice of
Termination" shall mean a notice which shall indicate the
specific termination provision in this Agreement relied
upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination
under the provision so indicated. No such purported
termination shall be effective if not effected pursuant to
a Notice of Termination satisfying the requirements of this
par. 19.
(b) Effect. No termination of this Agreement
shall affect any right or obligation of any party accrued
prior thereto and no such termination shall affect the
provisions of par.'s 10, 11, 12, 16, 17, 18, 19, 20, 21, 22
and 23 hereof, all of which shall remain in effect
notwithstanding any such termination.
20. Payment Obligations Absolute. The Company's
obligation during and after the term hereof to pay or cause
to be paid to Executive the compensation and payments
provided for in this Agreement and to make the arrangement
provided herein shall be absolute and unconditional and
shall not be diminished, reduced or affected by any
circumstances, including, without limitation, any setoff,
counterclaim, recoupment, defense or other right which the
Company may have against Executive or anyone else. All
amounts payable by the Company hereunder shall be paid
without notice or demand. Each and every payment made
hereunder by the Company shall be final.
21. Superseding Effect - Entire Agreement. This
Agreement supersedes any prior agreements or
understandings, oral or written, between the parties with
respect to the subject matter hereof and constitutes the
entire agreement of the parties with respect thereto. No
provision of this Agreement (including this par. 21) may be
waived, amended, or otherwise modified except by a
subsequent written agreement executed by the parties
hereto.
22. Venue; Expenses. Any action concerning this
Agreement may be brought in the federal or state courts
located in the County of Milwaukee, Wisconsin, and each
party consents to the venue and jurisdiction of such
courts. The Company shall pay all legal fees and expenses
incurred by Executive in connection with or as a result of
termination following a Change in Control (including any
fees incurred in contesting or disputing any termination).
In addition, if a dispute arises with respect to the
Company's obligations or Executive's rights under this
Agreement, or if any legal proceeding shall be brought to
enforce or interpret any provision contained herein, or to
recover damages for breach hereof, or in the event of any
other
litigation involving this Agreement, Executive shall
recover from the Company all attorneys' fees and costs and
disbursements incurred as a result of such dispute or legal
proceeding, regardless of the outcome, plus prejudgment
interest on any money judgement obtained by the Executive,
calculated at the rate of interest announced by First
Wisconsin National Bank of Milwaukee from time-to-time as
its prime rate, plus 2.0%, from the date that payments to
Executive should have been made under this Agreement.
23. Assignment; Binding Effect.
(a) This Agreement shall be binding upon, and
shall inure to the benefit of and be enforceable by, the
parties hereto and their respective successors and assigns,
provided that (i) this Agreement is a personal service
agreement and no right hereunder may be assigned by
Executive except as contemplated by par. 23(c) hereof and
(ii) unless the Company shall have complied with this par.
23, no right hereunder may be assigned or transferred by
the Company by operation of law or otherwise. Any
purported assignment or transfer in violation of this par.
23 shall be null and void.
(b) The Company will obtain from any purchaser
or other assignee or transferee of or successor to all or
substantially all of the business or assets of the Company,
an agreement in form and substance satisfactory to
Executive, to assume and agree to perform this Agreement in
the same manner and to the same extent that the Company
would be required to perform it as if no such purchase had
taken place. As used in this Agreement, the term "Company"
shall mean Harnischfeger Industries, Inc. as hereinbefore
defined and any successor to or purchaser, transferee or
assignee of its business or assets. The failure to obtain
such an assumption within sixty days following the closing
of any such purchase, assignment or transfer shall
thereupon immediately entitle Executive to invoke all
rights granted in par. 16.
(c) This Agreement shall inure to the benefit
of and be enforceable by the personal or legal
representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees of Executive.
24. Withholding. The Company shall be entitled to
withhold from amounts to be paid to Executive hereunder any
federal, state or local withholding or other taxes or
charges which it is from time-to-time required to withhold.
The Company shall be entitled to rely on an opinion of
counsel if any questions as to the amount or requirement of
any such withholding shall arise.
25. Invalidity. If a court shall determine that any
provision of this Agreement is invalid or unenforceable as
written, it is the intention of the parties that such
provision be interpreted or judicially modified so as to
enable such provision to be enforced to the maximum extent
permissible. Any invalid or unenforceable provision which
cannot be so modified shall be severed from this Agreement
and shall not affect the validity or enforceability of any
other provisions of this Agreement.
26. Notice. Notices given pursuant to this
Agreement shall be in writing and shall be deemed given
when received and if mailed, shall be mailed by United
States registered or certified mail, return receipt
requested, addressee only, postage prepaid, if to the
Company, to Harnischfeger Industries, Inc., Attention:
Secretary, 13400 Bishops Lane, Brookfield, Wisconsin 53005,
or if to Executive, at the address set forth below the
Executive's signature line of this Agreement, or to such
other address as the party to be notified shall have given
in writing to the other.
27. No Waiver. No waiver by either party at any
time of any breach by the other party of, or compliance
with, any condition or provisions of this Agreement to be
performed by the other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same
time or any prior to subsequent time.
28. Headings. The headings herein contained are for
reference only and shall not affect the meaning or
interpretation of any provisions of this Agreement.
IN WITNESS WHEREOF, Executive has affixed his hand
hereto, and the Company has caused this instrument to be
executed by a duly authorized officer thereof, as of the
day and year first above written.
----------------------------
K. Thor Lundgren
1711 E. Dean Road
Fox Point, WI 53217
ATTEST: HARNISCHFEGER INDUSTRIES, INC.
By
- --------------------- ---------------------------
Chairman, Board of Directors
By
- --------------------- ---------------------------
Chairman, Human Resources Committee
EXHIBIT 11
<TABLE>
HARNISCHFEGER INDUSTRIES, INC.
CALCULATIONS OF EARNINGS (LOSS) PER SHARE
(Dollar amounts in thousands except per share amounts)
<CAPTION>
Year Ended October 31,
--------------------------------------
Determination of Number of Shares 1994 1993 1992
- --------------------------------------------------------- ---------- ---------- ---------
<S> <C> <C> <C>
Average shares outstanding............................... 25,973,621 26,606,547 29,121,653
========== ========== ==========
NET INCOME (LOSS)
- ---------------------------------------------------------
Income (Loss) from Continuing Operations................. $ 19,122 $ (36,907) $49,797
Income (Loss) from Discontinued Operations, net of
applicable income taxes................................ (1,007) 3,680) 5,686
Gain on Sale of Discontinued Operation, net of applicable
taxes.................................................. - 16,173 -
Cumulative Effect of Accounting Change, net of applicable
taxes and minority interest............................ (66,142) - -
Earnings (Loss) Per Share
- ---------------------------------------------------------
Income (loss) from continuing operations................. $ .74 $ 1.39 $1.71
Income (loss) from discontinued operations............... (0.04) .14 .20
Gain on sale of discontinued operation................... - .61 -
Cumulative effect of accounting change................... (2.55) - -
Net Income (loss) per share $(1.85) $(0.64) $1.91
</TABLE>
EXHIBIT 13
Management's Discussion and Analysis of Financial Statements
OVERVIEW
Harnischfeger Industries, Inc. completed fiscal 1994 in the
midst of growing enthusiasm and increasing momentum. All
markets served by the Company are showing strong indications
that the cyclical downturn of the past several years has
turned. As a result, the Company posted income from
continuing operations of $19.1 million, or $0.74 per share,
on consolidated net sales of $1,116.7 million. This compares
with income from continuing operations of $11.4 million, or
$.43 per share, last year before considering the impact of
the 1993 restructuring and nonrecurring charges. Sales in
1993 amounted to $989.2 million. In addition, bookings
increased 12.1% in 1994 while backlog at October 31, 1994 was
up 16.6%, led by the Papermaking Machinery and
Systems("PaperGroup") and the Material Handling Equipment
segments.
In addition to achieving positive operating results,
management continued to focus on the five characteristics
required for consideration as a core business as outlined a
year ago: a global marketplace, leadership positions in the
industries served, strong aftermarket sales potential,
technological superiority and the ability to earn positive
Economic Value Added ("EVA"). In that regard, the most
significant event of the year was the acquisition of Joy
Technologies Inc.("Joy"), a world leader in underground
mining equipment and environmental products, consummated with
an exchange of common stock on November 29, 1994. In another
major strategic acquisition, the Company acquired Morris
Mechanical Handling Limited ("Morris") in September, 1994.
This company, based in the United Kingdom, has become part of
the Material Handling Equipment segment. These acquisitions,
as well as several smaller niche transactions, are discussed
in more detail below.
In April, 1994, the Company reported as a discontinued
business the remaining unit in the Systems Group, Syscon
Corporation ("Syscon"). The operating results of the Systems
Group have therefore been reclassified as discontinued
operations in the Statement of Income for each year
presented. It is expected that Syscon will be divested in
the first half of 1995.
In addition to moving forward with key acquisitions,
affiliations, and divestitures, all three of the Company's
existing core segments are experiencing strong order and
sales activity. Leading the way in 1994 was the Paper Group,
reporting net sales of $712.8 million, up 22.8% over 1993
levels, reflecting the beginning of an upturn in the cyclical
worldwide pulp and paper industry's capital spending. Return
on sales was 4.5% in 1994, compared to 3.8% in 1993, before
considering restructuring charges.
The Mining Equipment segment reported net sales of $294.5
million, up slightly from 1993. Return on sales for the
segment amounted to 6.6% in 1994 compared to 8.6% in 1993
before considering restructuring and nonrecurring charges, a
decrease primarily due to lower inventory levels resulting in
reduced absorption of fixed manufacturing costs.
While net sales for the Material Handling Equipment segment
decreased 6.5% to $109.4 million in 1994 from $117.0 million
in 1993, return on sales was 11.1% compared to 5.8% in 1993
reflecting higher machine margins and the continued growth of
the segment's aftermarket business.
EVA, introduced in fiscal 1993, was fully adopted for
purposes of management incentive compensation in fiscal 1994.
This concept emphasizes the weighted average after-tax cost
of capital as an important component of overall profitability
and rewards managers for net earnings in excess of this cost.
Each of the Company's continuing segments posted an
improvement in EVA achievement in 1994, with Material
Handling Equipment going positive --the first of the
Company's segments to do so.
Acquisitions And Divestitures
Fiscal 1994 saw significant acquisition activity occurring in
each of the Company's three operating segments. Announced in
August, 1994 and consummated early in fiscal 1995, the
acquisition of Joy has placed the Company as the world's
leader in both surface and underground mining equipment. The
transaction was completed on November 29, 1994 upon the
approval of the shareholders of each company.
Under the terms of the acquisition, to be accounted for as
a pooling of interests, the Company exchanged 17,720,750
common shares for all of Joy's 31,353,000 outstanding shares,
at an exchange ratio of .5652 of a share of the Company's
common stock for each of Joy's common shares.
Joy's Mining Group is a leader in the worldwide
development, manufacturing, distribution and servicing of
underground mining equipment for the extraction of coal and
other bedded materials. In addition, Joy's Environmental
Group is a supplier of air pollution and ash handling
equipment for electric utilities and other industrial
applications.
The financial position and results of operations of the
Company and Joy will be combined in fiscal 1995 retroactive
to November 1, 1994 and the fiscal year of Joy has been
conformed to the Company's fiscal year. In addition, all
prior periods presented will be restated to give effect to
the merger.
For the fiscal year ended February 25, 1994, Joy reported
net sales of $566.0 million and income from continuing
operations of $13.7 million. Total assets at that date were
$541.7 million. See additional discussion in "Liquidity and
Capital Resources" below and in Note 17 - Acquisition of Joy
Technologies Inc.
In September, 1994, the Company completed the acquisition
for $24.9 million of all of the outstanding shares of MMH
(Holdings) Limited, a holding company for Morris and related
companies. Morris is a manufacturer of a broad line of
cranes, hoists and other lifting equipment, and has an
extensive service organization that provides aftermarket
services to a broad spectrum of customers. Morris is
headquartered in Great Britain and also has operations in the
United States, the Far East and South Africa, and is a unit
of the Material Handling Equipment segment. The results of
Morris were included in the Company's consolidated operating
results for the month of October .
In addition, the Company completed two smaller acquisitions
during 1994. In July, 1994, the Company acquired a Mexican
company, Hercules, S.A. de C.V.("Hercules"), for $2.6
million. Hercules, a manufacturer of overhead cranes and
hoists serving the Mexican and South American markets, is
also a unit of the Material Handling Equipment segment.
The Company acquired substantially all of the common shares
of OASIS (Optical Alignment Systems and Inspection Services,
Inc.) for $7.0 million in September, 1994. The New
Hampshire- based company provides specialty services
principally to the paper industry and is part of the
Company's Beloit Corporation subsidiary.
In addition, Beloit has entered into an agreement with
Jagenberg Papiertechnik, GmbH, a German paper finishing and
coating equipment manufacturer. Under the Jagenberg
agreement, Beloit's Lenox Division will become the major
supplier of parts and service for all winder products in the
Americas. The agreement is currently being reviewed by
regulatory authorities with final approval expected to be
received in the first half of 1995.
Fiscal 1994 included efforts to divest of Syscon, the
remaining unit of the Company's Systems Group. In 1993, the
Systems Group consisted of two subsidiaries, Harnischfeger
Engineers, Inc. ("HEI") and Syscon. The Board of Directors
and management of the Company determined that this segment
did not meet the criteria of a core business. As such, the
Board of Directors determined that retention of the Systems
Group was not consistent with the Company's long-term goals.
On October 29, 1993, the Company completed the sale of HEI
to that unit's senior management and some equity partners.
Proceeds from the sale were $45.2 million and the Company
reported a $16.2 million after-tax gain on the sale in 1993.
In April, 1994, the Company announced its decision to
divest itself of Syscon. The Company is pursuing the
divestiture, which should be completed in the first half of
1995.
Results of Operations
SALES. Sales for fiscal 1994 of $1,116.7 million were 12.9%
greater than 1993 sales of $989.2 million, boosted in
particular by the strong increase in the Paper Group of
22.8%. Sales for the Mining Equipment segment of $294.5
million improved slightly over 1993 levels of $291.7 million.
The Material Handling Equipment segment saw a modest decline
in sales.
Worldwide sales amounted to $989.2 million in 1993 and
$1,141.5 million in 1992. Overcapacity within the pulp and
paper industry and depressed commodity prices and economic
uncertainties in the mining industry were the primary causes
for the 13.3% decrease in sales in 1993. The Material
Handling Equipment segment saw improvement in 1993 with sales
increases of 3.2% over 1992 levels.
COSTS AND EXPENSES. Cost of sales increased 14.8% to $892.4
million from $777.3 million in 1993. This was more than the
12.9% increase in sales reflecting lower margins achieved
primarily from machine sales. Product development, selling
and administrative expenses as a percent of sales decreased
to 18.0% from 18.7% in 1993 reflecting continued measures by
management to reduce costs and increase efficiencies.
Cost of sales decreased 10.8% in 1993, to $777.3 million
from $871.4 million in 1992. Underutilization of
manufacturing capacity in the Paper and Mining Equipment
segments resulted in the increase in cost of sales as a
percent of sales in 1993 to 78.6% as compared to 76.3% in
1992. Product development, selling and administrative
expenses as a percent of sales increased to 18.7% from 16.2%
in 1992 due primarily to the decrease in sales.
OPERATING RESULTS FROM CONTINUING OPERATIONS. The Company
reported income from continuing operations of $19.1 million
in 1994, as compared to a loss from continuing operations of
$(36.9) million in 1993 and income from continuing operations
of $49.8 million in 1992. Significant factors contributing
to the increase in 1994 included an $83.5 million increase in
operating profit, caused primarily by higher net sales in
1994 and the $75.0 million in restructuring and nonrecurring
charges in 1993. Offsetting this increase were higher taxes
of $25.9 million due to higher pre-tax results.
1993 Restructuring Actions
In the third quarter of fiscal 1993, the Company recorded a
restructuring charge of $67.0 million($43.1 million after-
tax, or $1.63 per share) to strengthen and streamline its
papermaking machinery and mining equipment businesses
consistent with action plans developed in light of the
Company's previously determined five core business criteria.
The restructuring actions were substantially completed by the
end of fiscal 1994. At October 31, 1994, remaining
restructuring reserves amount to $7.7 million, the majority
of which relates to the Paper Group.
Details regarding specific restructuring actions are as
follows:
1993 Restructuring Actions
<TABLE>
<CAPTION> (in millions)
Paper Mining
Group Equipment Other Total
<S> <C> <C> <C> <C>
Closure of facilities $20.5 $ - $ - $20.5
Inventory dispositions - 13.0 - 13.0
Product line discontinuance
or modification 14.0 9.0 - 23.0
Employee severance - 3.5 - 3.5
Other 5.5 - 1.5 7.0
------ ------- ------ ------
Pre-tax total $40.0 $25.5 $ 1.5 $67.0
====== ======= ====== ======
</TABLE>
Papermaking Machinery and Systems - $40.0 Million
The largest element of the Paper Group restructuring reserve
was for the closure of the Canadian papermaking machine
manufacturing operation. Manufacturing operations were moved
to the U.S. and the plant was closed in the second quarter of
1994. The provision consisted primarily of $3.2 million for
severance of selected employees (approximately 100 direct and
indirect employees in the manufacturing facility in Sorel,
Quebec, Canada) and transfer costs of others to other
operations in Canada and the U.S., $7.7 million for write-down
of facilities and equipment to net realizable value, $0.8
million to relocate machinery for use in other operations,
$2.3 million for scrapping inventory not usable elsewhere,
and $4.5 million for losses prior to shutdown.
After a detailed review of its product offerings, the Paper
Group determined that selected product lines should be
discontinued. In order to ensure customer satisfaction and to
maintain its reputation as the technological leader in the
industry, the Paper Group established a $9.0 million reserve
as a necessary cost to exit these product lines.
Other Paper Group actions included product line
rearrangement costs at three divisions totaling $5.0 million.
In each of these instances, inventory of the product line was
scrapped.
The remaining elements of the Paper Group reserve consisted
primarily of costs of closure of a roll-covering facility to
be moved to another larger location and costs to rationalize
selected nonoperating assets which did not earn a 12% after-
tax rate of return.
Mining Equipment - $25.5 Million
The Mining Equipment Division reassessed the amount of
inventory held in warehouses for the servicing of customer
parts requirements. As a result of a redefinition of
inventory held on consignment at customer mine sites and of
new part numbers subject to assessment for excess and obsolete
exposure, the Division decided to dispose of $13.0 million of
parts previously considered saleable at amounts greater than
cost.
The Mining Equipment Division has also charged $9.0 million
for product line discontinuance and modification. Of this
amount, $4.0 million was required to reposition the Division
with two improved models (Model 1550 and Model 2250) in the
hydraulic shovel market. An additional $5.0 million was
required to scrap several products which management determined
could not be made saleable, and to bring other models to a
saleable condition.
Severance costs of $3.5 million were recorded to reflect the
costs of reduced employment in the Mining Equipment Division.
The cash and noncash elements of the restructuring charge
approximated $39.0 million and $28.0 million, respectively.
In addition, the Mining Equipment Division recorded a
nonrecurring charge in the third quarter of fiscal 1993
resulting from the reestimation of certain warranty reserves.
The charge reduced pre-tax income by $8.0 million ($5.2
million after-tax, or $0.19 per share). This charge was the
result of a deeper analysis of open warranty claims and
customer requests, field experience on new products and
additional analytical data provided by new systems, which has
since resulted in engineering, design and manufacturing
changes. The Company's warranty methodology, while long-
established, is by its very nature based on management's
judgement and is not mathematically precise or actuarially
based. The resultant warranty reserves are reevaluated
periodically and reflect refinements of estimated warranty
exposure on evolving product lines. This additional warranty
reserve was used primarily during fiscal 1994.
INCOME TAXES
During the first quarter of fiscal 1994, the Company adopted
Statement of Financial Accounting Standards (SFAS) No. 109,
"Accounting for Income Taxes" (SFAS 109), by restating prior
years' financial statements, retroactive to 1989. The impact
of adopting this standard was to reduce previously reported
shareholders' equity by $15.0 million at November 1, 1991.
The Company's effective tax rate from continuing operations
was 19.9% in 1994, (33.1%) in 1993, and 34.8% in 1992. The
effective tax rate for 1994 differed from the federal
statutory rate of 35% due primarily to differences in foreign
and U.S. tax rates, general business credits and lower state
taxes due to net operating losses for state income tax
purposes.
A more detailed discussion of income taxes can be found in
Note 6 to the Financial Statements.
Other Postretirement Benefits
During the first quarter of fiscal 1994, the Company adopted
(SFAS No. 106), "Employers' Accounting for Postretirement
Benefits Other Than Pensions" (SFAS 106) through the immediate
recognition of the obligation. Under SFAS 106, the costs of
retiree health care and life insurance benefits are accrued
over relevant employee service periods. Previously, these
costs were charged to expense as claims were paid. The
cumulative effect of the accounting change required by this
Standard was a one-time pre-tax charge of $115.0 million
($66.1 million or $2.55 per share after taxes and minority
interest). The discount rate used in determining the
liability was 8.0%.
The Board of Directors of the Company approved a general
approach in 1993 that would culminate in the elimination of
all Company contributions towards postretirement health care
benefits. Increases in costs paid by the Company were capped
beginning in 1994 extending through 1998 and Company
contributions will be eliminated on January 1, 1999 for most
employee groups. The initial one-time pre-tax charge
reflected all plan terms and amendments in place on November
1, 1993. Negative plan amendments made subsequent to November
1, 1993 are being amortized from the date of amendment to
January 1, 1999. Postretirement benefit expense recognized
during fiscal 1994 was reduced by $3.0 million for
amortization of negative plan amendments. See further
discussion in "Liquidity and Capital Resources" below.
Bookings and Backlog
Backlog at October 31, 1994, 1993 and 1992 by business segment was as follows:
<TABLE>
<CAPTION>
(in thousands)
1994 1993 1992
----- ----- ------
<S> <C> <C> <C>
Papermaking machinery and systems $633,770 $550,660 $444,369
Mining equipment 70,880 102,165 111,519
Material handling equipment 107,112 43,112 62,043
-------- -------- ---------
$811,762 $695,937 $617,931
======== ======== =========
</TABLE>
Bookings were $1,196.8 million in 1994, $1,067.2 million in
1993 and $1,055.4 million in 1992. A discussion of changes in
bookings by segment is presented in the "Operating Results by
Business Segment" section which follows.
Liquidity and Capital Resources
The Company's capital structure at October 31, 1994 and 1993
was as follows:
<TABLE>
<CAPTION>
(in thousands)
1994 1993
------ ------
<S> <C> <C>
Short-term notes payable $ 14,083 $ 62,309
Long-term obligations, including current portion 244,529 246,389
-------- --------
258,612 308,698
Minority interest 85,570 89,110
Shareholders' equity, excluding SECT 539,991 543,692
-------- --------
Total capitalization $884,173 $941,500
======== ========
Debt to capitalization ratio 29.2% 32.8%
======== ========
</TABLE>
The Company's debt to capitalization ratio decreased to 29.2%
at October 31, 1994 from 32.8% at October 31, 1993.
Significant decreases in short-term borrowings due to strong
cash flow and higher cash levels at year-end resulted in the
improvement. Equity in the ratio calculation excludes the
Stock Employee Compensation Trust ("SECT") balance because
shares in the SECT are issued and outstanding.
Cash flow from operating activities was $100.0 million in
1994 compared to $67.9 million in 1993. The increase in cash
flow between the periods was primarily a result of higher
levels of advance payments and progress billings, increases in
accounts payable and a decrease in inventories. While cash
flow was favorably impacted in 1993 by strong collections of
receivables, cash flow in 1992 was negatively impacted by the
buildup of such receivables and the use of previously
collected advance payments and progress billings.
Net working capital of $250.8 million at October 31, 1994
remained about even with October 31, 1993 levels of $248.1
million. Cash used for property, plant and equipment,
acquisitions and the decrease in short-term borrowings was
offset by increased advance payments and progress billings and
$46.8 million from the sale of treasury stock (discussed
below). Although the reclassification of Syscon's assets and
liabilities as net assets of discontinued operations affected
the reported change in the Company's accounts receivable,
inventories, accounts payable and employee compensation and
benefit accruals in the Statement of Cash Flows, it had no
effect on the change in net working capital.
Net working capital decreased to $248.1 million in 1993 from
$420.0 million in 1992, due primarily to reductions in
worldwide receivables and inventories, and provisioning
related to the $67.0 million restructuring plan and $8.0
million nonrecurring warranty charge, offset by a decrease in
accounts payable.
Capital expenditures for property, plant and equipment in
1994 were $35.1 million compared with $58.2 million in 1993.
Higher capital expenditures in 1993 were due primarily to the
new Beloit R&D pilot paper machine. Depreciation and
amortization was $47.1 million and $44.5 million in 1994 and
1993, respectively.
Cash used for investing activities in 1994, primarily for
acquisitions, was $61.7 million and $51.9 million in 1993.
Cash used for financing activities in 1994 of $11.1 million
was used primarily to reduce short-term borrowings and for
dividends and was offset by proceeds of $46.8 million from the
sale of treasury stock discussed below. The significant
elements in the $55.0 million use of cash for financing
activities in 1993 were the purchase of 2,500,000 common
shares for the establishment of the SECT, which was financed
using available cash and additional short-term borrowings, and
dividends.
Significant changes to the Company's capital structure in 1994
are summarized below:
(1) Reduction in short-term notes payable of $48.1 million
due to strong positive operating cash flow.
(2) The sale of 2,000,000 shares of treasury stock on
September 7, 1994 for $46.8 million in a private
transaction. This sale was executed in connection with
the Company's merger with Joy to satisfy requirements
under the pooling of interests accounting rules relating
to treasury stock purchases. In May, 1993, following
a "Dutch auction" self-tender offer, the Company
purchased for cash 2,500,000 common shares, or
approximately 9% of common shares then outstanding,
at $19 5/8 per share, in conjunction with the
establishment of the Harnischfeger Industries, Inc.
SECT. Shares in the SECT are used to provide employee
benefits under plans that currently require shares
of stock.
The Company maintains the ability to expand its borrowings
in several ways, including the following:
(1) A shelf registration with the Securities and Exchange
Commission for the proposed sale of up to $150.0 million
of debt securities. To date, no securities have been
issued under this registration.
(2) A four-year Revolving Credit Facility Agreement between
the Company and certain domestic and foreign financial
institutions that allows for borrowings of up to $240.0
million (recently renegotiated from $159.0 million) at
rates expressed in relation to the LIBOR and other rates.
(3) Short-term bank credit lines of foreign subsidiaries of
approximately $61.1 million of which approximately $14.1
million was outstanding at October 31, 1994.
The Company believes its available cash, cash flow provided
by operating activities and committed credit lines provide
adequate liquidity on both a short- and long-term basis.
The acquisition of Joy, completed on November 29, 1994, has
altered the Company's capital structure. At the time the
transaction was completed, Joy's outstanding long-term
borrowings totaled approximately $318.0 million. Of this
amount, a $84.1 million bank facility, which was subject to a
change in control provision, was immediately retired by the
Company from available cash. Other debt includes $200.0
million of 10 1/4% Senior Notes due 2003 ("Senior Notes") and
approximately $34.0 million of Industrial Revenue Bonds and
other debt. The Company expects that its net interest expense
in 1995 will increase significantly over 1994 levels. The
Company's debt to capitalization ratio after the acquisition
of Joy will amount to approximately 44%.
The indenture for the Senior Notes provides that, upon a
"Change in Control" as defined therein, each holder of the
Senior Notes shall have the right to require the repurchase of
the Senior Notes at a cash purchase price equal to 101% of the
principal amount thereof plus accrued but unpaid interest, if
any, to the date of purchase. The acquisition of Joy
constituted a "Change in Control" under the indenture. On
December 29, 1994, the Company offered to repurchase the
Senior Notes, with the closing of such repurchase to occur not
less than 30 nor more than 60 days from that date. Any
required repurchases will be funded from cash, presently
committed facilities or with new financing on acceptable
terms. The Company may, at its option, redeem the Senior
Notes in whole or in part at any time on or after September 1,
1998 at 105.125% of their principal amount, plus accrued but
unpaid interest, declining to 100% of their principal amount,
plus accrued but unpaid interest, on or after September 1,
2000.
In connection with the Joy acquisition, the Company
exchanged 17,720,750 common shares to consummate the
transaction, after which 47,666,301 common shares were
outstanding. In addition, via an amendment to the Company's
Restated Certificate of Incorporation, authorized common stock
was increased from 50,000,000 to 100,000,000 shares.
The Company has no significant capital commitments as of
October 31, 1994. Any future capital commitments are expected
to be funded through cash flow from operations and, if
necessary, from available lines of credit.
It is the Company's policy not to, and it has not,
participated in high-yield financings, highly leveraged
transactions, or other "derivative" instruments. Hedging of
specific foreign exchange transaction exposures does occur in
certain circumstances.
The Company intends to continue to expand its businesses,
both internally and through acquisitions. Acquisitions are
evaluated in light of the five characteristics required of a
core business. It is expected that new acquisitions would be
financed primarily by internally-generated funds or additional
borrowings.
The Company's restructuring actions announced in the third
quarter of fiscal 1993 were substantially completed by the end
of fiscal 1994. Related cash requirements in 1994 were
financed internally. Cash requirements in fiscal 1995
relating to remaining restructuring actions will not be
significant.
The previously discussed implementation in the first quarter
of 1994 of SFAS 106 will have no impact on the Company's cash
outlays for these retiree benefits. Cash flow will improve in
the future as Company contributions are capped in future years
and then eliminated in 1999.
The Company will adopt SFAS 112, "Employers' Accounting for
Postemployment Benefits"(SFAS 112) in the first quarter of
fiscal 1995. Inasmuch as it is currently the Company's policy
to recognize obligations for most of the benefits covered by
SFAS 112, the impact of adoption on the Company's results of
operations and financial position will not be material.
Operating Results by Business Segment
Papermaking Machinery and Systems
<TABLE>
<CAPTION>
(in thousands)
1994 1993 1992
<S> <C> <C> <C>
Net sales $712,778 $580,421 $699,127
Operating profit before restructuring
charge 32,195 21,887 70,860
Restructuring charge - (40,000) -
Operating profit (loss) after
restructuring charge 32,195 (18,113) 70,860
Bookings 795,888 686,712 633,112
<TABLE/>
The Papermaking Machinery and Systems segment reported sales
of $712.8 million and operating profit of $32.2 million for
1994. Sales volume in 1994 was 22.8% higher than the prior
year's level of $580.4 million, reflecting the upturn in the
cyclical worldwide pulp and paper industry's capital spending
for original equipment. Foreign sales of this segment
amounted to 19.1% of total sales in 1994 and 28.2% in 1993
compared to a more typical 50/50 split, as U.S. activity was
stronger than in Europe. Export sales totaled $74.6 million
and $48.1 million in 1994 and 1993, respectively. Operating
profit in 1994 was 4.5% of sales compared to 3.8% before the
restructuring charge in 1993. Operating profit included other
income of $1.4 million, $(0.3) million and $(0.7) million for
the Company's equity share of Measurex Corporation's net
income (loss) for 1994, 1993 and 1992, respectively and an
amount representing a favorable confidential settlement of
patent litigation. Both sales and return on sales are
expected to improve in 1995 as the cyclical upturn continues.
In July, 1993, the Company announced plans to strengthen and
streamline its core businesses. As part of these plans, the
Paper Group recorded a $40.0 million restructuring charge,
primarily for the closure of its Canadian papermaking
machinery manufacturing facilities and consolidation of North
American papermaking machine manufacturing operations in
Beloit, Wisconsin. The restructuring charge reduced operating
results to a loss of $(18.1) million in 1993. The Paper
Group's restructuring activities were substantially completed
in 1994.
Net sales and operating profit before restructuring charge
amounted to $580.4 million and $21.9 million, respectively, in
1993. Net sales were 17.0% lower than the previous year
reflecting continued recession in the worldwide pulp and paper
industry. Operating profit before restructuring charge as a
percent of sales decreased to 3.8% in 1993 from 10.1% in 1992,
primarily due to underutilization of manufacturing capacity,
competitive pricing of new orders and foreign currency
transaction gains in 1992.
Bookings activity improved in 1994 to $795.9 million from
$686.7 million in 1993. The 15.9% increase reflects
improvement in both North American pulp and paper machinery
bookings and continued strength in overseas markets; bookings
in 1995 are expected to exceed new orders recorded in 1994.
The Paper Group continues to maintain its leadership in
papermaking machinery and allied products for the pulp and
paper industries.
Mining Equipment
</TABLE>
<TABLE>
<CAPTION>
(in thousands)
1994 1993 1992
<S> <C> <C> <C>
Net sales $294,497 $291,742 $328,997
Operating profit before restructuring
and nonrecurring charges 19,531 25,158 35,267
Restructuring and nonrecurring charges - (33,500) -
Operating profit (loss) after
restructuring and nonrecurring charges 19,531 (8,342) 35,267
Bookings 263,212 282,388 305,465
</TABLE>
The Mining Equipment segment reported net sales of $294.5
million in 1994, a slight increase from 1993 levels.
Operating profit was $19.5 million or 6.6% of sales compared
to operating profit before restructuring and nonrecurring
charges of $25.2 million or 8.6% of sales in 1993. The
decrease in operating profit reflected reduced absorption of
fixed manufacturing costs, as efforts were made to reduce
inventory levels. Foreign sales of the Mining Equipment
segment amounted to 29.1% of total sales in 1994 and 28.7% in
1993. Export sales of product manufactured in the U.S.
totaled $97.1 million and $103.0 million in 1994 and 1993,
respectively.
In the third quarter of fiscal 1993, the Mining Equipment
segment recorded a $25.5 million restructuring charge for
activities related principally to its plans to reduce
worldwide inventory and to enhance manufacturing and repair
parts capabilities. Other elements in the restructuring
charge provided for refocusing manufacturing and marketing
efforts and for employee severance costs. In addition, an
$8.0 million nonrecurring charge was recorded to reflect the
reestimation of certain warranty reserves. These charges
reduced operating results to a loss of $(8.3) million in 1993.
The activities addressed in the reserve were completed in
1994.
Net sales and operating profit before restructuring and
nonrecurring charges amounted to $291.7 million and $25.2
million, respectively, in 1993. Sales decreased 11.3% from
record levels achieved in 1992. Likewise, operating profit
before restructuring and nonrecurring charges decreased 28.7%
due primarily to lower sales volume in both machines and
parts, as well as reduced absorption of fixed manufacturing
costs.
Bookings amounted to $263.2 million in 1994 and $282.4
million in 1993. The 6.8% decrease was attributable to the
booking of a Model 9020 dragline in Australia in 1993 of
approximately $35 million. Excluding this large order,
booking levels improved in 1994 and are expected to improve
again in 1995, driven by strong coal demand and higher
commodity prices, particularly copper.
Material Handling Equipment
<TABLE>
<CAPTION>
(in thousands)
1994 1993 1992
<S> <C> <C> <C>
Net sales $109,429 $117,032 $113,412
Operating profit 12,094 6,753 10,343
Bookings 137,689 98,101 116,774
</TABLE>
The Material Handling Equipment segment reported net sales
of $109.4 million in 1994, a decrease of 6.5% from 1993 levels
of $117.0 million. However, operating profit increased to
$12.1 million, or 11.1% of sales, compared to $6.8 million, or
5.8%, of sales in 1993, reflecting higher machine margins and
the continued growth of the segment's aftermarket business.
Sales of the Material Handling Equipment segment were
principally in the U.S. in 1994, but recent acquisitions in
the U.K. and Mexico suggest a growing international focus in
1995.
Net sales of the Material Handling Equipment segment
increased to $117.0 million in 1993 from $113.4 million in
1992. Operating profit decreased to $6.8 million from $10.3
million in 1992, due primarily to lower machine margins
resulting from competitive pricing pressures on orders taken
in 1992.
Bookings amounted to $137.7 million in 1994, a 40.4%
increase from $98.1 million in 1993; these bookings do not
include purchased backlog of the Morris acquisition of $35.7
million. The sharp increase in bookings reflects the
segment's leadership in the domestic equipment market, growth
of the aftermarket business and a $20 million order for
container cranes booked by Morris in October.
Discontinued Operations
<TABLE>
<CAPTION>
(in thousands)
1994 1993 1992
<S> <C> <C> <C>
Net sales $132,260 $245,503 $234,308
Income (loss) from discontinued
operations (1,007) 3,680 5,686
</TABLE>
Net sales and loss from discontinued operations in 1994
amounted to $132.3 million and $(1.0) million, respectively,
as compared to $245.5 million and $3.7 million, respectively,
for 1993. The decreases from 1993 are the result of the sale
of HEI in October, 1993 and the recording of more than $5
million of nonrecurring charges by Syscon in 1994. As
discussed in more detail above and in Note 16 - Discontinued
Operations, the Company is pursuing a plan which provides for
the divestiture of Syscon, the remaining subsidiary of this
segment, in the first half of 1995.
Statement of Income
Year Ended October 31,(Dollar amounts in thousands except per share amounts)
<TABLE>
<CAPTION>
1994 1993
---------- ---------
<S> <C> <C>
Revenues
Net sales $1,116,704 $989,195
Other income 23,219 8,086
-------- ---------
1,139,923 997,281
Cost of Sales 892,449 777,320
Product Development, Selling
and Administrative Expenses 200,567 185,471
Restructuring Charge - 67,000
Nonrecurring Charge - 8,000
--------- ---------
Operating Income (Loss) 46,907 (40,510)
Interest (Expense)-Net (20,261) (21,796)
--------- ---------
Income (Loss) from Continuing
Operations before Provision
(Credit) for Income Taxes and
Minority Interest 26,646 (62,306)
Provision (Credit) for Income Taxes 5,300 (20,600)
--------- ---------
21,346 (41,706)
Minority Interest (2,224) 4,799
--------- ---------
Income (Loss) from Continuing
Operations 19,122 (36,907)
Income (Loss) from Discontinued
Operations, net of applicable
income taxes (1,007) 3,680
Gain on Sale of Discontinued Operation,
net of applicable income taxes - 16,173
Cumulative Effect of Accounting Change,
net of applicable income taxes and
minority interest (66,142) -
--------- --------
Net Income (Loss) $(48,027) $(17,054)
========= ========
Income (Loss) Per Share
Income (loss) from continuing
operations $ 0.74 $(1.39)
Income (loss) from discontinued
operations (0.04) 0.14
Gain on sale of discontinued operation - 0.61
Cumulative effect of accounting change (2.55) -
------- ------
Net Income (Loss)Per Share $(1.85) $(0.64)
========= ========
<CAPTION>
1992
----------
<S> <C>
Revenues
Net sales $1,141,536
Other income 14,271
---------
1,155,807
Cost of Sales 871,399
Product Development, Selling
and Administrative Expenses 185,127
Restructuring Charge -
Nonrecurring Charge -
---------
Operating Income (Loss) 99,281
Interest (Expense)-Net (8,667)
---------
Income (Loss) from Continuing
Operations before Provision
(Credit) for Income Taxes and
Minority Interest 90,614
Provision (Credit) for Income Taxes 31,550
---------
59,064
Minority Interest (9,277)
---------
Income (Loss) from Continuing
Operations 49,787
Income (Loss) from Discontinued
Operations, net of applicable
income taxes 5,686
Gain on Sale of Discontinued Operation,
net of applicable income taxes -
Cumulative Effect of Accounting Change,
net of applicable income taxes and
minority interest -
--------
Net Income (Loss) $55,473
========
Income (Loss) Per Share
Income (loss) from continuing
operations $1.71
Income (loss) from discontinued
operations 0.20
Gain on sale of discontinued operation -
Cumulative effect of accounting change -
------
Net Income (Loss)Per Share $1.91
========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial
Statements.
Balance Sheet
October 31,
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
1994
----------
<S> <C>
Assets
Current Assets:
Cash (including cash equivalents of $128,945 and $103,114 in 1994 and
1993, respectively, at cost which approximates market) $ 152,807
Accounts receivable-net 298,130
Inventories 209,487
Net current assets of discontinued operations 20,047
Other current assets 38,418
---------
718,889
Property, Plant and Equipment:
Land and improvements 26,227
Buildings 166,769
Machinery and equipment 506,563
---------
699,559
Accumulated depreciation (303,680)
---------
395,879
Investments and Other Assets:
Investment in Measurex Corporation 66,347
Goodwill 84,084
Intangible assets 41,919
Other assets 88,484
Noncurrent assets of discontinued operations 43,251
---------
324,085
---------
$1,438,853
===========
Liabilities and Shareholders' Equity
Current Liabilities:
Short-term notes payable, including current portion of
long-term obligations $ 15,404
Trade accounts payable 177,866
Employee compensation and benefits 60,971
Advance payments and progress billings 108,514
Accrued warranties 26,517
Other current liabilities 78,861
---------
468,133
Long-term Obligations 243,208
Other Liabilities:
Liability for postretirement benefits 96,097
Accrued pension and related costs 38,559
Other liabilities 9,449
Deferred income taxes 11,606
---------
155,711
Minority Interest 85,570
Shareholders' Equity:
Common stock (issued 32,798,155 shares and 32,798,155
shares, respectively) 32,798
Capital in excess of par value 416,277
Retained earnings 168,585
Cumulative translation adjustments (25,660)
--------
592,000
Less: Stock Employee Compensation Trust (2,150,416 shared and 2,526,553
shares, respectively) at market (53,760)
Treasury Stock (2,852,604 shares and 4,847,729 shares,
respectively) at cost (52,009)
---------
486,231
----------
$1,438,853
===========
<CAPTION>
1993
---------
<S> <C>
Assets
Current Assets:
Cash (including cash equivalents of $128,945 and $103,114 in 1994 and
1993, respectively, at cost which approximates market) $ 125,576
Accounts receivable-net 281,142
Inventories 218,440
Net current assets of discontinued operations -
Other current assets 49,162
---------
674,320
Property, Plant and Equipment:
Land and improvements 23,556
Buildings 162,001
Machinery and equipment 495,722
--------
681,279
Accumulated depreciation (276,936)
---------
404,343
Investments and Other Assets:
Investment in Measurex Corporation 66,563
Goodwill 115,755
Intangible assets 33,740
Other assets 76,547
Noncurrent assets of discontinued operations -
---------
292,605
--------
$1,371,268
===========
Liabilities and Shareholders' Equity
Current Liabilities:
Short-term notes payable, including current portion of
long-term obligations $ 65,316
Trade accounts payable 113,170
Employee compensation and benefits 52,805
Advance payments and progress billings 48,272
Accrued warranties 30,318
Other current liabilities 116,340
---------
426,221
Long-term Obligations 243,382
Other Liabilities:
Liability for postretirement benefits -
Accrued pension and related costs 32,676
Other liabilities 12,630
Deferred income taxes 79,457
---------
124,763
Minority Interest 89,110
Shareholders' Equity:
Common stock (issued 32,798,155 shares and 32,798,155
shares, respectively) 32,798
Capital in excess of par value 399,723
Retained earnings 227,991
Cumulative translation adjustments (28,475)
--------
632,037
Less: Stock Employee Compensation Trust (2,150,416 shared and 2,526,553
shares, respectively) at market (55,900)
Treasury Stock (2,852,604 shares and 4,847,729 shares,
respectively) at cost (88,345)
--------
487,792
--------
$1,371,268
==========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
<TABLE>
Statement of Cash Flows
Year Ended October 31,(Dollar amounts in thousands)
<CAPTION>
1994 1993
--------- -------
<S> <C> <C>
Operating Activities
Net income (loss) $(48,027) $ (17,054)
Add(deduct)-Items not affecting cash:
Restructuring charge - 67,000
Nonrecurring charge - 8,000
Cumulative effect of accounting change, net of
income taxes and minority interest 66,142 -
Gain on sale of discontinued operation - (16,173)
Depreciation and amortization 47,147 44,500
Minority interest, net of dividends paid 571 (7,956)
Deferred income taxes-net (8,653) (15,207)
Other-net (8,775) 6,161
Changes in working capital
Decrease in accounts receivable-net 5,009 89,759
Decrease in inventories 18,460 1,965
(Increase) in net current assets of discontinued
operations (20,047) -
(Increase) decrease in other current assets (4,861) 9,007
Increase (decrease) in trade accounts payable 48,669 (31,975)
(Decrease) in employee compensation and benefits (5,208) (17,909)
Increase (decrease) in advance payments and
progress billings 53,480 1,953
(Decrease) in other current liabilities (43,924) (54,194)
-------- --------
Net cash provided by (applied to) operating activities 99,983 67,877
-------- --------
Investment and Other Transactions
Acquisition of Morris Mechanical Handling Limited (24,890) -
Proceeds from sale of discontinued operation 23,219
Acquisition of J&L Fiber Services - (410)
Acquisition of and investment in Beloit Poland - -
Property, plant and equipment-net (35,141) (58,245)
Other-net (1,633) (16,496)
-------- --------
Net cash (applied to) investment and other transactions (61,664) (51,932)
-------- --------
Financing Activities
Sale of treasury stock 46,760 -
Purchase of stock for Stock Employee Compensation Trust - (49,431)
Purchase of treasury stock (124) (1,381)
Dividends paid (10,477) (10,669)
Exercise of stock options 2,919 266
Issuance of long-term obligations - -
Redemption of long-term obligations (2,079) (13,354)
(Decrease) increase in short-term notes payable (48,128) 19,615
-------- --------
Net cash (applied to) provided by financing activities (11,129) (54,954)
-------- --------
Effect of Exchange Rate Changes on Cash and Cash Equivalents 41 (6,812)
-------- --------
Increase (decrease) in Cash and Cash Equivalents 27,231 (45,821)
Cash and Cash Equivalents at Beginning of Year 125,576 171,397
-------- --------
Cash and Cash Equivalents at End of Year $152,807 $125,576
======== =========
</TABLE>
<TABLE>
Statement of Cash Flows
Year Ended October 31,(Dollar amounts in thousands)
<CAPTION>
1992
-------
<S> <C>
Operating Activities
Net income (loss) $55,473
Add(deduct)-Items not affecting cash:
Restructuring charge -
Nonrecurring charge -
Cumulative effect of accounting change, net of
income taxes and minority interest -
Gain on sale of discontinued operation -
Depreciation and amortization 39,853
Minority interest, net of dividends paid 5,118
Deferred income taxes-net (1,143)
Other-net 1,662
Changes in working capital
Decrease in accounts receivable-net 1,429
Decrease in inventories 10,306
(Increase) in net current assets of discontinued
operations -
(Increase) decrease in other current assets (5,997)
Increase (decrease) in trade accounts payable 10,427
(Decrease) in employee compensation and benefits (20,162)
Increase (decrease) in advance payments and
progress billings (67,947)
(Decrease) in other current liabilities (48,147)
--------
Net cash provided by (applied to) operating activities (19,128)
--------
Investment and Other Transactions
Acquisition of Morris Mechanical Handling Limited -
Proceeds from sale of discontinued operation -
Acquisition of J&L Fiber Services (46,206)
Acquisition of and investment in Beloit Poland (5,676)
Property, plant and equipment-net (50,246)
Other-net (7,313)
--------
Net cash (applied to) investment and other transactions (109,441)
--------
Financing Activities
Sale of treasury stock -
Purchase of stock for Stock Employee Compensation Trust -
Purchase of treasury stock (38,344)
Dividends paid (11,611)
Exercise of stock options 296
Issuance of long-term obligations 150,000
Redemption of long-term obligations (24,018)
(Decrease) increase in short-term notes payable 7,404
--------
Net cash (applied to) provided by financing activities 83,727
--------
Effect of Exchange Rate Changes on Cash and Cash Equivalents (4,161)
--------
Increase (decrease) in Cash and Cash Equivalents (49,003)
Cash and Cash Equivalents at Beginning of Year 220,400
--------
Cash and Cash Equivalents at End of Year $171,397
========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
<TABLE>
Statement of Shareholders' Equity
(Dollar amounts in thousands)
<CAPTION>
Capital in Cumulative
Common Excess of Retained Translation
Stock Par Value Earnings Adjustments
------- --------- -------- -----------
<S> <C> <C> <C> <C>
Balance at October 31,
1991 as previously
reported $32,751 $392,309 $227,317 $ (8,770)
Cumulative effect of
accounting change,net
of minority interest - - (14,957) -
Restated balance at ------ ------- ------- --------
October 31, 1991 32,751 392,309 212,360 (8,770)
Net income 55,473
Exercise of stock
options 19 277
Issuance of
restricted stock 14 171
Dividends paid
($.40 per share) (11,611)
Translation adjustments (10,253)
2,060,000 shares
acquired as
Treasury Stock
----- ------- ------- ---------
Balance at October
31, 1992 32,784 392,757 256,222 (19,023)
Net loss (17,054)
Exercise of stock
options 3 49
Issuance of
restricted stock 11 132
Dividends paid
($.40 per share) (11,177)
Dividends on
shares held
by SECT 508
Establishment of SECT
Adjust SECT shares to
market value 6,277
Translation adjustments (9,452)
2,577,500 shares
acquired as
Treasury Stock
Purchase of shares
by employee benefit
plans
------ ------- ------- ---------
Balance at October
31, 1993 32,798 399,723 227,991 (28,475)
Net loss (48,027)
Exercise of stock
options (1,024)
Issuance of
restricted stock (120)
Dividends paid
($.40 per share) (11,379)
Dividends on
shares held
by SECT 902
Adjust SECT shares to
market value 6,496
Translation adjustments 2,815
4,875 shares acquired
as Treasury stock
Sale of 2,000,000 shares of
Treasury stock 10,300
Purchase of shares
by employee benefit
plans
------ ------- ------- ---------
Balance at October
31, 1994 $32,798 $416,277 $168,585 $(25,660)
======= ======= ======== =========
<CAPTION>
Treasury
SECT Stock Total
------ --------- -----
<S> <C> <C> <C>
Balance at October 31,
1991 as previously
reported $ - $(49,189) $594,418
Cumulative effect of
accounting change net
of minority interest - - (14,957)
Restated balance at ------- ------- -------
October 31, 1991 - (49,189) 579,461
Net income 55,473
Exercise of stock
options 296
Issuance of
restricted stock 185
Dividends paid
($.40 per share) (11,611)
Translation adjustments (10,253)
2,060,000 shares
acquired as
Treasury Stock (38,344) (38,344)
------- ------- -------
Balance at October
31, 1992 - (87,533) 575,207
Net loss (17,054)
Exercise of stock
options 214 266
Issuance of
restricted stock 143
Dividends paid
($.40 per share) (11,177)
Dividends on
shares held
by SECT 508
Establishment of SECT (50,000) 50,000 -
Adjust SECT shares to
market value (6,277) -
Translation adjustments (9,452)
2,577,500 shares
acquired as
Treasury Stock (50,812) (50,812)
Purchase of shares
by employee benefit
plans 163 163
------- ------- -------
Balance at October
31, 1993 (55,900) (88,345) 487,792
Net loss (48,027)
Exercise of stock
options 3,943 2,919
Issuance of
restricted stock 262 142
Dividends paid
($.40 per share) (11,379)
Dividends on
shares held
by SECT 902
Adjust SECT shares to
market value (6,496) -
Translation adjustments 2,815
4,875 shares acquired
as Treasury stock (124) (124)
Sale of 2,000,000 shares of
Treasury stock 36,460 46,760
Purchase of shares
by employee benefit
plans 4,431 4,431
------- ------- -------
Balance at October
31, 1994 $(53,760) $(52,009) $486,231
========= ========= ========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial
Statements.
Notes to Consolidated Financial Statements
(Dollar amounts in thousands unless indicated.)
NOTE 1
SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION - The consolidated financial
statements include the accounts of all majority-owned
subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation.
INVENTORIES - Inventories are stated at the lower of cost or
market value. Cost is determined by the last-in, first-out
(LIFO) method for substantially all domestic inventories and
by the first-in, first-out (FIFO) method for inventories of
foreign subsidiaries.
REVENUE RECOGNITION - Revenue on long-term contracts is
generally recorded using the percentage-of-completion method
for financial reporting purposes. Such contracts include
contracts for papermaking machinery, certain mining
equipment, custom-engineered cranes and systems engineering.
Revenue on cost-plus-fee contracts is recognized to the
extent of costs incurred plus a proportionate amount of fees
earned. Losses, if any, are recognized in full as soon as
identified. Sales of other products and services are
recorded as products are shipped or services are rendered.
PROPERTY, PLANT AND EQUIPMENT - Property, plant and
equipment are stated at historical cost. Expenditures for
major renewals and improvements are capitalized, while
maintenance and repairs which do not significantly improve
the related asset or extend its useful life are charged to
expense as incurred.
For financial reporting purposes, plant and equipment are
depreciated primarily by the straight-line method over the
estimated useful lives of the assets. Depreciation claimed
for income tax purposes is computed by accelerated methods.
CASH EQUIVALENTS - The Company considers all highly liquid
debt instruments with a maturity of three months or less at
the date of purchase to be cash equivalents.
FOREIGN EXCHANGE CONTRACTS - Any gain or loss on forward
contracts designated as hedges of commitments is deferred
and included in the measurement of the related foreign
currency transaction, except that permanent losses are
recognized immediately.
FOREIGN CURRENCY TRANSLATION - The majority of the assets
and liabilities of the Company's international operations
are translated at year-end exchange rates; income and
expenses are translated at average exchange rates prevailing
during the year.
For operations whose functional currency is the local
currency, translation adjustments are accumulated in a
separate section of shareholders' equity. Transaction gains
and losses, as well as translation adjustments relating to
operations whose functional currency is the U.S. dollar, are
reflected in income. Pre-tax foreign exchange losses
included in operating income were $238 in 1994. Pre-tax
foreign exchange gains included in operating income in 1993
and 1992 were $3,917 and $7,795, respectively.
GOODWILL AND INTANGIBLE ASSETS - Goodwill represents the
excess of the purchase price over the fair value of
identifiable net assets of acquired companies and is being
amortized on a straight-line basis over periods ranging from
25 to 40 years. The Company assesses the carrying value of
goodwill at each balance sheet date. Consistent with the
November, 1993 FASB Exposure Draft, "Accounting for the
Impairment of Long-Lived Assets," such assessments include a
comparison of (a) the estimated future nondiscounted cash
flows anticipated to be generated during the remaining
amortization period of the goodwill to (b) the net carrying
value of goodwill. The Company recognizes diminution in
value of goodwill, if any, on a current basis. Other
intangible assets are amortized over the shorter of their
legal or economic useful lives ranging from 5 to 19 years.
Accumulated amortization was $34,042 and $32,102 at October
31, 1994 and 1993, respectively.
INCOME TAXES - Effective November 1, 1993, the Company
adopted Statement of Financial Accounting Standard (SFAS)
No. 109, "Accounting for Income Taxes" (SFAS 109)
retroactive to fiscal 1989. SFAS 109 changed the criteria
for measuring the provision for income taxes and recording
deferred tax assets and liabilities on the consolidated
balance sheet. Under SFAS 109, deferred income taxes are
recognized for the tax consequences of "temporary
differences" by applying enacted statutory tax rates
applicable to future years to differences between the
financial statement carrying amounts and the tax bases of
existing assets and liabilities. The Company reflected the
initial application of the new standard as a cumulative
effect of a change in accounting principle in the year of
adoption and accordingly recognized income of $5,520 in the
first quarter of fiscal 1989. The consolidated financial
statements for each year presented take into account the
effects of SFAS 109. See Note 6-Income Taxes.
RESEARCH AND DEVELOPMENT EXPENSES - Research and development
costs are expensed as incurred. Such costs incurred in the
development of new products or significant improvements to
existing products amounted to $25,016, $24,235, and $25,056
in 1994, 1993 and 1992, respectively. Certain capital
expenditures used in research activities, such as the
construction of the new pilot paper machine to be used in
research and for customer tests, are capitalized and
depreciated over their expected useful lives.
EARNINGS PER SHARE - Earnings per share are based upon the
weighted average number of common shares outstanding during
the year. The number of shares used in the computation were
25,973,621 in 1994, 26,606,547 in 1993, and 29,121,653 in
1992. Common stock equivalents were not significant in any
of the years presented. Shares in the Stock Employee
Compensation Trust ("SECT") are not considered outstanding
for computing earnings per share.
NOTE 2
ACQUISITIONS
In September, 1994, the Company completed the acquisition of
all of the outstanding shares of MMH (Holdings) Limited, a
holding company for Morris Mechanical Handling Limited
("Morris") and related companies for $24,890. Morris is a
manufacturer of a broad line of cranes, hoists, and other
lifting equipment, and has an extensive service organization
that provides aftermarket services for a broad spectrum of
lifting equipment. Morris is headquartered in Great Britain
and also has operations in the United States, the Far East
and South Africa, and is a unit of the Material Handling
Equipment segment.
The acquisition was accounted for as a purchase
transaction. The purchase price was allocated to the
specific net assets acquired based upon a recently completed
independent appraisal. The results of Morris for the month
of October were included in the Company's consolidated
operating results.
In addition, the Company completed two smaller
acquisitions during 1994. In July, 1994, the Company
acquired a Mexican company, Hercules, S.A. de C.V., for
$2,589. Hercules, a manufacturer of overhead cranes and
hoists serving the Mexican and South American markets, is
also a unit of the Material Handling Equipment segment. The
acquisition was accounted for as a purchase.
The Company's Beloit Corporation subsidiary acquired
substantially all of the common shares of OASIS (Optical
Alignment Systems and Inspection Services, Inc.) for $7,000
in September, 1994. The transaction was accounted for as a
purchase. The New Hampshire-based company provides
specialty services principally to the paper industry.
In July, 1992, the Company completed the acquisition of
certain assets and liabilities of the J&L Plate ("J&L")
refiner plate manufacturing and Gartland foundry facilities
of Sullivan Corporation, for a total purchase price of
$46,616. The acquisition was accounted for as a purchase
transaction. J&L, which has been renamed J&L Fiber
Services, is a wholly-owned subsidiary of Beloit
Corporation. J&L has focused on custom refiner plates
suitable for a variety of pulp and paper applications.
In 1990, the Company entered into an agreement with
Measurex Corporation ("Measurex") pursuant to which the
Company could purchase up to 20% of Measurex's outstanding
common stock in open market transactions. As of October 31,
1994, the Company's total investment in Measurex, including
related expenses, equity income (loss) and net of dividends
received, amounted to $66,347, representing 3,640,000 shares
or a 20% interest. The Company accounts for this investment
using the equity method and includes its equity income
(loss) in its Papermaking Machinery and Systems segment
("Paper Group"). The excess purchase price over the
Company's proportionate share of the underlying equity in
net assets is being amortized on a straight-line basis over
40 years. Also, see Note 14-Transaction with Affiliated
Companies.
NOTE 3
RESTRUCTURING AND NONRECURRING CHARGES
In the third quarter of fiscal 1993, the Company recorded a
restructuring charge to strengthen and streamline its
papermaking machinery and mining equipment businesses. The
total estimated cost of the restructuring activities reduced
pre-tax income by $67,000 ($43,113 after-tax, or $1.63 per
share). Of the total, $40,000 related to the Paper Group,
which was primarily for the closure of its Canadian
papermaking machinery manufacturing facilities and
consolidation of North American papermaking machine
manufacturing in Beloit, Wisconsin. The $25,500 charge for
Harnischfeger Corporation's Mining Equipment Division
related principally to its plans to reduce worldwide
inventories and to enhance manufacturing and repair parts
capabilities. Other elements in the restructuring charge
provided for refocusing manufacturing and marketing efforts
(to reduce non-value-added activities, to reduce
nonoperating assets and to focus on capital carrying costs)
as well as employee severance costs. Substantially all of
the restructuring reserve was used by the end of fiscal
1994. The remaining reserves at October 31, 1994 of $7,746
relate primarily to the Paper Group.
The Company recorded a charge in the third quarter of
fiscal 1993 resulting from the reestimation of certain
warranty reserves carried by the Mining Equipment Division.
The charge reduced pre-tax income by $8,000 ($5,214 after-
tax, or $.19 per share). This nonrecurring charge was the
result of a deeper analysis of open warranty claims and
customer requests, field experience on new products and
additional analytical data provided by new systems which has
since resulted in engineering, design and manufacturing
changes. The Company's warranty methodology, while
long-established, is by its very nature based on
management's judgement and is not mathematically precise or
actuarially based. The resultant warranty reserves are
reevaluated periodically and reflect refinements of
estimated warranty exposure on evolving product lines. This
additional warranty reserve was used primarily during fiscal
1994.
NOTE 4
ACCOUNTS RECEIVABLE
<TABLE>
Accounts receivable at October 31 consisted of the
following:
<CAPTION>
(in thousands)
1994 1993
----- ----
<S> <C> <C>
Trade receivables $234,843 $226,011
Unbilled receivables 68,496 66,442
Allowance for doubtful accounts and
contract losses (5,209) (11,311)
-------- --------
$298,130 $281,142
======== ========
</TABLE>
The amount of accounts receivable due beyond one year is not
significant.
NOTE 5
INVENTORIES
<TABLE>
Inventories at October 31 consisted of the following:
<CAPTION>
(in thousands)
1994 1993
---- ----
<S> <C> <C>
Finished goods $ 92,143 $ 93,570
Work in process and purchased parts 86,187 113,520
Raw materials 73,189 54,257
-------- ---------
251,519 261,347
Less excess of current cost over
stated LIFO value (42,032) (42,907)
-------- ---------
$209,487 $218,440
======== ========
</TABLE>
Inventories valued using the LIFO method represented
approximately 69% and 76% of consolidated inventories at
October 31, 1994 and 1993, respectively.
The Company has reduced inventory by $3,739 and $8,125 at
October 31, 1994 and 1993, respectively, for progress
payments received on contracts accounted for on the
completed contract method.
NOTE 6
INCOME TAXES
Effective November 1, 1993, the Company adopted SFAS No.
109, "Accounting for Income Taxes," retroactive to November
1, 1988. See Note 1-Significant Accounting Policies. The
impact on previously reported net income and earnings(loss)
per share from adopting the new standard is as follows:
<TABLE>
<CAPTION>
Year Ended October 31,(in thousands) 1993 1992
---------- -------
Income Per Income Per
(Loss) Share (Loss) Share
-------- ----- -------- -----
<S> <C> <C> <C> <C>
Increase (Decrease)
from previously
reported $644 $ .03 $(1,213) $(.04)
</TABLE>
The components of income (loss) from continuing operations
before income taxes and minority interest for the Company's
domestic and foreign operations for the years ended October
31 were as follows:
<TABLE>
<CAPTION>
(in thousands) 1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Domestic $ 3,839 $(56,043) $ 48,788
Foreign 22,807 (6,263) 41,826
-------- ------- -------
Income (loss) from continuing
operations before provision
(credit) for income taxes and
minority interest $ 26,646 $(62,306) $ 90,614
========= ======= =========
</TABLE>
The consolidated provision (credit) for income taxes
included in the statement of income for the years ended
October 31 consisted of the following:
<TABLE>
<CAPTION>
(in thousands) 1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Current provision:
Federal $ 2,282 $ 2,547 $ 3,436
State 572 2,100 1,235
Foreign 6,316 3,668 26,512
------- ------ -------
Total Current 9,170 8,315 $31,183
------- ------- -------
Deferred provision (credit):
Federal (45,630) (17,715) 7,135
State and foreign (1,040) 2,027 (3,235)
------- ------- -------
Total Deferred (46,670) (15,688) 3,900
------- ------- -------
Total consolidated income tax provision (credit)$(37,500) $(7,373) $35,083
======== ======= =======
</TABLE>
Income tax provision (credit) is included in the statement
of income as follows:
<TABLE>
<CAPTION>
(in thousands) 1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Continuing operations $ 5,300 $(20,600) $31,550
Income (loss) from discontinued operations 900 3,816 3,533
Gain on sale of discontinued operation - 9,411 -
Cumulative effect of accounting change (43,700) - -
-------- --------- --------
$(37,500) $(7,373) $35,083
======== ======== ========
</TABLE>
The difference between the federal statutory tax rate and
the effective tax rate on continuing operations for the
years ended October 31 follows:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Federal statutory tax rate 35.0% (34.8)% 34.0%
Goodwill amortization not
deductible for tax purposes 1.7 .7 .5
Canadian restructuring (1993) and
other differences in foreign and
U.S. tax rates (.1) 1.4 4.1
Differences in Foreign Sales
Corporation and U.S. tax rate (7.8) (1.9) (2.0)
State income taxes, net of
federal tax impact (5.2) 1.5 .5
General business credits utilized (5.2) (.4) --
Resolution of certain prior
years' tax exposures - - (2.2)
Other items-net 1.5 .4 (0.1)
------- ------ -----
Effective tax rate 19.9% (33.1)% 34.8%
======= ====== =====
</TABLE>
Temporary differences and carryforwards which gave rise to
the net deferred tax liability are as follows:
<TABLE>
<CAPTION>
October 31,(in thousands) 1994 1993
---------- -----------
<S> <C> <C>
Differences in revenue recognition
for book and tax purposes $ (565) $(5,233)
Inventories (3,381) (3,775)
Accrued expenses not currently
deductible 9,788 7,940
Provisions for restructuring not
currently deductible 2,588 19,154
Other - net (931) 5,337
------- --------
Total deferred income taxes included
in other current assets $ 7,499 $23,423
======= =======
Depreciation and amortization in
excess of book expense $(56,439) $(64,025)
Employee benefit related items 18,266 (16,886)
Tax credit carryforwards 40,497 29,628
Tax loss carryforwards 34,595 29,749
Other accruals and reserves in
excess of tax expense (13,686) (27,209)
State taxes (5,483) (8,143)
Other - net (15,222) (10,200)
-------- -------
2,528 (67,086)
Valuation Allowance (14,134) (12,371)
--------- --------
Total deferred income taxes $(11,606) $(79,457)
========= =========
Net deferred tax liability $ (4,107) $(56,034)
========= =========
</TABLE>
At October 31, 1994, the Company has foreign tax credit
carryforwards of $14,357 expiring in 1995, 1998 and 1999,
general business tax credits of $18,914 expiring in 2003-
2009, and alternative minimum tax credit carryforwards of
$7,226 which do not expire. In addition, tax loss
carryforwards consisted of foreign loss carryforwards of
$21,464 with various expiration dates, and domestic
carryforwards of $13,131 with various states and expiration
dates. The carryforwards will be available for the
reduction of future income tax liabilities.
U.S. income taxes, net of foreign taxes paid or payable,
have been provided on the undistributed profits of foreign
subsidiaries, except in those instances where such profits
are expected to be permanently reinvested. Such unremitted
earnings of subsidiaries which have been or are intended to
be permanently reinvested were $96,600 at October 31, 1994.
If, for some reason not presently contemplated, such profits
were to be remitted or otherwise became subject to U.S.
income tax, the Company expects to incur tax at
substantially less than the U.S. income tax rate as a result
of foreign tax credits that would be available.
Income taxes paid were $10,816, $11,858 and $40,020 for
1994, 1993 and 1992, respectively.
NOTE 7
LONG-TERM OBLIGATIONS, BANK CREDIT FACILITIES AND INTEREST
EXPENSE
Long-term obligations at October 31 consisted of the
following:
<TABLE>
<CAPTION>
(in thousands) 1994 1993
---- ----
<S> <C> <C>
8.9% Debentures, due 2022 $ 75,000 $ 75,000
8.7% Debentures, due 2022 75,000 75,000
Senior Notes, Series A through D, at
interest rates of between 8.9% and 9.1%,
due 1996 to 2006 75,000 75,000
Industrial Revenue Bonds, at
interest rates of between 5.9% and
7.6%, due 1994 to 2017 16,032 16,857
Other 3,497 4,532
--------- ---------
244,529 246,389
Less:
Amounts payable within one year 1,321 3,007
-------- ---------
$243,208 $243,382
======== ========
</TABLE>
The Company has $150,000 of unsecured debentures
outstanding with interest rates ranging from 8.7% to 8.9%
due at maturity in 2022.
The Senior Notes, Series A through D, are privately placed
and unsecured. The terms of the Note Agreements place
limits on the amount of additional long-term debt the
Company may issue and require maintenance of a minimum
consolidated net worth, as defined. Additional funded debt
may be incurred if immediately thereafter consolidated
funded debt does not exceed 50% of consolidated total
tangible assets, as defined.
The Series D Notes provide for eleven equal annual
repayments beginning in 1996; Series A through C Notes are
due at maturity in 1999, 1999 and 2001, respectively.
In 1992, the Company filed a shelf registration with the
Securities and Exchange Commission for the proposed sale of
up to $150,000 of additional debt securities. To date no
securities covered by the registration have been offered for
sale.
In November, 1993, the Company entered into a four-year
Revolving Credit Facility Agreement between the Company and
certain domestic and foreign financial institutions that
allowed for borrowings of up to $150,000 at rates expressed
in relation to LIBOR and other rates. In November 1994, the
facility was increased to $240,000, and was extended to
November, 1998. A facility fee is payable on the Revolving
Credit line.
The Industrial Revenue Bonds are secured by certain assets
of the Company's domestic operations.
Installments payable to holders of the outstanding
long-term obligations of the Company are due as follows:
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
1995. . . . . . . . . . . . . . . . . .$ 1,321
1996. . . . . . . . . . . . . . . . . . 2,849
1997. . . . . . . . . . . . . . . . . . 2,704
1998. . . . . . . . . . . . . . . . . . 2,467
1999. . . . . . . . . . . . . . . . . . 37,611
</TABLE>
At October 31, 1994, short-term bank credit lines of
foreign subsidiaries were approximately $61,102. The
outstanding borrowings were $14,083 with a
weighted average interest rate of 19.6%, reflecting higher
rates in Poland and South Africa. There were no
compensating balance requirements under these lines of
credit.
Net interest (expense) consisted of the following:
<TABLE>
<CAPTION>
Year Ended October 31,(in thousands)
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Interest income (1) $ 6,150 $ 5,801 $10,820
Interest expense (26,411) (27,597) (19,487)
-------- -------- -------
Interest (expense)-net $(20,261) $(21,796) $(8,667)
======== ======== =======
</TABLE>
(1) The Company reflected $1,546 and $2,200 of interest
income in 1993 and 1992, respectively, as a result of the
resolution of certain prior years' tax issues.
Interest paid was $25,990, $29,774 and $14,339 in 1994,
1993 and 1992, respectively.
NOTE 8
PENSION PLANS
The Company and its subsidiaries have a number of defined
benefit, defined contribution and government mandated
pension plans covering substantially all employees.
Benefits from these plans are based on factors which include
various combinations of years of service, fixed monetary
amounts per year of service, employee compensation during
the last years of employment and the recipient's social
security benefit. The Company's funding policy with respect
to its qualified plans is to contribute annually not less
than the minimum required by applicable law and regulation
nor more than the amount which can be deducted for income
tax purposes. The Company also has a nonqualified senior
executive supplemental pension plan, funded by Company
stock, which is based on credited years of service and
compensation during the last years of employment.
Certain foreign plans, which supplement or are coordinated
with government plans, many of which require funding through
mandatory government retirement plans or insurance company
plans, have pension funds or balance sheet accruals which
approximate the actuarially computed value of accumulated
plan benefits as of October 31, 1994 and 1993.
The Company recorded an additional minimum pension
liability and intangible asset of $19,915 and $16,820 in
1994 and 1993, respectively, to recognize the unfunded
accumulated benefit obligation of certain domestic plans.
Pension expense for all plans of the Company was $12,164
in 1994, $13,043 in 1993 and $17,042 in 1992. Net periodic
pension costs for U.S. plans and plans of subsidiaries
outside the United States for which SFAS No. 87 ("Employers'
Accounting for Pensions") has been adopted included the
following components:
<TABLE>
<CAPTION>
Year Ended October 31,(in thousands) 1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Service cost-benefits
earned during the year $ 12,123 $ 11,675 $ 13,101
Interest cost on projected
benefit obligation 24,900 23,543 24,281
Actual gain on plan assets (10,943) (36,005) (21,333)
Net amortization and deferral (14,667) 13,371 211
-------- -------- --------
Net periodic pension cost $ 11,413 $ 12,584 $ 16,260
======== ======== ========
</TABLE>
The discount rate used for U.S. plans was 8.0% in 1994,
and 8.5% in 1993 and 1992, and for non-U.S. plans ranged
from 6.7% to 15.0%. The assumed rate of increase in future
compensation of U.S. salaried employees was 5.0% in 1994 and
5.5% in 1993 and 1992, and for non-U.S. salaried employees
ranged from 5.0% to 11.0%. Benefits under the hourly
employee plans are generally not based on wages. The
expected long-term rate of return on assets for essentially
all U.S. and non-U.S. plans was 10.0%. The assumptions for
non-U.S. plans were developed on a basis consistent with
that for U.S. plans, adjusted to reflect prevailing economic
conditions and interest rate environments.
Primarily, as a result of the sale of Harnischfeger
Engineers, Inc.("HEI") in 1993 (see Note 16 - Discontinued
Operations), a curtailment occurred within the Harnischfeger
Salaried Pension Plan. Curtailment gains of $4,527 were
recorded in 1993, $3,969 of which was included in the gain
on sale of discontinued operations.
The following table sets forth the plans' funded status at
October 31, 1994 and 1993:
<TABLE>
<CAPTION>
1994
------------------------
Plans With Plans With
Assets Accumulated
Exceeding Benefits
Accumulated Exceeding
Benefits Assets
----------- ---------
<S> <C> <C>
Actuarial present value of:
Vested benefits $167,974 $103,738
Accumulated benefits 180,140 120,350
Projected benefits 220,426 126,228
Net assets available for benefits 227,796 87,369
--------- --------
Plans' assets greater (less) than projected benefits 7,370 (38,859)
Unrecognized (asset) obligation existing at adoption (7,400) 4,828
Unrecognized prior service cost 6,016 10,131
Unrecognized net (gain) loss 354 10,446
--------- --------
Net pension asset (liability) $ 6,340 $(13,454)
========= =========
<CAPTION>
1993
-------------------------
Plans With Plans With
Assets Accumulated
Exceeding Benefits
Accumulated Exceeding
Benefits Assets
---------- ----------
<S> <C> <C>
Actuarial present value of:
Vested benefits $147,613 $111,205
Accumulated benefits 159,264 120,766
Projected benefits 198,560 124,764
Net assets available for benefits 209,354 86,548
--------- ---------
Plans' assets greater (less) than projected benefits 10,794 (38,216)
Unrecognized (asset) obligation existing at adoption (7,406) 5,466
Unrecognized prior service cost 7,819 9,846
Unrecognized net (gain) loss (10,409) 5,479
--------- ---------
Net pension asset (liability) $ 798 $(17,425)
========= ==========
</TABLE>
Pension plan assets consist primarily of trust funds with
diversified portfolios of primarily equity and fixed income
investments.
The Company has a qualified profit sharing plan which
covers substantially all domestic employees except employees
covered by collective bargaining agreements and employees of
subsidiaries with separate defined contribution plans.
Contributions to the plan are based on the Company's
consolidated Economic Value Added ("EVA") performance. Profit
sharing expense was $3,300 in 1994. The Company made no
profit sharing contribution in 1993. Profit sharing expense
was $629 in 1992.
The FASB also has issued SFAS No. 112 "Employers
Accounting for Postretirement Benefits" which will be
implemented by the Company in the first quarter of fiscal
1995. The impact upon adoption on the Company's results of
operations and financial position will not be material.
NOTE 9
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company generally provides certain health care and life
insurance benefits for U.S. employees who retire after
attaining early retirement eligibility.
During the first quarter of fiscal 1994, the Company
adopted SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions" (SFAS 106),
through the immediate recognition of the obligation. Under
SFAS 106, the costs of retiree health care and life
insurance benefits are accrued over relevant employee
service periods. Previously, these costs were charged to
expense as claims were paid. The cumulative effect of the
accounting change required by this standard was a one time
pre-tax charge of $115,000 ($66,142 or $2.55 per share after
taxes and minority interest). The discount rate used in
determining the liability as of the date of adoption and as
of October 31, 1994 was 8.0%.
The following table sets forth the plans' funded status
and amounts recognized in the Company's balance sheet as of
October 31, 1994:
<TABLE>
<CAPTION>
(in thousands) 1994
<S> <C>
Accumulated postretirement benefit obligation:
Retirees $ 55,700
Fully eligible active plan participants 6,000
Other active plan participants 16,500
---------
Total 78,200
Plan asset at fair value 0
---------
Accumulated postretirement benefit obligation
in excess of plan assets 78,200
Unrecognized transition obligation 0
Unrecognized prior service credit 21,305
Unrecognized gain 10,176
---------
Accrued postretirement benefit liability 109,681
Less: Current portion 13,614
---------
$ 96,097
=========
</TABLE>
Net periodic postretirement benefit cost for fiscal year
1994 includes the following components:
<TABLE>
<CAPTION>
(in thousands) 1994
------
<S> <C>
Service cost $ 656
Interest cost on accumulated postretirement benefit
obligation 6,204
Actual return on plan assets 0
Amortization of prior service cost(credit) (2,995)
Net amortization and deferral 0
------
Net periodic postretirement benefit cost $3,865
======
</TABLE>
For measurement purposes, a 13.0% annual rate of increase
in the per capita cost of covered health care benefits for
non-medicare eligible participants was assumed for 1994
(11.0% used for medicare eligible participants); the rate
was assumed to decrease gradually to 5.0% for all
participants by 2001 and remain at that level thereafter.
The health care cost trend rate assumption has a significant
effect on the amounts reported. A one percentage point
increase in the assumed health care cost trend rates each
year would increase the accumulated postretirement benefit
obligation as of October 31, 1994 by $2,800, and the
aggregate service cost and interest cost components of the
net periodic postretirement benefit cost for the year by
$300.
The cost of providing these benefits to retirees was
$9,237 in 1993 and $7,908 in 1992.
In 1993, the Board of Directors of the Company approved a
general approach that would culminate in the elimination of
all Company contributions towards postretirement health care
benefits. Increases in costs paid by the Company were
capped beginning in 1994 extending through 1998 and Company
contributions will be eliminated on January 1, 1999 for most
employee groups. The initial one-time pre-tax charge
reflected all plan terms and amendments in place on November
1, 1993. Negative plan amendments made subsequent to
November 1, 1993 are being amortized from the date of
amendment to January 1, 1999. Amortization of negative plan
amendments in 1994 amounted to $2,995, which reduced
reported net periodic postretirement benefit cost.
NOTE 10
SHAREHOLDERS' EQUITY AND STOCK OPTIONS
As of October 31, 1994, the Company had 50,000,000
authorized shares of Common Stock, $1 par value, of which
1,923,384 shares are reserved for stock options and
restricted stock. On November 29, 1994, as a part of the
acquisition of Joy Technologies Inc. (see Note 17-
Acquisition of Joy Technologies Inc.), the Company's
authorized Common Stock was increased to 100,000,000 shares.
A Preferred Stock Purchase Right is attached to each share
of Common Stock which entitles a shareholder to exercise
certain rights in the event a person or group acquires or
seeks to acquire 20% or more of the outstanding Common
Stock of the Company.
The Incentive Stock Plan provides for the granting, up to
January 31, 1998, of qualified and non-qualified options,
stock appreciation rights and restricted stock to key
employees for not more than 2,400,000 shares of Common
Stock.
Since the inception of the Incentive Stock Plan, options
for the purchase of 2,296,550 shares have been granted, at
prices ranging from $6.75 to $27.00 per share. At October
31, 1994, 1,286,050 of the granted options were outstanding,
402,075 had been exercised and 608,425 had expired.
Generally, the options become exercisable in cumulative
installments of one-fourth of the shares in each year
beginning six months from the date of the grant. In
addition, 63,000 shares were reserved for restricted stock
in 1990. In 1994, 10,875 of the reserved restricted shares
were issued. The recipients of restricted stock have the
right to receive dividends and vote but such shares cannot
be transferred until they become fully vested. The shares
generally will become unrestricted following the end of
fiscal 1995. Compensation expense related to restricted
stock is included in income and amounted to $100 in 1994,
$170 in 1993 and $438 in 1992.
Certain information regarding stock options follows:
<TABLE>
<CAPTION>
Number Option Price
of Shares Per Share
--------- ----------------
<S> <C> <C>
Outstanding at October 31, 1991 1,097,475 $14.38 to 27.00
Granted 355,000 17.25 to 20.63
Exercised (18,475) 14.38 to 19.63
Canceled or expired (205,875) 14.38 to 24.63
---------- ----------------
Outstanding at October 31, 1992 1,228,125 14.38 to 27.00
Granted 348,750 18.50 to 19.63
Exercised (16,875) 14.38 to 19.25
Canceled or expired (46,175) 14.38 to 24.63
---------- ----------------
Outstanding at October 31, 1993 1,513,825 14.38 to 27.00
Granted 80,000 26.50
Exercised (162,650) 14.38 to 24.63
Canceled or expired (145,125) 14.38 to 24.63
---------- ----------------
Outstanding at October 31, 1994 1,286,050 14.38 to 27.00
---------- ----------------
Exercisable at October 31, 1994 749,863 $14.38 to 27.00
========== ================
</TABLE>
In September, 1994, the Company sold 2,000,000 shares of
common stock in a private transaction. The common stock
sold has not been registered under the Securities Act of
1933 and may not be offered or sold in the United States
absent registration or an applicable exemption from
registration requirements. This sale of stock satisfied the
requirements under the pooling of interest accounting rules
to replace shares repurchased during the two years prior to
the announcement of the Company's merger with Joy
Technologies Inc. The shares were sold from treasury stock.
Following a "Dutch auction" self-tender offer in May,
1993, the Company purchased for cash 2,500,000 common
shares, or approximately 9% of common shares outstanding at
that time, at $19 5/8 per share, in conjunction with the
establishment of the Harnischfeger Industries, Inc. SECT.
Concurrent with the purchase, the Company sold 2,547,771
common shares held in treasury to the SECT, amounting to
$50,000 at $19 5/8 per share. The purchase of the treasury
shares reduced shareholders' equity. The sale of the
treasury shares to the SECT had no impact on such equity.
Shares in the SECT are being used to provide future employee
benefits under plans that currently require shares of
Company stock.
Shares owned by the SECT are accounted for as treasury
stock until issued to existing benefit plans; they are
reflected as a reduction to shareholders' equity. Each
period the shares owned by the SECT are valued at the
closing market price, with corresponding changes in the SECT
balance reflected in capital in excess of par value. Also,
the shares in the SECT are not considered outstanding for
computing earnings per share.
NOTE 11
OPERATING LEASES
The Company leases certain office and warehouse space as
well as machinery, vehicles, data processing and other
equipment.
Certain of the leases have renewal options at reduced
rates and provisions requiring the Company to pay
maintenance, property taxes and insurance.
Generally, all rental payments are fixed. The Company's
assets and obligations under capital lease arrangements are
not significant.
Total rental expense under operating leases, excluding
maintenance, taxes and insurance, was $13,876, $13,646 and
$15,288 in 1994, 1993 and 1992, respectively.
At October 31, 1994, the future payments for all operating
leases with remaining lease terms in excess of one year, and
excluding maintenance, taxes and insurance, were as follows:
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
1995. . . . . . . . . . . . . . . . .$11,290
1996. . . . . . . . . . . . . . . . . 9,504
1997. . . . . . . . . . . . . . . . . 7,769
1998. . . . . . . . . . . . . . . . . 5,970
1999. . . . . . . . . . . . . . . . . 364
2000. . . . . . . . . . . . . . . . . 294
</TABLE>
NOTE 12
COMMITMENTS, CONTINGENCIES AND OFF-BALANCE-SHEET RISKS
At October 31, 1994, the Company was contingently liable to
banks, financial institutions and others for approximately
$71,000 for outstanding letters of credit securing
performance of sales contracts and other guarantees,
excluding the HEI back-up bond guarantee facility(see Note
16-Discontinued Operations). The Company may also guarantee
performance of its equipment at levels specified in sales
contracts without the requirement for letters of credit.
One such guarantee may require a loan to a customer
approximating the value of the related paper machine in the
event certain performance tests are not achieved.
Performance guarantees are a normal part of the Company's
business and have not resulted in significant cash outlays.
The Company is a party to litigation matters and claims
which are normal in the course of its operations and, while
the results of litigation and claims cannot be predicted
with certainty, management believes that the final outcome
of such matters will not have a materially adverse effect on
the Company's consolidated financial position or results of
operations.
The Company is also involved in a number of proceedings
and potential proceedings relating to environmental matters.
Although it is difficult to estimate the potential exposure
to the Company related to these environmental matters, the
Company believes that these matters will not have a
materially adverse effect upon its consolidated financial
position or results of operations.
The Company has entered into various foreign currency
exchange contracts with major international financial
institutions designed to minimize its exposure to exchange
rate fluctuations on foreign currency transactions. These
contracts are used to hedge known cash receipts and
disbursements in the ordinary course of business. At
October 31, 1994, the outstanding net U.S. dollar face
amounts of these contracts totaled approximately $1,549. The
difference between contract and estimated fair values at
October 31, 1994 was not significant. The Company does not
participate in derivative instruments or transactions.
As a prime contractor and subcontractor with various
agencies of the U.S. Government, principally the Department
of Defense, the Company's Systems Group is subject to strict
procurement regulations, with non-compliance found by any
one agency possibly resulting in fines, penalties, debarment
or suspension from receiving additional contracts with all
agencies. In July, 1993, the U.S. Air Force rescinded a
contract with Syscon Corporation ("Syscon") following a
post-award protest of the contract by another bidder. As a
result of internal reviews, Syscon determined that evidence
exists to indicate that an inaccurate certificate of
compliance may have been submitted in connection with the
contract. The outcome of the government investigation of
this matter is not presently determinable. Management
believes that the final outcome will not have a significant
future effect on the Company's consolidated financial
position or results of operations.
On May 21, 1993, a Federal court jury in Madison,
Wisconsin awarded Beloit Corporation $17,200 following a
patent infringement trial against J.M. Voith GmbH of Germany
and its subsidiary, Voith, Inc. The jury had determined
that Beloit's patents on its new Bel-Champ(TM) technology
for the drying section of large paper manufacturing machines
were valid and infringed by Voith in connection with Voith's
sale of a paper machine dryer section. The verdict of this
patent infringement trial has been appealed by Voith. The
award has not been recorded in the Company's financial
statements.
In addition, on November 23, 1994 a Federal court jury in
Madison, Wisconsin returned a verdict finding Valmet
Corporation of Finland guilty of infringing a key patent
held by Beloit Corporation on the same Bel-Champ paper
machine drying technology. In connection with this suit,
the jury awarded Beloit $7,875 in damages. It is expected
that the verdict in this case will be appealed by Valmet and
the award has not been recorded in the Company's financial
statements.
NOTE 13
DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate
the fair value of each class of financial instruments for
which it is practicable to estimate that value:
Cash and Cash Equivalents: The carrying value approximates
fair value because of the short maturity of those
instruments.
Long-Term Obligations: The fair value of the Company's
long-term obligations has been calculated by discounting
cash flows using current market yields quoted on similar
issues.
The estimated fair values of the Company's financial
instruments at October 31, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
1994
(in thousands) Carrying Value Fair Value
-------------- ----------
<S> <C> <C>
Cash and Cash Equivalents $ 152,807 $ 152,807
========= =========
Long-Term Obligations (244,529) (227,672)
========= =========
<CAPTION>
1993
(in thousands) Carrying Value Fair Value
-------------- ----------
<S> <C> <C>
Cash and Cash Equivalents $ 125,576 $ 125,576
========== =========
Long-Term Obligations (246,389) (284,783)
========== =========
</TABLE>
NOTE 14
TRANSACTIONS WITH AFFILIATED COMPANIES
Mitsubishi Heavy Industries, Ltd. ("Mitsubishi") owns a 20%
interest in Beloit Corporation. In connection with this
ownership interest, Mitsubishi entered into certain
agreements that provide it with the right to designate one
of Beloit's five directors. The agreements also place
certain restrictions on the transfer of Beloit stock. In
the event of change in control of the Company, Mitsubishi
has the right to sell its 20% interest back to the Company
for the greater of $60,000 or the book value of its equity
interest.
Transactions with Mitsubishi for the years ending October
31, were as follows:
<TABLE>
<CAPTION>
(in thousands) 1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
Sales $ 487 $ 152 $ 88
Purchases 191 5,352 897
Receivables 2,335 1,712 920
License Income 3,931 3,794 4,800
</TABLE>
The Company believes that its transactions with Mitsubishi
were competitive with alternate sources of supply for each
party involved.
In 1990, the Company entered into an agreement to acquire
up to a 20% interest in Measurex. As part of the agreement,
Measurex elected a nominee selected by the Company to its
Board of Directors. There were no significant transactions
with Measurex in 1994, 1993 or 1992. On December 29, 1994,
Measurex bought back 2,026,900 shares of its stock reducing
the Company's interest to 10%.
NOTE 15
SEGMENT INFORMATION
The Company designs, manufactures and markets products
structured into three industry segments.
Papermaking Machinery and Systems (Beloit Corporation)
produces and markets papermaking machinery and allied
equipment for the pulp and paper industries. The Company's
investment in Measurex Corporation and related equity income
(loss) are included in this segment's identifiable assets
and operating results.
The Mining Equipment Division (Harnischfeger Corporation)
designs, manufactures and markets electric mining shovels,
electric and diesel-electric draglines, buckets, hydraulic
mining excavators, large rotary blasthole drilling equipment
and related replacement parts for the surface mining and
quarrying industries.
The Material Handling Equipment Division (Harnischfeger
Corporation) designs, manufactures, services and markets
overhead cranes, electric wire rope and chain hoists,
engineered products, container cranes and crane
modernizations and electrical products for use in a variety
of industries and applications.
Intersegment sales are not significant. Common operating
plants have been allocated to the respective segments.
Corporate assets include principally cash, cash
equivalents, the investment in HEI in 1994 and 1993 and
administration facilities.
<TABLE>
<CAPTION>
Segments of Business by Industry Total Operating Depreciation and
(in thousands) Sales Income (Loss) Amortization
----- ------------- ---------------
<S> <C> <C> <C>
1994
Papermaking Machinery and Systems $ 712,778 $ 32,195 $ 31,945
Mining Equipment 294,497 19,531 11,492
Material Handling Equipment 109,429 12,094 2,981
---------- --------- ---------
Total continuing operations 1,116,704 63,820 46,418
Corporate (16,913) 729
Discontinued Operations
---------- --------- ---------
Consolidated total $1,116,704 $ 46,907 $ 47,147
========== ========= =========
1993
Papermaking Machinery and Systems $ 580,421 $ (18,113) $ 30,964
Mining Equipment 291,742 (8,342) 9,615
Material Handling Equipment 117,032 6,753 2,588
---------- ---------- ---------
Total continuing operations 989,195 (19,702) 43,167
Corporate (20,808) 1,333
Discontinued Operations
---------- ---------- ---------
Consolidated total $ 989,195 $ (40,510) $ 44,500
========== ========== =========
1992
Papermaking Machinery and Systems $ 699,127 $ 70,860 $ 27,865
Mining Equipment 328,997 35,267 8,372
Material Handling Equipment 113,412 10,343 2,415
---------- --------- ---------
Total continuing operations $1,141,536 $ 116,470 $ 38,652
Corporate (17,189) 1,201
Discontinued Operations
---------- --------- ---------
Consolidated total $1,141,536 $ 99,281 $ 39,853
========== ========= =========
<CAPTION>
Segments of Business by Industry Capital Identifiable
(in thousands) Expenditures Assets
------------ -----------
<S> <C> <C>
1994
Papermaking Machinery and Systems $ 27,599 $ 752,999
Mining Equipment 5,355 323,910
Material Handling Equipment 3,935 135,680
--------- ----------
Total continuing operations 36,889 1,212,589
Corporate 289 162,966
Discontinued Operations 63,298
--------- ----------
Consolidated total $ 37,178 $1,438,853
========== ==========
1993
Papermaking Machinery and Systems $ 44,347 $ 730,955
Mining Equipment 12,956 303,315
Material Handling Equipment 1,419 85,276
--------- ----------
Total continuing operations 58,722 1,119,546
Corporate 499 154,453
Discontinued Operations 97,269
--------- ----------
Consolidated total $ 59,221 $1,371,268
========== ==========
1992
Papermaking Machinery and Systems $ 27,842 $ 841,983
Mining Equipment 19,685 362,435
Material Handling Equipment 1,502 90,161
--------- ----------
Total continuing operations 49,029 1,294,579
Corporate 2,045 95,333
Discontinued Operations 144,808
--------- ---------
Consolidated total $ 51,074 $1,534,720
========= ==========
</TABLE>
<TABLE>
<CAPTION>
Geographical Segment Information Total Interarea Sales to Unaffil-
(in thousands) Sales Sales iated Customers
----- --------- ---------------
<S> <C> <C> <C>
1994
United States $ 986,400 $(122,916) $ 863,484
Europe 138,600 (42,111) 96,489
Other Foreign 166,750 (10,019) 156,731
Interarea Eliminations (175,046) 175,046 --
---------- --------- ----------
$1,116,704 $ -- $1,116,704
========== ========= ==========
1993
United States $ 824,923 $ (83,273) $ 741,650
Europe 129,302 (11,007) 118,295
Other Foreign 144,807 (15,557) 129,250
Interarea Eliminations (109,837) 109,837 --
---------- ---------- ---------
$ 989,195 $ -- $ 989,195
========== ========= ==========
1992
United States $ 781,860 $(110,575) $ 671,285
Europe 285,679 (20,023) 265,656
Other Foreign 220,512 (15,917) 204,595
Interarea Eliminations (146,515) 146,515 --
---------- --------- ----------
$1,141,536 $ -- $1,141,536
========== ========= ==========
<CAPTION>
Geographical Segment Information
Operating Identifiable
(in thousands) Income (Loss) Assets
------------- ------
<S> <C> <C>
1994
United States $ 40,937 $ 894,511
Europe 2,747 225,441
Other Foreign 18,523 112,569
Interarea Eliminations 1,613 (19,932)
--------- ----------
$ 63,820 $1,212,589
========== ==========
1993
United States $ (27,909) $ 840,503
Europe 3,077 173,692
Other Foreign 5,758 135,827
Interarea Eliminations (628) (30,476)
--------- ---------
$ (19,702) $1,119,546
========= =========
1992
United States $ 78,199 $899,862
Europe 22,354 266,346
Other Foreign 16,088 159,872
Interarea Eliminations (171) (31,501)
--------- ----------
$ 116,470 $1,294,579
========= ==========
</TABLE>
Exports of U.S.-produced products were approximately
$172,000, $151,000 and $169,000 in 1994, 1993 and 1992,
respectively.
Note 16
DISCONTINUED OPERATIONS
In 1993, the Systems Group consisted of two subsidiaries,
HEI and Syscon. The Board of Directors and management of
the Company determined that this segment did not meet the
criteria of a core business. As such, the Board of
Directors determined that retention of the Systems Group was
not consistent with the Company's long-term goals.
On October 29, 1993, the Company completed the sale of HEI
to that unit's senior management and some equity partners.
Proceeds from the sale were $45,219, consisting of $23,219
in cash at closing, $10,000 of preferred stock and a
ten-year subordinated promissory note for $12,000. The
preferred stock is nonvoting and nonconvertible, and carries
a dividend rate increasing from 6% in the first three years
to 8% in years 4-10. Mandatory redemption is scheduled in
year 10. The subordinated promissory note bears interest at
rates ranging from 8% to 16%, quarterly payments starting in
October, 1998 and a final payment of $3,500 in October,
2003. The Company agreed to make available a back-up
bonding guarantee facility for certain bid, performance and
other contract bonds issued by HEI. The maximum amount of
guarantees cannot exceed $100,000 in the first year
subsequent to sale, with the maximum amount decreasing to
zero by November, 2000. Outstanding contract bonds under
the guarantee arrangement totaled approximately $74,000 at
October 31, 1994. HEI typically requires similar bonds from
its major subcontractors. Such guarantees have been a
normal part of HEI's business in the past and have not
resulted in cash outlays. The back-up facility may not be
used for new types of business or for projects outside of
North America, nor does it permit exposure to consequential
damages on commercial contracts.
The Company reported a $16,173 after-tax gain on the sale
of this discontinued operation in 1993.
In the second quarter of fiscal 1994, the Company
announced its decision to divest itself of Syscon, the
remaining unit in the Systems Group. Although the Company
is pursuing a plan which provides for the spin-off of Syscon
through a dividend of Syscon stock to the shareholders of
Harnischfeger Industries, Inc., the Company retains the
option to pursue other divestiture alternatives. The
divestiture is anticipated to occur in the first half of
1995. The operating results of the Systems Group have been
segregated and are shown separately in the Statement of
Income as results from discontinued operations. Operating
results of discontinued operations as of October 31 were as
follows:
<TABLE>
<CAPTION>
(in thousands)
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Net sales $132,260 $245,503 $234,308
Income (loss) before income taxes (107) 7,496 9,219
Income taxes 900 3,816 3,533
Income (loss) from discontinued
operations (1,007) 3,680 5,686
</TABLE>
The difference between the federal statutory tax rate and
the effective tax rate relates primarily to non-deductible
goodwill of Syscon.
NOTE 17
ACQUISITION OF JOY TECHNOLOGIES INC.
On November 29, 1994, the Company completed the acquisition
of Joy Technologies Inc. ("Joy") upon the approval of the
shareholders of each company. Under the terms of the
acquisition, to be accounted for as a pooling of interests,
the Company exchanged 17,720,750 common shares for all of
Joy's 31,353,000 outstanding shares, at an exchange ratio of
.5652 of a share of the Company's common stock for each of
Joy's common shares.
Joy's Mining Group is a leader in the worldwide
development, manufacturing, distribution and servicing of
underground mining equipment for the extraction of coal and
other bedded materials. In addition, Joy's Environmental
Group is a supplier of air pollution and ash handling
equipment for electric utilities and other industrial
operations.
The financial position and results of operations of the
Company and Joy will be combined in fiscal 1995 retroactive
to November 1, 1994 and the fiscal year of Joy has been
conformed to the Company's fiscal year. In addition, all
prior periods presented will be restated to give effect to
the merger. The Company's fiscal 1994 financial statements
will be combined with Joy's fiscal 1994 financial statements
(fiscal year ended February 25, 1994). Joy's operating
results for the period February 26, 1994 to October 31, 1994
will be reflected as an adjustment to the combined Company's
retained earnings on November 1, 1994.
Presented below are condensed combined financial
statements as of and for the year ended October 31, 1994.
Amounts related to Joy are presented as of and for the year
ended February 25, 1994 and have been adjusted to reflect
the adoption of SFAS 106 through the immediate recognition
of the obligation as of the beginning of the period to
conform with the Company's adoption.
<TABLE>
Condensed Combined Balance Sheet
<CAPTION>
October 31, 1994
(in thousands) Harnischfeger Joy Combined
------------- ---------- --------
<S> <C> <C> <C>
ASSETS
Current assets $ 718,889 $ 324,512 $1,043,401
Property, plant and equipment-net 395,879 94,358 490,237
Other noncurrent assets 324,085 122,784 446,869
---------- ---------- ----------
$1,438,853 $ 541,654 $1,980,507
========== ========== ==========
LIABILITIES
Current liabilities $ 468,133 $ 143,943 $ 612,076
Long-term obligations 243,208 325,725 568,933
Other noncurrent liabilities 155,711 55,583 211,294
---------- ---------- ----------
867,052 525,251 1,392,303
Minority Interest 85,570 - 85,570
Shareholders' Equity 486,231 16,403 502,634
---------- ---------- ----------
$1,438,853 $ 541,654 $1,980,507
========== ========== ==========
</TABLE>
<TABLE>
Condensed Combined Statement of Operations
<CAPTION>
Year Ended October 31, 1994
(in thousands) Harnischfeger Joy Combined
------------- ---------- --------
<S> <C> <C> <C>
Net sales $1,116,704 $ 566,038 $1,682,742
Other income 23,219 82 23,301
---------- ---------- ----------
1,139,923 566,120 1,706,043
Operating costs & expenses 1,093,016 517,442 1,610,458
---------- ---------- ----------
Operating income 46,907 48,678 95,585
Interest expense, income taxes
and minority interest (27,785) (34,182) (61,967)
---------- ---------- ----------
Income from continuing operations 19,122 14,496 33,618
Accounting changes & other (67,149) (18,666) (85,815)
---------- ---------- ----------
Net income (loss) $ (48,027) $ (4,170) $ (52,197)
========== ========== ==========
Earnings per share from
continuing operations $0.77
==========
Net income (loss) per share $(1.19)
==========
</TABLE>
NOTE 18
UNAUDITED QUARTERLY FINANCIAL DATA AND STOCK PRICES
(Dollar amounts in thousands, except per share and market price amounts)
<TABLE>
<CAPTION>
Fiscal Quarter
First Second Third
---------------------------------------------
<S> <C> <C> <C>
Net sales $239,027 $253,566 $282,834
Gross profit 44,194 50,745 56,697
Operating income 8,135 9,063 10,650
Income from continuing operations 1,952 2,809 4,421
Income (loss) from discontinued
operations, net of applicable
income taxes 431 473 99
Cumulative effect of accounting
change, net of applicable income
taxes and minority interest (66,142) - -
--------- -------- --------
Net income(loss) $ (63,759) $ 3,282 $ 4,520
========= ======== ========
Earnings (loss) per share (1)
Income from continuing operations $ 0.08 $0.11 $0.17
Income (loss) from discontinued
operations 0.02 0.02 -
Cumulative effect of accounting
change (2.59) - -
--------- -------- --------
Net income(loss)per share $(2.49) $0.13 $0.17
========= ======== ========
Market price of common stock:
High $25 1/2 $25 3/4 $21 3/4
Low 21 1/2 20 1/8 18 1/2
<CAPTION>
Fiscal Quarter 1994
Fourth Year
----------------------
<S> <C> <C>
Net sales $341,277 $1,116,704
Gross profit 72,619 224,255
Operating income 19,059 46,907
Income from continuing operations 9,940 19,122
Income (loss) from discontinued
operations, net of applicable
income taxes (2,010) (1,007)
Cumulative effect of accounting
change, net of applicable income
taxes and minority interest - (66,142)
-------- ----------
Net income(loss) $ 7,930 $ (48,027)
======== ==========
Earnings (loss) per share (1)
Income from continuing operations $0.37 $0.74
Income (loss) from discontinued
operations (0.07) (0.04)
Cumulative effect of accounting
change - (2.55)
-------- ----------
Net income(loss)per share $0.30 $(1.85)
======== ==========
Market price of common stock:
High $26 1/2 $26 1/2
Low 20 1/2 18 1/2
</TABLE>
<TABLE>
(Dollar amounts in thousands, except per share and market price amounts)
<CAPTION>
Fiscal Quarter
First Second Third
--------------------------------------------
<S> <C> <C> <C>
Net sales $233,780 $259,043 $243,074
Gross profit 46,522 55,470 51,937
Operating income (loss) 4,174 9,619 (66,593)
Income (loss) from continuing
operations 258 3,054 (46,134)
Income from discontinued operations,
net of applicable income taxes 481 775 1,192
Gain on sale of discontinued
operation, net of applicable
income taxes -- -- --
-------- -------- --------
Net income (loss) $ 739 $ 3,829 $(44,942)
======== ======== ========
Earnings (loss) per share (2)
Income (loss) from continuing
operations $0.01 $0.11 $(1.82)
Income from discontinued operations 0.02 0.03 0.05
Gain on sale of discontinued
operation -- -- --
-------- -------- ---------
Net income (loss) per share $0.03 $0.14 ($1.77)
========= ======== =========
Market price of common stock:
High $20 7/8 $19 3/4 $21 3/8
Low 17 1/8 17 1/8 17 5/8
<CAPTION>
Fiscal Quarter 1993
Fourth Year
----------------------
<S> <C>
Net sales $253,780 $989,195
Gross profit 57,946 211,875
Operating income (loss) 12,290 (40,510)
Income (loss) from continuing
operations 5,915 (36,907)
Income from discontinued operations,
net of applicable income taxes 1,232 3,680
Gain on sale of discontinued
operation, net of applicable
income taxes 16,173 16,173
-------- --------
Net income (loss) $23,320 $(17,054)
======== ========
Earnings (loss) per share (2)
Income (loss) from continuing
operations $0.23 $(1.39)
Income from discontinued operations 0.05 0.14
Gain on sale of discontinued
operation 0.64 0.61
-------- --------
Net income (loss) per share $0.92 $(0.64)
========= ========
Market price of common stock:
High $22 3/4 $22 3/4
Low 19 1/8 17 1/8
</TABLE>
(1) Due to the effect of the sale of 2.0 million shares of
treasury stock in September, 1994 and the use of the
weighted average shares outstanding each quarter for
computing earnings (loss) per share, the sum of the
quarterly per share amounts does not equal the per
share amount for the fiscal year.
(2) Due to the effect of purchase of 2.5 million shares
for the Stock Employee Compensation Trust in April,
1993 and the use of the weighted average shares
outstanding each quarter for computing earnings (loss)
per share, the sum of the quarterly per share amounts
does not equal the per share amount for the fiscal
year.
Item 6.
<TABLE>
FIVE-YEAR REVIEW
OF SELECTED FINANCIAL DATA
<CAPTION>
Year Ended October 31,
(Dollar amounts in thousands
except per share amounts) 1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Revenues
Net sales $1,116,704 $ 989,195 $1,141,536
Other income 23,219 8,086 14,271
---------- --------- ----------
1,139,923 997,281 1,155,807
Cost of Sales 892,449 777,320 871,399
Product Development,
Selling and
Administrative Expenses 200,567 185,471 185,127
Restructuring Charge - 67,000 -
Nonrecurring Charge - 8,000 -
---------- ------- ----------
Operating Income (Loss) 46,907 (40,510) 99,281
Interest (Expense) Income-Net (20,261) (21,796) (8,667)
---------- ---------- -----------
Income (Loss) from Continuing
Operations before Provision
(Credit) for Income Taxes
and Minority Interest 26,646 (62,306) 90,614
Provision (Credit) for
Income Taxes 5,300 (20,600) 31,550
Minority Interest (2,224) 4,799 (9,277)
---------- ---------- -----------
Income(Loss) from
Continuing Operations 19,122 (36,907) 49,787
Income (Loss) from Discontinued
Operations, net of appli-
cable income taxes (1,007) 3,680 5,686
Gain on Sale of Discontinued
Operation, net of appli-
cable income taxes - 16,173 --
Cumulative Effect of Account-
ing Change, net of minority
interest (66,142) -- --
---------- ---------- ---------
Net Income (Loss) $ (48,027) $ (17,054) $ 55,473
========== ========== =========
Earnings (Loss) Per Share
Income (loss) from
continuing operations $0.74 $(1.39) $1.71
Income (loss) from discontinued
operations (.04) 0.14 0.20
Gain on sale of discon-
tinued operation -- 0.61 --
Cumulative effect of
accounting change (2.55) -- --
---------- ---------- ----------
Net Income (Loss) Per Share $(1.85) $ (0.64) $ 1.91
========== ========== ==========
Dividends Per Common Share $ 0.40 $ 0.40 $ 0.40
========== ========== =========
Working Capital:
Current assets $ 718,889 $ 674,320 $ 885,405
Current liabilities 468,133 426,221 465,459
---------- ---------- ----------
Working capital $ 250,756 $ 248,099 $ 419,946
Current ratio 1.5 1.6 1.9
========== ========== ==========
Plant and Equipment:
Net properties $ 395,879 $ 404,343 $ 386,948
Capital expenditures 37,178 59,221 51,074
Depreciation expense 43,575 40,738 35,858
========== ========== ==========
Total Assets $1,438,853 $1,371,268 $1,534,720
========== ========== ==========
Debt and Capitalized
Lease Obligations:
Long-term obligations(1) $ 244,529 $ 246,389 $ 260,436
Short-term notes payable 14,083 62,309 42,876
---------- ---------- ----------
$ 258,612 $ 308,698 $ 303,312
========== ========== ==========
Minority Interest $ 85,570 $ 89,110 $ 99,655
========== ========== ==========
Debt to Capitalization Ratio 29.2% 32.8% 31.0%
========== ========== ==========
Shareholders' Equity $ 486,231 $ 487,792 $ 575,207
Book value per share $17.49 $19.19 $20.57
Common shares
outstanding (2) 27,795,135 25,423,873 27,965,655
Number of (End of Year):
Employees 11,200 10,800 11,600
Common shareholders
of record 2,261 2,512 2,865
<CAPTION>
Year Ended October 31,
(Dollar amounts in thousands
except per share amounts) 1991 1990
-------- --------
<S> <C> <C>
Revenues
Net sales $1,359,823 $1,526,251
Other income 19,361 15,182
---------- ----------
1,379,184 1,541,433
Cost of Sales 1,078,317 1,240,646
Product Development,
Selling and
Administrative Expenses 190,008 189,256
Restructuring Charge - -
Nonrecurring Charge - -
---------- ---------
Operating Income (Loss) 110,859 111,531
Interest (Expense) Income-Net 4,598 8,150
---------- ----------
Income (Loss) from Continuing
Operations before Provision
(Credit) for Income Taxes
and Minority Interest 115,457 119,681
Provision (Credit) for
Income Taxes 40,750 39,500
Minority Interest (15,509) (16,918)
---------- ---------
Income(Loss) from
Continuing Operations 59,198 63,263
Income (Loss) from Discontinued
Operations, net of appli-
cable income taxes 5,066 6,772
Gain on Sale of Discontinued
Operation, net of appli-
cable income taxes -- --
Cumulative Effect of Account-
ing Change, net of minority
interest -- --
--------- ---------
Net Income (Loss) $ 64,264 $ 70,035
========= =========
Earnings (Loss) Per Share
Income (loss) from
continuing operations $1.91 $1.96
Income (loss) from discontinued
operations 0.16 0.21
Gain on sale of discon-
tinued operation -- --
Cumulative effect of
accounting change -- --
---------- -----------
Net Income (Loss) Per Share $ 2.07 $ 2.17
========== ===========
Dividends Per Common Share $ .40 $ .20
========== ==========
Working Capital:
Current assets $ 937,660 $1,003,701
Current liabilities 568,853 646,131
---------- ---------
Working capital $ 368,807 $ 357,570
Current ratio 1.6 1.6
========== ==========
Plant and Equipment:
Net properties $ 353,933 $ 349,185
Capital expenditures 47,103 60,355
Depreciation expense 32,612 29,437
========== ==========
Total Assets $1,525,436 $1,598,005
========== ==========
Debt and Capitalized
Lease Obligations:
Long-term obligations(1) $ 135,690 $ 121,702
Short-term notes payable 31,307 30,557
---------- ----------
$ 166,997 $ 152,259
========== ==========
Minority Interest $ 97,135 $ 94,048
========== ==========
Debt to Capitalization Ratio 19.8% 18.7%
========== ==========
Shareholders' Equity $ 579,461 $ 567,978
Book value per share $19.32 $17.92
Common shares
outstanding (2) 29,993,055 31,695,714
Number of (End of Year):
Employees 12,400 12,200
Common shareholders
of record 3,250 3,500
</TABLE>
(1) Includes amounts classified as current liabilities.
(2) As of end of year, excluding SECT shares.
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Directors and Shareholders
of Harnischfeger Industries, Inc.
In our opinion, the financial statements appearing on pages
26 to 43 of this report present fairly, in all material
respects, the consolidated financial position of
Harnischfeger Industries, Inc. and its subsidiaries (the
"Company") at October 31, 1994 and 1993, and the results of
their operations and their cash flows for each of the three
years in the period ended October 31, 1994, in conformity
with generally accepted accounting principles. These
financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on
these financial statements based on our audits. We
conducted our audits of these statements in accordance with
generally accepted auditing standards which 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, assessing the accounting principles
used and significant estimates made by management, and
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the
opinion expressed above.
As discussed in Notes 6 and 9, the Company changed its
method of accounting for income taxes and postretirement
benefits other than pensions effective November 1, 1993.
The consolidated financial statements referred to above have
been restated to reflect the retroactive application of the
change in the Company's method of accounting for income
taxes.
PRICE WATERHOUSE LLP
Milwaukee, Wisconsin
December 5, 1994
EXHIBIT 21
<TABLE>
HARNISCHFEGER INDUSTRIES, INC.
SUBSIDIARIES
October 31, 1994
Harnischfeger Industries, Inc. is publicly held and has
no parent. The following subsidiaries are wholly-owned except
as noted below:
<CAPTION>
Description (1)
<S> <C>
Beloit Corporation (2) . . . . . . . . . . . . . . . . Delaware
Beloit Canada Ltd./Ltee. . . . . . . . . . . . . . . Canada
Beloit Industrial Ltda. (3). . . . . . . . . . . . . Brazil
Beloit Poland S.A. (4) . . . . . . . . . . . . . . . Poland
Beloit Technologies, Inc.. . . . . . . . . . . . . . Delaware
BWRC, Inc. . . . . . . . . . . . . . . . . . . . . . Delaware
Beloit Italia SpA. . . . . . . . . . . . . . . . . Italy
Beloit Lenox Europa GmbH . . . . . . . . . . . . . Germany
Beloit Walmsley Limited. . . . . . . . . . . . . . United Kingdom
J&L Fiber Services, Inc. . . . . . . . . . . . . . Wisconsin
Optical Alignment Systems and Inspection Services, Inc.(5) New Hampshire
Sandusky International Inc.(6) . . . . . . . . . . Ohio
Harnischfeger Corporation. . . . . . . . . . . . . . . Delaware
Harnischfeger of Australia Pty. Ltd. (7) . . . . . . Australia
Harnischfeger do Brasil Comercio e Industria Limitada Brazil
Harnischfeger Corporation of Canada, Ltd.. . . . . . Canada
Harnischfeger GmbH (8) . . . . . . . . . . . . . . . Germany
Harnischfeger International Corporation, S.A.. . . . Panama
Harnischfeger (South Africa) (Proprietary) Limited .South Africa/Delaware
HCHC, Inc. . . . . . . . . . . . . . . . . . . . . . Delaware
Harnischfeger Contract Services, Inc.. . . . . . . Delaware
Harnischfeger Holdings Limited . . . . . . . . . . United Kingdom
MMH (Holdings) Limited . . . . . . . . . . . . . United Kingdom
Morris Mechanical Handling Limited . . . . . . United Kingdom
Linear Motors Limited. . . . . . . . . . . . United Kingdom
MMH (International) Limited. . . . . . . . . . United Kingdom
Morris Mechanical Handling, Inc. . . . . . . Delaware
Morris Mechanical Handling (Pty) Limited . . South Africa
Hercules S.A. de C.V (9) . . . . . . . . . . . . . Mexico
SPH Crane and Hoist, Inc.. . . . . . . . . . . . . . Delaware
HIHC, Inc. . . . . . . . . . . . . . . . . . . . . . . Delaware
Syscon Corporation . . . . . . . . . . . . . . . . . District of
Columbia
Syscon Services, Inc.. . . . . . . . . . . . . . . District of
Columbia
</TABLE>
- --------------------------
(1) Where the name of a subsidiary is indented, it is
wholly-owned by its immediate parent listed at the
margin above it, unless otherwise indicated.
(2) Harnischfeger Industries, Inc. owns 80% and Mitsubishi
Heavy Industries, Ltd. of Japan owns 20% of the voting
securities of Beloit Corporation.
(3) Beloit Corporation owns 45% of the voting quotas and
100% of the non-voting quotas and Monteiro Aranha S.A.
owns 55% of the voting quotas of Beloit Industrial Ltda.
This gives Beloit Corporation an 82.1% ownership of
Beloit Industrial Ltda.
(4) Beloit Corporation owns 99.5% of the voting securities
of Beloit Poland S.A.; the remaining .5% is owned by
employees.
(5) BWRC, Inc. owns 96% of the voting securities of Optical
Alignment Systems and Inspection Services, Inc.; the
remaining 4% is owned by an Employee Stock Ownership
Plan.
(6) BWRC, Inc. owns 50% of the voting securities of Sandusky
International, Inc.
(7) Harnischfeger Corporation owns 75% and Kobe Steel, Ltd.
of Japan owns 25% of the voting securities of
Harnischfeger of Australia Pty. Ltd.
(8) Harnischfeger Corporation owns 75% and Harnischfeger of
Australia Pty. Ltd. owns 25% of the voting securities of
Harnischfeger GmbH.
(9) HCHC, Inc. owns 90% and Harnischfeger Corporation owns
10% and of the voting securities of Hercules S.A. de
C.V.
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the
Prospectus constituting part of the Registration Statement on
Form S-3 and in the Registration Statements on Form S-8
listed below of Harnischfeger Industries, Inc. of our report
dated December 5, 1994 appearing on page 47 of the Annual
Report to Shareholders which is incorporated in this Annual
Report on Form 10-K. We also consent to the incorporation by
reference of our report on the Financial Statement Schedule,
which appears on page 20 of this Form 10-K.
1. Registration Statement on Form S-8 (Registration No. 33-42833)
2. Registration Statement on Form S-8 (Registration No. 33-23985)
3. Registration Statement on Form S-8 (Registration No. 33-18393)
4. Registration Statement on Form S-3 (Registration No. 33-51436)
5. Registration Statement on Form S-8 (Registration No. 33-46738)
6. Registration Statement on Form S-8 (Registration No. 33-46739)
7. Registration Statement on Form S-8 (Registration No. 33-46740)
8. Registration Statement on Form S-8 (Registration No. 33-57209)
PRICE WATERHOUSE LLP
Milwaukee, Wisconsin
January 27, 1995
EXHIBIT 24
POWER OF ATTORNEY
Form 10-K Annual Report
WHEREAS, Harnischfeger Industries, Inc., a
Delaware corporation (hereinafter referred to as the
"Corporation"), will file with the Securities and Exchange
Commission, under the provisions of the Securities Exchange
Act of 1934, a Form 10-K Annual Report for the fiscal year
ended October 31, 1994; and,
WHEREAS, the undersigned is a Director of the
Corporation;
NOW, THEREFORE, the undersigned hereby constitutes
and appoints Jeffery T. Grade, John A. McKay and Francis M.
Corby, Jr., and each or any of them, his attorney, with full
power to act for him and in his name, place and stead, to sign
his name in the aforesaid capacity to such Form 10-K Annual
Report, hereby ratifying and confirming all that said attorney
may or shall lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto
set his hand and seal this fifth day of December, 1994.
/s/Donna M. Alvarado SEAL)
---------------------
Donna M. Alvarado
<PAGE>
POWER OF ATTORNEY
Form 10-K Annual Report
WHEREAS, Harnischfeger Industries, Inc., a
Delaware corporation (hereinafter referred to as the
"Corporation"), will file with the Securities and Exchange
Commission, under the provisions of the Securities Exchange
Act of 1934, a Form 10-K Annual Report for the fiscal year
ended October 31, 1994; and,
WHEREAS, the undersigned is a Director of the
Corporation;
NOW, THEREFORE, the undersigned hereby constitutes
and appoints Jeffery T. Grade, John A. McKay and Francis M.
Corby, Jr., and each or any of them, his attorney, with full
power to act for him and in his name, place and stead, to sign
his name in the aforesaid capacity to such Form 10-K Annual
Report, hereby ratifying and confirming all that said attorney
may or shall lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto
set his hand and seal this fifth day of December, 1994.
/s/John D. Correnti (SEAL)
-------------------
John D. Correnti
<PAGE>
POWER OF ATTORNEY
Form 10-K Annual Report
WHEREAS, Harnischfeger Industries, Inc., a
Delaware corporation (hereinafter referred to as the
"Corporation"), will file with the Securities and Exchange
Commission, under the provisions of the Securities Exchange
Act of 1934, a Form 10-K Annual Report for the fiscal year
ended October 31, 1994; and,
WHEREAS, the undersigned is a Director of the
Corporation;
NOW, THEREFORE, the undersigned hereby constitutes
and appoints Jeffery T. Grade, John A. McKay and Francis M.
Corby, Jr., and each or any of them, his attorney, with full
power to act for him and in his name, place and stead, to sign
his name in the aforesaid capacity to such Form 10-K Annual
Report, hereby ratifying and confirming all that said attorney
may or shall lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto
set his hand and seal this fifth day of December, 1994.
/s/Don H. Davis, Jr. (SEAL)
--------------------
Don H. Davis, Jr.
<PAGE>
POWER OF ATTORNEY
Form 10-K Annual Report
WHEREAS, Harnischfeger Industries, Inc., a
Delaware corporation (hereinafter referred to as the
"Corporation"), will file with the Securities and Exchange
Commission, under the provisions of the Securities Exchange
Act of 1934, a Form 10-K Annual Report for the fiscal year
ended October 31, 1994; and,
WHEREAS, the undersigned is a Director of the
Corporation;
NOW, THEREFORE, the undersigned hereby
constitutes and appoints Jeffery T. Grade, John A. McKay and
Francis M. Corby, Jr., and each or any of them, his
attorney, with full power to act for him and in his name,
place and stead, to sign his name in the aforesaid capacity
to such Form 10-K Annual Report, hereby ratifying and
confirming all that said attorney may or shall lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto
set his hand and seal this fifth day of December, 1994.
/s/Harry L. Davis (SEAL)
-----------------
Harry L. Davis
<PAGE>
POWER OF ATTORNEY
Form 10-K Annual Report
WHEREAS, Harnischfeger Industries, Inc., a
Delaware corporation (hereinafter referred to as the
"Corporation"), will file with the Securities and Exchange
Commission, under the provisions of the Securities Exchange
Act of 1934, a Form 10-K Annual Report for the fiscal year
ended October 31, 1994; and,
WHEREAS, the undersigned is a Director of the
Corporation;
NOW, THEREFORE, the undersigned hereby
constitutes and appoints Jeffery T. Grade, John A. McKay and
Francis M. Corby, Jr., and each or any of them, his
attorney, with full power to act for him and in his name,
place and stead, to sign his name in the aforesaid capacity
to such Form 10-K Annual Report, hereby ratifying and
confirming all that said attorney may or shall lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto
set his hand and seal this fifth day of December, 1994.
/s/Robert M. Gerrity (SEAL)
--------------------
Robert M. Gerrity
<PAGE>
POWER OF ATTORNEY
Form 10-K Annual Report
WHEREAS, Harnischfeger Industries, Inc., a
Delaware corporation (hereinafter referred to as the
"Corporation"), will file with the Securities and Exchange
Commission, under the provisions of the Securities Exchange
Act of 1934, a Form 10-K Annual Report for the fiscal year
ended October 31, 1994; and,
WHEREAS, the undersigned is a Director of the
Corporation;
NOW, THEREFORE, the undersigned hereby
constitutes and appoints Jeffery T. Grade, John A. McKay and
Francis M. Corby, Jr., and each or any of them, his
attorney, with full power to act for him and in his name,
place and stead, to sign his name in the aforesaid capacity
to such Form 10-K Annual Report, hereby ratifying and
confirming all that said attorney may or shall lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto
set his hand and seal this fifth day of December, 1994.
/s/Jean-Pierre Labruyere (SEAL)
------------------------
Jean-Pierre Labruyere
<PAGE>
POWER OF ATTORNEY
Form 10-K Annual Report
WHEREAS, Harnischfeger Industries, Inc., a
Delaware corporation (hereinafter referred to as the
"Corporation"), will file with the Securities and Exchange
Commission, under the provisions of the Securities Exchange
Act of 1934, a Form 10-K Annual Report for the fiscal year
ended October 31, 1994; and,
WHEREAS, the undersigned is a Director of the
Corporation;
NOW, THEREFORE, the undersigned hereby
constitutes and appoints Jeffery T. Grade, John A. McKay and
Francis M. Corby, Jr., and each or any of them, his
attorney, with full power to act for him and in his name,
place and stead, to sign his name in the aforesaid capacity
to such Form 10-K Annual Report, hereby ratifying and
confirming all that said attorney may or shall lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto
set his hand and seal this fifth day of December, 1994.
/s/Ralph C. Joynes SEAL)
------------------
Ralph C. Joynes
<PAGE>
POWER OF ATTORNEY
Form 10-K Annual Report
WHEREAS, Harnischfeger Industries, Inc., a
Delaware corporation (hereinafter referred to as the
"Corporation"), will file with the Securities and Exchange
Commission, under the provisions of the Securities Exchange
Act of 1934, a Form 10-K Annual Report for the fiscal year
ended October 31, 1994; and,
WHEREAS, the undersigned is a Director of the
Corporation;
NOW, THEREFORE, the undersigned hereby
constitutes and appoints Jeffery T. Grade, John A. McKay and
Francis M. Corby, Jr., and each or any of them, his
attorney, with full power to act for him and in his name,
place and stead, to sign his name in the aforesaid capacity
to such Form 10-K Annual Report, hereby ratifying and
confirming all that said attorney may or shall lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto
set his hand and seal this fifth day of December, 1994.
/s/Herbert V. Kohler, Jr. (SEAL)
-------------------------
Herbert V. Kohler, Jr.
<PAGE>
POWER OF ATTORNEY
Form 10-K Annual Report
WHEREAS, Harnischfeger Industries, Inc., a
Delaware corporation (hereinafter referred to as the
"Corporation"), will file with the Securities and Exchange
Commission, under the provisions of the Securities Exchange
Act of 1934, a Form 10-K Annual Report for the fiscal year
ended October 31, 1994; and,
WHEREAS, the undersigned is a Director of the
Corporation;
NOW, THEREFORE, the undersigned hereby
constitutes and appoints Jeffery T. Grade, John A. McKay and
Francis M. Corby, Jr., and each or any of them, his
attorney, with full power to act for him and in his name,
place and stead, to sign his name in the aforesaid capacity
to such Form 10-K Annual Report, hereby ratifying and
confirming all that said attorney may or shall lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto
set his hand and seal this fifth day of December, 1994.
/s/ Robert F. Schnoes (SEAL)
---------------------
Robert F. Schnoes
<PAGE>
POWER OF ATTORNEY
Form 10-K Annual Report
WHEREAS, Harnischfeger Industries, Inc., a
Delaware corporation (hereinafter referred to as the
"Corporation"), will file with the Securities and Exchange
Commission, under the provisions of the Securities Exchange
Act of 1934, a Form 10-K Annual Report for the fiscal year
ended October 31, 1994; and,
WHEREAS, the undersigned is a Director of the
Corporation;
NOW, THEREFORE, the undersigned hereby
constitutes and appoints Jeffery T. Grade, John A. McKay and
Francis M. Corby, Jr., and each or any of them, his
attorney, with full power to act for him and in his name,
place and stead, to sign his name in the aforesaid capacity
to such Form 10-K Annual Report, hereby ratifying and
confirming all that said attorney may or shall lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto
set his hand and seal this fifth day of December, 1994.
/s/ Donald Taylor (SEAL)
-----------------
Donald Taylor
<PAGE>
POWER OF ATTORNEY
Form 10-K Annual Report
WHEREAS, Harnischfeger Industries, Inc., a
Delaware corporation (hereinafter referred to as the
"Corporation"), will file with the Securities and Exchange
Commission, under the provisions of the Securities Exchange
Act of 1934, a Form 10-K Annual Report for the fiscal year
ended October 31, 1994; and,
WHEREAS, the undersigned is a Director of the
Corporation;
NOW, THEREFORE, the undersigned hereby
constitutes and appoints Jeffery T. Grade, John A. McKay and
Francis M. Corby, Jr., and each or any of them, his
attorney, with full power to act for him and in his name,
place and stead, to sign his name in the aforesaid capacity
to such Form 10-K Annual Report, hereby ratifying and
confirming all that said attorney may or shall lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto
set his hand and seal this fifth day of December, 1994.
/s/C. R. Whitney (SEAL)
-----------------
C. R. Whitney
<PAGE>
POWER OF ATTORNEY
Form 10-K Annual Report
WHEREAS, Harnischfeger Industries, Inc., a
Delaware corporation (hereinafter referred to as the
"Corporation"), will file with the Securities and Exchange
Commission, under the provisions of the Securities Exchange
Act of 1934, a Form 10-K Annual Report for the fiscal year
ended October 31, 1994; and,
WHEREAS, the undersigned is a Director of the
Corporation;
NOW, THEREFORE, the undersigned hereby
constitutes and appoints Jeffery T. Grade, John A. McKay and
Francis M. Corby, Jr., and each or any of them, his
attorney, with full power to act for him and in his name,
place and stead, to sign his name in the aforesaid capacity
to such Form 10-K Annual Report, hereby ratifying and
confirming all that said attorney may or shall lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto
set his hand and seal this fifth day of December, 1994.
/s/Robert B. Hoffman (SEAL)
--------------------
Robert B. Hoffman
<TABLE> <S> <C>
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<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1994
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<RECEIVABLES> 303,339
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0
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