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, 1997.
/ / 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)
Delaware 39-1566457
(State of (I.R.S. Employer
Jurisdiction of Identification No.)
Incorporation or
Organization)
3600 South Lake Drive, St. Francis, Wisconsin 53235-3716
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, Including Area Code:
(414) 486-6400
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange On
Title of Each Class Which Registered
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 28, 1998, based on a
closing price of $35.50, was approximately $1,647.7 million.
The number of shares outstanding of Registrant's Common
Stock, as of January 28, 1998, was 47,811,544.
DOCUMENTS INCORPORATED BY REFERENCE
Management' Discussion and Analysis of Financial Statements,
Consolidated Financial Statements, Notes to Consolidated
Financial Statements, Report of Independent Accountants and
Five-Year Review of Financial Data of Registrant's.
Registrant's proxy statement for the 1998 annual meeting of
stockholders to be filed within 120 days of the end of the
Registrant's fiscal year.
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<CAPTION>
HARNISCHFEGER INDUSTRIES, INC.
INDEX TO
ANNUAL REPORT ON FORM 10-K
For The Year Ended October 31, 1997
Page
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Part I
Item 1. Business.................................................
Item 2. Properties...............................................
Item 3. Legal Proceedings........................................
Item 4. Submission of Matters to a Vote of Security Holders......
Part II
Item 5. Market for the Registrant's Common Stock and Related
Stockholder Matters......................................
Item 6. Selected Financial Data..................................
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations......................
Item 8. Financial Statements and Supplementary Data..............
Item 9. Changes in and disagreements with Accountants on Accounting
and Financial Disclosure.................................
Part III
Item 10. Directors and Executive Officers of the Registrant.......
Item 11. Executive Compensation...................................
Item 12. Security Ownership of Certain Beneficial Owners and
Management...............................................
Item 13. Certain Relationships and Related Transactions...........
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K..............................................
Signatures .........................................................
</TABLE>
<PAGE>
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 surface mining equipment (P&H Mining
Equipment); underground mining equipment (Joy Mining
Machinery); pulp and paper machinery (Beloit Corporation);
and material handling equipment (P&H Material Handling). In
early fiscal 1996, the Company completed the acquisition of
Dobson Park Industries plc ("Dobson"), an industrial
engineering group with interests in underground mining
equipment, industrial electronic control systems, toys and
plastics. Dobson's principal subsidiary, Longwall
International, is engaged in the manufacture, sale and
service of mining equipment for the international
underground coal mining industry and is being integrated
into the Company's Mining Equipment Segment. In March 1996,
the Company completed the purchase of the assets of the pulp
machinery division of Ingersoll-Rand Company.
Harnischfeger Industries is the direct successor to a
business begun over 100 years ago which, at October 31,
1997, through its subsidiaries, manufactures and markets
products classified into three industry segments: Mining
Equipment, Pulp and Papermaking Machinery, and Material
Handling. Each of the Company's three business segments made
strategic acquisitions during fiscal 1997. These
acquisitions enhanced the businesses' position in each of
their markets.
The following discussion and the portions of the
Company's 1997 Annual Report to Shareholders incorporated
herein by reference contain forward looking statements.
Terms such as "anticipate", "believe", "estimate", "expect",
"indicate", "may be", "objective", "plan", "predict", and
"will be" are intended to identify such statements.
Forward-looking statements are subject to certain risks,
uncertainties and assumptions which could cause actual
results to differ materially from those predicted. See
"Cautionary Factors" at the end of this Item 1.
MINING EQUIPMENT
P&H Mining Equipment is the world's largest producer of
electric mining shovels and walking draglines. In addition,
P&H Mining Equipment is a significant producer of hydraulic
mining excavators, blasthole drills, and 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 walking draglines range from 20
to 150 cubic yards. Blasthole drill models have drilling
diameters ranging from 9 to 22 inches and bit load
capacities from 70,000 to 150,000 pounds.
The products of P&H Mining Equipment 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.
P&H Mining Equipment has a relationship in the mining
shovel business with Kobe Steel, Ltd. ("Kobe") pursuant to
which P&H Mining Equipment 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 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 P&H Mining Equipment with an
opportunity to sell component parts for shovels built in
China.
On November 29, 1994, pursuant to an exchange of
common stock, the Company completed its acquisition of Joy
Technologies Inc. ("Joy" or "Joy Mining Machinery"), a world
leader in underground mining equipment. Joy manufactures
and services mining equipment for the underground extraction
of coal and other bedded materials and has significant
facilities in Australia, South Africa, the United Kingdom
and the United States, as well as sales offices in Poland
and the People's Republic of China. Joy Mining Machinery
designs, manufactures and distributes various equipment for
use in underground mining, including continuous miners;
longwall shearers; roof supports; armored face conveyors;
shuttle cars; continuous haulage systems; entry drivers and
sump shearers. Joy products 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 replacement parts distribution
centers to rebuild and service equipment and to sell
replacement parts in support of its installed base. This
network includes seven service centers in the United States
and five outside of the United States, all of which are
strategically located in major underground mining regions.
The financial position and results of operations of
Harnischfeger Industries and Joy were combined retroactively
in fiscal 1995.
In early fiscal 1996, the Company completed the
acquisition of Dobson for a purchase price of approximately
$330 million including acquisition costs plus the assumption
of net debt of approximately $40 million.
Dobson, headquartered in the United Kingdom, was an
industrial engineering group with interests in underground
mining equipment, industrial electronic control systems,
toys and plastics. Longwall International ("Longwall"), one
of the main subsidiaries of Dobson, was engaged in the
manufacture, sale and service of underground mining
equipment for the international coal mining industry. Its
products include electronically controlled roof support
systems, armored face conveyors, pumps and systems. The
Company is fully integrating Longwall's operations into Joy,
thus enabling Joy to offer integrated underground longwall
mining systems to the worldwide mining industry. Several
non-mining businesses were designated as businesses held for
sale with the original value of these businesses being set
at $100 million. At October 31, 1997, one business remained
unsold with a net realizable value of $9.3 million. The
remaining business is expected to be sold within the next
year.
Financial information with respect to the acquisition
of Dobson is presented in Note 2 to the Consolidated
Financial Statements of the 1997 Annual Report to
Shareholders incorporated herein by reference.
PULP AND PAPER MACHINERY
The Pulp and Paper Machinery Division is comprised of
the Company's 80% interest in Beloit Corporation ("Beloit").
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
pulp and paper machinery and related products used in the
pulp and paper industries. Beloit operates on a global basis
with major manufacturing facilities in ten 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 integrated pulp and
papermaking machinery; 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 connection with
complete installations and major rebuilds, Beloit engages in
"engineer, procure and construct" contracts which often
involve complex long-term construction projects, sometimes
in relatively undeveloped parts of the world. There are
special design, construction, project management, financing
and performance risks associated with these projects and
other large Beloit pulp and paper machinery sales. On March
27, 1996, the Company purchased the assets of the pulp
machinery division of Ingersoll-Rand Company ("IMPCO"),
which significantly strengthens Beloit's pulping equipment
offerings.
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.
A major factor in Beloit's success in the pulp and
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.
Beloit's manufacturing facilities are supported by a
domestic and international marketing network staffed by
experienced sales engineers.
In the fourth quarter of fiscal 1996, Beloit recorded a
$43.0 million pre-tax restructuring charge to strategically
focus on improving financial returns and increase customer
satisfaction while signicantly reducing costs and cycle
time. In fiscal 1997 and 1996, utilization of the
restructuring reserve totaled $29.8 million. It is expected
that the remaining restructuring actions will be
substantially completed by the end of fiscal 1998.
Financial information with respect to the Beloit
restructuring is presented in Note 3 to the Consolidated
Financial Statements of the 1997 Annual Report to
Shareholders incorporated herein by reference.
Formerly, the Pulp and Paper Machinery Division also
included the Company's 20% interest in Measurex Corporation
("Measurex"). In fiscal 1995, Measurex repurchased its
stock which had been held by the Company resulting in a pre-
tax gain of $29.7 million.
P&H MATERIAL HANDLING
P&H Material Handling produces lines of through-the-air
material handling equipment designed for a variety of users
and container handling cranes for use in ports in addition
to providing aftermarket support and distribution and
service.
Engineered overhead cranes are comprised of several
product lines: engineered cranes, standard cranes, portal
cranes, ship-to-shore 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 for
woodyard, scrap, and container handling.
P&H Material Handling has two groups specializing in
aftermarket support and distribution and service. The P&H
Aftermarket Group consists of Product Support, which markets
replacement products and repair parts and P&H
Modernizations, which handles pre-owned and remanufactured
cranes and parts plus provides engineering services for the
revitalization of crane and runway systems.P&H Distribution
and Service provides installation, erection and repair and
maintenance services under the ProCare(R) trademark.
DISCONTINUED SEGMENTS
Environmental
The Company completed the sale of Joy Environmental
Technologies ("JET") in the first quarter of 1996. JET was a
unit of Joy which supplied air pollution and ash handling
equipment for electric utilities and other industrial
operations.
Systems
Syscon Corporation ("Syscon"), the remaining unit in
the Company's Systems Group, was sold in February 1995 to
Logicon, Inc. Syscon was engaged principally in providing
systems development, systems integration and systems
services to the U. S. Government, government agencies and
commercial enterprises.
INTERNATIONAL OPERATIONS
Foreign sales of the Mining Equipment segment
generated approximately 59% of the segment's consolidated
net sales in 1997, 58% in 1996 and 44% in 1995.
In 1997, 1996 and 1995, Beloit's foreign sales amounted
to 57%, 53% and 41%, respectively, of Beloit's consolidated
net sales.
Foreign sales of the P&H Material Handling segment's
consolidated net sales amounted to 50% in 1997, 39% in 1996
and 48% in 1995.
Beloit has granted licensing agreements to serve
certain foreign markets to companies located in Australia,
Japan and Spain. Beloit maintains sales and service offices
throughout the world.
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 currency transactions. See "Cautionary Factors" for
additional risks associated with international operations.
GENERAL
Seasonality
No significant portion of Harnischfeger Industries'
business is subject to or influenced by seasonal factors;
however, the Company's business is influenced by the
cyclical nature of the paper, mining and capital goods
industries.
Distribution
P&H Mining Equipment and Joy Mining Machinery sales are
made mostly through the segments' headquarters and sales
offices located around the world. Joy's worldwide sales
forces have 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 operating a fleet of trucks
which visit customer sites on a regular basis in order to
deliver components and parts.
Sales of Beloit products are principally made directly
to end users. Beloit 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, overhead cranes and certain
electrical products are principally marketed directly from
the segments' 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. P&H
Material Handling has a dealer network of regional
distributorships (referred to as Material Handling Centers).
The manufacture and sale of repair and replacement
parts and the servicing of equipment are important and
growing aspects of each of the Company's businesses.
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.
P&H Mining Equipment's principal competitor in electric
mining shovels is Bucyrus International, Inc. Harnischfeger
Industries believes P&H Mining Equipment is the leading
participant in this market. Its principal competitors in the
hydraulic mining excavator market are Demag, Hitachi,
Caterpillar and Orenstein & Koppel. In draglines, the main
competitor is Bucyrus International, Inc. The Division's
main competitors in drills are Ingersoll-Rand, Driltech and
Bucyrus International, 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 timely, extensive and
cost-effective repair and rebuild services and replacement
parts. Joy's primary competitors in the continuous mining
machinery industry are EIMCO, Voest Alpine(a Tampella
Tamrock Company), Simmons-Rand Company(a subsidiary of Long-
Airdox Company) and Jeffrey. In the longwall shearer new
equipment market, Joy competes primarily with Anderson
Longwall (a subsidiary of Long-Airdox Company), Eickhoff
Corporation, and Mitsui Miike Machinery Company, Ltd. In
the continuous haulage market, Joy competes with Long-
Airdox, Fairchild International and Jeffrey. In roof
supports and armored face conveyors, Joy primarily competes
with DBT, Long-Airdox Company and several regional
suppliers. In the sale of replacement parts for Joy's
equipment, Joy competes with various suppliers.
The pulp and paper capital machinery market is globally
competitive; Beloit's two major paper machinery competitors
are foreign-owned companies. The principal competitors are
Valmet Corporation, Finland and Voith Sulzer Papiertechnik
GMBH, with headquarters in Germany. The principal
competitors in pulp machinery are Sunds Defibrator,
Ahlstrom, Kvaerner and Andritz. In the aftermarket area,
Beloit competes with various small suppliers.
The principal worldwide competitors for P&H Material
Handling are Demag and Konecranes International KCI.
Harnischfeger Industries believes that P&H Material Handling
is one of the largest worldwide participants in this market.
When considering any specific geographic market, the
competitors would normally be split into overhead cranes,
dockside cranes, hoists, and service. There are significant
numbers of competitors in each of the geographic markets and
segments of those markets.
Customers
Sales to a Pacific Rim customer in the Pulp and Paper
Machinery Segment approximated 12% of the Company's
consolidated net sales for fiscal 1997 and the related
accounts receivable from this customer approximated 25% of
consolidated accounts receivable at October 31, 1997.
Backlog
Backlog by business segment for the Company's
continuing operations (in thousands of dollars) as of the
end of fiscal years 1997 and 1996 was as follows:
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October 31,
------------------------
1997 1996
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Mining Equipment........................ $ 358,340 $ 453,480
Pulp and Paper Machinery.. ......... ... 776,618 846,137
Material Handling ...................... 97,743 132,550
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$1,232,701 $1,432,167
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Supply of Materials and Purchased Components
P&H Mining Equipment and P&H Material Handling
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 items. Joy believes that it has
adequate sources of supplies of component parts and raw
materials for its manufacturing requirements. No single
source is dominant.
Pulp and Paper Machinery 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 5,300 suppliers,
of which approximately 1,600 are most commonly used. No
single source is dominant.
Patents and Licenses
Joy and P&H Mining Equipment and their respective
subsidiaries own numerous patents and trademarks and have
patent licenses from others relating to their respective
products and manufacturing methods. Also, patent licenses
are granted to others throughout the world and royalties are
received under most of these licenses. While they do not
consider any particular patent or license or group of
patents or licenses to be essential to their respective
business as a whole, they consider their patents and
licenses significant to the conduct of its business in
certain product areas.
Beloit and other papermaking machinery manufacturers
have made extensive use of patents. 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.
P&H Material Handling has numerous trademarks and
domestic and foreign patents, patent applications and patent
licensing agreements. P&H Material Handling does not
consider these businesses 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
products, and improvement of existing products. Beloit
maintains research and development facilities in Rockton,
Illinois; Pittsfield, Massachusetts; Bolton, England; Clarks
Summit, Pennsylvania; Portland, Oregon; and Waukesha,
Wisconsin. P&H Mining Equipment and P&H Material Handling
maintain 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. Research and
development expenses were $40.1 million in 1997, $34.5
million in 1996 and $30.3 million in 1995.
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, 1997, Harnischfeger Industries
employed approximately 17,700 people, of which approximately
9,700 were employed in the United States. Approximately
3,400 of the U. S. employees are represented by local unions
under collective bargaining agreements with expiration dates
from May 31, 1998 to June 1, 2001. Harnischfeger Industries
believes that it maintains generally good relationships with
its employees.
Financial Information about Industry Segments
The financial information on industry segments is
presented in Note 15 to the Consolidated Financial
Statements incorporated herein by reference.
Common Stock
In September, 1997, the Company announced that the
board of directors had authorized the purchase of up to ten
million shares of the Company's common stock. As of January
28, 1998, The Company had repurchased 1,576,400 shares
through open-market transactions at a cost of $62.1 million.
Other
On January 28, 1998, the Company announced the sale of 80
percent of the Company's P&H Material Handling unit for
approximately $340 million in cash at closing in a
transaction with Chartwell Investments, Inc. In addition,
the Company will receive preferred stock and royalty
payments from the new Company for 10 years. The 1998 after-tax
cash proceeds from the transaction are expected to total
approximately $300 million.
The transaction is expected to close in two months, subject
to completion of Chartwell's financing arrangements.
Chartwell is a private investment firm based in New York
City that controls businesses in distribution and services
with over $1 billion in sales. The Company expects to use
the proceeds of the sale to pay down debt and to buy back
stock as part of the Company's previously announced intent
to repurchase 10 million shares.
In regard to the Company's anticipated first-quarter 1998
earnings performance, the Company said it is experiencing
softness in orders for both mining equipment and pulp and
paper machinery. As a result, management's expectation is
that results for the Company's fiscal first quarter ending
January 31, 1998 will fall below the earnings of 65 cents
per share recorded in the equivalent, year-earlier period.
Cautionary Factors
This report and other documents or oral statements which
have been and will be prepared or made in the future contain
or may contain forward-looking statements by or on behalf of
the Company. Such statements are based upon management's
expectations at the time they are made. In addition to the
assumptions and other factors referred to specifically in
connection with such statements, the following factors,
among others, could cause actual results to differ
materially from those contemplated.
The Company's principal businesses involve designing,
manufacturing, marketing and servicing large, complex
machines for the mining, papermaking and capital goods
industries. Long periods of time are necessary to plan,
design and build these machines. With respect to new
machines and equipment, there are risks of customer
acceptance and start-up or performance problems. Large
amounts of capital are required to be devoted by the
Company's customers to purchase these machines and to
finance the mines, paper mills, steel mills and other
facilities that use these machines. The Company's success
in obtaining and managing a relatively small number of sales
opportunities, including the companies' success in securing
payment for such sales and meeting the requirements of
warranties and guarantees associated with such sales, can
affect the Company's financial performance. In addition,
many projects are located in undeveloped or developing
economies where political and business conditions are less
predictable. In recent years, more than 50% of the
Company's total sales occurred outside the United States.
Other factors that could cause actual results to differ
materially from those contemplated include:
- Factors affecting customers' purchases of new
equipment, rebuilds, parts and services such as:
production capacity, stockpiles and production
and consumption rates of coal, copper, iron,
gold, fiber, paper/paperboard, recycled paper,
steel and other commodities; the cash flows of
customers; the cost, availability and quality of
financing to customers and the ability of
customers to obtain regulatory approval for
investments in mining, papermaking, steel
making, automotive manufacturing and other heavy
industrial projects; consolidations among
customers; work stoppages at customers or
providers of transportation; and the timing,
severity and duration of customer buying cycles,
particularly in the paper and mining businesses.
- Factors affecting the Company's ability to
capture available sales opportunities,
including: customers' perceptions of the quality
and value of the Company's products as compared
to competitors' products; whether the Company
has successful reference installations to show
customers, especially for papermaking and mining
equipment; customers' perceptions of the health
and stability of the Company as compared to its
competitors; the Company's ability to assist
with competitive financing programs and the
availability of manufacturing capacity at the
Company's factories.
- Factors affecting the Company's ability to
successfully manage sales it obtains, such as:
the accuracy of the Company's cost and time
estimates for major projects; the adequacy of
the Company's systems to manage major projects
and its success in completing projects on time
and within budget; the Company's success in
recruiting and retaining managers and key
employees; wage stability and cooperative labor
relations; plant capacity and utilization; and
whether acquisitions are assimilated and
divestitures completed without notable surprises
or unexpected difficulties.
- Factors affecting the Company's general
business, such as: unforeseen patent, tax,
product, environmental, employee health or
benefit or contractual liabilities; nonrecurring
restructuring charges; changes in accounting or
tax rules or regulations; and reassessments of
asset valuations such as inventories.
- Factors affecting general business levels, such
as political or economic turmoil in major
markets such as the United States, Canada,
Europe, Asia and the Pacific Rim, South Africa,
Australia and Chile; environmental and trade
regulations; and currency stability and ease of
exchange of currencies.
Item 2. Properties
As of October 31, 1997, the following principal
properties were owned, except as indicated. All of these
plants are generally suitable for operations.
Harnischfeger Industries owns a 94,000 square foot
office building in St. Francis, Wisconsin, which is used as
its worldwide corporate headquarters.
<TABLE>
<CAPTION>
MINING EQUIPMENT LOCATIONS
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.
Franklin, Pennsylvania... 714,640 63 Underground coal mining
machinery,
components and parts.
Warrendale, Pennsylvania. 82,750 13 Underground coal mining
parts and service.
Reno, Pennsylvania....... 121,400 22 Components and parts
for mining machinery.
Brookpark, Ohio.......... 85,000 4 Components and parts
for mining machinery.
Solon, Ohio.............. 96,800 14 Components and parts
for mining machinery.
Abingdon, Virginia....... 63,400 22 Underground coal
mining machinery
and components.
Bluefield, Virginia...... 102,160 15
Duffield, Virginia....... 72,000 11
Homer City, Pennsylvania. 79,500 10 Mining machinery rebuild,
Meadowlands, Pennsylvania 118,316 13 service and
Mt. Vernon, Illinois..... 107,130 12 parts sales.
Price, Utah.............. 44,200 6
Mesa, Arizona............ 12,000 5 Components and parts
for mining machinery.
Bassendean, Australia.... 72,500 5 Components and parts
for mining machinery.
Mt. Thorley, Australia... 81,800 11 Components and parts
for mining machinery.
Kurri Kurri,
Australia.............. 61,000 7 Mining machinery rebuild,
service and
parts sales.
Mackay, Australia........ 35,500 3 Components and parts
for mining machinery.
Litigow, Australia....... 9,000 2 Parts sales for mining
machinery parts
sales.
Wollongong, Australia.... 54,000 3 Rebuild service center.
Moss Vale, Australia..... 107,000 18 Underground coal mining
machinery,
components and parts.
Parkhurst, Australia..... 26,900 15 Rebuild service center.
Rockhampton, Australia... 8,000 3 Sales.
Johannesburg, So.
Africa................. 44,000(1) 1 Electrical products and
components for
mining shovels.
Steeledale, South Africa. 557,400 15 Underground coal mining
machinery, components
and parts.
Wadeville, South Africa 154,000 34 Coal mining machinery
assembly and
service.
Belo Horizonte, Brazil... 37,700 1 Components and parts
for mining
shovels.
Santiago, Chile.......... 6,800 1
Antofagasta, Chile....... 9,000 1 Electrical and
Calama, Chile............ 5,500 1 mechanical repairs.
Pinxton, England......... 76,000 10 Fabrication.
Wigan, England........... 337,000 27 Mining machinery,
components and parts.
Worcester, England....... 100,000 9 Mining machinery,
components and parts.
Bestwood, England........ 190,000(2) 16 Service and rebuilds.
- -------------------------
</TABLE>
(1) Under a lease expiring in 2005.
(2) Under a lease expiring in 1998.
The mining equipment segment operates warehouses in
Casper, Gillette and Green River, Wyoming; Hibbing,
Minnesota; Charleston and Pineville, West Virginia;
Milwaukee, Wisconsin; Mesa, Arizona; Elco, Nevada;
Birmingham, Alabama; Carlsbad, New Mexico; Norton, Virginia;
Lovely and Henderson, Kentucky; Hinton, Sparwood, Cornwall
and Vancouver, Canada; Cardiff, Bayswater, Mt. Thorley,
Gracemere, Rockhampton, Emerald, Kurri Kurri and Litigow,
Australia; Belo Horizonte, Brazil; Santiago, Iquique and
Calama, Chile; Johannesburg, Wadeville and Hendrina, South
Africa; Stobswood and Bestwood, England and Puerto Ordaz,
Venezuela. The warehouses in Casper, Hibbing, Milwaukee, Mt.
Thorley, Belo Horizonte and Johannesburg are owned; the
others are leased. In addition, the segment leases sales
offices throughout the United States and in principal
locations in other countries.
<TABLE>
<CAPTION>
PULP AND PAPER MACHINERY LOCATIONS
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.
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.
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..... 127,000 17
Columbus, Mississippi..... 133,000 22 Rubber and polymeric
Federal Way, Washington... 55,000 3 covers for rolls;
Neenah, Wisconsin......... 77,000 10 Rubber blankets; rubber
Clarks Summit, Pennsylvania 99,800 10 linings and
Renfrew, Canada........... 145,000 22 metal roll repairs.
Hattiesburg, Mississippi.. 100,000 15 Component parts and repair
of stock and pulp
preparation equipment,
papermaking machinery
and finished product
processing equipment.
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.
Nashua, New Hampshire..... 425,000 63 Stock and pulp preparation
equipment and specialized
processing systems.
Pensacola, Florida........ 7,250 2 Specialty services
provided principally
to the paper industry.
Sandusky, Ohio............ 254,000 13 Centrifugal castings.
Glenrothes, Scotland...... 56,000 8 Centrifugal castings.
Sherbrooke, Quebec, Canada 337,000 26 Stock and pulp preparation
equipment and
specialized processing
systems.
Campinas, Brazil.......... 202,000 33 Papermaking machinery
and finished
product processing
equipment; stock and
pulp preparation
equipment; woodyard and
pulp plant equipment.
Bolton, England........... 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...... 271,500 28 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.
Tullins, France........... 145,000 9 Roll repair facility
and other general
maintenance.
Cernay, France............ 35,200 15 Roll-covering service.
- -------------------------
</TABLE>
(1) Under a lease expiring in 2007.
(2) Under a lease expiring in 2019.
The Pulp and Paper Machinery 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.
<TABLE>
<CAPTION>
P&H MATERIAL HANDLING LOCATIONS
Floor Space Land Area
Plant and Location (Sq. Ft.) (Acres) Principal Operations
- ------------------------- ----------- --------- -------------------
<S> <C> <C> <C>
Windsor, Wisconsin..... 55,000 (1) 5 Remanufacture of
overhead cranes,
hoists and material
handling equipment.
Oak Creek, Wisconsin..... 277,000 36 Engineered and
standard overhead
cranes, hoists
and material
handling equipment.
Franklin, Ohio........... 75,000 18 Standard overhead
cranes and service.
Birmingham, Alabama...... 36,500 3 Standard overhead
cranes and
service.
Simpsonville, S. Carolina 40,400 (2) 6 Standard overhead
cranes and service.
Loughborough, England.... 420,000 36 Engineered and
standard overhead
cranes, hoists,
controls and
material handling
equipment.
Johannesburg, South Africa 124,000 7 Engineered and
standard overhead
cranes, hoists
and material
handling equipment.
Mexico City, Mexico...... 65,000 3 Engineered and
standard overhead
cranes, hoists
and material
handling equipment.
Mississauga, Canada...... 17,600 (3) 1 Manufacture of brakes.
Edmonton, Canada......... 58,300 3 Standard overhead
cranes and service.
Singapore, Singapore..... 21,200 (4) 1 Standard overhead
cranes and hoist
distribution.
- ----------------------------------
</TABLE>
(1) Under a lease expiring in 2002
(2) Under a lease expiring in 1999
(3) Under a lease expiring in 2000
(4) Under a lease expiring in 2024
The material handling division has leased facilities
for its company owned Material Handling Centers in San
Leandro, California; Reno, Nevada; Dallas and Houston,
Texas; New Orleans, Louisiana; Nashua, New Hampshire;
Chicago, Illinois; Detroit and Grand Rapids, Michigan;
Pittsburgh, Pennsylvania; Columbus, Cincinnati and
Cleveland, Ohio; Louisville, Kentucky; Denver, Colorado;
Waukesha, Wisconsin; Lynwood, Washington; Phoenix, Arizona;
and Richmond, Calgary and Saskatoon, Canada. In addition,
the division leases sales offices throughout the United
States and in principal locations in other countries. It
also has approximately 24 leased locations for service
operations in the United Kingdom, Mexico and South Africa.
Information relating to lease commitments is presented
in Note 11 to the Consolidated Financial Statements
incorporated herein by reference.
Item 3. Legal Proceedings
The Company is party to litigation matters and claims,
which are normal in the course of its operations. Also, as
a normal part of their operations, the Company's
subsidiaries undertake certain contractual obligations,
warranties and guarantees in connection with the sale of
products or services. Although the outcome of these matters
cannot be predicted with certainty and favorable or
unfavorable resolutions may affect income on a quarter-to-
quarter basis, management believes that such matters will
not have a materially adverse effect on the Company's
consolidated financial position. In the case of Beloit
Corporation, certain litigation matters and claims are
currently pending in connection with its contractual
undertakings. Beloit may on occasion enter into
arrangements to participate in the ownership of or operate
pulp or papermaking facilities in order to satisfy
contractual undertakings or resolve disputes.
One of the claims against Beloit involves a lawsuit
brought by Potlatch Corporation that alleges pulp line
washers supplied by Beloit for less than $15 million failed
to perform satisfactorily. In June, 1997, a Lewiston, Idaho
jury awarded Potlatch $95 million in damages in the case.
Beloit has appealed this award to the Idaho Supreme Court.
While the eventual outcome of the Potlatch case cannot be
predicted, reserves in the October 31, 1997 Consolidated
Balance Sheet are less than the full amount of the jury
award.
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.
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 1997.
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, their ages, their offices with
Harnischfeger Industries and the period during which they
have held such offices.
<TABLE>
<CAPTION>
Name Age Current Office and Principle Occupation
- ---------------------------- --- ---------------------------------------
<S> <C> <C>
Jeffery T. Grade............ 54 Chairman of the Board and Chief Executive
Officer since 1993; Chief Executive Officer
since 1992; President and Chief Operating
Officer from 1986 to 1995; Director since 1983;
Senior Vice President, Finance and Administration
and Chief Financial Officer from 1983 to 1986.
Number of Years as an Officer 15
John Nils Hanson............ 56 President and Chief Operating Officer
since July 1, 1995; President and Chief
Executive Officer of Joy Mining Machinery
1990 to July 1995. Director since 1996.
Number of Years as an Officer 2
Francis M. Corby, Jr........ 53 Executive Vice President for Finance and
Administration since December 1994;
Senior Vice President, Finance and
Chief Financial Officer
from 1986 to December 1994.
Director since 1996.
Number of Years as an Officer 12
James A. Chokey............. 54 Executive Vice President for Law and
Government Affairs since July 1997;
Senior Vice President, Law and
Corporate Development of Beloit
Corporation from 1996 to July 1997.
Number of Years as an Officer -
Mark E. Readinger........... 44 Senior Vice President since
August, 1997; President
and Chief Operating Officer of
Joy Mining Machinery since 1996;
Senior Vice President of Marketing
and General Manager of the
Joy North American Aftermarket
Operations from 1994 to 1996.
Number of Years as an Officer -
Robert W. Hale.............. 51 Senior Vice President since
August, 1997; President
of P&H Mining Equipment since
December 1994; Vice
President of P&H Material
Handling from 1998 to 1994.
Number of Years as an Officer -
Thomas Engelsman............ 47 Senior Vice President since
August, 1997; President of
Beloit Corporation since August, 1995.
Number of Years as an Officer -
</TABLE>
Mr. Chokey joined Beloit Corporation in April 1996. Prior
to joining the Company, Mr. Chokey held similar positions
with Cooper Industries, A.O. Smith Corporation, RTE
Corporation and Joy Technologies Inc., where he was employed
from 1973 to 1987.
Mr. Readinger joined Joy in 1994. Prior to joining Joy, Mr.
Readinger held several positions at TRW, Inc. and its
subsidiaries from 1989 to 1994, including Vice President and
General Manager, Manager of Strategic Development and
Director of Planning.
Mr. Engelsman joined Beloit Corporation in August, 1995.
Prior to joining Beloit Corporation, Mr. Engelsman was
President and Chief Executive Officer of the Energy
Management division of Landis and Gyr from 1991 to 1995.
The business address of each such person is 3600 South
Lake Drive, St. Francis, Wisconsin 53235-3716. All officers
listed above are citizens of the United States of America
except for Mr. Engelsman who is a citizen of Australia.
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 herein by reference from the 1997 Annual Report
to Shareholders. Item 7a is not applicable.
<TABLE>
<CAPTION>
Form 10-K
Item Number
- -----------
<S> <C>
Item 5. Market for the Registrant's Common Stock
and Related Stockholder
Matters (see also information filed in
this report on Form 10-K)
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of
Financial Condition and
Results of Operations
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and disagreements with
Accountants 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 in Part I of this report, is
incorporated by reference from the Company's Proxy Statement
for its 1998 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
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
Consolidated Statement of Income for the years ended
October 31, 1997, 1996 and 1995
Consolidated Balance Sheet at October 31, 1997 and
1996
Consolidated Statement of Cash Flow for the years
ended October 31, 1997, 1996 and 1995
Consolidated Statement of Shareholders' Equity for
the years ended October 31, 1997, 1996 and 1995
Notes to Consolidated Financial Statements
Report of Independent Accountants
* Incorporated by reference from the 1997 Annual Report to
Shareholders.
(2) Financial Statement Schedule
For the Years Ended October 31, 1997, 1996 and 1995:
II. Valuation and Qualifying Accounts
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.
<TABLE>
<CAPTION>
(3) Exhibits
Exhibit
Number Exhibit
- ------- --------------------------------------------
<S> <C>
3(a) Restated Certificate of Incorporation of
Harnischfeger Industries, Inc. (incorporated
by reference to Exhibit 3(a) to Report of
Harnischfeger Industries, Inc. on Form 10-Q
for the quarter ended April 30, 1997).
(b) Bylaws of Harnischfeger Industries, Inc.,
as amended April 15, 1997 (incorporated by
reference to Exhibit 3(b) to Report of
Harnischfeger Industries, Inc. on Form 10-Q for
the quarter ended April 30, 1997).
(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).
4(a) 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).
(b) 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).
(c) 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).
(d) 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).
(e) 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).
(f) 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).
(g) 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).
(h) Registration Statement filed on Form S-3,
for issuance of Debt Securities of up to
$200,000,000 dated April 10, 1996, File No. 333-2401.
(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) Amendment No. 1 to the Rights Agreement dated
as of October 9, 1995.
(k) 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).*
(l) Amendment One to Harnischfeger Industries, Inc.
Stock Employee Compensation Trust Agreement dated
January 1, 1994.(incorporated by reference to Exhibit
4(j) to Report of Harnischfeger Industries, Inc.
on Form 10-K for the year ended October 31, 1995,
File No. 1-9299).*
(m) Amendment Two to Harnischfeger Industries, Inc.
Stock Employee Compensation Trust Agreement dated
May 6, 1995 (incorporated by reference to Exhibit
4(k) to Report of Harnischfeger Industries, Inc.
on Form 10-K for the year ended October 31, 1995,
File No. 1-9299).*
(n) $500,000,000 Credit Agreement dated as of
October 17, 1997 among Harnischfeger Industries Inc.
as borrower and each other financial institution which
from time to time thereto as lenders, Chase
Manhattan Bank as Administrative Agent, First Chicago
Markets, Inc. as Syndication Agent and Royal Bank of
Canada as Documentaion Agent.
(o) Form of Indenture, dated as of September 1, 1993,
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).
9(a) Amendment No. 1 to Form of Indenture for Joy
Technologies Inc.'s 10 1/4% Senior Notes due 2002.
(b) Amendment No. 2 to Form of Indenture for Joy
Technologies Inc.'s 10 1/4% Senior Notes due 2002.
10(a) Harnischfeger Industries, Inc. 1988 Incentive
Stock Plan, as amended on March 6, 1995 (incorporated
by reference to Exhibit 10(a) to Report of
Harnischfeger Industries, Inc. on Form 10-K for
the year ended October 31, 1995, File No. 01-9299).*
(b) Harnischfeger Industries, Inc. Stock Incentive Plan
as amended and restated as of February 10, 1997
(incorporated by reference to Exhibit 10(a)
to Report of Harnischfeger Industries, Inc. on form
10-Q for the quarter ended January 31, 1997).*
(c) Harnischfeger Industries, Inc. Executive Incentive Plan,
as amended and restated as of February 10, 1997
(incorporated by reference to Exhibit 10(b) to Report of
Harnischfeger Industries, Inc. on Form 10-Q for
the quarter ended January 31, 1997).*
(d) Long-Term Compensation Plan for Key Executives
as of September 8, 1997.*
(e) Harnischfeger Industries, Inc. Supplemental
Retirement and Stock Funding Plan, as amended
and restated as of February 10, 1997 (incorporated
by reference to Exhibit 10(b) to Report of Harnischfeger
Industries, Inc. on Form 10-Q for the quarter
ended January 31, 1997).*
(f) Directors Stock Compensation Plan,as amended and restated,
as of February 10, 1997 (incorporated by reference
to Exhibit 10(b) to Report of Harnischfeger Industries,
Inc. on Form 10-Q for the quarter ended January 31, 1997).*
(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) Long-Term Compensation Plan for Directors
as of September 8, 1997.*
(i) Joy Technologies Inc. 1991 Stock Option and
Equity Incentive Plan dated November 12, 1991
(incorporated by reference to Exhibit 99-1999.1 to
Registration Statement on For S-8, File No. 33-57209).*
(j) Amendment to Joy Technologies Inc. 1991 Stock
Option and Equity Incentive Plan dated November
29, 1994 (incorporated by reference to
Exhibit 99-1999.2 to Registration Statement on
Form S-8, File No. 33-57209).*
(k) Harnischfeger Industries Deferred Compensation Trust
as amended and restated as of October 9, 1995
(incorporated by reference to exhibit 10 to Report of
Harnischfeger Industries, Inc. on Form 10-Q for
the quarter ended January 31, 1995, File No. O1-9299).*
(l) Amendment No. 1 to Harnischfeger Industries
Deferred Compensation Trust as amended and
restated as of October 9, 1995 (incorporated by
reference to Exhibit 10(j) to Report of Harnischfeger
Industries, Inc. on Form 10-K for the year ended
October 31, 1996, File No. 01-9299).*
(m) Amended and Restated Grant Letter issued on
June 8, 1997 to Jeffery T. Grade.*
(n) Amended and Restated Grant Letter issued on
June 8, 1997 to Francis M. Corby, Jr.*
11 Statement Re Computation of Earnings Per Share.
13 1997 Annual Report to Shareholders
21 Subsidiaries of the Registrant.
23 Consent of Price Waterhouse LLP
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
NONE
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors of
Harnischfeger Industries, Inc.
Our audits of the consolidated financial statments referred
to in our report dated November 18, 1997 appearing in the
1997 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.
PRICE WATERHOUSE LLP
Milwaukee, Wisconsin
November 18, 1997
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 St.
Francis, Wisconsin, on the 29th day of January 1998.
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 29, 1998.
<TABLE>
<CAPTION>
Signature Title
- ------------------------------- --------------------------------------
<S> <C>
/s/JEFFERY T. GRADE Chairman and Chief Executive Officer
-------------------------
Jeffery T. Grade
/s/JOHN NILS HANSON Director and President and Chief
--------------------- Operating Officer
John Nils Hanson
/s/FRANCIS M. CORBY, JR. Director and Executive Vice
----------------------- President for Finance
Francis M. Corby, Jr. and Administration
/s/JAMES C. BENJAMIN Vice President and Controller
------------------------
James C. Benjamin
(1) Director
------------------------
Donna M. Alvarado
(1) Director
------------------------
Larry D. Brady
(1) Director
------------------------
John D. Correnti
(1) Director
------------------------
Harry L. Davis
(1) Director
------------------------
Robert M. Gerrity
(1) Director
------------------------
Robert B. Hoffman
(1) Director
------------------------
Ralph C. Joynes
(1) Director
------------------------
Jean-Pierre Labruyere
(1) Director
------------------------
L. Donald LaTorre
(1) Director
------------------------
Leonard E. Redon
(1) Director
------------------------
Donald Taylor
</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 29, 1998
By: /s/JEFFERY T. GRADE
--------------------
Jeffery T. Grade,
Attorney-in-fact
<PAGE>
Item 5
MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
THE ANNUAL MEETING
The annual meeting of the shareholders of Harnischfeger
Industries, Inc. will be held at Milwaukee's Wyndham Hotel,
139 E. Kilbourn Ave., on Tuesday, April 14, 1998 at 10:00
a.m.
ANNUAL REPORT ON FORM 10-K
Copies of the annual report on Form 10-K, filed with the
Securities and Exchange Commission, will be available to
shareholders after February 15, 1998 without charge on
request to:
Shareholder Services
Harnischfeger Industries, Inc.
P.O. Box 554
Milwaukee, WI 53201-0554
Telephone: (414)486-6480
TRANSFER AGENT AND REGISTRAR
Bank of Boston
c/o Boston EquiServe
Mail Stop 45-02-64
P.O. Box 644
Boston, MA 02102-0644
Telephone:(617)575-3400
MARKET AND OWNERSHIP OF COMMON STOCK
The principal market for the Company's Common Stock is the
New York Stock Exchange, where its trading symbol is HPH.
As of October 31, 1997, the approximate number of holders of
record of the Company's Common Stock was 2,000. In
addition, there were an estimated 10,000 beneficial owners
of shares held of record by brokers and fiduciaries.
CORPORATE HEADQUARTERS
3600 South Lake Drive
St. Francis, WI 53235-3716
MAILING ADDRESS
P.O. Box 554
Milwaukee, WI 53201-0554
SHAREHOLDER SERVICES
Annual Report Requests and General Information:
(414)486-6626
FINANCIAL INFORMATION
To obtain fax copies of recent financial press releases and
quarterly statements on request, please call 1-800-758-5804
and use access code 396450 at the prompt.
Our press releases are available on the World Wide Web at
http://www.prnewswire.com. Click on Company News On Call to
find Harnischfeger.
<TABLE>
<CAPTION>
HARNISCHFEGER INDUSTRIES, INC.
SCHEDULE VIII
VALUATION AND QUALIFYING ACCOUNTS
(Thousands of Dollars)
Balance at Additions
Beginning by
Classification of Year Acquisition
- ------------------------------ ---------- -----------
<S> <C> <C>
Allowances Deducted in Balance Sheet
from Accounts Receivable:
For the year ended October 31, 1997
Doubtful accounts $ 8,612 $ 158
====== ======
For the year ended October 31, 1996
Doubtful accounts $ 7,604 $ 2,240
====== ======
For the year ended October 31, 1995
Doubtful accounts $ 7,230 $ 495
====== ======
(1) Represents write-off of bad debts, net of recoveries.
</TABLE>
<TABLE>
<CAPTION>
HARNISCHFEGER INDUSTRIES, INC.
SCHEDULE VIII
VALUATION AND QUALIFYING ACCOUNTS
(Thousands of Dollars)
Additions
Charged
Classification to Expense Deductions(1)
- ------------------------------ ----------- -------------
<S> <C> <C>
Allowances Deducted in Balance Sheet
from Accounts Receivable:
For the year ended October 31, 1997
Doubtful accounts $ 2,604 $(3,006)
======= =======
For the year ended October 31, 1996
Doubtful accounts $ 4,278 $(4,381)
======= =======
For the year ended October 31, 1995
Doubtful accounts $ 1,483 $(1,514)
======= ========
(1) Represents write-off of bad debts, net of recoveries.
</TABLE>
<TABLE>
<CAPTION>
HARNISCHFEGER INDUSTRIES, INC.
SCHEDULE VIII
VALUATION AND QUALIFYING ACCOUNTS
(Thousands of Dollars)
Other Items
Including
Transactions
Currency of
Translation Discontinued
Classification Effects Operations
- ------------------------------ ------------- -----------
<S> <C> <C>
Allowances Deducted in Balance Sheet
from Accounts Receivable:
For the year ended October 31, 1997
Doubtful accounts $ (291) $ 242
======= =======
For the year ended October 31, 1996
Doubtful accounts $(1,117) $ (12)
======= =======
For the year ended October 31, 1995
Doubtful accounts $ (26) $ (64)
======= =======
(1) Represents write-off of bad debts, net of recoveries.
</TABLE>
<TABLE>
<CAPTION>
HARNISCHFEGER INDUSTRIES, INC.
SCHEDULE VIII
VALUATION AND QUALIFYING ACCOUNTS
(Thousands of Dollars)
Balance
at End
Classification of Year
- ------------------------------ ---------
<S> <C>
Allowances Deducted in Balance Sheet
from Accounts Receivable:
For the year ended October 31, 1997
Doubtful accounts $ 8,319
=======
For the year ended October 31, 1996
Doubtful accounts $ 8,612
=======
For the year ended October 31, 1995
Doubtful accounts $ 7,604
=======
(1) Represents write-off of bad debts, net of recoveries.
</TABLE>
<TABLE>
Allowance Deducted in Balance Sheet from Deferred Tax Assets:
<CAPTION>
Balance at Additions/ Balance
Beginning Deductions- at end
of Year Net of Year
---------- ---------- --------
<S> <C> <C> <C>
For the year ended October 31, 1997 $ 44,968 $(10,073) $ 34,895
========== ========== ========
For the year ended October 31, 1996 $ 18,256 $ 26,712 $ 44,968
========== ========== ========
For the year ended October 31, 1995 $ 14,206 $ 4,050 $ 18,256
========== ========== ========
/TABLE
<PAGE>
EXHIBIT 11
HARNISCHFEGER INDUSTRIES, INC.
CALCULATIONS OF EARNINGS (LOSS) PER SHARE
(Dollar amounts in thousands except per share amounts)
<TABLE>
<CAPTION>
Year Ended October 31,
----------------------
Determination of Number of Shares 1997 1996
--------------------------------- ---- ----
<S> <C> <C>
Average shares outstanding.......................... 47,826,813 47,196,388
=========== ==========
Net Income (Loss)
-----------------
Income from Continuing Operations.................. $152,840 $114,217
Loss from and Net Loss on Sale of Discontinued
Operation, net of applicable income taxes.......... - -
Extraordinary Loss on Retirement of Debt, net of
applicable income taxes............................ (12,999) -
--------- ---------
Net Income .......................................... $139,841 $114,217
======== =========
Earnings (Loss) Per Share
-------------------------
Income from continuing operations................... $ 3.20 $ 2.42
Loss from and net loss on sale of
discontinued operation.............................. - -
Extraordinary loss on retirement of debt............. (0.27) -
-------- ------
Net Income Per Share................................ $ 2.93 $ 2.42
======== ========
</TABLE>
EXHIBIT 11
HARNISCHFEGER INDUSTRIES, INC.
CALCULATIONS OF EARNINGS (LOSS) PER SHARE
(Dollar amounts in thousands except per share amounts)
<TABLE>
<CAPTION>
Year Ended October 31,
----------------------
Determination of Number of Shares 1995
--------------------------------- -------
<S> <C>
Average shares outstanding............................ 46,218,144
==========
Net Income (Loss)
-----------------
Income from Continuing Operations..................... $ 92,120
Loss from and Net Loss on Sale of Discontinued
Operation, net of applicable income taxes........... (31,235)
Extraordinary Loss on Retirement of Debt, net of
applicable income taxes............................. (3,481)
---------
Net Income ........................................... $ 57,404
=========
Earnings (Loss) Per Share
-------------------------
Income from continuing operations..................... $ 1.99
Loss from and net loss on sale of
discontinued operation............................... (0.67)
Extraordinary loss on retirement of debt.............. (0.08)
-------
Net Income Per Share.................................. $ 1.24
=======
</TABLE>
<PAGE>
<PAGE>
Exhibit 4(j)
AMENDMENT NO. 1 TO RIGHTS AGREEMENT
-------------------------------------
AMENDMENT, dated as of October 9, 1995, to the Rights
Agreement, dated as of February 8, 1989 (the "Rights
Agreement"),
-----------------------
between Harnischfeger Industries, Inc., a Delaware
corporation (the "Company"), and The First National Bank of
Boston, as Rights Agent (the
------------
"Rights Agent").
-----------------
The Company and the Rights Agent have heretofore executed
and entered into the Rights Agreement. Pursuant to Section
26 of the Rights Agreement, the Company and the Rights Agent
may from time to time supplement or amend the Rights
Agreement in accordance with the provisions of Section 26
thereof. All acts and things necessary to make this
Amendment a valid agreement, enforceable according to its
terms, have been done and performed, and the execution and
delivery of this Amendment by the Company and the Rights
Agent have been in all respects duly authorized by the
Company and the Rights Agent.
In consideration of the foregoing and the mutual agreements
set forth herein, the parties hereto agree as follows:
1.The Rights Agreement is hereby further modified and amended
by inserting the following after the last sentence of
Section 1(a):
Notwithstanding the foregoing, if the Board of
Directors of the Company determines in good
faith that a Person who would otherwise be an
"Acquiring Person", as defined pursuant to the
foregoing provisions of this paragraph (a), has
become such inadvertently, and such Person
divests as promptly as practicable a sufficient
number of shares of Common Stock so that such
Person would no longer be an "Acquiring Person",
as defined pursuant to the foregoing provisions
of this paragraph (a), then such Person shall
not be deemed to be an "Acquiring Person" for
any purposes of this Agreement.
2.Section 1(k) of the Rights Agreement shall be deleted in
its entirety and replaced with the following:
(k) "Distribution Date" shall mean the Close of Business on
the earlier of (i) the tenth day after the Stock
Acquisition Date and (ii) the tenth Business Day
(or such later date as may be determined by
action of the Board of Directors prior to such
time as any Person becomes an Acquiring Person)
after the first date (including, without
limitation, any such date which is on or after
the date of this Agreement and prior to the
issuance of the Rights) of the commencement of,
or first public disclosure of the intent to
commence, by any Person (other than an Exempt
Person) a tender or exchange offer for
securities of the Company if, upon consummation
thereof, such Person could be the Beneficial
Owner of 20% or more of the Common Stock then
outstanding, determined without taking into
account any securities exercisable or
exchangeable for, or convertible into, Common
Stock (other than any such securities
beneficially owned by any such Person).
3.The first sentence of Section 11(a) (ii) of the Rights
Agreement shall be deleted in its entirety and replaced with
the following:
A "Triggering Event" shall be deemed to occur in
the event that any Person shall become an
Acquiring Person.
4.Section 23(a) of the Rights Agreement shall be deleted in
its entirety and replaced with the following:
(a)The Board of Directors of the Company may, at
its option, at any time prior to the earlier of
(i) such time as any Person becomes an Acquiring
Person, (ii) the effective time of a Business
Combination and (iii) the Expiration Date,
redeem all but not less than all of the then-outstanding
Rights at a redemption price of $.02
per Right (appropriately adjusted to reflect any
stock split, stock dividend or similar
transaction occurring after the date of this
Agreement).
5.This Amendment to the Rights Agreement shall be governed
by and construed in accordance with the laws of the State of
Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such State
applicable to contracts to be made and performed entirely
within such State.
6.This Amendment to the Rights Agreement may be executed in
any number of counterparts and each of such counterparts
shall for all purposes be deemed an original and all such
counterparts shall together constitute but one and the same
instrument. Terms not defined herein shall, unless the
context otherwise requires, have the meanings assigned to
such terms in the Rights Agreement.
7.Except as expressly set forth herein, this Amendment to
the Rights Agreement shall not by implication or otherwise
alter, modify, amend or in any way affect any of the terms,
conditions, obligations, covenants or agreements contained
in the Rights Agreement, all of which are ratified and
affirmed in all respects and shall continue in full force
and effect.
8.If any term, provision, covenant or restriction of this
Amendment to the Rights Agreement is held by a court of
competent jurisdiction or other authority to be invalid,
void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Amendment to
the Rights Agreement, and of the Rights Agreement, shall
remain in full force and effect and shall in no way be
affected, impaired or invalidated.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and attested, all as of the
date and year first written above.
Attest:Harnischfeger Industries, Inc.
By: __________________________
By: _________________________
Attest:The First National Bank of Boston
By: __________________________
By: _________________________
Exhibit 4(n)
$500,000,000
REVOLVING CREDIT AGREEMENT
Dated as of October 17, 1997
among
HARNISCHFEGER INDUSTRIES, INC.
as Borrower,
and
THE FINANCIAL INSTITUTIONS
FROM TIME TO TIME PARTY HERETO,
as Lenders,
FIRST CHICAGO CAPITAL MARKETS, INC.,
as Syndication Agent,
ROYAL BANK OF CANADA,
as Documentation Agent,
CHASE SECURITIES INC.,
as Advisor and Arranger,
and
THE CHASE MANHATTAN BANK,
as Administrative Agent
REVOLVING CREDIT AGREEMENT
This Revolving Credit Agreement dated as of October 17, 1997
(the "Signing 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 8.2(a) (together
with
--------------
their respective successors and assigns, individually, a
"Lender" and collectively, the
------
"Lenders"), CHASE SECURITIES INC., a New York corporation,
as
-------
advisor to the Borrower (in such capacity, the "Advisor"),
and
-------
arranger of the commitments hereunder (in such capacity, the
"Arranger"), FIRST CHICAGO CAPITAL MARKETS, INC., as
--------
syndication agent (in such capacity, the "Syndication
Agent"),
-----------------
ROYAL BANK OF CANADA, as documentation agent (in such
capacity, the "Documentation Agent"), and THE CHASE
MANHATTAN
-------------------
BANK, a New York banking corporation, in its separate
capacity as administrative agent for the Lenders hereunder
(in such capacity, the "Administrative Agent").
--------------------
ARTICLE I
DEFINITIONS
1.1 Certain Defined Terms
---------------------
The following terms used in this Agreement shall have the
following meanings (such meaning 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:
"Administrative Agent" shall have the meaning
--------------------
ascribed to such term in the preamble hereto and shall
include any successor Administrative Agent appointed
pursuant to Section 7.7.
- -----------
"Advisor" shall have the meaning ascribed to such
-------
term in the preamble hereto.
"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.
"Agents" shall mean the Administrative Agent, the
-------
Documentation Agent, the Syndication Agent and the Advisor,
collectively.
"Aggregate Commitments" shall mean the aggregate
----------------------
amount of the Commitments of all Lenders, from time to time,
which on the Signing Date is $500,000,000.
"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 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 Chase 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 the Administrative Agent from
three New York City negotiable certificate of deposit
dealers of recognized standing selected by the
Administrative Agent. "Federal Funds Effective Rate"
----------------------------
shall mean, for any day, a fluctuating interest rate per
annum equal to the weighted average (rounded upwards, if
necessary, to the nearest 1/100 of 1%) 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
(rounded upwards, if necessary, to the nearest 1/100 of 1%)
of the quotations for such day on such transactions received
by the Administrative Agent from three Federal funds brokers
of recognized standing selected by the Administrative Agent.
"Assessment Rate" shall mean, for
- ---------------
any day, the annual assessment rate in effect on such day
that is payable by a member of the Bank Insurance Fund
classified as "well-capitalized" and within supervisory
subgroup "B" (or a comparable successor risk classification)
within the meaning of 12 C.F.R. Part 327 (or any successor
provision) to the FDIC for insurance by such corporation of
time deposits made in dollars at the offices of such member
in the United States; provided that if, as a result of any
change in any law, rule
--------
or regulation, it is no longer possible to determine the
Assessment Rate as aforesaid, then the Assessment Rate shall
be such annual rate as shall be determined by the
Administrative Agent to be representative of the cost of
such insurance to the Lenders. If the Administrative 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
Administrative 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 from and including 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
Administrative Agent as its Applicable Lending Office with
respect to such Competitive Bid Loan.
"Arranger" shall have the meaning ascribed to such
--------
term in the preamble hereto.
"Assignment and Acceptance" shall mean an
--------------------------
Assignment and Acceptance in the form of Exhibit 1 delivered
---------
to the Administrative Agent in connection with an assignment
of all or a portion of a Lender's interest under this
Agreement pursuant to Section 8.2.
-----------
"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 2.5(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 Loans, 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 2.3).
-----------
"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.
"Chase" shall mean The Chase Manhattan Bank, a New
------
York banking corporation, and any successor thereto.
"Closing Date" means the date on which all of the
-------------
conditions precedent described in Section 3.1 have been
-----------
satisfied; provided that such date occurs on or before
October 31, 1997.
"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 8.2(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 2.3.
-----------
"Competitive Bid Accept/Reject Letter" shall mean
------------------------------------
a notification made by the Borrower pursuant to Section 2.3
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 2.3.
- -----------
"Competitive Bid Loan" shall have the meaning
-------------------
ascribed to such term in Section 2.1(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 2.4.
-----------
"Competitive Bid Rate" shall mean, as to any
--------------------
Competitive Bid made by a Lender pursuant to Section 2.3 (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 2.5(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.
"Documentation Agent" shall have the meaning
--------------------
ascribed to such term in the preamble hereto.
"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 Administrative Agent.
"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 release, discharges of 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 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 Administrative 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 2.5(a)(ii).
------------------
"Eurodollar Rate Margin" shall mean (i) 0.15% per
-----------------------
annum when the Rating falls within Level I, (ii) 0.20% per
annum when the Rating falls within Level II or (iii) 0.30%
per annum when the Rating falls within Level III. The
applicable percentage for determining the Eurodollar Rate
Margin shall change on the effective date of any change in
the Level of the Rating.
"Event of Default" shall mean any of the
----------------
occurrences set forth in Section 6.1 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 2.6(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
exercising 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 2.5(c) or repaid or prepaid in
--------------
accordance with Section 2.1(c) and Section 2.7 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 2.3, 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 Administrative 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 First Trust N.A., as
successor Trustee, pursuant to which Joy issued 10 1/4%
senior notes due 2003 as in effect on the Signing Date.
"Lender" shall have the meaning ascribed to such
-------
term in the preamble and shall include Chase, in its
individual capacity.
"Level" shall mean any of Level I, Level II and
------
Level III. "Level I" shall mean that the Rating is either
(I)
-------
A- or higher by S&P or (ii) A3 or higher by Moody's; "Level
-----
II" shall mean that the 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
-------- ----
if Ratings are given by both S&P and Moody's and such
Ratings are not equivalent, the "Level" will be determined
using the higher of the two Ratings, unless such Ratings are
two or more steps apart, in which case the step immediately
below the higher Rating will be used; provided, further,
that for
-------- ------- ----
purposes of determining the Level of the 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, non-credit
enhanced, 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 Administrative 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 Administrative Agent by
each of the Reference Banks as the rate per annum at which
deposits in Dollars are offered to such Reference Bank 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 2.7(d).
--------------
"Loan Documents" shall mean this Agreement, the
---------------
Notes and all other agreements delivered to the
Administrative 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 2.3(a).
--------------
"Notice of Competitive Bid Request" shall have the
---------------------------------
meaning provided in Section 2.3(a).
--------------
"Notice of Conversion/Continuation" shall mean,
----------------------------------
with respect to a proposed conversion or continuation of a
Loan pursuant to Section 2.5(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 2.2(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 Administrative Agent or any Lender pursuant to this
Agreement and all other present and future Indebtedness and
other liabilities of the Borrower owing to any Agent, any
Lender or any Person entitled to indemnification pursuant to
Section 8.4, 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.
"Outstandings" shall mean, at any given time, the
-------------
aggregate outstanding principal balance of Revolving Loans
and the Competitive Bid Loans.
"Participant" shall have the meaning ascribed to
------------
such term in Section 8.2(e).
--------------
"Performance Undertaking" shall have the meaning
------------------------
ascribed to such term in Section 5.2(e)(ii).
------------------
"Person" shall mean any natural person,
-------
corporation, limited partnership, limited liability company,
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, non-credit enhanced, debt
rating by S&P or Moody's.
"Reference Banks" shall mean the principal London
----------------
offices of Chase, The First National Bank of Chicago and
Royal Bank of Canada, (or if any 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 8.5(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 Administrative Agent.
"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 2.1.
-----------
"Revolving Loan" shall have the meaning ascribed
---------------
to such term in Section 2.1(a).
--------------
"Revolving Loan Note" shall have the meaning
-------------------
ascribed to such term in Section 2.4.
-----------
"S&P" shall mean Standard and Poor's Ratings
---
Services, a division of McGraw Hill Companies, and its
successors.
"Scheduled Expiration Date" shall mean October 17,
-------------------------
2002.
"Signing Date" shall have the meaning ascribed to
------------
that term in the preamble hereto.
"Spread" shall mean, as to any Competitive Bid
-------
Loan bearing interest based on 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
Administrative 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, limited liability
company, 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.
"Syndication Agent" shall have the meaning
------------------
ascribed to such term in the preamble hereto.
"Taxes" shall have the meaning ascribed to such
------
term in Section 2.10(a).
---------------
"Termination Date" shall mean the earliest of (a)
-----------------
the Scheduled Expiration Date, (b) the date of termination
of the Commitments pursuant to Section 2.2(e) or Section 6.2
and
-------------- -----------
at October 31, 1997, unless the Closing Date occurs on or
before such date.
"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.
0.1 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.
0.1 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.
0.1 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.
ARTICLE II
AMOUNTS AND TERMS OF THE REVOLVING CREDIT FACILITY
2.1 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 Closing 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
Administrative 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
Administrative 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 2.9(d),
--------------
Revolving Loans may be voluntarily prepaid at any time in
accordance with Section 2.2(d) 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 2.1 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 Administrative 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.
2.2 Loan Facility Mechanics
-----------------------
(a)Notice of Revolving Borrowing. Whenever
-----------------------------
the Borrower desires to borrow under the first sentence of
Section 2.1(a), the Borrower shall deliver to the
- --------------
Administrative 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
Administrative Agent in its sole discretion at such time,
the Borrower may give the Administrative Agent telephonic
notice of any such proposed Borrowing by the time required
under this Section 2.2(a);
--------------
provided that, in the event the Administrative Agent so
- --------
consents, such notice shall be confirmed in writing by
delivery to the Administrative 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
2.2(a) shall be
--------------
irrevocable.
(b)Making of Loans. Promptly after receipt of
---------------
a Notice of Revolving Borrowing under Section 2.2(a) (or
--------------
telephonic notice in lieu thereof if the Administrative
Agent consents to such telephonic notice), the
Administrative 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 Administrative 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
Administrative Agent's receipt of the proceeds of such
Revolving Loans, the Administrative Agent shall (unless it
has learned that any of the conditions precedent set forth
in Section 3.1, with respect to the Closing Date, or that
any
-----------
of the conditions precedent set forth in Section 3.2, 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
-------------------------
Administrative 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 Administrative Agent such Lender's
Revolving Loan on such Funding Date, the Administrative
Agent may assume that such Lender has made such amount
available to the Administrative Agent on such Funding Date
and the Administrative 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
Administrative 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
Administrative 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 Administrative
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 thereafter 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 Administrative 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 Administrative 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 2.2(c)
shall be deemed to relieve any Lender of its
- --------------
obligation hereunder to make its Revolving Loan on any
Funding Date.
(d)Voluntary Prepayment of Revolving Loans.
---------------------------------------
Whenever the Borrower desires to prepay Revolving Loans
under Section 2.1(c), the Borrower shall give prior written
notice
- --------------
to the Administrative Agent designating the date (which
shall be a Business Day) of such prepayment and the amount
of prepayment and whether the prepayment is of Eurodollar
Loans or Base Rate Loans. Such notice of prepayment must be
received by the Administrative Agent no later than 12:00
noon (New York City time) at least three (3) Business Days
in advance of the proposed prepayment date and the
Administrative Agent shall promptly notify each Lender by
telex or telecopy or other similar form of teletransmission
of the proposed pre-payment. Any such prepayment of
Revolving Loans shall be (i) for the entire balance of the
Revolving Loans or (ii) in an aggregate principal amount
equal to $10,000,000 or a whole multiple of $1,000,000 in
excess thereof. Any notice of prepayment pursuant to this
Section 2.2(d) shall be
--------------
irrevocable.
(e)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
2.2(e),
--------------
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 Administrative
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 Administrative Agent
shall notify each Lender of the proposed termination or
reduction. 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 2.2(e)
shall be irrevocable.
--------------
(f)Retention of Rights and Remedies.
--------------------------------
Notwithstanding 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.
2.3 Competitive Bid Procedures. (a) Whenever the Borrower
--------------------------
desires to incur a Competitive Bid Borrowing, it shall give
the Administrative 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 Administrative
---------
Agent's sole discretion, and the Administrative Agent shall
promptly notify the Borrower of such rejection. The
Administrative 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 Administrative 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
Administrative Agent. Competitive Bids that do not conform
substantially to the format of Exhibit 7 may be rejected by
the Administrative
---------
Agent after conferring with, and upon the instruction of,
the Borrower, and the Administrative 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
an 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 Administrative 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 2.3(b) shall be irrevocable.
--------------
(c)The Administrative 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 Administrative 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 2.3.
----------- -----------
(d)The Borrower may in its sole and absolute discretion,
subject only to the provisions of this Section
-------
2.3(d), accept or reject any Competitive Bid referred to in
- ------
Section 2.3(c) above. The Borrower shall notify the
- --------------
Administrative 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
- -------
2.3(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 2.3(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 2.3(d)
-------------
shall be irrevocable.
(e)The Administrative 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 Administrative 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 Administrative 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 Administrative Agent
pursuant to Section 2.3(b) above.
--------------
(g)All notices required by this Section 2.3
-----------
shall be given in accordance with Section 8.7.
-----------
2.4 Notes The Borrower shall execute and
-----
deliver to each Lender (or to the Administrative Agent on
behalf of each Lender) on or before the Closing 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
--------
2.5(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
2.5(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.
2.5 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 2.2(a) or at the time a Notice
of
--------------
Conversion/Continuation is delivered by the Borrower
pursuant to Section 2.5(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 outstanding with respect to
which a Notice of Revolving Borrowing or a Notice of
Conversion/Continuation has not been delivered to the
Administrative 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 2.5(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
2.5(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 2.3
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 2.3.
-----------
(b)Interest Payments. Subject to Section
-----------------
2.5(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. (iii) Subject
--------------------------
to the provisions of Sections 2.8 and 2.9, 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 2.9(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 converted 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
-------
2.5(c), the Borrower shall deliver a Notice of
- ------
Conversion/Continuation to the Administrative 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 delivering the above--
described Notice of Conversion/Continuation, the Borrower
may give the Administrative Agent telephonic notice of any
proposed conversion or continuation by the time required
under this Section 2.5(c); provided that such notice shall
be
-------------- --------
confirmed in writing by delivery to the Administrative 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 2.5(c)
--------------
(or telephonic notice in lieu thereof), the Administrative
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 2.5(a) and the
payment
--------------
dates specified in Section 2.5(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 Administrative 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 2.5(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 day 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.
2.6 Fees
----
(a)Facility Fee. The Borrower shall pay to
------------
the Administrative Agent, for the account of the Lenders in
accordance with their respective Pro Rata Shares, except as
set forth in Section 8.5(b)(vi), a fee (the "Facility Fee"),
------------------ ------------
accruing at (i) 0.10% per annum when the Rating falls within
Level I, (ii) 0.125% per annum when the Rating falls within
Level II and (iii) 0.20% per annum when the Rating falls
within Level III, on the average daily aggregate amount of
the Aggregate Commitments (regardless of Outstandings) for
the period commencing on the Closing 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 Closing 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 Rating.
(b)Payment of Fees. The fees described in
---------------
this Section 2.6 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 Administrative Agent or any
Lender, including, without limitation, amounts referred to
in this Section 2.6 and in Section 8.3, shall constitute
Obligations.
- ----------- -----------
All fees described in this Section 2.6 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.
2.7 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 Administrative Agent or the Lenders (or any of them)
shall be made without setoff, counterclaim, defense,
condition or reservation or right, in Dollars and in
immediately available funds, delivered to the Administrative
Agent not later than 12:00 noon (New York City time) on the
date and at the place due, to such account of the
Administrative Agent as it may designate, for the account of
the Administrative Agent or the Lenders, as the case may be;
and funds received by the Administrative Agent after that
time and date shall be deemed to have been paid and received
by the Administrative Agent on the next succeeding Business
Day. Payments actually received by the Administrative Agent
for the account of the Administrative Agent or the Lenders,
or any of them, shall be paid to them promptly after receipt
thereof by the Administrative 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 Administrative 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.
-----------------------------------------
(iv) Subject to the provisions of Section 8.5(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
-------
8.5(b), after the occurrence of an Event of Default and
while
- ------
the same is continuing, the Administrative 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 Administrative Agent may have
advanced on behalf of any Lender for which the
Administrative 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
Administrative 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 2.7(b)(ii)
and
------------------
the related provisions of this Agreement are set forth
solely to determine the rights and priorities of the
Administrative Agent and the Lenders as among themselves.
The order of priority set forth in clauses (C) through (F)
of this Section
--- ---
2.7(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 2.7(b)(ii) may be changed only with the prior
written
- ------------------
consent of the Administrative Agent.
(iii) Subject to Section 8.5(b), the
--------------
Administrative 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 Administrative 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 2.6, 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)Administrative Agent's Accounting. The
---------------------------------
Administrative 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 Administrative Agent's Loan
Account made in accordance with the Administrative Agent's
customary accounting practices as in effect from time to
time shall constitute, as between the Administrative Agent
and any Lender, prima facie evidence of the accuracy of such
entries.
----- -----
2.8 Interest Periods By giving notice as set
----------------
forth in Section 2.2(a), 2.3(a) or 2.5(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 2.8 and Section 2.9, 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 Administrative
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.
2.9 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 Administrative 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 Administrative 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
Administrative Agent shall forthwith give notice thereof to
the Borrower and each Lender, whereupon until the
Administrative 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. (v) 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
Administrative Agent of that determination and the reasons
therefor. The Administrative Agent shall promptly forward
any such notice it receives to the other Lenders.
(ii) Upon the giving of the notice referred
to in Section 2.9(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
Administrative 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 2.9(c)(i) that such Lender may lawfully make
- -----------------
Eurodollar Rate Loans, such Lender shall promptly give
notice (by teletransmission or by telephone promptly
confirmed in writing) to the Borrower and the Administrative
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 Administrative 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 2.5(a), 2.5(d), 2.6, 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 applicable conditions precedent set forth in
Article III 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
-------
2.5(c)(ii), (ii) if any principal payment of any Eurodollar
- ----------
Rate Loan (including, without limitation, any prepayment
pursuant to Section 2.1(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 6.2 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 2.9(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 2.9(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 (e) Any and all payments by the
-----
Borrower hereunder shall be made, in accordance with Section
-------
2.7, 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 Signing 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 Administrative
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 Administrative 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 Administrative 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 Administrative 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 Administrative 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
Administrative 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
------------
Administrative 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 Administrative Agent (as the case may be)
makes written demand therefor. A certificate as to any
additional amount payable to any Lender or the
Administrative Agent under this Section 2.10 submitted to
the Borrower and the Administrative
- ------------
Agent (if a Lender is so submitting) by such Lender or the
Administrative 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 Administrative Agent such certificates,
receipts and other documents as may be required (in the
judgment of such Lender or the Administrative Agent) to
establish any tax credit to which such Lender or the
Administrative 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 Administrative Agent, at its address referred
to in Section 8.7, 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 Agreement.
(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 Administrative Agent on or before the
Signing Date, or, if later, the date on which such Lender
becomes a Lender pursuant to Section 8.2 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 Administrative 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 Administrative Agent from time to time a true and
accurate certificate executed in duplicate by a duly
authorized officer of such Lender substantially in a form
satisfactory to the Borrower and the Administrative 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 Administrative 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
Administrative Agent within fifteen (15) days prior to
January 1, 1998, and every third (3rd) anniversary of such
date thereafter, 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
Administrative 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
Administrative Agent such additional documents as may be
reasonably required by the Borrower or the Administrative
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 Signing Date or (b) compliance with any guideline
or request issued or made after the Signing 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 Administrative
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 Administrative 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 Administrative Agent with a specimen
signature of each such officer or employee. The
Administrative 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
Administrative Agent receives written notice to the
contrary. The Administrative 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 Administrative 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
Administrative Agent nor any Lender shall incur any
liability to the Borrower in acting upon any telephonic
notice referred to above which the Administrative 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
-------
2.9(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 Administrative Agent may make
written demand on such Affected Lender (with a copy to the
Administrative Agent in the case of a demand by the Borrower
and a copy to the Borrower in the case of a demand by the
Administrative 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 8.2
-----------
which the Borrower or the Administrative 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 8.2.
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 2.9(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 2.9, 2.10, 2.11,
8.3 and
------------ ---- ---- ----
8.4.
- ---
Upon the replacement of any Affected Lender pursuant to this
Section 2.13, the provisions of Section
------------ -------
8.5(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
3.1 Conditions Precedent to Initial Loans The agreement of
-------------------------------------
each Lender to make the initial Loans requested to be made
by it is subject to the satisfaction, prior to or
concurrently with the making of such Loans on the Closing
Date, of all of the following conditions precedent:
(a)Documents. The Administrative Agent and
---------
the Lenders shall have received each of the following
documents: (i) this Agreement, the Notes and the Borrower's
Certificate of the Secretary or Assistant Secretary of the
Borrower, each duly executed where appropriate and in form
and substance satisfactory to the Administrative Agent and
the Lenders, (ii) an opinion of counsel to the Borrower,
substantially in the form of Exhibit 11 hereto, (iii) and
such
----------
additional documentation as the Administrative Agent or any
Lender may reasonably request.
(b)Termination of Existing Credit Agreement.
----------------------------------------
The Amended and Restated Credit Agreement, dated as of
November 25, 1994, as amended, among the Borrower, certain
financial institutions from time to time parties thereto and
Chase, as agent, shall have been terminated and all
outstanding obligations thereunder shall have been paid in
full.
(c)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.
(d)Representations and Warranties. All of the
------------------------------
representations and warranties contained in Section 4.1
shall
-----------
be true and correct in all material respects.
(e)Fees Paid. There shall have been paid to
---------
the Administrative Agent, for the account of the
Administrative Agent, all fees to be received on the Closing
Date as the Administrative Agent and the Borrower shall have
previously agreed in writing.
3.2 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 Administrative
-------------------
Agent shall have received in accordance with the provisions
of Section 2.2(a), with respect to any Revolving Loan, an
- --------------
original and duly executed Notice of Revolving Borrowing or,
in accordance with the provisions of Section 2.3(a) with
--------------
respect to any Competitive Bid Loan, a Notice of Competitive
Bid Borrowing or, in accordance with the provisions of
Section
- -------
2.5, 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 4.1 (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 2.10 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 3.2 have been
satisfied or waived in
-----------
writing pursuant to Section 8.6.
-----------
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties The Borrower hereby
------------------------------
represents and warrants to each Lender and each 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 Administrative Agent and the
Lenders, its audited consolidated balance sheet as of
October 31, 1996 and its audited consolidated statements of
income and cash flows for the fiscal year ended October 31,
1996 and its Form 10-Q Quarterly Report filed with the SEC
for the period ended July 31, 1997; 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
----------
Schedule 4.1(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 Signing 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 Signing 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. Neither the Borrower nor 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 Administrative 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; 8.70% debentures due 6/15/2022; 7-
1/4% debentures due 12/15/2025; and 6-7/8% debentures due
2/15/2027), in each case together with any amendments
thereto.
ARTICLE V
COVENANTS
5.1 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.
(d)Notice of Defaults: ERISA Events. The
--------------------------------
Borrower shall give prompt written notice to the
Administrative 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 6.1(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.
(e)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 Administrative 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.
(f)Reporting; Financial Statements. The
-------------------------------
Borrower shall furnish to the Administrative 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 5.2(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 5.2(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 Signing
Date that has not been previously disclosed to the
Administrative Agent and the Lenders pursuant to this
Section.
(v) Other Information. Such other
statements
-----------------
or reports as the Administrative Agent may reasonably
request in form and detail satisfactory to the
Administrative 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
Administrative 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 Administrative Agent and the Lenders
a complete copy of (i) each agreement or indenture entered
into after the Signing 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 Signing 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.
5.2 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. (iv) 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 5.2(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
-------
5.2(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
5.2(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 HK Systems, Inc.
(formerly known as 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
(l) $50,000,000 during the period from November 1, 1996
through and including October 31, 1997, (2) $20,000,000
during the period from November 1, 1997 through and
including October 31, 1998 and (3) $0 after October 31,
1998;
(ii) any Person which becomes a Consolidated
Subsidiary after the date of this Agreement shall for
all purposes of this Section 5.2(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 5.2(a)(i)(B) shall constitute the
issuance of
--------------------
additional Funded Debt, which is, in turn, subject to the
limitations of Section 5.2(a)(i)(B).
--------------------
(b)Net Worth. The Borrower shall at all times
---------
maintain Consolidated Net Worth of no less than
$600,000,000, which amount shall be increased as of the date
the annual consolidated financial statements are furnished
to the Administrative Agent pursuant to Section 5.1(e)(ii)
for fiscal
------------------
year 1998 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
5.2(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 5.2(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 5.2(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 Subsidiaries listed on Schedule 5.2(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;
(ix) Indebtedness of each of Joy, Beloit
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; or
(ix) Indebtedness of any Person that becomes
a Subsidiary after the Signing 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 5.2(f) existing as of the
--------------
date of this Agreement and described in Schedule 5.2(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 Signing 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 Signing Date;
(vii) Liens (A) in connection with asset based
financing arranged by any captive finance Subsidiary;
(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 or (C) on any deposit, investment
or other depository account of a foreign Subsidiary to
secure Indebtedness of one or more other foreign
Subsidiaries;
provided that the sum of the obligations secured by Liens
- --------
described in sub-clauses (A), (B) and (C) 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.
(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.
5.3 Changes in GAAP and Borrower's Fiscal Year If, after
the
------------------------------------------
Signing 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
6.1 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 2.6
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 5.2(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 5.2(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 Administrative Agent, or any Lender through
the Administrative 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 5.1(c), such 30-day grace period shall commence
- --------------
without the giving of such notice by the Administrative
Agent or any Lender.
(e)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 $25,000,000
or more, or (B) the Indebtedness due thereunder in the
aggregate amount of $25,000,000 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 $25,000,000 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.
6.2 Remedies (f) Automatically upon the occurrence of an
--------
Event of Default under Section 6.1(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 2.9(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 6.1(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 6.1(a), the waiver of which shall
--------------
require the consent of all Lenders), the Administrative
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 2.9(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
8.6.
-----------
0.1 Setoff Rights If any amount payable hereunder or under
-------------
the Notes is not paid as and when due, the Borrower hereby
authorizes the Administrative 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 Administrative 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 Administrative Agent of any action taken by such Lender,
Participant or Affiliate pursuant to this Section 6.3.
-----------
ARTICLE VII
THE ADMINISTRATIVE AGENT
7.1 Appointment (a) Each of the Lenders hereby
-----------
designates and appoints Chase as the Administrative Agent of
such Lender under this Agreement and the other Loan
Documents, and each of the Lenders hereby irrevocably
authorizes the Administrative 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 reasonably incidental thereto. The Administrative 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 Administrative 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 7.7). In performing its functions and
-----------
duties under this Agreement and the other Loan Documents,
the Administrative 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.
7.2 Nature of Duties The Administrative 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 Administrative Agent shall be mechanical and
administrative in nature. The Administrative 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 Administrative 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 Administrative 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 Signing Date or at any time or times thereafter.
If the Administrative Agent seeks the consent or approval of
the Requisite Lenders to the taking or refraining from
taking any action hereunder, the Administrative Agent shall
send notice thereof to each Lender. The Administrative
Agent shall promptly notify each Lender at any time that the
Requisite Lenders or, where expressly required, all of the
Lenders, have instructed the Administrative Agent to act or
refrain from acting pursuant hereto.
7.3 Rights, Exculpation, Etc Neither the Administrative
------------------------
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 therewith, except
that (i) the Administrative 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 Administrative 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 Administrative 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 Administrative 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
Administrative 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 Administrative Agent is permitted or
required to take or to grant, and if such instructions are
promptly requested, the Administrative 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
Administrative Agent as a result of the Administrative 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.
7.4 Reliance The Administrative 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.
7.5 Indemnification To the extent that the Administrative
---------------
Agent is not reimbursed and indemnified by the Borrower or
the Borrower fails upon demand by the Administrative Agent
to perform its obligations to reimburse or indemnify the
Administrative Agent, the Lenders will severally reimburse
and indemnify the Administrative 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
Administrative 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 Administrative 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 Administrative 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 8.3(a)(ii) or
(iii) the legal fees and
------------------
expenses incurred by the Administrative Agent in connection
with the execution and delivery of this Agreement and the
other Loan Documents. The obligations of the Lenders under
this Section 7.5 shall survive the payment in full of the
-----------
Loans and the termination of this Agreement.
7.6 The Administrative Agent Individually With respect to
-------------------------------------
its Pro Rata Share hereunder and the Loans made by it, the
Administrative 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
Administrative Agent in its individual capacity as a Lender
or one of the Requisite Lenders. The Administrative 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 Administrative
Agent pursuant hereto.
7.7 Successor Administrative Agent; Resignation of
----------------------------------------------
Administrative Agent (a) The Administrative Agent may
- --------------------
resign from the performance of its functions 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 Administrative Agent gives notice of its
desires to resign from the performance of its functions and
duties as Administrative Agent, any such resignation shall
take effect only upon the acceptance by a successor
Administrative Agent of appointment pursuant to clauses (b)
-----------
and (c) below.
---
(b)The Requisite Lenders shall appoint a successor
Administrative Agent.
(c)If a successor Administrative Agent shall not have been so
appointed within said thirty (30)-day period, the retiring
Administrative Agent shall then appoint a successor
Administrative Agent who shall serve as Administrative Agent
until such time, if any, as the Requisite Lenders appoint a
successor Administrative Agent as provided above.
(d) Upon the appointment of a successor Administrative
Agent, the term "administrative agent" shall, for all
purposes of this Agreement and the other Loan Documents,
thereafter include such successor, except that the retiring
Administrative 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 8.4.
-----------
(e)Notwithstanding anything in this Section 7.7 to the
contrary, no Person shall serve as an
- -----------
Administrative Agent unless such Person is a Lender.
(f)None of the Syndication Agent, the Documentation Agent, the
Advisor and the Arranger shall have any duties or
obligations hereunder in its capacity as such.
ARTICLE VIII
MISCELLANEOUS
8.1 Entire Agreement This written Agreement, together with
----------------
the letter agreement between the Borrower, the
Administrative Agent and Chase Securities Inc. dated as of
October 7, 1997 (which letter agreement relates solely to
matters between the Borrower, the Administrative Agent and
Chase Securities Inc.), 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.
8.2 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
Administrative 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
$10,000,000 (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 contained in Sections 2.9,
2.10,
------------ ----
and 2.11), the Borrower and Administrative 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 Administrative 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
Acceptance, which effective date shall be at least five (5)
Business Days after the execution date thereof (unless the
Borrower and the Administrative 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
Acceptance, 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
--------
2.9, 2.10, 2.11, 8.3 and 8.4, 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 assignee 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 responsibility
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 furnished
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 5.1 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 Administrative 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 Administrative Agent to
take such action as an Administrative Agent on its behalf
and to exercise such powers under this Agreement and the
other Loan Documents as are delegated to the Administrative
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 Administrative 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 Administrative 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 Administrative 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 Administrative
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 8.2(a) have been met, (i) accept such Assignment
and
- --------------
Acceptance, (ii) record the information contained therein in
the Administrative 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
- --------
Administrative 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 responsible 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 2.9, 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
Administrative 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 Administrative 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
Administrative 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
Administrative Agent that the applicable Assignment and
Acceptance has been accepted by the Administrative 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
Administrative 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.
8.3 Expenses
--------
(a)Generally. The Borrower agrees upon
---------
demand to pay, or reimburse the Administrative Agent for,
any and all reasonable and necessary out-of-pocket costs
incurred by the Administrative 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 Administrative Agent's
counsel; (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 Administrative 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 Administrative 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 8.4.
-----------
(b)After Default. The Borrower further
-------------
agrees to pay, or reimburse the Administrative 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 Administrative 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
transactions contemplated hereby or by any of the Loan
Documents. Any payments made by the Borrower or received by
the Administrative Agent and applied as reimbursements for
costs and expenses under this Section 8.3(b) shall be
--------------
apportioned among the Administrative Agent and the Lenders
in the order of priority set forth in Section 2.7.
-----------
8.4 Indemnification (a) The Borrower agrees to
---------------
indemnify and hold harmless the Administrative Agent, each
and all of the Lenders, each of the Affiliates of Chase 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, loses,
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 2.9(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 Indemnitee
appraised
- -------
of the progress of any such claim, action, suit or
proceeding, and provided further that if such Indemnitee
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 Indemnitee 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 8.4 shall survive the
payment in full of
-----------
principal and interest hereunder and the termination of this
Agreement.
8.5 Ratable Sharing; Defaulting Lender
----------------------------------
(a)Subject to Sections 2.7 and 8.5(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 2.2(c), 2.2(f),
--------------- ------
2.5(b), 2.9(d), 2.10, 2.11, 2.13, 8.3 and 8.4), 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 rescinded and the purchase prices paid for such
participations 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 participation from
another Lender pursuant to this Section 8.5(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 Administrative 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 Administrative 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
-------
8.5(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 2.5(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 8.5(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 2.5 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 2.7,
-----------
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
-------
8.5(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.
8.6 Amendments and Waivers Subject to the provisions of
----------------------
Section 2.7(b)(ii), no amendment or modification 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 or any other amount hereunder due to 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 8.6 or in the third sentence of
-----------
Section 8.14, or (iv) waive or amend the condition precedent
- ------------
set forth in clause (iv) of Section 3.2(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 Administrative Agent shall be effective without the
written concurrence of the Administrative Agent. The
Administrative 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 8.6 shall be
binding on each
-----------
assignee, transferee or recipient of a Lender's Commitment
or Loans, each future assignee, transferee or recipient of a
Lender's Commitment or Loans, and, if signed by the Borrower
(when required), on the Borrower.
8.7 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 Administrative Agent shall not be effective
until received by the Administrative Agent. For the
purposes hereof, the addresses of the parties hereto (until
notice of a change thereof is delivered as provided in this
Section 8.7) 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 Administrative Agent with the information requested on
Exhibit
- -------
10 with respect to such Lender as such information changes
- --
from time to time.
8.8 Failure or Indulgence Not Waiver; Remedies Cumulative
No
-----------------------------------------------------
failure or delay on the part of the Administrative 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 existing under the Loan Documents are cumulative to
and not exclusive of any rights or remedies otherwise
available.
8.9 Termination Upon the termination in whole of the
-----------
Commitments pursuant to the terms of this Agreement, the
Borrower shall pay to the Administrative 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 Administrative 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 Administrative Agent or the
Lenders, or the Administrative 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 ADMINISTRATIVE 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 8.2), and in the event
of
-----------
such transfer or assignment, 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 conditions 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
Borrower'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 Administrative 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
Administrative 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 Administrative 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.<PAGE>
IN WITNESS WHEREOF, this Agreement has
been duly executed as
of the date set forth above.
HARNISCHFEGER INDUSTRIES, INC.,
as the Borrower
By:___________________________________
Name:
Title:
THE CHASE MANHATTAN BANK,
as Administrative Agent and as a Lender
By:___________________________________
Name:
Title:
<PAGE>
THE FIRST NATIONAL BANK OF CHICAGO
By:___________________________________
Name:
Title:<PAGE>
ROYAL BANK OF CANADA
By:___________________________________
Name:
Title:<PAGE>
NATIONAL AUSTRALIA BANK LIMITED A.C.N. 004044937
By:___________________________________
Name:
Title:<PAGE>
MARSHALL & ILSLEY BANK
By:___________________________________
Name:
Title:
<PAGE>
NATIONAL WESTMINSTER BANK
By:___________________________________
Name:
Title:
<PAGE>
ABN AMRO BANK N.V.
By:___________________________________
Name:
Title:
By:___________________________________
Name:
Title:
<PAGE>
THE ASAHI BANK, LTD.
By:___________________________________
Name:
Title:
<PAGE>
BANCA COMMERCIALE ITALIANA, CHICAGO BRANCH
By:___________________________________
Name:
Title:
<PAGE>
THE BANK OF NEW YORK
By:___________________________________
Name:
Title:
<PAGE>
THE BANK OF NOVA SCOTIA
By:___________________________________
Name:
Title:
<PAGE>
BANK ONE, WISCONSIN
By:___________________________________
Name:
Title:
<PAGE>
BANQUE NATIONALE DE PARIS
By:___________________________________
Name:
Title:
<PAGE>
CIBC, INC.
By:___________________________________
Name:
Title:
<PAGE>
COMMERZBANK AKTIENGESELLSCHAFT, CHICAGO BRANCH
By:___________________________________
Name:
Title:
<PAGE>
FIRSTAR BANK MILWAUKEE, N.A.
By:___________________________________
Name:
Title:
<PAGE>
FIRST UNION NATIONAL BANK
By:___________________________________
Name:
Title:
<PAGE>
THE FUJI BANK, LIMITED
By:___________________________________
Name:
Title:
<PAGE>
NATIONSBANK, N.A.
By:___________________________________
Name:
Title:
<PAGE>
PNC BANK, NATIONAL ASSOCIATION
By:___________________________________
Name:
Title:
<PAGE>
ISTITUTO BANCARIO SAN PAOLO DI TORINO SPA
By:___________________________________
Name:
Title:
<PAGE>
FIRST BANK NATIONAL ASSOCIATION
By:___________________________________
Name:
Title:
<PAGE>
KREDIETBANK N.V.
By:___________________________________
Name:
Title:
<PAGE>
CARIPLO-CASSA DI RISPARMIO DELLE PROVINCIE LOMBARDE SPA
By:___________________________________
Name:
Title:
<PAGE>
WACHOVIA BANK, N.A.
By:___________________________________
Name:
Title:
<PAGE>
THE NORTHERN TRUST COMPANY
By:___________________________________
Name:
Title:
<PAGE>
BANK AUSTRIA AG
By:___________________________________
Name:
Title:
<PAGE>
BARCLAYS BANK PLC
By:___________________________________
Name:
Title:
<PAGE>
THE SANWA BANK, LIMITED, CHICAGO BRANCH
By:___________________________________
Name:
Title:
<PAGE>
Exhibit 10(d)
HARNISCHFEGER INDUSTRIES, INC.
-------------------------------
LONG-TERM COMPENSATION PLAN FOR KEY EXECUTIVES
- ----------------------------------------------
1. Purpose. The Harnischfeger Industries,
-------
Inc. Long-Term Compensation Plan for Key Executives (the
"Plan"), established effective as of September 8, 1997 by
Harnischfeger Industries, Inc. (the "Company"), is intended
to provide certain key officers of the Company a one-time
grant of long-term compensation incentives directly linked
to achieving high performance for Company shareholders.
2. Administration. The Plan will be
--------------
administered by the Human Resources Committee of the Board
of Directors of the Company or such other committee of two
or more directors constituted to comply with the Non-Employee
Director requirements of Rule 16b-3 promulgated
pursuant to the Securities Exchange Act of 1934 as amended
and Securities Exchange Commission interpretations
thereunder as the Board of Directors may designate from time
to time (the "Committee"), which Committee from time to time
may delegate the performance of certain of its ministerial
duties under the Plan, such as the keeping of records and
participants' accounts, to such person or persons as it may
select. Awards under the Plan shall be granted on the basis
of five consecutive years (each a "Plan Year" and,
individually, Plan Years 1, 2, 3, 4 and 5, respectively)
consisting of the five 12-month periods beginning on
September 8, 1997 and ending on September 7, 2002. The
Company shall pay the cost of Plan administration. The
Committee shall have the power, right and duty to interpret
the provisions of the Plan and may from time to time adopt
procedures with respect to the administration of the Plan.
Any decision made by the Committee in good faith in
connection with its administration of or responsibilities
under the Plan shall be conclusive on all persons.
3. Participation. Each executive of the
-------------
Company listed on Schedule I shall be a participant in the
Plan (a "Participant").
4. Shares. The total number of shares of
------
the Company's common stock ("Stock") (other than Dividend
Shares (as defined below) and Stock awarded through the
reinvestment of cash distributions as provided in paragraph
6(b)hereof) which may be awarded to each Participant under
the Plan (the "Total Share Award") is listed on Schedule I.
5. Stock Price Targets. The Stock prices
-------------------
at which awards are made under the Plan (the"Stock Price
Targets") and corresponding percentages of Total Share
Awards to be granted under the Plan (the"Percents of Total
Share Award") for each Plan Year are listed on Schedule II.
6. Awards. If at any time during a Plan
------
Year the average closing price of the Stock on the New York
Stock Exchange Composite Tape for twenty (20) consecutive
trading days equals or exceeds a Stock Price Target for such
Plan Year, each Participant who is then employed by the
Company shall be awarded (i) a number of shares of Stock (a
"Stock Award") which together with all previous Stock Awards
equals the Total Share Award for such Participant multiplied
by the Percent of Total Share Award corresponding to such
Stock Price Target and (ii) an additional number of shares
of Stock (rounded to the nearest whole number of shares)
(the "Dividend Shares") equal to the number of shares of
Stock that would have been credited to the Participant's
account as the result of the reinvestment of cash
distributions in the manner and at the prices specified in
paragraph 6(b) below had such Stock Award been made on
September 8, 1997. Any Participant whose employment with
the Company terminates for any reason prior to September 8,
2002 shall not be eligible for additional Stock Awards under
the Plan following the date of such termination of
employment. Each award shall be in Stock and shall be
delivered into the Harnischfeger Industries Deferred
Compensation Trust ("Rabbi Trust") subject to the terms
hereinafter set forth:
(a) Shares of Stock awarded under the Plan
shall be registered by the Company in the name of the
Rabbi Trust and delivered to the Rabbi Trust, provided,
however, that the
-----------------
Company may direct the trustee of the Rabbi Trust (the
"Trustee") to use for this purpose shares of Stock
previously delivered by the Company to the Rabbi Trust
to the extent such shares exceed the Company's aggregate
obligations to all plans covered by the Rabbi Trust.
The Stock transferred to the Rabbi Trust hereunder may
at the Company's option be acquired through open market
purchases or may be treasury shares provided that any
such shares are duly registered or exempted from
registration pursuant to applicable federal and state
securities laws. Although the Company intends to exert
its best efforts so that the shares transferred to the
Rabbi Trust or distributed to Participants or their
beneficiaries hereunder will be registered under, or
exempt from the registration requirements of, the
Securities Act of 1933 (the "Securities Act") and any
applicable state securities laws, if the allocation or
distribution would otherwise result in the violation by
the Company of any provision of the Securities Act or of
any state securities law, the Company may require that
such transfer or distribution be deferred until the
Company has taken appropriate action to avoid any such
violation.
(b) A bookkeeping account shall be maintained
in the name of each Participant which will reflect the
shares of Stock awarded under the Plan, and shall be
credited to reflect all dividends, stock splits and
other distributions with respect to such shares. All
cash distributions with respect to Stock shall be
invested by the Trustee in shares of Stock through open
market or other appropriate purchases as soon as
practicable after receipt of same. The number of shares
credited to each Participant's bookkeeping account in
respect of each cash distribution with respect to Stock
transfered to the Rabbi Trust hereunder will be the same
as if the cash distribution were used to purchase shares
of Stock at 75% of the average price paid by the Trustee
for Stock purchased when it reinvests such cash
dividends in Stock as provided in Paragraph 4.1 of the
Rabbi Trust. The Company shall from time to time as
needed make available to the Trustee sufficient shares
of Stock in connection with such discounted purchase of
Stock with cash dividends. Each Participant's
bookkeeping account shall be debited to reflect any
distributions made to a Participant when made.
(c) Stock equal to the number of shares
credited to a Participant's bookkeeping account shall
be distributed to him (or to his beneficiary in the
event of his death) promptly (but not sooner than
fifteen (15) days) following his termination of
employment with the Company or its subsidiaries;
provided, however, that a Participant may upon written
notice to the Committee given at least one year prior to
his termination of employment, elect an annual
distribution of such Stock over a period of time of up
to ten (10) years (e.g. if a ten year election, one
tenth of the balance at the time of the first
distribution, one ninth of the balance at the time of
the second distribution, etc.) and provided further that
a Participant may upon written notice to the Committee
given at least one year prior to his termination of
employment elect to delay until the next calendar year
following his termination of employment either the
distribution of or, if the Participant has elected
annual distributions over a period of time, the initial
distribution from his account. During the first ten
(10) days following a Participant's termination of
employment, the Participant (or the Participant's
beneficiary in the event of the Participant's death)
shall have the right to elect to receive payment
hereunder in cash, Stock or a combination of cash and
Stock. Upon receipt of a written request from a
Participant that a part or all of the distribution be
made in cash, the Company shall direct the Trustee to
credit such Participant's bookkeeping account with an
amount (the
"Cash Portion") equal to the product of the number of
shares of Stock then credited to Participant's
bookkeeping account necessary to comply with the request
(the "Diversified Shares") and the closing price of the
Stock on the New York Stock Exchange Composite Tape as
of the date the request is received by the Company.
Thereafter, the Trustee shall adjust such Participant's
bookkeeping account as if the Cash Portion were invested
in cash, cash equivalents, mutual funds or marketable
securities as directed by the Committee from time to
time and as if the Diversified Shares had been sold.
(d) Notwithstanding the foregoing, in the
event of a "Change in Control" of the Company (as
defined in the Rabbi Trust), the Company shall purchase
for cash all shares of Stock then credited to all
Participants' bookkeeping accounts at a per-share price
equal to the the Change in Control Price, and the
Trustee is directed to sell such shares upon such terms.
Immediately after the Company purchases any shares
pursuant to this Section 6(d), the Committee shall cause
the Trustee to effect a distribution of all cash
proceeds of such sale to the Participants in accordance
with their bookkeeping accounts. As used herein,
"Change in Control Price" means the higher of (i) the
highest reported sales price, regular way, of a share of
Stock in any transaction reported on the New York Stock
Exchange Composite Tape or other national securities
exchange on which such shares are listed or on NASDAQ,
as applicable, during the sixty (60)-day period prior to
and including the date of a Change in Control and (ii)
if the Change in Control is the result of a tender or
exchange offer or a Business Combination (as defined in
the Rabbi Trust), the highest price per share of Stock
paid in such tender or exchange offer or Business
Combination. To the extent that the consideration paid
in any such transaction described above consists all or
in part of securities or other non-cash consideration,
the value of such securities or other non-cash
consideration shall be determined by the Incumbent Board
(as defined in the Rabbi Trust).
7. Designation of Beneficiaries. Each
----------------------------
Participant from time to time may name any person or persons
(who may be named concurrently, contingently or
successively) to whom his benefits under the Plan are to be
paid if he dies before he receives his full benefits
hereunder. Each such beneficiary designation will revoke
all prior designations by the Participant, shall not require
the consent of any previously named beneficiary, shall be in
a form prescribed by the Committee, and will be effective
only when filed with the Committee during the Participant's
lifetime. If a Participant fails to designate a beneficiary
before his death, the beneficiary shall be the Participant's
estate.
8. General. No Participant or other person
-------
shall have any right, title or interest in any property of
the Company as a result of an award under the Plan. No
rights or interests of Participants under this Plan shall be
assignable either voluntarily or involuntarily nor shall the
establishment nor continuance of this Plan affect or enlarge
the employment rights of any Participant or constitute a
contract of employment with any Participant. No Committee
member shall be personally liable for any act done or
omitted to be done in good faith in the administration of
the Plan. Except as provided in Section 6 hereof, nothing
herein shall require the Company to segregate or set aside
any funds or other property for the purpose of paying any
amounts, the payment of which has been deferred under the
Plan.
9. Facility of Payment. When a person
-------------------
entitled to benefits under the Plan is under legal
disability, or, in the Committee's opinion, is in any way
incapacitated so as to be unable to manage his affairs, the
Committee may direct the payment of benefits to such
person's legal representative, or to a relative or friend of
such person for such person's benefit, or the Committee may
direct the application of such benefits for the benefit of
such person. Any payments made in accordance with the
preceding sentence shall be a full and complete discharge of
any liability for such payment under the Plan.
10. Withholding for Taxes. Notwithstanding
---------------------
any other provision of the Plan, the Committee may on behalf
of the Participant withhold or direct the Trustee to
withhold from any payment to be made under the Plan, whether
in the form of cash or shares of Stock, such amount or
amounts as may be required for purposes of complying with
appropriate federal, state or foreign tax withholding
provisions. Subject to the discretion of the Committee, no
distribution will be made to the Participant until all tax
withholding obligations have been satisfied.
11. Benefit Statements. The Company shall
------------------
provide statements of their bookkeeping accounts to
Participants on a periodic basis but not less than annually
in such form and at such time as it deems appropriate.
12. Amendment and Termination. The Company
-------------------------
may not amend or terminate the Plan without the express
written consent of each Participant who is affected by such
amendment or termination.
13. Controlling Law. The laws of Wisconsin
---------------
shall be controlling in all matters relating to the Plan.
14. Gender and Number. Where the context
-----------------
admits, words in the masculine gender shall include the
feminine and neuter genders, the plural shall include the
singular and the singular shall include the plural.
15. Gross-Up Payments. Subject to
-----------------
Participants complying with the requirements of this Section
15, in the event it shall be determined that any payment or
distribution under the Plan to or for the benefit of a
Participant, determined without regard to any additional
payments required by this first paragraph of this Section 15
(a "Payment"), would be subject to the excise tax imposed by
Section 4999 of the Internal Revenue Code of 1986, as
amended (the "Code") or any interest or penalties are
incurred by a Participant with respect to such excise tax
(such excise tax, together with any such interest and
penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Participant shall be entitled to
receive an additional payment (a "Gross-Up Payment") in an
amount such that after payment by the Participant of all
taxes (including any interest or penalties imposed with
respect to such taxes), including, without limitation, any
income taxes (and any interest or penalties imposed with
respect thereto) and Excise Tax imposed upon the Gross-Up
Payment, the Participant retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon the Payments.
Subject to the provisions of the third
paragraph of this Section 15, all determinations required to
be made under this Section 15, including whether and when a
Gross-Up Payment is required and the amount of such Gross-Up
Payment and the assumptions to be utilized in arriving at
such determination, shall be made by Price Waterhouse LLP or
any successor thereto (the "Accounting Firm") which shall
provide detailed supporting calculations both to the Company
and Participants within thirty (30) business days of the
receipt of notice from a Participant that there has been a
Payment, or such earlier time as is requested by the
Company. All fees and expenses of the Accounting Firm shall
be borne solely by the Company. Any Gross-Up Payments, as
determined pursuant to this Section 15, shall be paid by the
Company to Participants within five days of the receipt of
the Accounting Firm's determination. Any determination by
the Accounting Firm shall be binding upon the Company and
Participants. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the
initial determination by the Accounting Firm hereunder, it
is possible that Gross-Up Payments which will not have been
made by the Company should have been made ("Underpayment"),
consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its
remedies pursuant to the third paragraph of this Section 15
and the Participant thereafter is required to make a payment
of any Excise Tax, the Accounting Firm shall determine the
amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for
the benefit of the Participant.
Participants shall notify the Company in
writing of any claim by the Internal Revenue Service that,
if successful, would require the payment by the Company of a
Gross-Up Payment. Such notification shall be given as soon
as practicable but no later than thirty (30) business days
after the Participant is informed in writing of such claim
and shall apprise the Company of the nature of such claim
and the date on which such claim is requested to be paid.
The Participant shall not pay such claim prior to the
expiration of the thirty (30)-day period following the date
on which it gives such notice to the Company (or such
shorter period ending on the date that any payment of taxes
with respect to such claim is due). If the Company notifies
the Participant in writing prior to the expiration of such
period that it desires to contest such claim, the
Participant shall: (i) give the Company any information
reasonably requested by the Company relating to such claim;
(ii) take such action in connection with contesting such
claim as the Company shall reasonably request in writing
from time to time, including, without limitation, accepting
legal representation with respect to such claim by an
attorney reasonably selected by the Company; (iii) cooperate
with the Company in good faith in order effectively to
contest such claim; and (iv) permit the Company to
participate in any proceedings relating to such claim;
provided, however, that the Company shall bear and
- -----------------
pay directly all costs and expenses (including additional
interest and penalties) incurred in connection with such
contest and shall indemnify and hold the Participant
harmless, on an after-tax basis, for any Excise Tax or
income tax (including interest and penalties with respect
thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the
foregoing provisions of this third paragraph of Section 15,
the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may
pursue or forgo any and all administrative appeals,
proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole
option, either direct the Participant to pay the tax claimed
and sue for a refund or contest the claim in any permissible
manner, and the Participant shall prosecute such contest to
a determination before any administrative tribunal, in a
court of initial jurisdiction and in one or more appellate
courts, as the Company shall determine; provided, however,
that if the Company
-----------------------
directs the Participant to pay such claim and sue for a
refund, the Company shall advance the amount of such payment
to the Participant, on an interest-free basis and shall
indemnify and hold the Participant harmless, on an after-tax
basis, from any Excise Tax or income tax (including interest
or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with
respect to such advance; and further provided that any
extension
---------------------
of the statute of limitations relating to payment of taxes
for the taxable year of the Participant with respect to
which such contested amount is claimed to be due is limited
solely to such contested amount. Furthermore, the Company's
control of the contest shall be limited to issues with
respect to which a Gross-Up Payment would be payable
hereunder and the Participant shall be entitled to settle or
contest, as the case may be, any other issue raised by the
Internal Revenue Service or any other taxing authority.
If, after the receipt by the Participant of an
amount advanced by the Company pursuant to the third
paragraph of this Section 15, the Participant becomes
entitled to receive any refund with respect to such claim,
the Participant shall (subject to the Company's complying
with the requirements of the third paragraph of this Section
15) promptly pay to the Company the amount of such refund
(together with any interest paid or credited thereon after
taxes applicable thereto). If, after the receipt by the
Participant of an amount advanced by the Company pursuant to
the third paragraph of this Section 15, a determination is
made that the Participant shall not be entitled to any
refund with respect to such claim and the Company does not
notify the Participant in writing of its intent to contest
such denial of refund prior to the expiration of thirty (30)
days after such determination, then such advance shall be
forgiven and shall not be required to be repaid and the
amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.
-------------------------------------------<PAGE>
Exhibit 10(h)
HARNISCHFEGER INDUSTRIES, INC.
---------------------------------
LONG-TERM COMPENSATION PLAN FOR DIRECTORS
------------------------------------------
1. Purpose. The Harnischfeger Industries, Inc.
-------
Long-Term Compensation Plan for Directors (the "Plan"),
established effective as of September 8, 1997 by
Harnischfeger Industries, Inc. (the "Company"), is intended
to provide directors who are not employees of the Company a
one-time grant of long-term compensation incentives directly
linked to achieving high performance for Company
shareholders.
2. Administration. The Plan will be administered
--------------
by the Human Resources Committee of the Board of Directors
of the Company or such other committee of two or more
directors constituted to comply with the Non-Employee
Director requirements of Rule 16b-3 promulgated pursuant to
the Securities Exchange Act of 1934 as amended and
Securities Exchange Commission interpretations thereunder as
the Board of Directors may designate from time to time (the
"Committee"), which Committee from time to time may delegate
the performance of certain of its ministerial duties under
the Plan, such as the keeping of records and participants'
accounts, to such person or persons as it may select.
Awards under the Plan shall be granted on the basis of five
consecutive years (each a "Plan Year" and, individually,
Plan Years 1, 2, 3, 4 and 5, respectively) consisting of the
five 12-month periods beginning on September 8, 1997 and
ending on September 7, 2002. The Company shall pay the cost
of Plan administration. The Committee shall have the power,
right and duty to interpret the provisions of the Plan and
may from time to time adopt procedures with respect to the
administration of the Plan. Any decision made by the
Committee in good faith in connection with its
administration of or responsibilities under the Plan shall
be conclusive on all persons.
3. Participation. Each director of the Company
-------------
listed on Schedule I shall be a participant in the Plan (a
"Participant").
4. Shares. The total number of shares of the
------
Company's common stock ("Stock") (other than Dividend Shares
(as defined below) and Stock awarded through the
reinvestment of cash distributions as provided in paragraph
6(b)hereof) which may be awarded to each Participant under
the Plan (the "Total Share Award") is listed on Schedule I.
5. Stock Price Targets. The Stock prices at
which
-------------------
awards are made under the Plan (the"Stock Price Targets")
and corresponding percentages of Total Share Awards to be
granted under the Plan (the"Percents of Total Share Award")
for each Plan Year are listed on Schedule II.
6. Awards. If at any time during a Plan Year the
------
average closing price of the Stock on the New York Stock
Exchange Composite Tape for twenty (20) consecutive trading
days equals or exceeds a Stock Price Target for such Plan
Year, each Participant who is then a director of the Company
shall be awarded (i) a number of shares of Stock (a "Stock
Award") which together with all previous Stock Awards equals
the Total Share Award for such Participant multiplied by the
Percent of Total Share Award corresponding to such Stock
Price Target and (ii) an additional number of shares of
Stock (rounded to the nearest whole number of shares) (the
"Dividend Shares") equal to the number of shares of Stock
that would have been credited to the Participant's account
as the result of the reinvestment of cash distributions in
the manner and at the prices specified in paragraph 6(b)
below had such Stock Award been made on September 8, 1997.
Any Participant who ceases to be a director of the Company
for any reason prior to September 8, 2002 shall not be
eligible for additional Stock Awards under the Plan
following the date he ceases to be a director of the
Company. Each award shall be in Stock and shall be
delivered into the Harnischfeger Industries Deferred
Compensation Trust ("Rabbi Trust") subject to the terms
hereinafter set forth:
(a) Shares of Stock awarded under the Plan
shall be registered by the Company in the name of the
Rabbi Trust and delivered to the Rabbi Trust, provided,
however, that the Company may direct the
-----------------------
trustee of the Rabbi Trust (the "Trustee") to use for
this purpose shares of Stock previously delivered by the
Company to the Rabbi Trust to the extent such shares
exceed the Company's aggregate obligations to all plans
covered by the Rabbi Trust. The Stock transferred to
the Rabbi Trust hereunder may at the Company's option be
acquired through open market purchases or may be
treasury shares provided that any such shares are duly
registered or exempted from registration pursuant to
applicable federal and state securities laws. Although
the Company intends to exert its best efforts so that
the shares transferred to the Rabbi Trust or distributed
to Participants or their beneficiaries hereunder will be
registered under, or exempt from the registration
requirements of, the Securities Act of 1933 (the
"Securities Act") and any applicable state securities
laws, if the allocation or distribution would otherwise
result in the violation by the Company of any provision
of the Securities Act or of any state securities law,
the Company may require that such transfer or
distribution be deferred until the Company has taken
appropriate action to avoid any such violation.
(b) A bookkeeping account shall be maintained
in the name of each Participant which will reflect the
shares of Stock awarded under the Plan, and shall be
credited to reflect all dividends, stock splits and
other distributions with respect to such shares. All
cash distributions with respect to Stock shall be
invested by the Trustee in shares of Stock through open
market or other appropriate purchases as soon as
practicable after receipt of same. The number of shares
credited to each Participant's bookkeeping account in
respect of each cash distribution with respect to Stock
transferred to the Rabbi Trust hereunder will be the
same as if the cash distribution were used to purchase
shares of Stock at 75% of the average price paid by the
Trustee for Stock purchased when it reinvests such cash
dividends in Stock as provided in Paragraph 4.1 of the
Rabbi Trust. The Company shall from time to time as
needed make available to the Trustee sufficient shares
of Stock in connection with such discounted purchase of
Stock with cash dividends. Each Participant's
bookkeeping account shall be debited to reflect any
distributions made to a Participant when made.
(c) Stock equal to the number of shares
credited to a Participant's bookkeeping account shall be
distributed to him (or to his beneficiary in the event
of his death) promptly (but not sooner than fifteen (15)
days) following the date he ceases to be a director of
the Company; provided, however, that a Participant may
upon written notice to the Committee given at least one
year prior to the date he ceases to be a director of the
Company, elect an annual distribution of such Stock over
a period of time of up to ten (10) years (e.g. if a ten
year election, one tenth of the balance at the time of
the first distribution, one ninth of the balance at the
time of the second distribution, etc.) and provided
further that a Participant may upon written notice to
the Committee given at least one year prior to his
termination of employment elect to delay until the next
calendar year following the date he ceases to be a
director of the Company either the distribution of or,
if the Participant has elected annual distributions over
a period of time, the initial distribution from his
account. During the first ten (10) days following the
date a Participant ceases to be a director of the
Company, the Participant (or the Participant's
beneficiary in the event of the Participant's death)
shall have the right to elect to receive payment
hereunder in cash, Stock or a combination of cash and
Stock. Upon receipt of a written request from a
Participant that a part or all of the distribution be
made in cash, the Company shall direct the Trustee to
credit such Participant's bookkeeping account with an
amount (the "Cash Portion") equal to the product of the
number of shares of Stock then credited to Participant's
bookkeeping account necessary to comply with the request
(the "Diversified Shares") and the closing price of the
Stock on the New York Stock Exchange Composite Tape as
of the date the request is received by the Company.
Thereafter, the Trustee shall adjust such Participant's
bookkeeping account as if the Cash Portion were invested
in cash, cash equivalents, mutual funds or marketable
securities as directed by the Committee from time to
time and as if the Diversified Shares had been sold.
(d) Notwithstanding the foregoing, in the
event of a "Change in Control" of the Company (as
defined in the Rabbi Trust), the Company shall purchase
for cash all shares of Stock then credited to all
Participant's bookkeeping accounts at a per-share price
equal to the Change in Control Price, and the Trustee is
directed to sell such shares upon such terms.
Immediately after the Company purchases any shares
pursuant to this Section 6(d), the Committee shall cause
the Trustee to effect a distribution of all cash
proceeds of such sale to the Participants in accordance
with their bookkeeping accounts. As used herein,
"Change in Control Price" means the higher of (i) the
highest reported sales price, regular way, of a share of
Stock in any transaction reported on the New York Stock
Exchange Composite Tape or other national securities
exchange on which such shares are listed or on NASDAQ,
as applicable, during the sixty (60)-day period prior to
and including the date of a Change in Control and (ii)
if the Change in Control is the result of a tender or
exchange offer or a Business Combination (as defined in
the Rabbi Trust), the highest price per share of Stock
paid in such tender or exchange offer or Business
Combination. To the extent that the consideration paid
in any such transaction described above consists all or
in part of securities or other non-cash consideration,
the value of such securities or other non-cash
consideration shall be determined by the Incumbent Board
(as defined in the Rabbi Trust).
7. Designation of Beneficiaries. Each
Participant
----------------------------
from time to time may name any person or persons (who may be
named concurrently, contingently or successively) to whom
his benefits under the Plan are to be paid if he dies before
he receives his full benefits hereunder. Each such
beneficiary designation will revoke all prior designations
by the Participant, shall not require the consent of any
previously named beneficiary, shall be in a form prescribed
by the Committee, and will be effective only when filed with
the Committee during the Participant's lifetime. If a
Participant fails to designate a beneficiary before his
death, the beneficiary shall be the Participant's estate.
8. General. No Participant or other person shall
-------
have any right, title or interest in any property of the
Company as a result of an award under the Plan. No rights
or interests of Participants under this Plan shall be
assignable either voluntarily or involuntarily nor shall the
establishment nor continuance of this Plan affect or enlarge
the employment rights of any Participant or constitute a
contract of employment with any Participant. No Committee
member shall be personally liable for any act done or
omitted to be done in good faith in the administration of
the Plan. Except as provided in Section 6 hereof, nothing
herein shall require the Company to segregate or set aside
any funds or other property for the purpose of paying any
amounts, the payment of which has been deferred under the
Plan.
9. Facility of Payment. When a person entitled
to
-------------------
benefits under the Plan is under legal disability, or, in
the Committee's opinion, is in any way incapacitated so as
to be unable to manage his affairs, the Committee may direct
the payment of benefits to such person's legal
representative, or to a relative or friend of such person
for such person's benefit, or the Committee may direct the
application of such benefits for the benefit of such person.
Any payments made in accordance with the preceding sentence
shall be a full and complete discharge of any liability for
such payment under the Plan.
10. Benefit Statements. The Company shall
provide
------------------
statements of their bookkeeping accounts to Participants on
a periodic basis but not less than annually in such form and
at such time as it deems appropriate.
11. Amendment and Termination. The Company
may not
-------------------------
amend or terminate the Plan without the express written
consent of each Participant who is affected by such
amendment or termination.
12. Controlling Law. The laws of Wisconsin
shall be
---------------
controlling in all matters relating to the Plan.
13. Gender and Number. Where the context
admits,
-----------------
words in the masculine gender shall include the feminine and
neuter genders, the plural shall include the singular and
the singular shall include the plural.
14. Gross-Up Payments. Subject to
Participants
-----------------
complying with the requirements of this Section 14, in the
event it shall be determined that any payment or
distribution under the Plan to or for the benefit of a
Participant, determined without regard to any additional
payments required by this first paragraph of this Section 14
(a "Payment"), would be subject to the excise tax imposed by
Section 4999 of the Internal Revenue Code of 1986, as
amended (the "Code") or any interest or penalties are
incurred by a Participant with respect to such excise tax
(such excise tax, together with any such interest and
penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Participant shall be entitled to
receive an additional payment (a "Gross-Up Payment") in an
amount such that after payment by the Participant of all
taxes (including any interest or penalties imposed with
respect to such taxes), including, without limitation, any
income taxes (and any interest or penalties imposed with
respect thereto) and Excise Tax imposed upon the Gross-Up
Payment, the Participant retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon the Payments.
Subject to the provisions of the third
paragraph of this Section 14, all determinations required to
be made under this Section 14, including whether and when a
Gross-Up Payment is required and the amount of such Gross-Up
Payment and the assumptions to be utilized in arriving at
such determination, shall be made by Price Waterhouse LLP or
any successor thereto (the "Accounting Firm") which shall
provide detailed supporting calculations both to the Company
and Participants within thirty (30) business days of the
receipt of notice from a Participant that there has been a
Payment, or such earlier time as is requested by the
Company. All fees and expenses of the Accounting Firm shall
be borne solely by the Company. Any Gross-Up Payments, as
determined pursuant to this Section 14, shall be paid by the
Company to Participants within five days of the receipt of
the Accounting Firm's determination. Any determination by
the Accounting Firm shall be binding upon the Company and
Participants. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the
initial determination by the Accounting Firm hereunder, it
is possible that Gross-Up Payments which will not have been
made by the Company should have been made ("Underpayment"),
consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its
remedies pursuant to the third paragraph of this Section 14
and the Participant thereafter is required to make a payment
of any Excise Tax, the Accounting Firm shall determine the
amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for
the benefit of the Participant.
Participants shall notify the Company in
writing of any claim by the Internal Revenue Service that,
if successful, would require the payment by the Company of a
Gross-Up Payment. Such notification shall be given as soon
as practicable but no later than thirty (30) business days
after the Participant is informed in writing of such claim
and shall apprise the Company of the nature of such claim
and the date on which such claim is requested to be paid.
The Participant shall not pay such claim prior to the
expiration of the thirty (30)-day period following the date
on which it gives such notice to the Company (or such
shorter period ending on the date that any payment of taxes
with respect to such claim is due). If the Company notifies
the Participant in writing prior to the expiration of such
period that it desires to contest such claim, the
Participant shall: (i) give the Company any information
reasonably requested by the Company relating to such claim;
(ii) take such action in connection with contesting such
claim as the Company shall reasonably request in writing
from time to time, including, without limitation, accepting
legal representation with respect to such claim by an
attorney reasonably selected by the Company; (iii) cooperate
with the Company in good faith in order effectively to
contest such claim; and (iv) permit the Company to
participate in any proceedings relating to such claim;
provided, however, that the Company shall bear and pay
- -----------------------
directly all costs and expenses (including additional
interest and penalties) incurred in connection with such
contest and shall indemnify and hold the Participant
harmless, on an after-tax basis, for any Excise Tax or
income tax (including interest and penalties with respect
thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the
foregoing provisions of this third paragraph of Section 14,
the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may
pursue or forgo any and all administrative appeals,
proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole
option, either direct the Participant to pay the tax claimed
and sue for a refund or contest the claim in any permissible
manner, and the Participant shall prosecute such contest to
a determination before any administrative tribunal, in a
court of initial jurisdiction and in one or more appellate
courts, as the Company shall determine; provided, however,
-----------------
that if the Company directs the Participant to pay such
- ----
claim and sue for a refund, the Company shall advance the
amount of such payment to the Participant, on an interest-free
basis and shall indemnify and hold the Participant
harmless, on an after-tax basis, from any Excise Tax or
income tax (including interest or penalties with respect
thereto) imposed with respect to such advance or with
respect to any imputed income with respect to such advance;
and further provided that any extension of the statute of
---------------------
limitations relating to payment of taxes for the taxable
year of the Participant with respect to which such contested
amount is claimed to be due is limited solely to such
contested amount. Furthermore, the Company's control of the
contest shall be limited to issues with respect to which a
Gross-Up Payment would be payable hereunder and the
Participant shall be entitled to settle or contest, as the
case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
If, after the receipt by the Participant of an
amount advanced by the Company pursuant to the third
paragraph of this Section 14, the Participant becomes
entitled to receive any refund with respect to such claim,
the Participant shall (subject to the Company's complying
with the requirements of the third paragraph of this Section
14) promptly pay to the Company the amount of such refund
(together with any interest paid or credited thereon after
taxes applicable thereto). If, after the receipt by the
Participant of an amount advanced by the Company pursuant to
the third paragraph of this Section 14, a determination is
made that the Participant shall not be entitled to any
refund with respect to such claim and the Company does not
notify the Participant in writing of its intent to contest
such denial of refund prior to the expiration of thirty (30)
days after such determination, then such advance shall be
forgiven and shall not be required to be repaid and the
amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.
-------------------------------------------
Exhibit 10(m)
October 29, 1997
AMENDED AND RESTATED GRANT LETTER
This restatement of the Grant Letter issued on June 8,
1997 clarifies the distribution provisions of paragraph 1.
The Company acknowledges that the Grant Date applicable to
this Grant Letter is July 1, 1997, the date the notification
and stock certificate referenced in the Grant Letter were
received by the Company.
Mr. Jeffery T. Grade
c/o Harnischfeger Industries, Inc.
3600 S. Lake Drive
St. Francis, WI 53235
This Grant Letter is issued to Jeffery T. Grade ("you").
Effective on the date (the "Grant Date") you notify
Harnischfeger Industries, Inc. ("Company") that you elect to
nullify the grant of restricted Company stock made to you on
April 8, 1996 and that you surrender to the Company all
shares of restricted Company stock made to you on April 8,
1996, Company grants to you the Benefit defined below,
provided, however, that all rights
-----------------
under this Grant Letter cease unless such election and
delivery occur prior to the date you attain the age of
fifty-four years. This grant is subject to the conditions
and restrictions set forth below, and none other, and you
are entitled to the rights and benefits set forth below, and
none other.
1. (a) As used in this grant letter, the term
"Benefit" means the contractual right to receive a
distribution on the Payment Date (as defined below) of a
number of shares of common stock of the Company ("Common
Stock") equal to the number of shares of Common Stock which
would be in an account if (i) 178,229 shares of Common Stock
were placed in such account on the Grant Date and (ii) such
account were credited with additional shares of Common Stock
on each date between the Grant Date and the Payment Date
that the Company makes a cash distribution on Common Stock
where the number of shares of Common Stock so credited is
equal to the cash distribution payable on the number of
shares of Common Stock credited to such account as of the
record date for such cash distribution divided by 75% of the
closing price of the Common Stock on the New York Stock
Exchange Composite Tape on the payment date of such cash
distribution.
(b) The Company shall maintain a bookkeeping
account in your name which will indicate the number of
shares of Common Stock on which your Benefit will be
measured. Promptly following the Grant Date and from time
to time thereafter the Company shall deliver into the
Harnischfeger Industries, Inc. Deferred Compensation Trust
("Rabbi Trust"), subject to the terms and conditions
hereinafter set forth, shares of Common Stock equal to the
number of shares indicated in the bookkeeping account which
represents your Benefit. Following the Payment Date, your
bookkeeping account shall be credited to reflect all
dividends, stock splits and other distributions with respect
to shares of Common Stock reflected by such account in the
manner and at the rate described in paragraph 1(a)(ii)
above. Your bookkeeping account shall be charged with any
payment made to you when made.
(c) A number of shares of Common Stock equal
to the number of shares indicated by your bookkeeping
account shall be distributed to you (or your beneficiary in
the event of your death) promptly (but not sooner than
fifteen (15) days) following the Payment Date, provided,
however, that you may, upon written notice to the Company
given one year prior to the Payment Date, request that the
Company approve an annual distribution of the amount of
shares indicated by your bookkeeping account over a period
of time not to exceed ten (10) years (e.g. if a ten-year
election, shares representing one-tenth of the balance of
your bookkeeping account at the time of the first
distribution, shares representing one-ninth of the balance
of your bookkeeping account at the time of the second
distribution, etc.) and provided further that you may upon
written notice to the Company given at least one year prior
to the Payment Date elect to delay until the next calendar
year following the Payment Date either the distribution of
or, if you have elected annual distributions over a period
of time, the initial distribution of shares representing
your bookkeeping account.
(d) During the first ten (10) days following
the Payment Date, you (or your beneficiary in the event of
your death) shall have the right to elect to receive payment
in cash, Common Stock or a combination of cash and Common
Stock. Upon receipt of a written request from you that a
part or all of the distribution be made in cash, the Company
shall credit your bookkeeping account with an amount (the
"Cash Portion") equal to the product of the number of shares
of Common Stock necessary to comply with the request (the
"Diversified Shares") and the closing price of the Common
Stock on the New York Stock Exchange Composite Tape on the
Payment Date (or, if the New York Stock Exchange is not open
on the Payment Date, the date next preceding the Payment
Date that the New York Stock Exchange is open). Thereafter,
your bookkeeping account shall be kept as if the Cash
Portion were invested in cash, cash equivalents, mutual
funds or marketable securities and as if the Diversified
Shares had been sold.
2. The Benefit shall become payable on the date
(the "Payment Date") the earliest of any of the following
events occurs: (a) The date on which you retire from the
Company, provided such retirement is not prior to the date
you attain the age of fifty-five years; (b) The occurrence
of a Change in Control or Potential Change in Control (as
such terms are respectively defined in the Company's
Deferred Compensation Trust and your prior Executive
Employment and Severance Agreement); (c) Termination of your
employment without Cause (as defined in paragraph 4) or
deliberate action by the Company to adversely affect your
employment; (d) Any attempt (other than by you) to challenge
or nullify this grant except as permitted by paragraphs 3(a)
and (b) hereof; or (e) Your death or disability.
3. The Benefit shall not become payable and shall
be forfeited if any of the following events occurs: (a) You
unilaterally terminate employment with the Company prior to
the occurrence of any event set forth in paragraphs 2(a)-(e)
hereof; or (b) The Company terminates you as an employee and
officer of the Company for "Cause" (as defined in paragraph
4) prior to the occurrence of any event set forth in
paragraphs 2(a)-(e) hereof.
4. As used in paragraph 3(b) of this grant
letter, the term "Cause" shall mean (a) Your willful and
continued failure to substantially perform the reasonably
assigned duties with the Company which are consistent with
your current position and job responsibilities, other than
any such failure resulting from incapacity due to physical
or mental illness, after a written demand for substantial
performance is delivered to you by the Board of Directors of
the Company which specifically identifies the manner in
which you have not substantially performed the assigned
duties, or (b) Your 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 your 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 advice 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, you shall
not be deemed to have been terminated for Cause unless and
until there shall have been delivered to you 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 you and an opportunity
for you, together with your counsel, to be heard before the
Board), finding that in the good faith opinion of the Board
of Directors, you were guilty of the conduct set forth above
in paragraph 3(b) and specifying the particulars thereof in
detail.
5. In the event (a) the number of shares of Common Stock is
increased or decreased at any time prior to the Benefit
becoming fully vested and non-forfeitable, by stock split,
by declaration by the Board of Directors of a dividend
payable only in shares of such stock, or by any other
extraordinary distribution of shares or (b) any merger,
consolidation, or reorganization, or other change in
corporate structure materially changes the terms or value of
the Common Stock, the amount and/or terms of your Benefit
shall be adjusted in such manner as to fully protect your
rights and the relative value of the Benefit.
6. Any notice to be given by you to the Company pursuant
hereto shall be addressed to the Company in care of the
Secretary at the Company's principal place of business or
shall be delivered to the Company. Such notice shall be
deemed to be delivered to the Company when deposited in the
mail or physically delivered to the Company. Any notice to
be given to you shall be addressed to you at the address
shown below, or at such other address as you may direct in
writing. Any such notice shall be deemed to be delivered to
you when you actually receive such notice.
7. The Grant Letter was effective June 8, 1997, the date it
was signed by you and on behalf of the Company. This
Amended and Restated Grant Letter shall be effective when
signed by you and by the representative of the Company
identified below.
Harnischfeger Industries, Inc.
________________________
Name: Jeffery T. Grade By:
---------------------------
President and
Address: Chief Operating Officer
Date: __________________________
<PAGE>
Exhibit 10(n)
October 29, 1997
AMENDED AND RESTATED GRANT LETTER
This restatement of the Grant Letter issued on June 8,
1997 clarifies the distribution provisions of paragraph 1.
The Company acknowledges that the Grant Date applicable to
this Grant Letter is July 8, 1997, the date the notification
and stock certificate referenced in the Grant Letter were
received by the Company.
Mr. Francis M. Corby, Jr.
c/o Harnischfeger Industries, Inc.
3600 S. Lake Drive
St. Francis, WI 53235
This Grant Letter is issued to Francis M. Corby, Jr.
("you"). Effective on the date (the "Grant Date") you
notify Harnischfeger Industries, Inc. ("Company") that you
elect to nullify the grant of restricted Company stock made
to you on April 8, 1996 and that you surrender to the
Company all shares of restricted Company stock made to you
on April 8, 1996, Company grants to you the Benefit defined
below, provided, however,
-----------------
that all rights under this Grant Letter cease unless such
election and delivery occur prior to the date you attain the
age of fifty-four years. This grant is subject to the
conditions and restrictions set forth below, and none other,
and you are entitled to the rights and benefits set forth
below, and none other.
1. (a) As used in this grant letter, the term
"Benefit" means the contractual right to receive a
distribution on the Payment Date (as defined below) of a
number of shares of common stock of the Company ("Common
Stock") equal to the number of shares of Common Stock which
would be in an account if (i) 95,571 shares of Common Stock
were placed in such account on the Grant Date and (ii) such
account were credited with additional shares of Common Stock
on each date between the Grant Date and the Payment Date
that the Company makes a cash distribution on Common Stock
where the number of shares of Common Stock so credited is
equal to the cash distribution payable on the number of
shares of Common Stock credited to such account as of the
record date for such cash distribution divided by 75% of the
closing price of the Common Stock on the New York Stock
Exchange Composite Tape on the payment date of such cash
distribution.
(b) The Company shall maintain a bookkeeping
account in your name which will indicate the number of
shares of Common Stock on which your Benefit will be
measured. Promptly following the Grant Date and from time
to time thereafter the Company shall deliver into the
Harnischfeger Industries, Inc. Deferred Compensation Trust
("Rabbi Trust"), subject to the terms and conditions
hereinafter set forth, shares of Common Stock equal to the
number of shares indicated in the bookkeeping account which
represents your Benefit. Following the Payment Date, your
bookkeeping account shall be credited to reflect all
dividends, stock splits and other distributions with respect
to shares of Common Stock reflected by such account in the
manner and at the rate described in paragraph 1(a)(ii)
above. Your bookkeeping account shall be charged with any
payment made to you when made.
(c) A number of shares of Common Stock equal
to the number of shares indicated by your bookkeeping
account shall be distributed to you (or your beneficiary in
the event of your death) promptly (but not sooner than
fifteen (15) days) following the Payment Date, provided,
however, that you may, upon written notice to the Company
given one year prior to the Payment Date, request that the
Company approve an annual distribution of the amount of
shares indicated by your bookkeeping account over a period
of time not to exceed ten (10) years (e.g. if a ten-year
election, shares representing one-tenth of the balance of
your bookkeeping account at the time of the first
distribution, shares representing one-ninth of the balance
of your bookkeeping account at the time of the second
distribution, etc.) and provided further that you may upon
written notice to the Company given at least one year prior
to the Payment Date elect to delay until the next calendar
year following the Payment Date either the distribution of
or, if you have elected annual distributions over a period
of time, the initial distribution of shares representing
your bookkeeping account.
(d) During the first ten (10) days following
the Payment Date, you (or your beneficiary in the event of
your death) shall have the right to elect to receive payment
in cash, Common Stock or a combination of cash and Common
Stock. Upon receipt of a written request from you that a
part or all of the distribution be made in cash, the Company
shall credit your bookkeeping account with an amount (the
"Cash Portion") equal to the product of the number of shares
of Common Stock necessary to comply with the request (the
"Diversified Shares") and the closing price of the Common
Stock on the New York Stock Exchange Composite Tape on the
Payment Date (or, if the New York Stock Exchange is not open
on the Payment Date, the date next preceding the Payment
Date that the New York Stock Exchange is open). Thereafter,
your bookkeeping account shall be kept as if the Cash
Portion were invested in cash, cash equivalents, mutual
funds or marketable securities and as if the Diversified
Shares had been sold.
2. The Benefit shall become payable on the date
(the "Payment Date") the earliest of any of the following
events occurs: (a) The date on which you retire from the
Company, provided such retirement is not prior to the date
you attain the age of fifty-five years; (b) The occurrence
of a Change in Control or Potential Change in Control (as
such terms are respectively defined in the Company's
Deferred Compensation Trust and your prior Executive
Employment and Severance Agreement); (c) Termination of your
employment without Cause (as defined in paragraph 4) or
deliberate action by the Company to adversely affect your
employment; (d) Any attempt (other than by you) to challenge
or nullify this grant except as permitted by paragraphs 3(a)
and (b) hereof; or (e) Your death or disability.
3. The Benefit shall not become payable and shall
be forfeited if any of the following events occurs: (a) You
unilaterally terminate employment with the Company prior to
the occurrence of any event set forth in paragraphs 2(a)-(e)
hereof; or (b) The Company terminates you as an employee and
officer of the Company for "Cause" (as defined in paragraph
4) prior to the occurrence of any event set forth in
paragraphs 2(a)-(e) hereof.
4. As used in paragraph 3(b) of this grant
letter, the term "Cause" shall mean (a) Your willful and
continued failure to substantially perform the reasonably
assigned duties with the Company which are consistent with
your current position and job responsibilities, other than
any such failure resulting from incapacity due to physical
or mental illness, after a written demand for substantial
performance is delivered to you by the Board of Directors of
the Company which specifically identifies the manner in
which you have not substantially performed the assigned
duties, or (b) Your 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 your 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 advice 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, you shall
not be deemed to have been terminated for Cause unless and
until there shall have been delivered to you 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 you and an opportunity
for you, together with your counsel, to be heard before the
Board), finding that in the good faith opinion of the Board
of Directors, you were guilty of the conduct set forth above
in paragraph 3(b) and specifying the particulars thereof in
detail.
5. In the event (a) the number of shares of Common Stock is
increased or decreased at any time prior to the Benefit
becoming fully vested and non-forfeitable, by stock split,
by declaration by the Board of Directors of a dividend
payable only in shares of such stock, or by any other
extraordinary distribution of shares or (b) any merger,
consolidation, or reorganization, or other change in
corporate structure materially changes the terms or value of
the Common Stock, the amount and/or terms of your Benefit
shall be adjusted in such manner as to fully protect your
rights and the relative value of the Benefit.
6. Any notice to be given by you to the Company pursuant
hereto shall be addressed to the Company in care of the
Secretary at the Company's principal place of business or
shall be delivered to the Company. Such notice shall be
deemed to be delivered to the Company when deposited in the
mail or physically delivered to the Company. Any notice to
be given to you shall be addressed to you at the address
shown below, or at such other address as you may direct in
writing. Any such notice shall be deemed to be delivered to
you when you actually receive such notice.
7. The Grant Letter was effective June 8, 1997, the date it
was signed by you and on behalf of the Company. This
Amended and Restated Grant Letter shall be effective when
signed by you and by the representative of the Company
identified below.
<TABLE>
<CAPTION>
<S> <C>
Harnischfeger
Industries, Inc.
- ------------------------------
Name: Francis M. Corby, Jr.
By:
---------------------------
President and Chief
Address: Operating Officer
Date: _________________________
/TABLE
<PAGE>
Exhibit 13
Management Discussion & Analysis of Financial Statements
Harnischfeger Industries, Inc.
Overview
Fiscal 1997 marked another year of global growth and
financial achievement with an added emphasis on life-cycle
management. The Company reported strong financial results,
showing income from continuing operations of $152.8 million,
or $3.20 per share, on consolidated net sales of $3,088.5
million. This compares with income from continuing
operations of $114.2 million, or $2.42 per share, in 1996 on
sales of $2,863.9 million, which included a restructuring
charge totaling $43.0 million ($21.8 million after tax and
minority interest, or $0.46 per share). Net income for 1997
was $139.8 million, or $2.93 per share, including a $13.0
million extraordinary loss on retirement of debt. In
addition, bookings of $3,080.8 million were on par with 1996
bookings.
All three of the Company's business segments continued
to experience strong order and sales activity. Leading the
way in 1997 was the Pulp and Paper Machinery segment. The
segment reported net sales of $1,267.8 million, up 12% over
1996 levels, reflecting continued strength in the market for
papermaking machines, particularly in the Pacific Rim and
Latin America. Operating income improved from $91.5 million
in 1996, excluding the restructuring charge, to $104.1
million in 1997.
The Mining Equipment segment, which includes P&H Mining
Equipment and Joy Mining Machinery ("Joy"), also reported
strong results with net sales of $1,467.3 million, up 4%
from 1996. The increase is due to growth in the aftermarket
business of both surface and underground mining and steady
original equipment sales.
Sales for the Material Handling segment increased 9% to
$353.4 million in 1997 from $323.2 million in 1996.
Operating income increased from $33.1 million in 1996 to
$38.4 million in 1997. These strong results are due
primarily to improved results in existing product lines and
businesses.
The strategy of focusing on the five characteristics
required of a core business - 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") -
continued to steer the actions of the Company in fiscal
1997.
Fiscal 1997 marked the fifth year that the Company was
guided by the EVA philosophy and the second year that each
of the Company's segments posted positive EVA achievement.
The Company continues to use EVA for purposes of management
incentive compensation. EVA, which measures operating
results after taxes in excess of the after-tax cost of
capital, has helped to maintain and sometimes reduce capital
employed at times of increasing profits and sales.
The discussion in Management's Discussion and Analysis
contains forward-looking statements. When used in this
document, terms such as "anticipate", "believe", "estimate",
"expect", "indicate", "may be", "objective", "plan",
"predict", and "will be" are intended to identify such
statements. Forward-looking statements are subject to
certain risks, uncertainties and assumptions which could
cause actual results to differ materially from those
projected. (See Cautionary Factors below.)
Acquisitions and Divestitures
In fiscal 1997, the Company focused on life-cycle management
initiatives through continued global expansion and
streamlining of existing businesses. Key acquisitions and
divestitures improved the Company's positioning in the
worldwide market.
Each of the Company's three business segments made
strategic acquisitions in fiscal 1997. The acquisitions
supported the life-cycle management initiative and enhanced
the businesses' positions in each of their markets. All
acquisitions were accounted for as purchase transactions
with resultant goodwill being amortized over a 30- or
40-year period. In addition, the Company divested of a few
smaller business divisions to enable the segments to focus
on core competencies.
In early fiscal 1996, the Company completed the
acquisition of Dobson Park ("Dobson") which firmly
established the Company as a world leader in both surface
and underground mining equipment. The transaction was
completed for a purchase price of approximately $330
million, including acquisition costs, plus the assumption of
net debt of approximately $40 million. The acquisition was
accounted for as a purchase transaction with the purchase
price allocated to specific assets acquired and liabilities
assumed. Resultant goodwill is being amortized over 40
years.
Dobson, headquartered in the United Kingdom, was an
industrial engineering group with interests in mining
equipment, industrial electronic control systems, toys and
plastics. Longwall International ("Longwall"), the main
subsidiary of Dobson, was engaged in the manufacture, sale
and service of mining equipment for the international coal
mining industry. Its principal products included
electronically controlled roof support systems and armored
face conveyors. The acquisition of Dobson enabled Joy to
offer integrated underground longwall mining systems to the
worldwide mining industry.
As a part of the Dobson acquisition, several non-mining
businesses were designated as businesses held for sale. The
original value of the businesses was set at $100.0 million.
At October 31, 1997, one business remains unsold with a
total net realizable value of $9.3 million. It is expected
that this remaining business will be sold within the next
year. Profit/losses generated during the period related to
businesses held for sale have been excluded from operating
results.
On March 27, 1996, the Company's Beloit Corporation
subsidiary purchased the assets of the Pulp Machinery
Division of Ingersoll-Rand Company ("IMPCO") for $119.2
million, including acquisition costs. The acquisition was
accounted for as a purchase transaction with the purchase
price allocated to specific assets acquired and liabilities
assumed. Resultant goodwill is being amortized over 40
years. With this acquisition, Beloit now offers a full line
of pulping machinery and systems.
On November 29, 1994, the Company completed the
acquisition of Joy Technologies Inc. ("JTI") through a
stock-for-stock merger following approval of the merger by
shareholders of each company. Under the terms of the
acquisition, accounted for as a pooling of interests, the
Company exchanged 17,720,750 shares of Company common stock
for all of JTI's 31,353,000 outstanding shares, at an
exchange ratio of .5652 of a share of the Company's common
stock for each of JTI's common shares.
Transaction costs incurred to complete the JTI merger of
$17.5 million ($11.4 million after tax, or $0.24 per share)
were charged to income and consisted primarily of investment
banker, attorney and accountant fees, severance and related
benefits, and printing, mailing and registration expenses.
In addition, during fiscal years 1995 through 1997, the
Company made several smaller acquisitions in each of the
three business segments. All acquisitions were accounted for
as purchase transactions. Resultant goodwill is being
amortized over a 30- or 40-year period.
On April 12, 1995, the Company announced its decision to
divest of Joy Environmental Technologies ("JET"), a unit of
JTI that supplies air pollution and ash handling equipment
for electric utilities and other industrial operations.
Accordingly, the operating results of JET were segregated
and reflected in the Consolidated Statement of Income as a
discontinued operation. In December, 1995, the Company
completed the sale of JET to Babcock and Wilcox, an
operating unit of McDermott International, for $11.7
million. The loss on the sale, net of applicable taxes, was
recorded in fiscal 1995.
In February, 1995, the Company completed the sale of
Syscon Corporation ("Syscon") to Logicon, Inc. for a cash
price of $45 million. In connection with this sale, the
Company recorded a loss on sale of discontinued operations
of $(21.9) million or $(0.48) per share, net of applicable
income taxes, in the first quarter of 1995.
In September, 1997, the Company announced that it was
exploring the possible sale of P&H Material Handling. At the
end of fiscal 1997, the segment had not been sold.
Results of Operations - Consolidated
Sales: Worldwide sales in fiscal 1997 amounted to $3,088.5
million representing an increase of 8% over 1996 sales of
$2,863.9 million. All three segments reported strong
increases, led by a 12% increase in the Pulp and Paper
Machinery segment. Mining Equipment segment sales increased
4% over the prior year and Material Handling segment sales
increased 9% over the prior year.
Sales for fiscal 1996 of $2,863.9 million were 33%
greater than 1995 sales of $2,152.1 million, led by a strong
increase in the Mining Equipment segment of 49%. Sales for
the Pulp and Paper Machinery segment rose 17%. The Material
Handling segment reported a sales increase of 35% over the
prior year.
Costs and Expenses: Costs of sales increased 8% to $2,341.5
million in 1997 from $2,166.8 million in 1996. Strong
increases in sales volume during the period were the primary
reason for the increase. Product development, selling and
administrative expenses as a percent of sales were 14.8% in
1997 and 15.1% in 1996. This level of expenses reflects
continued efforts by the Company to control costs.
Cost of sales for 1996 increased 30% to $2,166.8 million
from $1,671.9 million in 1995. This increase is consistent
with the 33% increase in sales for the same period. Product
development, selling and administrative expenses as a
percent of sales decreased to 15.1% from 15.4% in 1995.
Operating Results from Continuing Operations: The Company
reported income from continuing operations of $152.8 million
in 1997 compared to income from continuing operations of
$114.2 million in 1996 ($136.0 million, or $2.88 per share
before the nonrecurring restructuring charge) and $92.1
million in 1995. The primary factor contributing to the
increase in 1997 was an increase in operating income offset
by higher interest expense and increased taxes resulting
from higher pre-tax income.
1996 Restructuring Actions
In the fourth quarter of fiscal 1996, the Company's Beloit
Corporation subsidiary recorded a restructuring charge of
$43.0 million ($21.8 million after tax and minority
interest, or $0.46 per share). The focus of the
restructuring was to improve financial returns and increase
customer satisfaction while significantly reducing costs and
cycle times. In fiscal 1997, utilization of the
restructuring reserve totaled $29.8 million. It is expected
that the remaining restructuring actions will be
substantially completed by the end of fiscal 1998.
Details regarding specific restructuring actions are as
follows:
<TABLE>
<CAPTION>
Original Reserve 10/31/97
Reserve Utilized Reserve
<S> <C> <C> <C>
Employee severance $15,900 $(12,851) $ 3,049
Machinery and
equipment dispositions 7,600 (6,830) 770
Closure of facilities 6,800 (703) 6,097
Sale of businesses 6,000 (3,085) 2,915
Other 6,700 (6,301) 399
------- -------- -------
$43,000 $(29,770) $13,230
======= ======== =======
</TABLE>
The cash and noncash elements of the restructuring charge
approximated $27.7 million and $15.3 million, respectively.
It is expected that the remaining restructuring actions will
be funded through cash flows from continuing operations.
Additional details are discussed in the "Operating
Results by Business Segment"section which follows and in the
Notes to Consolidated Financial Statements. (Note 3 -
Restructuring Charge.)
Income Taxes
The Company's effective tax rate from continuing operations
was 34.0% in 1997 (compared to a 35.0% federal statutory
rate), 35.0% in 1996, and 35.0% in 1995. The effective tax
rate in 1997 differed from the federal statutory rate of
35.0% due primarily to usage of tax credits.
A more detailed discussion of income taxes can be found
in the Notes to Consolidated Financial Statements. (Note 6 -Income Taxes.)
Adoption of New Accounting Standards
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
for certain plans beginning in 1994 extending through 1998
and Company contributions will be eliminated on January 1,
1999 for most employee groups, excluding Joy. For Joy, based
upon existing plan terms, future eligible retirees will
participate in a premium cost-sharing arrangement which is
based on age as of March 1, 1993 and position at the time of
retirement. Active Joy employees under age 45 as of March 1,
1993 and new hires after April 1, 1993 will be required to
pay 100% of the applicable premium.
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 for 1997 and
1996 was reduced by $12.8 million and $10.8 million,
respectively, for amortization of negative plan amendments.
The Company adopted Statement of Financial Accounting
Standard ("SFAS") No. 112, "Employers' Accounting for
Postemployment Benefits" in the first quarter of fiscal
1995. The impact of adoption of SFAS No. 112 on the
Company's results of operations and financial position was
not material.
The Company adopted the disclosure requirements of SFAS
No. 123, "Accounting for Stock-Based Compensation" effective
for the 1997 financial statements. The standard provides for
reporting stock-based compensation at fair value instead of
the currently used intrinsic value method. The change is not
required to be recorded in the financial statements but the
pro-forma effect of the standard must be included in the
footnotes to the financial statements, if material. The
Company has elected to continue measuring compensation cost
using the intrinsic value method and as such, no
compensation expense for stock options has been recorded.
See Notes to Consolidated Financial Statements. (Note 10 -
Shareholders' Equity and Stock Options.)
In February, 1997, the Financial Accounting Standards
Board ("FASB") issued SFAS No. 128, "Earnings per Share.""
This statement establishes revised standards for computing
and presenting earnings per share. The statement is
effective for the Company's fiscal 1998 first quarter. All
prior periods will be required to be restated. The adoption
of this standard will not have a material impact on the
Company's reported earnings per share.
In June, 1997, the FASB issued SFAS No. 130, "Reporting
Comprehensive Income". The standard requires that certain
items recognized under accounting principles as components
of comprehensive income be reported in a financial statement
that is displayed with the same prominence as other
financial statements. The Company is not required to adopt
the standard until fiscal 1999.
Bookings and Backlog
<TABLE>
<CAPTION>
Backlog at October 31, 1997, 1996 and 1995 by business
segment was as follows:
IN THOUSANDS
1997 1996 1995
<S> <C> <C> <C>
Mining
Equipment $ 358,340 $ 453,480 $ 221,540
Pulp and Paper
Machinery 776,618 846,137 679,625
Material
Handling 97,743 132,550 130,879
---------- ---------- -----------
$1,232,701 $1,432,167 $1,032,044
========== ========== ===========
</TABLE>
Bookings were $3,080.8 million in 1997, $3,000.8 million in
1996 and $2,252.3 million in 1995. A discussion of changes
in bookings by segment is presented in the "Operating
Results by Business Segment" section which follows.
Mining Equipment backlog was reduced by $18.0 million in
fiscal 1997 due to divestitures. Backlog for Pulp and Paper
Machinery was reduced by $170.0 million due to change of
scope and indefinite deferments on certain contracts booked
in prior years and $3.8 million due to divestitures.
Liquidity and Capital Resources
<TABLE>
<CAPTION>
The Company's capital structure at October 31, 1997 and 1996 was as follows:
IN THOUSANDS
1997 1996
------------ -----------
<S> <C> <C>
Short-term notes payable $ 214,126 $ 45,261
Long-term obligations,
including current portion 725,193 662,137
------------ -------------
939,319 707,398
Minority interest 101,364 93,652
Shareholders' equity 764,220 673,485
------------ -------------
Total capitalization $1,804,903 $1,474,535
============ ==============
Debt to capitalization ratio 52.0% 48.0%
===== ======
</TABLE>
The Company's debt to capitalization ratio increased to
52.0% at October 31, 1997 from 48.0% at October 31, 1996.
The increase was caused primarily by the increase in net
working capital to finance increased operating levels and
the buyback of common stock, offset by an increase in equity
from strong operating results.
Cash flow used by operating activities was $79.3 million
in 1997 compared to cash flow provided by operating
activities of $80.4 million in 1996 and $125.3 million in
1995. The decrease in cash flow between periods was caused
primarily by a net increase in working capital items,
particularly unbilled receivables on large paper machine
orders in the Pacific Rim, offset by higher net income and
deferred taxes.
Net working capital of $426.4 million at October 31,
1997 increased $93.3 million from October 31, 1996 levels of
$333.1 million. The change was primarily due to increases in
accounts receivable and inventories and a decrease in other
current liabilities, offset by an increase in accounts
payable.
Net working capital decreased to $333.1 million in 1996
from $490.1 million in 1995, due mainly to cash used for
acquisitions and restructuring activities.
Cash applied to investing activities in 1997 was $102.3
million, primarily caused by additional investments in
property, plant and equipment. Cash applied to investing
activities in 1996 was $424.0 million, primarily caused by
the acquisitions of Dobson and IMPCO, offset by the sale of
businesses.
Capital expenditures for property, plant and equipment
in 1997 net of dispositions were $99.9 million compared with
$66.6 million in 1996. Depreciation and amortization was
$94.4 million and $89.3 million in 1997 and 1996,
respectively.
The $176.9 million of cash provided by financing
activities in 1997 was primarily due to the issuance of
$150.0 million, 67/8% debentures on February 25, 1997 and
increases in borrowings against the Revolving Credit
Facility, offset by the repurchase of JTI's 101/4% Senior
Notes and a buyback of common stock. Cash provided by
financing activities in 1996 of $140.4 million was primarily
from the issuance of debt related to the Dobson acquisition
offset by a decrease in short-term notes payables.
The Company completed the acquisition of Dobson in early
1996 for a purchase price of approximately $330.0 million,
including acquisition costs. The transaction was funded via
a short-term bridge financing facility arranged specifically
for this acquisition, issuance of commercial paper, other
short-term facilities and available cash. The short-term
facilities were replaced with $150.0 million, 71/4%
debentures issued on December 19, 1995, at 99.153%.
The Company's Beloit Corporation subsidiary purchased
the assets of IMPCO on March 27, 1996 for a purchase price
of $119.2 million, including acquisition costs. The
acquisition of IMPCO was funded via short-term bridge loans
and the Revolving Credit Facility.
On October 7, 1997, JTI offered to purchase for cash any
and all of its outstanding 101/4% Senior Notes in a
fixed-spread tender offer. This offer expired on October 21,
1997, with $180.7 million being repurchased. As a result of
the Senior Note repurchases, the Company recorded an
extraordinary loss on debt retirement, net of applicable
income taxes, of $(13.0) million, or $(0.27) per share,
consisting primarily of unamortized financing costs and
purchase premiums. The indenture for the Senior Notes
provides that J.T.I. 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
interest, declining to 100% of their principal amount, plus
accrued interest, on or after September 1, 2000. It is the
Company's current intention to redeem the remaining Senior
Notes ($7.7 million) in September, 1998.
In September, 1997, the Company announced that the board
of directors had authorized the purchase of up to ten
million shares of the Company's common stock. As of October
31, 1997, the Company had repurchased 906,400 shares through
open-market transactions at a cost of $38.2 million.
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 sale of up to $200.0 million of
debt securities. To date, $150.0 million have been issued
under this registration.
(2) A Revolving Credit Facility Agreement expiring
October, 2002 between the Company and certain domestic and
foreign financial institutions that allows for borrowings of
up to $500.0 million at rates expressed in relation to LIBOR
and other rates. Direct borrowings and commercial paper are
both considered a utilization of the facility. At October
31, 1997, utilization of the facility amounted to $150.0
million and $84.1 million for direct borrowings and
commercial paper, respectively.
(3) Short-term bank credit lines of foreign
subsidiaries of approximately $218.3 million of which
approximately $74.0 million was outstanding at October 31,
1997.
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 Company has no significant capital commitments as of
October 31, 1997. Any future 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 participate 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.
Operating Results by Business Segment
Mining Equipment:
<TABLE>
<CAPTION>
IN THOUSANDS
1997 1996 1995
<S> <C> <C> <C>
Net sales $1,467,341 $1,405,936 $941,779
Operating income 201,803 183,141 122,116
Bookings 1,390,161 1,406,381 972,419
</TABLE>
The Mining Equipment segment reported net sales of
$1,467.3 million in 1997, a 4% increase from 1996 sales of
$1,405.9 million. The sales increase is due to an increase
in aftermarket activity for both surface and underground
mining operations. Operating income was $201.8 million or
13.8% of sales, compared to operating income of $183.1
million or 13.0% of sales in 1996. Net sales and operating
income amounted to $941.8 million and $122.1 million,
respectively, in 1995.
The increase in operating income is primarily due to
increased sales. Foreign sales of the Mining Equipment
segment amounted to 59% of total sales in 1997, 58% in 1996
and 44% in 1995.
Bookings amounted to $1,390.2 million in 1997 compared
to $1,406.4 million in 1996. The decrease is the result of
market softness for original equipment for underground
mining.
Pulp and Paper Machinery:
<TABLE>
<CAPTION>
IN THOUSANDS
1997 1996 1995
<S> <C> <C> <C>
Net sales $1,267,847 $1,134,779 $ 970,418
Operating income before
restructuring charge 104,085 91,511 56,062
Restructuring charge - (43,000) -
---------- ----------- --------
Operating income after
restructuring charge 104,085 48,511 56,062
Bookings 1,372,085 1,269,507 1,016,273
</TABLE>
The Pulp and Paper Machinery segment reported sales of
$1,267.8 million and operating income of $104.1 million for
1997. Sales volume in 1997 was 12% higher than the prior
year's level of $1,134.8 million, reflecting continued
strength in the worldwide pulp and paper industry's spending
for original equipment and aftermarket services. Foreign
sales for this segment amounted to 57% of total sales in
1997, 53% in 1996 and 41% in 1995. Operating income in 1997
was 8.2% of sales compared to 8.1% in 1996 before the
restructuring charge.
Net sales and operating income amounted to $1,134.8
million and $48.5 million, respectively, in 1996. Net sales
were 17% higher than in 1995 reflecting the cyclical upturn
in the worldwide pulp and paper industry. Operating income
as a percent of sales increased to 8.1%, before the
restructuring charge, in 1996 from 5.8% in 1995.
In the fourth quarter of fiscal 1996, the Pulp and Paper
Machinery segment recorded a restructuring charge of $43.0
million. The focus of the restructuring was to better serve
its customers, strengthen market position, enable the
segment to increase EVA and improve profitability levels.
The charge was primarily comprised of costs related to
severance, machinery and equipment dispositions, closure of
certain facilities and sale of businesses. See Notes to
Consolidated Financial Statements. (Note 3 - Restructuring
Charge.)
Bookings activity improved in 1997 to $1,372.1 million
from $1,269.5 million in 1996. The 8% increase reflects
improved bookings in both pulp and paper machinery and
aftermarket services and products, particularly in the
Pacific Rim and Latin America.
MATERIAL HANDLING:
<TABLE>
<CAPTION>
IN THOUSANDS
1997 1996 1995
<S> <C> <C> <C>
Net sales $353,350 $323,216 $239,882
Operating income 38,399 33,107 22,850
Bookings 318,543 324,887 263,649
</TABLE>
The Material Handling segment reported net sales of $353.4
million in 1997, an increase of 9% from 1996 levels of
$323.2 million. Operating income increased to $38.4 million
compared to $33.1 million in 1996, an increase of 16%.
Increases are primarily due to improved results from
existing businesses. Foreign sales amounted to 50% of total
sales in 1997 compared to 39% in 1996 and 48% in 1995.
Net sales of the Material Handling segment increased to
$323.2 million in 1996 from $239.9 million in 1995.
Operating income increased from $22.9 million in 1995 to
$33.1 million in 1996. The increase in both sales and
profitability is primarily due to improved results from
original equipment sales and aftermarket services from
existing businesses.
Bookings amounted to $318.5 million in 1997, as compared
to $324.9 million in 1996. The bookings levels reflect the
segment's continued leadership in the domestic equipment
market and continued growth of its aftermarket business.
The Company is currently exploring the potential
divestiture of the Material Handling business. The potential
sale will be contingent on the Company receiving adequate
terms and proceeds for the business.
DISCONTINUED OPERATIONS:
<TABLE>
<CAPTION>
IN THOUSANDS
1997 1996 1995
<S> <C> <C> <C>
Net sales $ - $ - $101,472
Loss from discontinued
operations - - (31,235)
</TABLE>
Net sales and loss from discontinued operations in 1995
of $101.5 million and $(31.2) million, respectively, relate
to the sale of Syscon and JET.
Other
The Company is party to litigation matters and claims which
are normal in the course of its operations. Also, as a
normal part of their operations, the Company's subsidiaries
undertake contractual obligations, warranties and guarantees
in connection with the sale of products or services.
Although the outcome of these matters cannot be predicted
with certainty and favorable or unfavorable resolution may
affect income on a quarter-to-quarter basis, management
believes that such matters will not have a materially
adverse effect on the Company's consolidated financial
position. In the case of Beloit Corporation, certain
litigation matters and claims are currently pending in
connection with its contractual undertakings. Beloit may on
occasion enter into arrangements to participate in the
ownership of or operate pulp or paper making facilities in
order to satisfy contractual undertakings or resolve
disputes.
One of the claims against Beloit involves a lawsuit
brought by Potlatch Corporation that alleges pulp line
washers supplied by Beloit for less than $15.0 million
failed to perform satisfactorily. In June, 1997, a Lewiston,
Idaho jury awarded Potlatch $95.0 million in damages in the
case. Beloit has appealed this award to the Idaho Supreme
Court. While the eventual outcome of the Potlatch case
cannot be predicted, reserves in the October 31, 1997
Consolidated Balance Sheet are less than the full amount of
the jury award.
On August 14, 1997, the Company established a new
long-term incentive compensation plan which covers 11 key
elected officers of the Company. The plan, which replaces
traditional stock options for the participants, consists of
awards of up to an aggregate of 1.2 million shares based
upon achievement of pre-established stock price improvement
factors. The base stock price was set at $40.87 per share.
The minimum requirements of the plan call for a portion of
the shares to be awarded if a 30% increase in stock price
occurs within three years. The shares shall be fully awarded
if the stock price increases by 50% within three years or
70% within five years. If target prices are not met, none of
the shares will be awarded. As the stock price has declined
since inception of the plan, no compensation expense was
recorded in fiscal 1997.
The Company has addressed Year 2000 system issues in all
of its subsidiaries and does not anticipate any significant
problems in the transition to the year 2000. Anticipated
Year 2000 conversion costs will be expensed as incurred and
are expected to be immaterial.
Cautionary Factors
This report and other documents or oral statements which
have been and will be prepared or made in the future contain
or may contain forward-looking statements by or on behalf of
the Company. Such statements are based upon management's
expectations at the time they are made. In addition to the
assumptions and other factors referred to specifically in
connection with such statements, the following factors,
among others, could cause actual results to differ
materially from those contemplated.
The Company's principal businesses involve designing,
manufacturing, marketing and servicing large, complex
machines for the mining, papermaking and capital goods
industries. Long periods of time are necessary to plan,
design and build these machines. With respect to new
machines and equipment, there are risks of customer
acceptance and start-up or performance problems. Large
amounts of capital are required to be devoted by the
Company's, steel mills and other facilities that use these
machines. The Company's success in obtaining and managing a
relatively small number of sales opportunities, including
warranties and guarantees associated therewith, can affect
the Company's financial performance. In addition, many
projects are located in undeveloped or developing economies
where business conditions are less predictable. In recent
years, more than 50% of the Company's total sales occurred
outside the United States.
Other factors that could cause actual results to differ
materially from those contemplated include:
- - Factors affecting purchases of new equipment, rebuilds,
parts and services such as: production capacity, stockpiles
and production and consumption rates of coal, copper, iron,
gold, fiber, paper/paperboard, recycled paper, steel and
other commodities; the cash flows of customers; the cost and
availability of financing to customers and the ability of
customers to obtain regulatory approval for investments in
mining, papermaking, steel making, automotive manufacturing
and other heavy industrial projects; the ages, efficiencies
and utilization rates of existing equipment; the development
of new technologies; the availability of used or alternative
equipment; consolidations among customers; work stoppages at
customers or providers of transportation; and the timing,
severity and duration of customer buying cycles,
particularly in the paper and mining businesses.
- - Factors affecting the Company's ability to capture
available sales opportunities, including: customers'
perceptions of the quality and value of the Company's
products as compared to competitors' products; the existence
of patents protecting or restricting the Company's ability
to offer features requested by customers; whether the
Company has successful reference installations to show
customers, especially for papermaking and mining equipment;
customers' perceptions of the health and stability of the
Company as compared to its competitors; the Company's
ability to assist with competitive financing programs; the
availability of manufacturing capacity at the Company's
factories; and whether the Company can offer the complete
package of products and services sought by its customers.
- - Factors affecting the Company's ability to successfully
manage sales it obtains, such as: the accuracy of the
Company's cost and time estimates for major projects; the
Company's success in completing projects on time and within
budget; the Company's success in recruiting and retaining
managers and key employees; wage stability and cooperative
labor relations; plant capacity and utilization; and whether
acquisitions are assimilated and divestitures completed
without notable surprises or unexpected difficulties.
- - Factors affecting the Company's general business, such as:
unforeseen patent, tax, product, environmental, employee
health or benefit or contractual liabilities; nonrecurring
restructuring charges; changes in accounting or tax rules or
regulations; and reassessments of asset valuations such as
inventories.
- - Factors affecting general business levels, such as:
political turmoil and economic growth in major markets such
as the United States, Canada, Europe, the Far East, South
Africa, Australia and Chile; environmental and trade
regulations; and the stability and ease of exchange of
currencies.
<TABLE>
<CAPTION>
Consolidated Statement of Income
Harnischfeger Industries, Inc.
Years Ended October 31,
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
1997 1996
<S> <C> <C>
Revenues
Net sales $3,088,538 $2,863,931
Other income 29,705 23,639
---------- ----------
3,118,243 2,887,570
Cost of Sales 2,341,515 2,166,775
Product Development,
Selling
and Administrative
Expenses 457,456 433,776
Restructuring Charge - 43,000
---------- ----------
Operating Income 319,272 244,019
Interest Expense - Net (72,543) (62,258)
---------- ----------
Income before Joy Merger
Costs, Gain on Sale
of Measurex Investment,
Provision
for Income Taxes and
Minority Interest 246,729 181,761
Joy Merger Costs - -
Gain on Sale of Measurex
Investment - -
Provision for
Income Taxes (83,875) (63,600)
Minority Interest (10,014) (3,944)
----------- -----------
Income from Continuing
Operations 152,840 114,217
Loss from and Net Loss
on Sale of
Discontinued Operation,
net of applicable
income taxes - -
Extraordinary Loss on
Retirement of Debt,
net of applicable
income taxes (12,999) -
----------- ----------
Net Income $ 139,841 $ 114,217
=========== ==========
Earnings Per Share
Income from
continuing operations $3.20 $2.42
Loss from and net
loss on sale of
discontinued operation - -
Extraordinary loss on
retirement of debt (0.27) -
------ ------
Net Income Per Share $2.93 $2.42
====== ======
</TABLE>
The Accompanying Notes are an Integral Part of the Financial
Statements.
<TABLE>
<CAPTION>
Consolidated Statement of Income
Harnischfeger Industries, Inc.
Years Ended October 31,
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
1995
<S> <C>
Revenues
Net sales $2,152,079
Other income 32,208
----------
2,184,287
Cost of Sales 1,671,932
Product Development, Selling
and Administrative Expenses 330,990
Restructuring Charge -
----------
Operating Income 181,365
Interest Expense - Net (40,713)
-----------
Income before Joy Merger Costs,
Gain on Sale
of Measurex Investment,
Provision
for Income Taxes and
Minority Interest 140,652
Joy Merger Costs (17,459)
Gain on Sale of
Measurex Investment 29,657
Provision for Income Taxes (53,500)
Minority Interest (7,230)
-----------
Income from
Continuing Operations 92,120
Loss from and Net Loss
on Sale of
Discontinued Operation,
net of applicable
income taxes (31,235)
Extraordinary Loss on
Retirement of Debt,
net of applicable
income taxes (3,481)
------------
Net Income $ 57,404
============
Earnings Per Share
Income from continuing
operations $1.99
Loss from and net loss
on sale of
discontinued operation (0.67)
Extraordinary loss on
retirement of debt (0.08)
------------
Net Income Per Share $1.24
============
</TABLE>
The Accompanying Notes are an Integral Part of the Financial
Statements.
<TABLE>
<CAPTION>
Consolidated Balance Sheet
Harnischfeger Industries, Inc.
Years Ended October 31,
(DOLLAR AMOUNTS IN THOUSANDS)
1997 1996
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents
(including cash equivalents
of $6,376 and $3,455 in
1997 and 1996,
respectively, at cost which
approximates market) $ 29,383 $ 36,936
Accounts receivable - net 836,169 667,786
Inventories 594,761 547,115
Businesses held for sale 9,323 26,152
Other current assets 119,076 132,261
--------- ---------
1,588,712 1,410,250
Property, Plant and Equipment:
Land and improvements 60,724 48,371
Buildings 293,501 301,010
Machinery and equipment 821,479 776,332
--------- ---------
1,175,704 1,125,713
Accumulated depreciation (518,604) (491,668)
--------- ----------
657,100 634,045
Investments and Other Assets:
Goodwill 508,634 512,693
Intangible assets 33,027 39,173
Other assets 137,062 93,868
--------- ----------
678,723 645,734
--------- ----------
$ 2,924,535 $2,690,029
========= ==========
Liabilities and Shareholders' Equity
Current Liabilities:
Short-term notes payable, including
current portion of
long-term obligations $ 225,853 $ 49,633
Trade accounts payable 460,689 346,056
Employee compensation
and benefits 132,268 160,488
Advance payments and progress
billings 85,680 155,199
Accrued warranties 47,753 50,718
Other current liabilities 210,054 315,033
--------- ----------
1,162,297 1,077,127
Long-term Obligations 713,466 657,765
Other Liabilities:
Liability for postretirement
benefits 56,202 78,814
Accrued pension and
related costs 36,707 39,902
Other liabilities 11,608 14,364
Deferred income taxes 78,671 54,920
--------- ----------
183,188 188,000
Minority Interest 101,364 93,652
Shareholders' Equity:
Common stock (issued 51,607,172
and 51,406,946 shares,
respectively) 51,607 51,407
Capital in excess of par value 625,358 615,089
Retained earnings 268,287 148,175
Cumulative translation
adjustments (41,440) (37,584)
Less: Stock Employee
Compensation Trust
(1,433,147 and
1,533,993 shares,
respectively) at market (56,430) (61,360)
Treasury Stock (3,127,697
and 2,274,613 shares,
respectively) at cost (83,162) (42,242)
------------ ---------
764,220 673,485
------------ ---------
$ 2,924,535 $ 2,690,029
============ ==========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial
Statements.
<TABLE>
<CAPTION>
Consolidated Statement of Cash Flow
Harnischfeger Industries, Inc.
Years Ended October 31,
(DOLLAR AMOUNTS IN THOUSANDS)
1997 1996
<S> <C> <C>
Operating Activities
Net income $ 139,841 $ 114,217
Add (deduct) - Items not
affecting cash:
Restructuring charge - 43,000
Loss from discontinued operations,
net of income taxes - -
Extraordinary loss on retirement
of debt, net of income taxes 12,999 -
Net gain on sale of
Measurex investment,
net of income taxes - -
Depreciation and amortization 94,425 89,270
Minority interest,
net of dividends paid 9,767 3,254
Deferred income taxes - net 58,145 18,855
Other - net (33,895) (22,065)
Changes in working capital,
excluding the effects of
acquisition opening balance sheets:
(Increase) in accounts
receivable - net (199,809) (81,007)
(Increase) in inventories (48,276) (30,291)
(Increase) in other current assets (23,550) (10,978)
Increase in trade accounts payable 114,927 18,223
(Decrease) increase in employee
compensation and benefits (28,545) (6,729)
(Decrease) increase in advance
payments and progress billings (69,251) (62,071)
(Decrease) increase in
other current liabilities (106,123) 6,673
---------- ---------
Net cash (used) provided by
operating activities (79,345) 80,351
Investment and Other Transactions
Purchase of Dobson Park Industries plc,
net of cash acquired of $4,631 - (325,369)
Purchase of Pulp Machinery Division
of Ingersoll-Rand, net of
cash acquired of $6,858 - (112,372)
Other acquisitions,
net of cash acquired (17,097) (11,350)
Proceeds from sale of
New Philadelphia Fan Co. 18,051 -
Proceeds from sale of
Castings Division 7,229 -
Proceeds from sale of non-core
Dobson Park businesses 16,829 73,848
Proceeds from sale of Joy
Environmental Technologies - 11,651
Proceeds from sale of investment
in Measurex Corporation - -
Proceeds from sale of
Syscon Corporation - -
Property, plant and equipment
- acquired (133,497) (83,388)
Property, plant and
equipment - retired 33,549 16,826
Other - net (27,368) 6,174
---------- ----------
Net cash (applied to)
provided by investment and
other transactions (102,304) (423,980)
---------- ----------
Financing Activities
Purchase of treasury stock (40,720) -
Dividends paid (19,151) (18,905)
Exercise of stock options 7,164 6,762
Issuance of long-term obligations 261,411 198,892
Redemption of long-term obligations (198,270) (2,334)
Increase (decrease) in
short-term notes payable 166,505 (43,973)
--------- ---------
Net cash provided by (applied to)
financing activities 176,939 140,442
--------- ---------
Effect of Exchange Rate Changes
on Cash and Cash Equivalents (2,843) 1,080
---------- ---------
(Decrease) Increase in Cash
and Cash Equivalents (7,553) (202,107)
---------- ----------
Cash and Cash Equivalents
at Beginning of Year 36,936 239,043
---------- ----------
Cash and Cash Equivalents
at End of Year $ 29,383 $ 36,936
========== ==========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial
Statements.
<TABLE>
<CAPTION>
Consolidated Statement of Cash Flow
Harnischfeger Industries, Inc.
Years Ended October 31,
(DOLLAR AMOUNTS IN THOUSANDS)
1995
<S> <C>
Operating Activities
Net income $ 57,404
Add (deduct) - Items not affecting cash:
Restructuring charge -
Loss from discontinued
operations, net of income taxes 31,235
Extraordinary loss on retirement
of debt, net of income taxes 3,481
Net gain on sale of Measurex investment,
net of income taxes (18,657)
Depreciation and amortization 70,512
Minority interest, net of dividends paid 3,589
Deferred income taxes - net 10,937
Other - net 3,594
Changes in working capital, excluding
the effects of
acquisition opening balance sheets:
(Increase) in accounts receivable - net (73,343)
(Increase) in inventories (28,003)
(Increase) in other current assets (7,776)
Increase in trade accounts payable 13,922
(Decrease) increase in employee
compensation and benefits 16,217
(Decrease) increase in advance
payments and progress billings 34,156
(Decrease) increase in other
current liabilities 8,033
--------
Net cash (used) provided
by operating activities 125,301
--------
Investment and Other Transactions
Purchase of Dobson Park Industries plc,
net of cash acquired of $4,631 -
Purchase of Pulp Machinery Division
of Ingersoll-Rand, net of
cash acquired of $6,858 -
Other acquisitions, net of cash acquired (27,905)
Proceeds from sale of
New Philadelphia Fan Co. -
Proceeds from sale of Castings Division -
Proceeds from sale of non-core
Dobson Park businesses -
Proceeds from sale of Joy
Environmental Technologies -
Proceeds from sale of investment
in Measurex Corporation 96,004
Proceeds from sale of Syscon Corporation 45,000
Property, plant and equipment - acquired (73,484)
Property, plant and equipment - retired 11,724
Other - net (7,249)
---------
Net cash (applied to) provided
by investment and
other transactions 44,090
---------
Financing Activities
Purchase of treasury stock (3,009)
Dividends paid (18,524)
Exercise of stock options 17,309
Issuance of long-term obligations 9,588
Redemption of long-term obligations (108,769)
Increase (decrease) in short-term
notes payable 828
---------
Net cash provided by (applied to)
financing activities (102,577)
---------
Effect of Exchange Rate Changes
on Cash and Cash Equivalents (520)
---------
(Decrease) Increase in Cash and Cash Equivalents 66,294
---------
Cash and Cash Equivalents at Beginning of Year 172,749
---------
Cash and Cash Equivalents at End of Year $ 239,043
=========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial
Statements.
Consolidated Statement
of Shareholders' Equity
Harnischfeger Industries, Inc.
<TABLE>
<CAPTION>
(DOLLAR AMOUNTS IN THOUSANDS)
Capital in
Common Excess of
Stock Par Value
<S> <C> <C>
Balance at October 31, 1994 $50,519 $577,068
Net income
Exercise of 861,930 stock
options 599 9,131
Dividends paid ($0.40 per share)
Dividends on shares held by SECT 681
Adjust SECT shares to
market value 16,832
Translation adjustments
110,000 shares acquired
as Treasury Stock
457,991 shares transferred from
Treasury Stock to SECT
Purchase of 425,345 shares
by employee benefit plans
-------- --------
Balance at October 31, 1995 51,118 603,712
Net income
Exercise of 320,172 stock
options 282 5,730
Issuance of restricted stock 7 (11,555)
Dividends paid ($0.40 per share)
Dividends on shares held by SECT 697
Adjust SECT shares to
market value 13,541
Translation adjustments
Purchase of 230,000 shares
by employee benefit plans 2,964
-------- -------
Balance at October 31, 1996 51,407 615,089
Net income
Exercise of 301,072 stock
options 200 4,984
Dividends paid ($0.40 per share)
Dividends on shares held by SECT 578
Adjust SECT shares to
market value (2,950)
Translation adjustments
Purchase of 209,373 shares
by employee benefit plans 4,582
1,062,457 shares
acquired as treasury stock
Amortization of unearned
compensation on restricted stock 3,075
------- --------
Balance at October 31, 1997 $51,607 $625,358
======= ========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial
Statements.
<TABLE>
<CAPTION>
Consolidated Statement
of Shareholders' Equity
Harnischfeger Industries, Inc.
(DOLLAR AMOUNTS IN THOUSANDS)
Cumulative
Retained Translation
Earnings Adjustments
<S> <C> <C>
Balance at October 31, 1994 $15,361 $(37,452)
Net income 57,404
Exercise of 861,930 stock
options
Dividends paid ($0.40 per share) (19,205)
Dividends on shares held by SECT
Adjust SECT shares to
market value
Translation adjustments (4,666)
110,000 shares acquired
as Treasury Stock
457,991 shares transferred from
Treasury Stock to SECT
Purchase of 425,345 shares
by employee benefit plans
-------- ---------
Balance at October 31, 1995 53,560 (42,118)
Net income 114,217
Exercise of 320,172 stock
options
Issuance of restricted stock
Dividends paid ($0.40 per share) (19,602)
Dividends on shares held by SECT
Adjust SECT shares to
market value
Translation adjustments 4,534
Purchase of 230,000 shares
by employee benefit plans
------- --------
Balance at October 31, 1996 148,175 (37,584)
Net income 139,841
Exercise of 301,072 stock
options
Dividends paid ($0.40 per share) (19,729)
Dividends on shares held by SECT
Adjust SECT shares to
market value
Translation adjustments (3,856)
Purchase of 209,373 shares
by employee benefit plans
1,062,457 shares
acquired as treasury stock
Amortization of unearned
compensation on restricted stock
-------- --------
Balance at October 31, 1997 $268,287 $(41,440)
======== =========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial
Statements.
<TABLE>
<CAPTION>
Consolidated Statement
of Shareholders' Equity
Harnischfeger Industries, Inc.
(DOLLAR AMOUNTS IN THOUSANDS)
Treasury
SECT Stock
------ --------
<S> <C> <C>
Balance at October 31, 1994 $(53,760) $(52,009)
Net income
Exercise of 861,930 stock
options 7,579
Dividends paid ($0.40 per share)
Dividends on shares held by SECT
Adjust SECT shares to
market value (16,832)
Translation adjustments
110,000 shares acquired
as Treasury Stock (3,009)
457,991 shares transferred from
Treasury Stock to SECT (8,505) 8,505
Purchase of 425,345 shares
by employee benefit plans 11,035
-------- ---------
Balance at October 31, 1995 (60,483) (46,513)
Net income
Exercise of 320,172 stock
options 750
Issuance of restricted stock 11,914
Dividends paid ($0.40 per share)
Dividends on shares held by SECT
Adjust SECT shares to
market value (13,541)
Translation adjustments
Purchase of 230,000 shares
by employee benefit plans 4,271
-------- ----------
Balance at October 31, 1996 (61,360) (42,242)
Net income
Exercise of 301,072 stock
options 1,980
Dividends paid ($0.40 per share)
Dividends on shares held by SECT
Adjust SECT shares to
market value 2,950
Translation adjustments
Purchase of 209,373 shares
by employee benefit plans 3,888
1,062,457 shares
acquired as treasury stock (44,808)
Amortization of unearned
compensation on restricted stock
--------- ---------
Balance at October 31, 1997 $(56,430) $(83,162)
========= =========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial
Statements.
<TABLE>
<CAPTION>
Consolidated Statement
of Shareholders' Equity
Harnischfeger Industries, Inc.
(DOLLAR AMOUNTS IN THOUSANDS)
Total
------
<S> <C>
Balance at October 31, 1994 $499,727
Net income 57,404
Exercise of 861,930 stock
options 17,309
Dividends paid ($0.40 per share) (19,205)
Dividends on shares held by SECT 681
Adjust SECT shares to
market value -
Translation adjustments (4,666)
110,000 shares acquired
as Treasury Stock (3,009)
457,991 shares transferred from
Treasury Stock to SECT -
Purchase of 425,345 shares
by employee benefit plans 11,035
--------
Balance at October 31, 1995 559,276
Net income 114,217
Exercise of 320,172 stock
options 6,762
Issuance of restricted stock 366
Dividends paid ($0.40 per share) (19,602)
Dividends on shares held by SECT 697
Adjust SECT shares to
market value -
Translation adjustments 4,534
Purchase of 230,000 shares
by employee benefit plans 7,235
---------
Balance at October 31, 1996 673,485
Net income 139,841
Exercise of 301,072 stock
options 7,164
Dividends paid ($0.40 per share) (19,729)
Dividends on shares held by SECT 578
Adjust SECT shares to
market value -
Translation adjustments (3,856)
Purchase of 209,373 shares
by employee benefit plans 8,470
Purchase of 1,062,457 shares
acquired as treasury stock (44,808)
Amortization of unearned
compensation on restricted stock 3,075
--------
Balance at October 31, 1997 $764,220
========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial
Statements.
Notes to Consolidated
Financial Statements
Harnischfeger Industries, Inc.
(Dollar amounts in thousands unless indicated)
Note 1
Significant Accounting Policies
Basis of Presentation: The consolidated financial statements
and related notes give retroactive effect to the merger on
November 29, 1994 with Joy Technologies Inc. ("JTI") for all
periods presented, accounted for as a pooling of interests.
The Consolidated Statement of Income has also been restated
to reflect the Company's divestiture in 1995 of the Systems
Group and Joy Environmental Technologies ("JET") accounted
for as discontinued operations. (See Note 16 - Discontinued
Operations.) The term "Company" as used in these
consolidated financial statements refers to Harnischfeger
Industries, Inc. and its subsidiaries.
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.
Use of Estimates: The preparation of financial statements in
conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the
date of the financial statements, and the reported amounts
of revenues and expenses during the reporting period.
Ultimate realization of assets and settlement of liabilities
in the future could differ from those estimates.
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 the 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 and custom-engineered cranes. 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
is 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 is
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) gains
included in operating income were $(701), $(1,150) and
$1,901 in 1997, 1996 and 1995, 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
amortized on a straight-line basis over periods ranging from
30 to 40 years. The Company assesses the carrying value of
goodwill at each balance sheet date. Consistent with
Statement of Financial Accounting Standard ("SFAS") No. 121,
"Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of", such assessments
include, as appropriate, 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 20 years. Accumulated amortization was $95,033 and
$93,383 at October 31, 1997 and 1996, respectively.
Income Taxes: 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, and
for tax basis carryforwards. A valuation allowance is
provided for deferred tax assets where it is considered more
likely than not that the Company will not realize the
benefit of such assets. (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 $40,094, $34,471 and $30,348
in 1997, 1996 and 1995, respectively. Certain capital
expenditures used in research activities, such as the
construction of a pilot paper machine 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
47,826,813, 47,196,388 and 46,218,144 in 1997, 1996 and
1995, respectively. 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 purposes of computing earnings
per share.
future accounting changes: In February, 1997, the Financial
Accounting Standards Board ("FASB") issued SFAS No. 128,
"Earnings per Share." This statement establishes revised
standards for computing and presenting earnings per share.
The statement is effective for the Company's fiscal 1998
first quarter. All prior periods will be required to be
restated. The adoption of this standard will not have a
material impact on the Company's reported earnings per
share.
In June, 1997, the FASB issued SFAS No. 130, "Reporting
Comprehensive Income". The standard requires that certain
items recognized under accounting principles as components
of comprehensive income be reported in a financial statement
that is displayed with the same prominence as other
financial statements. The Company is not required to adopt
the standard until fiscal 1999.
Note 2
Acquisitions
In early fiscal 1996, the Company completed the acquisition
of Dobson Park Industries plc ("Dobson") for a purchase
price of approximately $330,000, including acquisition
costs, plus the assumption of net debt of approximately
$40,000. The acquisition was accounted for as a purchase
transaction with the purchase price allocated to the fair
value of specific assets acquired and liabilities assumed.
Resultant goodwill is being amortized over 40 years.
Dobson, headquartered in the United Kingdom, was an
industrial engineering group with interests in underground
mining equipment, industrial electronic control systems,
toys and plastics. Longwall International ("Longwall"), one
of the main subsidiaries of Dobson, was engaged in the
manufacture, sale and service of underground mining
equipment for the international coal mining industry.
Longwall's products included electronically controlled roof
support systems and armored face conveyors.
The Company is fully integrating Longwall's operations
into Joy Mining Machinery ("Joy"), thus enabling Joy to
offer integrated underground longwall mining systems to the
worldwide mining industry. As a result of this integration,
the Company established purchase accounting reserves to
provide for the estimated costs of this effort. The reserves
related primarily to the closure of selected manufacturing
and service facilities, severance and relocation costs
approximated $71,000. As of October 31, 1997, approximately
$46,000 of the reserves had been used.
As part of the Dobson acquisition, the non-core
businesses are held for sale and separately classified as
such in the Consolidated Balance Sheet. These businesses
were originally valued at $100,000. All but one of the
businesses have been sold, aggregating net proceeds of
$90,677. The remaining balance represents the net realizable
value including the expected cash flow from the remaining
business. This business is expected to be sold within the
next year. Profit/losses generated during the period related
to businesses held for sale have been excluded from
operating results.
On March 27, 1996, the Company's Beloit Corporation
subsidiary purchased the assets of the Pulp Machinery
Division of Ingersoll-Rand Company ("IMPCO") for $119,230,
including acquisition costs. The acquisition was accounted
for as a purchase transaction with the purchase price
allocated to the fair value of specific assets acquired and
liabilities assumed. Resultant goodwill is being amortized
over 40 years.
On November 29, 1994, the Company completed the
acquisition of JTI upon the approval of the shareholders of
each company. Under the terms of the acquisition, accounted
for as a pooling of interests, the Company exchanged
17,720,750 common shares for all of JTI's 31,353,000
outstanding shares, at an exchange ratio of .5652 of a share
of the Company's common stock for each of JTI's common
shares.
Transaction costs incurred to complete the JTI merger of
$17,459 ($11,384 after tax, or $0.24 per share) were charged
to income and consisted primarily of investment banker,
attorney and accountant fees, severance and related
benefits, and printing, mailing and registration expenses.
Note 3
Restructuring Charge
In the fourth quarter of fiscal 1996, the Company's Beloit
Corporation subsidiary recorded a restructuring charge. The
focus of the restructuring is to better serve its customers
and strengthen its market position in the worldwide pulp and
paper industry. The restructuring is consistent with the
Company's policy to generate positive Economic Value Added
("EVA"). The restructuring initiative involves organizing
engineering and manufacturing operations into Centers of
Excellence and expanding the aftermarket capabilities of the
subsidiary. The total estimated cost of the restructuring
activities reduced pre-tax income by $43,000 ($21,830 after
tax and minority interest, or $0.46 per share). Included in
the charge are costs related to severance for approximately
500 employees worldwide, the disposition of machinery and
equipment, closure of certain facilities and the sale of
businesses. At the end of fiscal 1997, $29,770 had been
charged against the reserve and 444 employees had been
terminated in accordance with the plan.
<TABLE>
<CAPTION>
Details of the restructuring charge are as follows:
Original Reserve 10/31/97
Reserve Utilized Reserve
<S> <C> <C> <C>
Employee severance $15,900 $(12,851) $ 3,049
Machinery and
equipment dispositions 7,600 (6,830) 770
Closure of facilities 6,800 (703) 6,097
Sale of businesses 6,000 (3,085) 2,915
Other 6,700 (6,301) 399
-------- --------- -------
$43,000 $(29,770) $13,230
======= ======== =======
</TABLE>
The cash and noncash elements of the restructuring
charge approximated $27,700 and $15,300, respectively. Cash
outflows to date are approximately $18,400. The remaining
reserves are expected to be substantially utilized during
1998.
Note 4
Accounts Receivable
<TABLE>
<CAPTION>
Accounts receivable at October 31 consisted of the following:
1997 1996
<S> <C> <C>
Trade receivables $438,591 $507,312
Unbilled receivables 405,897 169,086
Allowance for doubtful
accounts and
contract losses (8,319) (8,612)
-------- --------
$836,169 $667,786
======== ========
</TABLE>
The amount of accounts receivable due beyond one year is not
significant.
Note 5
Inventories
<TABLE>
<CAPTION>
Inventories at October 31 consisted of the following:
1997 1996
<S> <C> <C>
Finished goods $274,391 $198,160
Work in process and
purchased parts 247,568 278,671
Raw materials 132,980 134,448
-------- --------
654,939 611,279
Less excess of current
cost over stated
LIFO value (60,178) (64,164)
--------- ---------
$594,761 $547,115
========= =========
</TABLE>
Inventories valued using the LIFO method represented
approximately 54% and 56% of consolidated inventories at
October 31, 1997 and 1996, respectively.
Note 6
Income Taxes
<TABLE>
<CAPTION>
The components of income for the Company's domestic and
foreign operations for the years ended October 31 were as
follows:
1997 1996 1995
<S> <C> <C> <C>
Domestic $153,830 $ 82,533 $102,701
Foreign 92,899 99,228 37,951
-------- -------- --------
Pre-tax income from
continuing operations
before Joy merger costs
and gain on sale of
Measurex investment $246,729 $181,761 $140,652
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
The consolidated provision for income taxes included in the
Consolidated Statement of Income for the years ended October
31 consisted of the following:
1997 1996 1995
<S> <C> <C> <C>
Current provision:
Federal $ 4,352 $ 4,957 $17,934
State 1,618 2,288 1,311
Foreign 24,691 36,474 14,690
--------- --------- -------
Total current 30,661 43,719 33,935
Deferred provision
(credit):
Federal 44,784 13,409 7,721
State and foreign (236) 6,472 1,509
---------- ---------- -------
Total deferred 44,548 19,881 9,230
---------- ---------- -------
Total consolidated
income tax provision $75,209 $63,600 $43,165
======= ======= =======
</TABLE>
The income tax provision is included in the Consolidated
Statement of Income as follows:
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Continuing operations $ 83,875 $63,600 $53,500
Loss from discontinued
operations - - (8,015)
Extraordinary item -
retirement of debt (8,666) - (2,320)
-------- ------- -------
$75,209 $63,600 $43,165
======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
The difference between the federal statutory tax rate and
the effective tax rate on continuing operations for the
years ended October 31 are as follows:
1997 1996 1995
<S> <C> <C> <C>
Federal statutory tax rate 35.0% 35.0% 35.0%
Goodwill amortization
not deductible for
tax purposes 1.4 1.9 0.7
Differences in foreign
and U.S. tax rates 8.1 3.4 0.3
Differences in Foreign
Sales Corporation and
U.S. tax rate (0.7) (0.6) (1.5)
State income taxes, net
of federal tax impact 0.7 1.8 0.5
General business and foreign
tax credits utilized (12.8) (9.1) (1.5)
Other items-net 2.3 2.6 1.5
----- ----- -----
Effective tax rate 34.0% 35.0% 35.0%
===== ===== =====
</TABLE>
Temporary differences and carryforwards which gave rise to
the net deferred tax (liability) asset at October 31 are as
follows:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Inventories $(16,788) $(22,601)
Reserves not currently
deductible 5,757 59,892
Depreciation and amortization
in excess of book expense (41,926) (54,666)
Employee benefit related items 15,319 22,823
Tax credit carryforwards 28,300 14,579
Tax loss carryforwards 65,032 71,572
Other - net (65,618) (36,956)
Valuation allowance (34,895) (44,968)
--------- ---------
Net deferred tax
(liability) asset $(44,819) $ 9,675
======= =======
</TABLE>
This net (liability) asset is included in the Consolidated
Balance Sheet in the following captions:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Other current assets $ 33,852 $ 64,595
Deferred income taxes (78,671) (54,920)
--------- ---------
$(44,819) $ 9,675
========= =========
</TABLE>
At October 31, 1997, the Company had general business
tax credits of $17,971 expiring in 2009-2012, and
alternative minimum tax credit carryforwards of $10,329
which do not expire. In addition, tax loss carryforwards
consisted of foreign carryforwards of $25,469 with various
expiration dates, capital loss carryforwards of $19,481 with
various expiration dates, and domestic carryforwards of
$20,082 with various states and expiration dates. The
carryforwards will be available for the reduction of future
income tax liabilities; a valuation allowance has been
recorded against certain of these carryforwards for which
utilization is uncertain.
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 $160,300 at October 31, 1997.
If, for some reason not presently contemplated, such profits
were to be remitted or otherwise become 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 $11,809, $30,205 and $31,686 for
1997, 1996 and 1995, respectively.
Note 7
Long-Term Obligations, Bank Credit Facilities and Interest
Expense
<TABLE>
<CAPTION>
Long-term obligations at October 31 consisted of the following:
1997 1996
<S> <C> <C>
10 1/4% Senior Notes,
due 2003 $ 7,730 $188,380
8.9% Debentures, due 2022 75,000 75,000
8.7% Debentures, due 2022 75,000 75,000
71/4% Debentures, due 2025
(net of discount of $1,247
and $1,261, respectively) 148,753 148,739
67/8% Debentures, due 2027
(net of discount of $111) 149,889 -
Senior Notes, Series A
through D, at interest rates
of between 8.9% and 9.1%,
due 1998 to 2006 71,364 73,182
Revolving Credit Facility 150,000 40,000
Industrial Revenue Bonds, at
interest rates of between 5.9%
and 8.8%, due 1998 to 2017 33,400 34,629
Other 14,057 27,207
--------- ---------
725,193 662,137
Less:
Amounts payable within
one year 11,727 4,372
-------- ---------
$713,466 $657,765
======== =========
</TABLE>
The 101/4% Senior Notes have a maturity date of
September 1, 2003. JTI 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
interest, declining to 100% of their principal amount, plus
accrued interest, on or after September 1, 2000.
In addition, upon a change of control of JTI, JTI is
required to make an offer to purchase the Senior Notes then
outstanding at a purchase price equal to 101% of the
principal amount thereof plus accrued interest. On December
29, 1994, JTI issued an offer to purchase for cash at 101%
any and all of its outstanding 101/4% Senior Notes. This
offer expired on February 10, 1995 with $270 being
repurchased under the offer. Prior to this tender offer, the
Company had purchased $11,350 of outstanding 101/4% Senior
Notes in unsolicited open market transactions. In 1995, as a
result of the 101/4% Senior Note repurchases and repayment
of remaining borrowings under JTI's Bank Facility, the
Company recorded an extraordinary loss on debt retirement,
net of applicable income taxes, of $(3,481), or $(0.08) per
share, consisting primarily of unamortized financing costs
and purchase premiums.
On October 7, 1997, JTI issued a fixed-spread tender
offer to purchase any and all of its 101/4% Senior Notes.
This offer expired on October 21, 1997 with $180,650 being
repurchased under the offer. In 1997, as a result of the
101/4% Senior Note repurchases, the Company recorded an
extraordinary loss on debt retirement, net of applicable
income taxes, of $(12,999), or $(0.27) per share, consisting
primarily of unamortized financing costs and purchase
premiums. Debt purchased was funded through available cash
and credit facilities. It is the Company's current intention
to redeem the remaining notes in September, 1998.
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 71/4% debentures were issued on December 19, 1995 at
99.153%. The debentures mature on December 15, 2025, are not
redeemable prior to maturity and are not subject to any
sinking fund requirements.
In 1996, the Company filed a shelf registration with the
Securities and Exchange Commission for the sale of up to
$200,000 of debt securities. On February 25, 1997, $150,000
of 67/8% debentures were issued at 99.925%. Proceeds were
used to repay short-term indebtedness and to increase cash.
The debentures will mature on February 15, 2027, are not
redeemable by the Company prior to maturity and are not
subject to sinking fund requirements. Each holder of the
debentures has the right to require the Company to repay the
holders, in whole or in part, on February 15, 2007, at a
repayment price equal to 100% of the aggregate principal
amount thereof plus accrued and unpaid interest. Interest on
the debentures is payable semi-annually on February 15 and
August 15 of each year commencing on August 15, 1997.
The Senior Notes, Series A through D, are privately
placed and unsecured. 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.
The terms of certain of the debt instruments 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.
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. In October, 1997, the
$240,000 facility was replaced by a new $500,000 Revolving
Credit Facility which expires in October, 2002. A facility
fee is payable on the Revolving Credit Facility. At October
31, 1997, direct outstanding borrowings under the facility
were $150,000 and commercial paper borrowings, considered a
utilization of the facility, were $84,149.
Installments payable to holders of the outstanding long-term
obligations of the Company are due as follows:
1998 $11,727
1999 39,215
2000 2,738
2001 28,073
2002 152,062
At October 31, 1997, short-term bank credit lines of
foreign subsidiaries were approximately $218,300. The
outstanding borrowings were $73,977 with a weighted average
interest rate of 7.2%. There were no compensating balance
requirements under these lines of credit.
<TABLE>
<CAPTION>
Net interest expense consisted of the following:
1997 1996 1995
<S> <C> <C> <C>
Interest income $ 3,458 $ 6,505 $ 11,035
Interest expense (76,001) (68,763) (51,748)
---------- ---------- ---------
Interest
expense - net $(72,543)$ (62,258) $(40,713)
========== ========== =========
</TABLE>
Interest paid was $76,378, $65,161 and $52,615 in 1997,
1996 and 1995, respectively.
Note 8
Pensions and Other
Employee Benefits
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 held in a
trust, 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 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, 1997 and 1996.
The Company recorded an additional minimum pension
liability and intangible asset of $4,513 and $5,600 in 1997
and 1996, respectively, to recognize the unfunded
accumulated benefit obligation of certain plans. Pension
expense for all plans of the Company was $20,953 in 1997,
$19,132 in 1996 and $17,344 in 1995. 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>
1997 1996 1995
<S> <C> <C> <C>
Service cost-benefits
earned during the year $ 23,602 $ 22,892 $ 16,854
Interest cost on projected
benefit obligation 62,722 56,792 33,655
Actual gain on
plan assets (115,397) (98,003) (55,856)
Net amortization
and deferral 43,277 33,832 20,134
--------- --------- ---------
Net periodic pension cost $ 14,204 $ 15,513 $ 14,787
========= ========= =========
</TABLE>
The discount rate used for U.S. plans was 7.5% in 1997 and
8.0% in 1996 and 1995, respectively, and for non-U.S. plans
ranged from 7.0%-15.0%. The assumed rate of increase in
future compensation of U.S. salaried employees was 4.5% in
1997 and 5.0% in 1996 and 1995, respectively, and for
non-U.S. salaried employees ranged from 2.0%-12.0%. Benefits
under the hourly employee plans are generally not based on
wages. The expected long-term rate of return on assets for
U.S. plans ranged from 8.0% to 10.0% and for non-U.S. plans
ranged from 8.5%-16.0%. 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.
The following table sets forth the plans' funded status at
October 31, 1997 and 1996:
<TABLE>
<CAPTION>
1997
Plans With Plans With
Assets Accumulated
Exceeding Benefits
Accumulated Exceeding
Benefits Assets
<S> <C> <C>
Actuarial present
value of:
Vested benefits $715,967 $30,043
Accumulated benefits 757,050 35,492
Projected benefits 827,474 42,903
Net assets available
for benefits 864,281 9,836
Plans' assets greater
(less)
than projected
benefits 36,807 (33,067)
Unrecognized (asset)
obligation existing
at adoption (5,328) 663
Unrecognized prior
service cost 33,657 1,801
Unrecognized net
(gain) loss (18,341) 9,272
--------- ---------
Net pension asset
(liability) $ 46,795 $(21,331)
========= =========
</TABLE>
<TABLE>
<CAPTION>
1996
Plans With Plans With
Assets Accumulated
Exceeding Benefits
Accumulated Exceeding
Benefits Assets
<S> <C> <C>
Actuarial present
value of:
Vested benefits $601,511 $ 34,139
Accumulated benefits 633,397 39,149
Projected benefits 704,585 46,243
Net assets available
for benefits 771,887 9,807
Plans' assets greater
(less)
than projected
benefits 67,302 (36,436)
Unrecognized (asset)
obligation existing
at adoption (5,508) 846
Unrecognized prior
service cost 27,311 2,023
Unrecognized net
(gain) loss (38,358) 9,748
--------- --------
Net pension asset
(liability) $50,747 $(23,819)
========= =========
</TABLE>
Pension plan assets consist primarily of trust funds with
diversified portfolios of primarily equity and fixed income
investments.
The Company has a profit sharing plan which covers
substantially all domestic employees except certain
employees covered by collective bargaining agreements and
employees of subsidiaries with separate defined contribution
plans. Payments to the plan are based on the Company's EVA
performance. Profit sharing expense was $9,957 in 1997,
$10,783 in 1996 and $6,321 in 1995.
In the first quarter of fiscal 1995, the Company
implemented SFAS No. 112, "Employers' Accounting for
Postemployment Benefits". The impact upon adoption of SFAS
No. 112 on the Company's results of operations and financial
position was not material.
Note 9
Postretirement Benefits Other Than Pensions
The Company generally provides certain health care and life
insurance benefits under various plans for U.S. employees
who retire after attaining early retirement eligibility,
subject to the plan amendments discussed below.
The weighted average discount rate used in determining
the postretirement benefit obligation was 7.5% at October
31, 1997 and 8.0% at October 31, 1996 and October 31, 1995,
respectively.
The following table sets forth the plans' funded status
and amounts recognized in the Company's Consolidated Balance
Sheet as of October 31:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Accumulated postretirement
benefit obligation:
Retirees $53,531 $58,819
Fully eligible active plan
participants 2,052 2,788
Other active plan
participants 3,182 7,832
------- -------
Total 58,765 69,439
Plan assets at fair value - -
Accumulated postretirement
benefit obligation in excess
of plan assets 58,765 69,439
Unrecognized transition
obligation - -
Unrecognized prior service
credit 11,903 20,653
Unrecognized gain 2,590 7,214
------- -------
Accrued postretirement
benefit liability 73,258 97,306
Less: Current portion 17,056 18,492
------- -------
$56,202 $78,814
======= =======
</TABLE>
For measurement purposes, an annual rate of increase in
the per capita cost of covered health care benefits in the
range of 6.2% to 9.0% for non-Medicare eligible participants
was assumed for 1997 (a range of 5.4% to 8.0% was used for
Medicare eligible participants); these rates were assumed to
decrease gradually to 5.0% for most participants by 2001 and
remain at that level thereafter. The health care cost trend
rate assumption has an 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, 1997 by
$3,000 and the aggregate service cost and interest cost
components of the net periodic postretirement benefit cost
for the year by $200. Postretirement life insurance benefits
have a minimal effect on the total benefit obligation.
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 for certain plans beginning in 1994 extending through
1998 and Company contributions will be eliminated on January
1, 1999 for most employee groups, excluding Joy. For Joy,
based upon existing plan terms, future eligible retirees
will participate in a premium cost-sharing arrangement which
is based upon age as of March 1, 1993 and position at the
time of retirement. Active employees under age 45 as of
March 1, 1993 and any new hires after April 1, 1993 will be
required to pay 100% of the applicable premium.
<TABLE>
<CAPTION>
Net periodic postretirement benefit cost includes the following components:
1997 1996 1995
<S> <C> <C> <C>
Service cos $ 163 $ 327 $ 502
Interest cost on
accumulated
postretirement
benefit obligation 4,743 5,632 6,475
Amortization of prior
service (credit) (12,810) (10,780) (9,417)
Net amortization and
deferral (2,943) (2,624) (225)
---------- --------- ---------
Net periodic
postretirement
benefit cost $ (10,847) $ (7,445) $ (2,665)
========== ========== ==========
</TABLE>
Note 10
Shareholders' Equity and Stock Options
The Company's authorized common stock amounts to 150,000,000
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.
In September, 1997, the Company announced its intent to
repurchase up to ten million shares of its common stock. At
October 31, 1997, the Company had repurchased 906,400 shares
for treasury at a cost of approximately $38,200. An
additional $6,600 of treasury stock was repurchased in
separate transactions.
In fiscal 1997, the Company adopted the disclosure
requirements of SFAS No. 123, "Accounting for Stock-Based
Compensation," but elected to continue to measure
compensation cost using the intrinsic value method, in
accordance with Accounting Principles Board ("APB") Opinion
No. 25, "Accounting for Stock Issued to Employees."
Accordingly, no compensation cost for stock options has been
recognized. If compensation cost had been determinined
based on the estimated fair value of options granted in 1996
and 1997, consistent with the methodology in SFAS No. 123,
the pro forma effects on the Company's net income and
earnings per share would not have been material.
The fair value of each option granted in 1996 and 1997 was
estimated using the Black-Scholes option-pricing method with
the following weighted average assumptions:
Expected stock price volatility 29.45%
Risk-free interest rate 6.54%
Expected life of options 7 years
Expected dividends $0.40 per share
On August 14, 1997, the Company established a new long-term
incentive compensation plan which covers 11 key elected
officers of the Company. The plan, which replaces
traditional stock options for these participants, consists
of awards of up to an aggregate of 1,200,000 shares based
upon achievement of pre-established stock price improvement
factors. The base stock price was set at $40.87 per share.
The minimum requirements of the plan call for a portion of
the shares to be awarded if a 30% increase in stock price
occurs within three years. The shares shall be fully awarded
if the stock price increases 50% within three years or 70%
within five years. If target prices are not met, none of the
shares will be awarded. As the stock price has declined
since inception of the plan, no compensation expense was
recorded in fiscal 1997.
At the April 9, 1996 annual meeting, shareholders
approved a new Stock Incentive Plan. This plan provides for
the granting, up to April 9, 2006, of qualified and
non-qualified options, stock appreciation rights, restricted
stock and performance units to key employees for not more
than 2,000,000 shares of common stock. Non-qualified options
covering 30,000 shares were granted under this plan in
fiscal year 1997.
The Company's 1988 Incentive Stock Plan provides for the
granting of qualified and non-qualified options, stock
appreciation rights and restricted stock to key employees
for not more than 3,600,000 shares of common stock. In
fiscal 1996, non-qualified options and restricted stock
covering 4,000 and 347,857 shares, respectively, were
granted under this plan. The restricted stock was issued in
connection with the cancellation of the employment contracts
of certain senior executive officers. Shares are forfeited
if the officer voluntarily terminates employment before age
55. During 1997, the shares were surrendered in exchange for
comparable payment rights based on stock held in the
Company's deferred compensation trust. Following shareholder
approval of the Stock Incentive Plan, the 1988 Incentive
Stock Plan terminated for the granting of future awards.
Since the inception of the 1978 and 1988 Incentive Stock
Plans and the 1996 Stock Incentive Plan, options for the
purchase of 4,160,405 shares have been granted at prices
ranging from $6.75 to $47.00 per share. At October 31, 1997,
1,159,771 of the options were outstanding, 1,901,075 had
been exercised and 1,099,559 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.
<TABLE>
<CAPTION>
Certain information regarding stock options is as follows:
Number Weighted Average
of Shares Price Per Share
<S> <C> <C>
Outstanding at
October 31, 1994 1,858,946 $19.04
Granted 637,750 29.17
Exercised (861,930) 18.44
Canceled or expired (190,480) 19.01
---------- ------
Outstanding at
October 31, 1995 1,444,286 23.88
Granted 494,900 37.83
Exercised (320,172) 20.97
Canceled or expired (120,680) 23.86
---------- ------
Outstanding at
October 31, 1996 1,498,334 29.11
Granted 30,000 43.29
Exercised (301,072) 23.80
Canceled or expired (67,491) 30.37
---------- ------
Outstanding at
October 31, 1997 1,159,771 30.78
---------- ------
Exercisable at
October 31, 1997 573,386 $26.86
========== ======
</TABLE>
The weighted average contractual life of options outstanding
at October 31, 1997 is 7.78 years with exercise prices
ranging from $14.38 to $47.00.
Following a "Dutch auction" self-tender offer in May,
1993, the Company purchased for cash 2,500,000 shares of
common stock, or approximately 9% of shares of common stock
outstanding at that time, at $195/8 per share, in
conjunction with the establishment of the Harnischfeger
Industries, Inc. Stock Employee Compensation Trust ("SECT").
Concurrent with the purchase, the Company sold 2,547,771
shares of common stock held in treasury to the SECT,
amounting to $50,000 at $195/8 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 fund future
employee benefit obligations under plans that currently
require shares of Company common 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. Shares
owned by the SECT are valued at the closing market price
each period, with corresponding changes in the SECT balance
reflected in capital in excess of par value. Shares in the
SECT are not considered outstanding for computing earnings
per share.
Note 11
Operating Leases
The Company leases certain plant, 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 $27,307, $27,887 and
$20,822 in 1997, 1996 and 1995, respectively.
At October 31, 1997, 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:
1998 $19,761
1999 20,000
2000 13,496
2001 10,169
2002 8,716
2003 and thereafter 81,091
Note 12
Commitments, Contingencies and Off-Balance-Sheet Risks
At October 31, 1997, the Company was contingently liable to
banks, financial institutions and others for approximately
$441,000 for outstanding letters of credit securing
performance of sales contracts and other guarantees in the
ordinary course of business, excluding the H-K Systems, Inc.
back-up bond guarantee facility. The Company may also
guarantee performance of its equipment at levels specified
in sales contracts without the requirement of a letter of
credit.
The Company is party to litigation matters and claims
which are normal in the course of its operations. Also, as a
normal part of their operations, the Company's subsidiaries
undertake contractual obligations, warranties and guarantees
in connection with the sale of products or services.
Although the outcome of these matters cannot be predicted
with certainty and favorable or unfavorable resolution may
affect income on a quarter-to-quarter basis, management
believes that such matters will not have a materially
adverse effect on the Company's consolidated financial
position. In the case of Beloit Corporation, certain
litigation matters and claims are currently pending in
connection with its contractual undertakings. Beloit may on
occasion enter into arrangements to participate in the
ownership of or operate pulp or papermaking facilities in
order to satisfy contractual undertakings or resolve
disputes.
One of the claims against Beloit involves a lawsuit
brought by Potlatch Corporation that alleges pulp line
washers supplied by Beloit for less than $15,000 failed to
perform satisfactorily. In June, 1997, a Lewiston, Idaho
jury awarded Potlatch $95,000 in damages in the case. Beloit
has appealed this award to the Idaho Supreme Court. While
the eventual outcome of the Potlatch case cannot be
predicted, reserves in the October 31, 1997 Consolidated
Balance Sheet are less than the full amount of the jury
award.
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, 1997, the outstanding net U.S. dollar face amounts of
contracts to cover sales and purchase activity totaled
approximately $78,400. In addition, at October 31, 1997, the
Company had outstanding foreign exchange contracts totaling
$10,689 to cover interest and borrowing obligations. The
difference between contract and estimated fair values at
October 31, 1997 was not significant. It is the Company's
policy not to participate in high-yield financings, highly
leveraged transactions or other "derivative" instruments.
On October 29, 1993, the Company completed the sale of
H-K Systems, Inc. to that unit's senior management and some
equity partners. The Company agreed to make available a
back-up bonding guarantee facility for certain bid,
performance and other contract bonds issued by H-K Systems,
Inc. Outstanding contract bonds under the guarantee
arrangement totaled approximately $14,700 at October 31,
1997. No new bonds can be issued during 1998.
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 based on prevailing market
quotations and 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, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
1997
Carrying Value Fair Value
<S> <C> <C>
Cash and Cash
Equivalents $ 29,383 $ 29,383
=========== ===========
Long-Term Obligations (725,193) (769,361)
=========== ===========
1996
Carrying Value Fair Value
Cash and Cash
Equivalents $ 36,936 $ 36,936
=========== ==========
Long-Term Obligations (662,137) (708,204)
=========== ==========
</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.
On October 1, 1996, Beloit Corporation entered into a
joint venture agreement with Eduard Kuester Maschinenfabrik
GmbH & Co. KG ("Kuesters"). Kuesters owns a 55% interest in
the joint venture and is authorized to appoint two of the
four members of the joint venture advisory board, including
the chairman.
<TABLE>
<CAPTION>
Transactions with related parties for the years ending
October 31 were as follows:
1997 1996 1995
<S> <C> <C> <C>
Sales $ 3,965 $1,267 $1,553
Purchases 39,413 223 265
Receivables 8,291 6,306 6,413
Payables 18,994 41 14
License Income 7,831 7,127 7,582
</TABLE>
The Company believes that its transactions with all
related parties were competitive with alternate sources of
supply for each party involved.
As of October 31, 1994, the Company's total investment
in Measurex Corporation, including related expense, equity
income and net of dividends received, amounted to $66,347,
representing a 20% interest. In fiscal 1995, Measurex
repurchased its stock which had been purchased by the
Company resulting in a pre-tax gain of $29,657. Measurex
continues to have cooperative agreements with Beloit.
Note 15
Segment Information
The Company designs, manufactures, markets and services
products structured into three industry segments.
The "Mining Equipment Segment" consists of P&H Mining
Equipment (Harnischfeger Corporation) and Joy Mining
Machinery. P&H Mining Equipment 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. Joy Mining Machinery designs,
manufactures and distributes continuous miners, longwall
shearers, roof supports, face conveyors, shuttle cars and
flexible conveyor train continuous haulage systems for use
in the underground extraction of coal and other minerals. In
addition, Joy engineers, manufactures and markets worldwide
a highwall mining system for the extraction of coal from
exposed surface seams in the walls of surface coal mines,
trenches and mountainside benches. It also rebuilds and
services installed equipment and sells spare parts for the
equipment it manufactures.
The "Pulp and Paper Machinery Segment" (Beloit
Corporation) designs, manufactures, services and markets
papermaking machinery and allied equipment for the pulp and
paper industries. Sales to a Pacific Rim customer in this
segment approximated 12% of the Company's consolidated net
sales for fiscal 1997 and the related accounts receivable
from this customer approximated 25% of consolidated accounts
receivable at October 31, 1997.
The "Material Handling Segment" (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 worldwide in
a variety of industries and applications. In September,
1997, the Company announced that it was exploring the
possible sale of this business segment.
Intersegment sales are not significant. Common operating
plants have been allocated to the respective segments.
Corporate assets include principally cash, cash
equivalents, and administration facilities.
<TABLE>
<CAPTION>
Segments of Business by Industry
Total Operating
Sales Income
--------- ---------
<S> <C> <C>
1997
Mining Equipment $1,467,341 $ 201,803
Pulp and Paper Machinery 1,267,847 104,085
Material Handling 353,350 38,399
---------- ---------
Total continuing operations 3,088,538 344,287
Corporate - (25,015)
---------- ---------
Consolidated total $3,088,538 $ 319,272
========== =========
1996
Mining Equipment $1,405,936 $ 183,141
Pulp and Paper Machinery 1,134,779 48,511(1)
Material Handling 323,216 33,107
---------- ---------
Total continuing operations 2,863,931 264,759
Corporate - (20,740)
Consolidated total $2,863,931 $ 244,019
========== =========
1995
Mining Equipment $ 941,779 $ 122,116
Pulp and Paper Machinery 970,418 56,062
Material Handling 239,882 22,850
---------- ---------
Total continuing operations 2,152,079 201,028
Corporate - (19,663)
Discontinued Operations - -
---------- ---------
Consolidated total $2,152,079 $181,365
========== =========
</TABLE>
(1) After restructuring charge of $43,000.
<TABLE>
<CAPTION>
Segments of Business by Industry
Depreciation and Capital
Amortization Expenditures
---------------- ------------
<S> <C> <C>
1997
Mining Equipment $ 41,231 $ 61,004
Pulp and Paper Machinery 45,122 53,616
Material Handling 6,964 7,096
---------- --------
Total continuing operations 93,317 121,716
Corporate 1,108 11,781
---------- --------
Consolidated total $ 94,425 $133,497
========== ========
1996
Mining Equipment $ 44,051 $ 23,938
Pulp and Paper Machinery 38,788 39,769
Material Handling 5,893 6,833
---------- --------
Total continuing operations 88,732 70,540
Corporate 538 12,848
---------- --------
Consolidated total $ 89,270 $ 83,388
========== ========
1995
Mining Equipment $ 29,280 $ 25,963
Pulp and Paper Machinery 33,296 39,227
Material Handling 4,517 5,609
---------- --------
Total continuing operations 67,093 70,799
Corporate 675 2,473
Discontinued Operations 2,744 212
---------- --------
Consolidated total $ 70,512 $ 73,484
========== ========
</TABLE>
(1) After restructuring charge of $43,000.
<TABLE>
<CAPTION>
Segments of Business by Industry
Identifiable
Assets
------------
<S> <C>
1997
Mining Equipment $1,371,484
Pulp and Paper Machinery 1,240,764
Material Handling 232,559
----------
Total continuing operations 2,844,807
Corporate 79,728
----------
Consolidated total $2,924,535
==========
1996
Mining Equipment $1,362,435
Pulp and Paper Machinery 1,023,819
Material Handling 204,412
----------
Total continuing operations 2,590,666
Corporate 99,363
----------
Consolidated total $2,690,029
==========
1995
Mining Equipment $ 797,921
Pulp and Paper Machinery 817,411
Material Handling 154,905
----------
Total continuing operations 1,770,237
Corporate 222,881
Discontinued Operations 47,649
----------
Consolidated total $2,040,767
==========
</TABLE>
(1) After restructuring charge of $43,000.
<TABLE>
<CAPTION>
Geographical Segment Information
Total Interarea
Sales Sales
------- ---------
<S> <C> <C>
1997
United States $2,121,490 $(280,314)
Europe 760,752 (165,730)
Other Foreign 661,915 (9,575)
Interarea Eliminations (455,619) 455,619
----------- ---------
$3,088,538 $ -
=========== ==========
1996
United States $1,860,203 $(213,061)
Europe 837,815 (158,639)
Other Foreign 562,558 (24,945)
Interarea Eliminations (396,645) 396,645
----------- ---------
$2,863,931 $ -
=========== =========
1995
United States $1,690,096 $(199,940)
Europe 337,293 (43,604)
Other Foreign 381,493 (13,259)
Interarea Eliminations (256,803) 256,803
----------- ---------
$2,152,079 $ -
=========== =========
</TABLE>
<TABLE>
<CAPTION>
Geographical Segment Information
Sales to
Unaffiliated Operating
Customers Income
----------- --------
<S> <C> <C>
1997
United States $1,841,176 $247,285
Europe 595,022 114,629
Other Foreign 652,340 50,077
Interarea Eliminations - (67,704)
---------- --------
$3,088,538 $344,287
========== ========
1996
United States $1,647,142 $156,556
Europe 679,176 86,273
Other Foreign 537,613 49,263
Interarea Eliminations - (27,333)
---------- --------
$2,863,931 $264,759
========== ========
1995
United States $1,490,156 $165,916
Europe 293,689 19,520
Other Foreign 368,234 35,290
Interarea Eliminations - (19,698)
---------- ---------
$2,152,079 $201,028
========== =========
</TABLE>
<TABLE>
<CAPTION>
Geographical Segment Information
Identifiable
Assets
----------
<S> <C>
1997
United States $1,814,018
Europe 672,929
Other Foreign 441,489
Interarea Eliminations (83,629)
----------
$2,844,807
==========
1996
United States $1,456,221
Europe 700,496
Other Foreign 478,847
Interarea Eliminations (44,898)
----------
$2,590,666
==========
1995
United States $1,202,038
Europe 313,822
Other Foreign 261,171
Interarea Eliminations (6,794)
----------
$1,770,237
==========
</TABLE>
Exports of U.S.-produced products were approximately
$508,000, $321,000 and $263,000 in 1997, 1996 and 1995,
respectively.
Note 16
Discontinued Operations
In February, 1995, the Company completed the sale of Syscon
Corporation to Logicon, Inc. for a cash price of $45,000. In
connection with this sale, the Company recorded a loss of
$(21,948) or $(0.48) per share, net of applicable income
taxes, in the first quarter of 1995.
In December, 1995, the Company completed the sale of
substantially all of the assets of JET to Babcock and
Wilcox, an operating unit of McDermott International, for
$11,651. The loss on sale, net of applicable income taxes,
was recorded in fiscal 1995. As a result, the Consolidated
Statement of Income reflects a loss from the discontinued
operations of $(9,287) or $(0.19) per share for fiscal 1995.
Operating results of discontinued operations as of October
31, were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Net sales $ - $ - $101,472
Loss before
income taxes - - (39,250)
Income taxes credit - - 8,015
------ ----- ---------
Loss from
discontinued
operations $ - $ - $(31,235)
====== ===== =========
</TABLE>
Report of Independent Accountants
Price Waterhouse LLP
To The Directors and Shareholders of Harnischfeger
Industries, Inc.
In our opinion, the consolidated financial statements
appearing on pages 36 to 54 of this report present fairly,
in all material respects, the financial position of
Harnischfeger Industries, Inc. and its subsidiaries (the
"Company") at October 31, 1997 and 1996, and the results of
their operations and their cash flows for each of the three
years in the period ended October 31, 1997, 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.
Milwaukee, Wisconsin
November 18, 1997
<TABLE>
<CAPTION>
Unaudited Quarterly Financial Data and Stock Prices
Harnischfeger Industries, Inc.
(Dollar amounts in thousands except per share and market price amounts)
Fiscal Quarter 1997
First Second
--------- --------
<S> <C> <C>
Net sales $699,411 $794,578
Gross profit 171,774 189,632
Operating income 67,500 91,373
Income from continuing
operations 30,858 44,971
Extraordinary loss on
retirement of debt, net of
applicable income taxes - -
--------- --------
Net income $ 30,858 $ 44,971
========= ========
Earnings per share:
Income from continuing
operations $ 0.65 $ 0.94
Extraordinary loss on
retirement of debt - -
--------- --------
Net income per share $ 0.65 $ 0.94
========= ========
Market price of common stock:
High $ 50 $ 49 1/4
Low 39 1/2 40
Fiscal Quarter 1996
First Second
-------- --------
Net sales $632,684 $739,509
Gross profit 141,152 178,689
Operating income 53,178 72,649
Net income $ 23,191 $ 33,555
======== ========
Earnings per share:
Net income per share $ 0.50 $ 0.71
Market price of common stock:
High $ 35 1/4 $ 42 1/8
Low 28 5/8 33 3/4
</TABLE>
<TABLE>
<CAPTION>
Unaudited Quarterly Financial Data and Stock Prices
Harnischfeger Industries, Inc.
(Dollar amounts in thousands except per share and market price amounts)
Fiscal Quarter 1997
Third Fourth
------ ------
<S> <C> <C>
Net sales $786,029 $808,520
Gross profit 185,681 199,936
Operating income 75,270 85,129
Income from continuing
operations 35,890 41,121
Extraordinary loss on
retirement of debt, net of
applicable income taxes - (12,999)
-------- ---------
Net income $ 35,890 $ 28,122
======== =========
Earnings per share:
Income from continuing
operations $ 0.75 $ 0.86
Extraordinary loss on
retirement of debt - (0.27)
-------- ---------
Net income per share $ 0.75 $ 0.59
======== =========
Market price of common stock:
High $43 7/8 $ 44 13/16
Low 38 7/8 37 15/16
Fiscal Quarter 1996
Third Fourth (1)
------- ----------
Net sales $779,752 $711,986
Gross profit 182,487 194,828
Operating income 79,502 38,690
Net income $ 37,692 $ 19,779
======== ========
Earnings per share:
Net income per share $ 0.80 $ 0.41
======== ========
Market price of common stock:
High $ 41 5/8 $ 41
Low 30 1/4 30 7/8
</TABLE>
(1) After restructuring charge of $43,000 ($21,830 after
tax, or $0.46 per share)
<TABLE>
<CAPTION>
Unaudited Quarterly Financial Data and Stock Prices
Harnischfeger Industries, Inc.
(Dollar amounts in thousands except per share and market price amounts)
1997
Year
------
<S> <C>
Net sales $3,088,538
Gross profit 747,023
Operating income 319,272
Income from continuing operations 152,840
Extraordinary loss on
retirement of debt, net of
applicable income taxes (12,999)
-----------
Net income $ 139,841
===========
Earnings per share:
Income from continuing operations $ 3.20
Extraordinary loss on
retirement of debt (0.27)
-----------
Net income per share $ 2.93
===========
Market price of common stock:
High $ 50
Low 37 15/16
1996
Year (1)
-----------
Net sales $2,863,931
Gross profit 697,156
Operating income 244,019
Net income $ 114,217
==========
Earnings per share:
Net income per share $ 2.42
==========
Market price of common stock:
High $ 42 1/8
Low 28 5/8
</TABLE>
(1) After restructuring charge of $43,000 ($21,830 after
tax, or $0.46 per share)
<TABLE>
<CAPTION>
Five-Year Review of Selected Financial Data
Harnischfeger Industries, Inc.
Years Ended October 31,
(Dollar amounts in thousands
except per share amounts)
1997 1996
---- ----
<S> <C> <C>
Revenues
Net sales $3,088,538 $2,863,931
Other income 29,705 23,639
---------- ----------
3,118,243 2,887,570
Cost of Sales 2,341,515 2,166,775
Product Development, Selling
and Administrative Expenses 457,456 433,776
Restructuring Charges - 43,000
Nonrecurring Charge - -
---------- ----------
Operating Income (Loss) 319,272 244,019
Interest Expense - Net (72,543) (62,258)
---------- ----------
Pre-tax Income (Loss) before
Joy Merger Costs and Gain
on Sale of Measurex Investment 246,729 181,761
Joy Merger Costs - -
Gain on Sale of Measurex Investment - -
(Provision) Credit for Income Taxes (83,875) (63,600)
Minority Interest (10,014) (3,944)
Income (Loss) from Continuing
Operations 152,840 114,217
Income (Loss) from and (Net Loss)
on Sale of Discontinued Operations,
net of applicable income taxes - -
Extraordinary Loss on Retirement
of Debt, net of applicable
income taxes (12,999) -
Cumulative Effect of Accounting
Change, net of applicable income
taxes and minority interest - -
---------- ----------
Net Income (Loss) $ 139,841 $ 114,217
========== ==========
Earnings (Loss) Per Share
Income (loss) from continuing
operations $ 3.20 $ 2.42
Income (loss) from and (net loss)
on sale of discontinued operations - -
Extraordinary loss on
retirement of debt (0.27) -
Cumulative effect of
accounting change - -
---------- ----------
Net Income (Loss) Per Common Share $2.93 $ 2.42
========== ==========
Dividends Per Common Share $0.40 $ 0.40
========== ==========
Bookings $3,080,789 $3,000,775
========== ==========
</TABLE>
<TABLE>
<CAPTION>
Five-Year Review of Selected Financial Data
Harnischfeger Industries, Inc.
Years Ended October 31,
(Dollar amounts in thousands except per share amounts)
1995 1994
------- ------
<S> <C> <C>
Revenues
Net sales $2,152,079 $1,551,728
Other income 32,208 23,301
---------- ----------
2,184,287 1,575,029
Cost of Sales 1,671,932 1,195,851
Product Development, Selling
and Administrative Expenses 330,990 279,016
Restructuring Charges - -
Nonrecurring Charge - -
---------- ----------
Operating Income (Loss) 181,365 100,162
Interest Expense - Net (40,713) (47,366)
---------- ----------
Pre-tax Income (Loss) before
Joy Merger Costs and Gain
on Sale of Measurex Investment 140,652 52,796
Joy Merger Costs (17,459) -
Gain on Sale of Measurex Investment 29,657 -
(Provision) Credit for Income Taxes (53,500) (13,979)
Minority Interest (7,230) (2,224)
---------- ----------
Income (Loss) from Continuing
Operations 92,120 36,593
Income (Loss) from and (Net Loss)
on Sale of Discontinued Operations,
net of applicable income taxes (31,235) (3,982)
Extraordinary Loss on Retirement
of Debt, net of applicable
income taxes (3,481) (4,827)
Cumulative Effect of Accounting
Change, net of applicable income
taxes and minority interest - (81,696)
---------- ----------
Net Income (Loss) $ 57,404 $ (53,912)
========== ==========
Earnings (Loss) Per Share
Income (loss) from continuing
operations $1.99 $0.84
Income (loss) from and (net loss)
on sale of discontinued operations (0.67) (0.09)
Extraordinary loss on
retirement of debt (0.08) (0.11)
Cumulative effect of
accounting change - (1.87)
---------- ----------
Net Income (Loss) Per Common Share $1.24 $(1.23)
========== ==========
Dividends Per Common Share $0.40 $ 0.40
========== ==========
Bookings $2,252,341 $1,636,931
========== ==========
</TABLE>
<TABLE>
<CAPTION>
Five-Year Review of Selected Financial Data
Harnischfeger Industries, Inc.
Years Ended October 31,
(Dollar amounts in thousands except per share amounts)
1993
--------
<S> <C>
Revenues
Net sales $1,409,204
Other income 9,040
----------
1,418,244
Cost of Sales 1,083,846
Product Development, Selling
and Administrative Expenses 259,831
Restructuring Charges 67,000
Nonrecurring Charge 8,000
----------
Operating Income (Loss) (433)
Interest Expense - Net (48,313)
Pre-tax Income (Loss) before
Joy Merger Costs and Gain
on Sale of Measurex Investment (48,746)
Joy Merger Costs -
Gain on Sale of Measurex Investment -
(Provision) Credit for Income Taxes 16,497
Minority Interest 4,799
----------
Income (Loss) from Continuing
Operations (27,450)
Income (Loss) from and (Net Loss)
on Sale of Discontinued Operations,
net of applicable income taxes 7,760
Extraordinary Loss on Retirement
of Debt, net of applicable
income taxes -
Cumulative Effect of Accounting
Change, net of applicable income
taxes and minority interest -
----------
Net Income (Loss) $ (19,690)
==========
Earnings (Loss) Per Share
Income (loss) from continuing
operations $(0.62)
Income (loss) from and (net loss)
on sale of discontinued operations 0.18
Extraordinary loss on
retirement of debt -
Cumulative effect of
accounting change -
-----------
Net Income (Loss) Per Common Share $(0.44)
===========
Dividends Per Common Share $ 0.40
===========
Bookings $1,487,502
===========
</TABLE>
<TABLE>
<CAPTION>
Five-Year Review of Selected Financial Data
Harnischfeger Industries, Inc.
Years Ended October 31,
(Dollar amounts in thousands except per share amounts)
1997 1996
---- ----
<S> <C> <C>
Working Capital:
Current assets $1,588,712 $1,410,250
Current liabilities 1,162,297 1,077,127
---------- ----------
Working capital $ 426,415 $ 333,123
========== ==========
Current ratio 1.4 1.3
Plant and Equipment
Net properties $ 657,100 $ 634,045
Capital expenditures 133,497 83,388
Depreciation expense 71,824 67,051
========== ==========
Total assets $2,924,535 $2,690,029
========== ==========
Debt and Capitalized Lease Obligations
Long-term obligations (1) $ 725,193 $ 662,137
Short-term notes payable 214,126 45,261
---------- ----------
$ 939,319 $ 707,398
========== ==========
Minority Interest $ 101,364 $ 93,652
========== ==========
Debt to Capitalization Ratio (2) 52.0% 48.0%
========== ==========
Shareholders' Equity $ 764,220 $ 673,485
Book value per share $16.24 $14.15
Common shares outstanding (3) 47,046,328 47,598,340
========== ==========
Number of (End of Year):
Employees 17,700 17,100
Common Shareholders of Record 1,861 1,972
========== ==========
</TABLE>
(1) Includes amounts classified as current portion of
long-term obligations
(2) Total debt to total debt, minority interest and
shareholders' equity
(3) As of end of year, excluding SECT shares
<TABLE>
<CAPTION>
Five-Year Review of Selected Financial Data
Harnischfeger Industries, Inc.
Years Ended October 31,
(Dollar amounts in thousands except per share amounts)
1995 1994
----- ----
<S> <C> <C>
Working Capital:
Current assets $1,213,390 $1,043,401
Current liabilities 723,303 612,076
---------- ----------
Working capital $ 490,087 $ 431,325
Current ratio 1.7 1.7
========== ==========
Plant and Equipment
Net properties $ 487,656 $ 490,237
Capital expenditures 73,484 50,842
Depreciation expense 56,642 58,628
========== ==========
Total assets $2,040,767 $1,981,953
========== ==========
Debt and Capitalized Lease
Obligations
Long-term obligations (1) $ 462,991 $ 571,054
Short-term notes payable 18,921 14,419
---------- ----------
$ 481,912 $ 585,473
========== ==========
Minority Interest $ 89,611 $ 85,570
========== ==========
Debt to Capitalization Ratio (2) 42.6% 49.9%
========== ==========
Shareholders' Equity $ 559,276 $ 502,365
Book value per share $11.98 $11.04
Common shares outstanding (3) 46,693,061 45,503,451
========== ==========
Number of (End of Year):
Employees 14,000 14,900
Common Shareholders of Record 2,114 2,261
========== ==========
</TABLE>
(1) Includes amounts classified as current portion of
long-term obligations
(2) Total debt to total debt, minority interest and
shareholders' equity
(3) As of end of year, excluding SECT shares
<TABLE>
<CAPTION>
Five-Year Review of Selected Financial Data
Harnischfeger Industries, Inc.
Years Ended October 31,
(Dollar amounts in thousands except per share amounts)
1993
------
<S> <C>
Working Capital:
Current assets $ 983,038
Current liabilities 607,802
----------
Working capital $ 375,236
Current ratio 1.6
==========
Plant and Equipment
Net properties $ 505,412
Capital expenditures 71,761
Depreciation expense 56,467
==========
Total assets $1,908,250
==========
Debt and Capitalized Lease Obligations
Long-term obligations (1) $ 559,852
Short-term notes payable 67,742
----------
$ 627,594
==========
Minority Interest $ 89,110
==========
Debt to Capitalization Ratio (2) 51.1%
==========
Shareholders' Equity $ 511,169
Book value per share $11.83
Common shares outstanding (3) 43,200,676
==========
Number of (End of Year):
Employees 14,700
Common Shareholders of Record 2,512
==========
</TABLE>
(1) Includes amounts classified as current portion of
long-term obligations
(2) Total debt to total debt, minority interest and
shareholders' equity
(3) As of end of year, excluding SECT shares
BOARD OF DIRECTORS
Donna M. Alvarado (1992)
Managing Director
Aguila International (2, 4, 5)
Larry D. Brady (1995)
President and Director
FMC Corporation (3, 4)
Francis M. Corby, Jr. (1996)
Executive Vice President
Finance and Administration
Harnischfeger Industries, Inc.
John D. Correnti (1994)
President, Chief Executive Officer and Director
Nucor Corporation (1, 2, 4)
Harry L. Davis (1987)
Professor of Creative Management
Graduate School of Business
The University of Chicago (2, 3, 4)
Robert M. Gerrity (1994)
Chairman and Chief Executive Officer
Antrim Group Inc. (3, 4)
Jeffery T. Grade (1983)
Chairman and Chief Executive Officer
Harnischfeger Industries, Inc. (2)
John Nils Hanson (1996)
President and Chief Operating Officer
Harnischfeger Industries, Inc.
Robert B. Hoffman (1994)
Vice Chairman
Monsanto Company (1, 2, 3, 5)
Ralph C. Joynes (1988)
Retired Vice Chairman
President and Chief Operating Officer
USG Corporation (1, 2, 3)
Jean-Pierre LabruyAre (1994)
Chairman and Chief Executive
LabruyAre EberlA S.A. (1, 5)
L. Donald LaTorre (1997)
President
L&G Management Consulting Corporation (3, 5)
Leonard E. Redon (1997)
Director, Rochester Area Operations and
Vice President of Eastman Kodak Company (1, 5)
Donald Taylor (1979)
Principal
Sullivan Associates (1, 2, 4)
Note: Year indicates date of election
to the board of directors.
OFFICERS
Jeffery T. Grade
Chairman and Chief Executive Officer (6)
John Nils Hanson
President and Chief Operating Officer (6)
Francis M. Corby, Jr.
Executive Vice President
Finance and Administration (6)
James A. Chokey
Executive Vice President
Law and Government Affairs (6)
James C. Benjamin
Vice President and Controller
Tom Engelsman
Senior Vice President and President of Beloit Corporation
Michael S. Erwin
President of P&H Material Handling, Harnischfeger
Corporation
Robert W. Hale
Senior Vice President and President of P&H Mining Equipment
Gary E. Lakritz
Vice President, Taxes
Joseph A. Podawiltz
Vice President, Human Resources
Mark E. Readinger
Senior Vice President and President of Joy Mining Machinery
Somerset R. Waters
Vice President and Treasurer
(1) Audit Committee
(2) Executive Committee
(3) Finance and Strategic Planning Committee
(4) Human Resources Committee
(5) Pension Committee
(6) Corporate Management Policy Committee
DIRECTORS EMERITI
Herbert V. Kohler, Jr.
Chairman of the Board and President
Kohler Company
Robert F. Schnoes
Chairman, President and Chief Executive Officer
Freeport Corporation
C.R. "Bud" Whitney
Retired Chairman
Allen-Bradley Company
Design by Design Partners, Inc. Printing by Mandel.
Principal photography by John Nienhuis.
THE ANNUAL MEETING
The annual meeting of the shareholders of Harnischfeger
Industries, Inc. will be held at Milwaukee's Wyndham Hotel,
139 E. Kilbourn Ave., on Tuesday, April 14, 1998 at 10:00
a.m.
ANNUAL REPORT ON FORM 10-K
Copies of the annual report on Form 10-K will be available
to shareholders after February 15, 1998 without charge on
request to:
Harnischfeger Industries, Inc.
P.O. Box 554
Milwaukee, WI. 53201-0554
Attn: Shareholder Services
TRANSFER AGENT AND REGISTRAR
Bank of Boston
c/o Boston EquiServe
Mail Stop 45-02-64
P.O. Box 644
Boston,MA 02102-0644
Telephone (617) 575-3400
MARKET AND OWNERSHIP OF COMMON STOCK
The principal market for the Company's Common Stock is the
New York Stock Exchange where its trading symbol is HPH. As
of October 31, 1997, the approximate number of holders of
record of the Company's Common Stock was 2,000. In
addition, there were an estimated 10,000 beneficial owners
of shares held of record by brokers and fiduciaries.
CORPORATE HEADQUARTERS
3600 South Lake Drive
St. Francis, Wisconsin 53235
MAILING ADDRESS
P.O. Box 554
Milwaukee, WI. 53201-0554
SHAREHOLDER SERVICES
Annual Report Requests and General Information
(414) 486-6626
FINANCIAL INFORMATION
To obtain fax copies of recent financial press releases and
quarterly statements on request, please call 1-800-758-5804
and use access code 396450 at the prompt.
WEB SITE
Our web address is www.harnischfeger.com. Our news
releases, up-to-date stock quotes and an on-line request
form for financial materials all are available on our web
site.
EXHIBIT 21
HARNISCHFEGER INDUSTRIES, INC.
SUBSIDIARIES
October 31, 1997
Harnischfeger Industries, Inc. is publicly held and has no
parent. The following subsidiaries are wholly-owned except
as noted below. Certain subsidiaries, which if considered
in the aggregate as a single subsidiary would not constitute
a significant subsidiary, are omitted from this list.
<TABLE>
<CAPTION>
Description (1)
Jurisdiction
------------
<S> <C>
Beloit Corporation (2) Delaware
Beloit Canada Ltd./Ltee (3) Canada
Joy Technologies Canada Inc.(4) Canada
Harnischfeger Corporation of Canada, Ltd.(5) Canada
Beloit Industrial Ltda. (6) Brazil
Beloit International Pty. Ltd. Australia
Beloit Pulping Group, Inc. Delaware
Beloit Poland S.A. (7) Poland
Beloit Technologies, Inc. Delaware
BWRC, Inc. Delaware
Beloit Africa (Proprietary) Limited South Africa
Beloit Asia Pacific (M) Inc. Mauritius
Beloit Asia Pacific Pte.Ltd. Singapore
Beloit Asia Pacific (T) Co., Ltd. Thailand
Beloit Italia S.p.A. (8) Italy
Beloit Nippon Ltd. Japan
Beloit Lenox GmbH Germany
Beloit Walmsley Limited England
J&L Fiber Services, Inc. Wisconsin
IMPCO Voest Alpine Pulping Technologies GmbH Austria
Optical Alignment Systems and Inspection Services, Inc. New Hampshire
Sandusky International, Inc.(9) Ohio
Kuesters Beloit Verwaltungs GmbH (10) Germany
Lenox Machine Company S.A. Switzerland
Harnischfeger Corporation (doing business under the names
"P&H Mining Equipment" and "P&H Material Handling") Delaware
Birmingham Crane & Hoist, Inc. Alabama
Blooma Engineering Pte. Limited (11) Singapore
Harnischfeger Distribution & Service, LLC Wisconsin
Canada Inc (12) Canada
Harnischfeger GmbH (13) Germany
Harnischfeger (South Africa) (Proprietary) Limited South Africa
HCHC, Inc. Delaware
Harnischfeger of Australia Pty. Ltd. (14) Australia
Harnischfeger do Brasil Comercio e Industria Limitada Brazil
Harnischfeger de Chile Limitada(15) Chile
Harnischfeger Venezuela, S.A. Venezuela
Harnischfeger Contract Services, Inc. Delaware
Harnischfeger Holdings Limited England
MMH (Holdings) Limited England
Harnischfeger Mexico Holdings S.A. de C.V. (16) Mexico
P&H MinePro Services Peru S.A.(17) Peru
Joy Technologies Inc. (doing business under
the name "Joy Mining Machinery) Delaware
Joy Manufacturing Company Pty. Limited Australia
Joy Mining Machinery Limited England
Joy MM Holdings (U.K.) Ltd. England
Joy Manufacturing Co. (U.K.)Limited England
South African Longwall Pty. Limited South Africa
</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% of the voting
securities of Beloit Corporation.
(3) Beloit Corporation owns 70% of the voting securities
of Beloit Canada Ltd./Ltee. Harnischfeger
Corporation, Joy Technologies Inc., and Joy
Technologies Canada Inc. each own 10% of the voting
securities of Beloit Canada Ltd./Ltee.
(4) Beloit Canada Ltd./Ltee owns 90% and Joy Technologies
Inc. owns 10% of the voting securities of Joy
Technologies Canada Inc.
(5) Joy Technologies Canada Inc. owns 90% and
Harnischfeger Corporation owns 10% of the voting
securities of Harnischfeger Corporation of Canada
Limited.
(6) Beloit Corporation owns 45% of the voting quotas and
100% of the non-voting quotas of Beloit Industrial
Ltda. This gives Beloit Corporation an 82.1%
ownership of Beloit Industrial Ltda.
(7) Harnischfeger Corporation owns 99.88% of the voting
securities of Beloit Poland S.A.
(8) BWRC, Inc. owns 99.98% of the voting securities of Beloit Italia S.p.A.
(9) BWRC, Inc. owns 50% of the voting securities of
Sandusky International, Inc.
(10) Beloit Corporation owns 45% of the voting securities
of Kuesters Beloit Verwaltungs GmbH.
(11) Harnischfeger Corporation owns 85% of the voting
securities of Blooma Engineering Pte Ltd.
(12) Harnischfeger Corporation owns 98% and Harnischfeger
Corporation of Canada Limited. Ltd. owns 2% of the voting securities of
Canada Inc.
(13) Harnischfeger Corporation owns 75% and Harnischfeger
of Australia Pty. Ltd owns 25% of the voting
securities of Harnischfeger GmbH.
(14) HCHC, Inc. owns 75% of the voting securities of
Harnischfeger of Australia Pty. Ltd.
(15) HCHC, Inc. owns 90% and Harnischfeger Corporation owns
10% of the voting securities of Harnischfeger de Chile Limitada.
(16) HCHC, Inc. owns 90% and Harnischfeger Corporation owns
10% of the voting securities of Harnischfeger Mexico Holdings S.A. de
C.V.
(17) HCHC, Inc. owns 90% and Harnischfeger Corporation owns
10% of the voting securities of P&H MinePro Services Peru S.A.
Exhibit 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the
Prospectuses constituting part of the Registration
Statements on Form S-3 and in the Registration Statements on
Form S-8 listed below of Harnischfeger Industries, Inc. of
our report dated November 18, 1997 appearing in 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 in 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. 33-46738)
4. Registration Statement on Form S-8 (Registration No. 33-46739)
5. Registration Statement on Form S-8 (Registration No. 33-46740)
6. Registration Statement on Form S-8 (Registration No. 33-57209)
7. Registration Statement on Form S-3 (Registration No. 33-57979)
8. Registration Statement on Form S-8 (Registration No. 33-58087)
9. Registration Statement on Form S-8 (Registration No. 333-01703)
10. Registration Statement on Form S-8 (Registration No. 333-01705)
11. Registration Statement on Form S-3 (Registration No. 333-02401)
12. Registration Statement on Form S-8 (Registration No.
333-10327)
13. Registration Statement on Form S-8 (Registration No. 333-10329)
PRICE WATERHOUSE LLP
Milwaukee, Wisconsin
January 26, 1998
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,
1997; and,
WHEREAS, the undersigned is a Director of the
Corporation;
NOW, THEREFORE, the undersigned hereby constitutes
and appoints Jeffery T. Grade, John N. Hanson and Francis M.
Corby, Jr., and each or any of them, her attorney, with full
power to act for her and in her name, place and stead, to sign
her 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
her hand and seal this 8th day of December, 1997.
/s/Donna M. Alvarado
_________________________________ (SEAL)
Donna M. Alvarado
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,
1997; and,
WHEREAS, the undersigned is a Director of the
Corporation;
NOW, THEREFORE, the undersigned hereby constitutes
and appoints Jeffery T. Grade, John N. Hanson 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 8th day of December, 1997.
/s/John D. Correnti
_______________________(SEAL)
John D. Correnti
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,
1997; and,
WHEREAS, the undersigned is a Director of the
Corporation;
NOW, THEREFORE, the undersigned hereby constitutes
and appoints Jeffery T. Grade, John N. Hanson 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 8th day of December, 1997.
/s/Robert M. Gerrity
_______________________ (SEAL)
Robert M. Gerrity
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,
1997; and,
WHEREAS, the undersigned is a Director of the
Corporation;
NOW, THEREFORE, the undersigned hereby constitutes
and appoints Jeffery T. Grade, John N. Hanson 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 8th day of December, 1997.
/s/Harry L. Davis
_________________________ (SEAL)
Harry L. Davis
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,
1997; and,
WHEREAS, the undersigned is a Director of the
Corporation;
NOW, THEREFORE, the undersigned hereby constitutes
and appoints Jeffery T. Grade, John N. Hanson 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 8th day of December, 1997.
/s/Ralph C. Joynes
_______________________ (SEAL)
Ralph C. Joynes
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,
1997; and,
WHEREAS, the undersigned is a Director of the
Corporation;
NOW, THEREFORE, the undersigned hereby constitutes
and appoints Jeffery T. Grade, John N. Hanson 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 8th day of December, 1997.
/s/Robert B. Hoffman
____________________________ (SEAL)
Robert B. Hoffman
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,
1997; and,
WHEREAS, the undersigned is a Director of the
Corporation;
NOW, THEREFORE, the undersigned hereby constitutes
and appoints Jeffery T. Grade, John N. Hanson 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 8th day of December, 1997.
/s/L. Donald LaTorre
_______________________ (SEAL)
L. Donald LaTorre
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,
1997; and,
WHEREAS, the undersigned is a Director of the
Corporation;
NOW, THEREFORE, the undersigned hereby constitutes
and appoints Jeffery T. Grade, John N. Hanson 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 8th day of December, 1997.
/s/Donald Taylor
_____________________ (SEAL)
Donald Taylor
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,
1997; and,
WHEREAS, the undersigned is a Director of the
Corporation;
NOW, THEREFORE, the undersigned hereby constitutes
and appoints Jeffery T. Grade, John N. Hanson 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 8th day of December, 1997.
/s/Leonard E. Redon
________________________ (SEAL)
Leonard E. Redon
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,
1997; and,
WHEREAS, the undersigned is a Director of the
Corporation;
NOW, THEREFORE, the undersigned hereby constitutes
and appoints Jeffery T. Grade, John N. Hanson 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 8th day of December, 1997.
/s/Jean-Pierre Labruyere
_________________________ (SEAL)
Jean-Pierre Labruyere
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,
1997; and,
WHEREAS, the undersigned is a Director of the
Corporation;
NOW, THEREFORE, the undersigned hereby constitutes
and appoints Jeffery T. Grade, John N. Hanson 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 8th day of December, 1997.
/s/Larry D. Brady
_________________________ (SEAL)
Larry D. Brady
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,
1997; and,
WHEREAS, the undersigned is a Director of the
Corporation;
NOW, THEREFORE, the undersigned hereby constitutes
and appoints John N. Hanson 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 8th day of December, 1997.
/s/Jeffery T. Grade
______________________ (SEAL)
Jeffery T. Grade
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,
1997; and,
WHEREAS, the undersigned is a Director of the
Corporation;
NOW, THEREFORE, the undersigned hereby constitutes
and appoints Jeffery T. Grade and John N. Hanson, 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 8th day of December, 1997.
/s/ Francis M. Corby, Jr.
_________________________ (SEAL)
Francis M. Corby, Jr.
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,
1997; and,
WHEREAS, the undersigned is a Director of the
Corporation;
NOW, THEREFORE, the undersigned hereby constitutes
and appoints Jeffery T. Grade 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 8th day of December, 1997.
/s/John N. Hanson
________________________ (SEAL)
John N. Hanson
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