AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 14, 2002
REGISTRATION NO. 333-86742
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
AMENDMENT NO. 1 TO
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------
JOY GLOBAL INC.*
(Exact name of Registrant as specified in its charter)
<Table>
DELAWARE 3532 39-1566457
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</Table>
---------------------
SUITE 2780
100 EAST WISCONSIN AVENUE
MILWAUKEE, WISCONSIN 53202
(414) 319-8500
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
---------------------
ERIC B. FONSTAD
ASSOCIATE GENERAL COUNSEL AND SECRETARY
100 EAST WISCONSIN AVENUE, SUITE 2780
MILWAUKEE, WISCONSIN 53202
(414) 319-8500
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
---------------------
COPIES OF ALL COMMUNICATIONS, INCLUDING COMMUNICATIONS SENT TO AGENT FOR
SERVICE, SHOULD BE SENT TO:
KEITH S. CROW
KIRKLAND & ELLIS
200 EAST RANDOLPH DRIVE
CHICAGO, ILLINOIS 60601
(312) 861-2000
*The companies listed on the next page are also included in this Form S-4
Registration Statement as additional Registrants.
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: The
exchange will occur as soon as practicable after the effective date of this
Registration Statement.
---------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<Table>
<Caption>
- ------------------------------------------------------------------------------------------------------------------------
TITLE OF EACH CLASS OF AMOUNT TO BE PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED AGGREGATE OFFERING PRICE REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------------------
8 3/4% Senior Subordinated Notes due 2012,
Series B..................................... $200,000,000 100% $18,400(2)(4)
- ------------------------------------------------------------------------------------------------------------------------
Guarantees on Senior Subordinated Notes(1)..... -- -- (3)
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
</Table>
(1) All subsidiary guarantors are wholly owned subsidiaries of the Registrant
and have each guaranteed the notes being registered.
(2) Calculated in accordance with Rule 457 under the Securities Act of 1933, as
amended.
(3) Pursuant to Rule 457(n), no separate fee is payable with respect to the
guarantees being registered hereby.
(4)Previously paid.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<Table>
<Caption>
PRIMARY STANDARD
INDUSTRIAL
JURISDICTION OF I.R.S. EMPLOYER CLASSIFICATION CODE
EXACT NAME OF ADDITIONAL REGISTRANTS FORMATION IDENTIFICATION NO. NUMBER
- ------------------------------------ --------------- ------------------ -------------------
American Alloy Corporation(1) Ohio 34-1769497 3532
Benefit, Inc.(1) Delaware 39-1601477 6371
Dobson Park Industries Inc.(2) Delaware 13-2001775 6719
Harnischfeger Corporation(1) Delaware 39-0334430 3532
Harnischfeger Technologies, Inc.(2) Delaware 52-2058704 6794
Harnischfeger World Services
Corporation(1) Delaware 39-1221771 8999
HCHC, Inc.(2) Delaware 51-0355340 6719
HCHC UK Holdings, Inc.(2) Delaware 51-0371672 6719
HIHC, Inc.(2) Delaware 51-0327827 6719
Joy MM Delaware, Inc.(2) Delaware 51-0339005 6794
Joy Technologies Inc.(1) Delaware 13-3389174 3532
JTI UK Holdings, Inc.(2) Delaware 51-0371671 6719
RCHH, Inc.(1) Delaware 39-1904508 6719
South Shore Corporation(1) Wisconsin 39-1800007 6531
South Shore Development, LLC(1) Delaware 39-1566457 6531
The Horsburgh & Scott Company(1) Ohio 34-0298010 3566
</Table>
- ---------------
(1) Address of Registrant is c/o Joy Global Inc., 100 East Wisconsin Avenue,
Suite 2780, Milwaukee, Wisconsin 53202.
(2) Address of Registrant is 2751 Centerville Road, Suite 310, Wilmington,
Delaware 19808.
THIS INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THESE
SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED WITH THE SEC
IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL NOR IS IT AN OFFER TO BUY
THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED MAY 14, 2002
PROSPECTUS
JOY GLOBAL INC.
---------------------
WE ARE OFFERING TO EXCHANGE:
UP TO $200,000,000 OF
OUR NEW 8 3/4% SENIOR SUBORDINATED NOTES DUE 2012, SERIES B
FOR
A LIKE AMOUNT OF
OUR OUTSTANDING 8 3/4% SENIOR SUBORDINATED NOTES DUE 2012.
Expires 5:00 p.m., New York City time, June , 2002, unless extended.
There is no existing public market for the outstanding notes or the
exchange notes. We do not intend to list the exchange notes on any securities
exchange or seek approval for quotation through any automated trading system.
Each broker-dealer that receives exchange notes for its own account
pursuant to the exchange offer must acknowledge that it will deliver a
prospectus in connection with any resale of such exchange notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of exchange notes received in exchange for outstanding notes where
such outstanding notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities. We have agreed that, for a
period of 180 days after the Expiration Date (as defined herein), we will make
this prospectus available to any broker-dealer for use in connection with any
such resale. See "Plan of Distribution."
---------------------
FOR A DISCUSSION OF CERTAIN FACTORS THAT YOU SHOULD CONSIDER BEFORE
PARTICIPATING IN THIS EXCHANGE OFFER, SEE "RISK FACTORS" BEGINNING ON PAGE 13 OF
THIS PROSPECTUS.
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED THE NOTES
TO BE DISTRIBUTED IN THE EXCHANGE OFFER, NOR HAVE ANY OF THESE ORGANIZATIONS
DETERMINED THAT THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
May , 2002
WE HAVE NOT AUTHORIZED ANYONE TO GIVE ANY INFORMATION OR REPRESENT ANYTHING
TO YOU OTHER THAN THE INFORMATION CONTAINED IN THIS PROSPECTUS. YOU MUST NOT
RELY ON ANY UNAUTHORIZED INFORMATION OR REPRESENTATIONS.
---------------------
TABLE OF CONTENTS
<Table>
<Caption>
PAGE
----
Prospectus Summary.......................................... 1
Forward-Looking Statements.................................. 11
Risk Factors................................................ 13
Exchange Offer; Registration Rights......................... 19
Use of Proceeds............................................. 28
Capitalization.............................................. 29
Selected Historical Consolidated Financial and Other Data... 30
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 32
Business.................................................... 47
Description of Other Indebtedness........................... 63
Description of the Notes.................................... 65
United States Federal Income Tax Consequences............... 111
Plan of Distribution........................................ 115
Where You Can Find More Information......................... 115
Incorporation by Reference.................................. 116
Legal Matters............................................... 117
Independent Accountants..................................... 117
Unaudited Pro Forma Consolidated Statement of Operations.... P-1
</Table>
---------------------
UNTIL , 2002, ALL DEALERS THAT BUY, SELL OR TRADE THE EXCHANGE
NOTES, WHETHER OR NOT PARTICIPATING IN THE EXCHANGE OFFER, MAY BE REQUIRED TO
DELIVER A PROSPECTUS. THIS REQUIREMENT IS IN ADDITION TO THE DEALERS' OBLIGATION
TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS AND SUBSCRIPTIONS.
In this prospectus, we rely on and refer to information regarding the
mining machinery and equipment industry and its segments and participants from
market research reports, analyst reports and other publicly available
information, including reports issued or prepared by the Energy Information
Administration ("EIA"). We also rely on information and data generated
internally in connection with our ongoing monitoring of industry sales for
marketing and other purposes. Although we believe that this information is
reliable, we cannot guarantee the accuracy and completeness of this information,
and we have not independently verified any of it.
Our equipment is used in high productivity mining operations. Historically,
our underground mining machinery has been sold principally in the United States,
Australia, South Africa and the United Kingdom, which represent all the world's
high productivity mining regions other than Germany. To date, underground mining
operations in Russia, China, India and Poland have not generally used high
productivity mining equipment. Historically, our surface mining equipment has
been sold to mines throughout the world, although Russia and China have only
made limited use of high productivity surface mining equipment. For purposes of
this prospectus, and unless otherwise stated, all information related to the
installed base of mining equipment and other industry information and statistics
is limited to the population of high productivity mining equipment in the
principal geographic areas in which we have historically sold our products.
References to the "Company," "Joy Global," the "Successor Company," "we,"
"us," and "our" in this prospectus refer to Joy Global Inc. References to our
"predecessor" or the "Predecessor Company" mean the Company prior to its
emergence from bankruptcy. The names of our products and services used in this
prospectus, including Joy(R), P&H(R) and MinePro(R), are our trademarks, trade
names and service marks. Names of other companies and associations used in this
prospectus are trademarks or trade names of the respective organizations.
PROSPECTUS SUMMARY
This summary highlights the material information about our company and the
exchange offer. This summary does not contain all of the information that may be
important to you in deciding whether to participate in the exchange offer. We
encourage you to read this prospectus in its entirety.
OVERVIEW
We are the world's leading manufacturer and servicer of high productivity
mining equipment for the extraction of coal and other minerals and ores. Our
equipment is used in major mining centers throughout the world to mine coal,
copper, iron ore, oil sands and other minerals. We operate in two business
segments: Underground Mining Machinery, comprised of our Joy Mining Machinery
business ("Joy"), and Surface Mining Equipment, comprised of our P&H Mining
Equipment business ("P&H"). Joy is the world's largest producer of high
productivity underground mining machinery for the extraction of coal and other
bedded materials. P&H is the world's largest producer of electric mining shovels
and walking draglines, and a leading producer of rotary blasthole drills for
open-pit mining operations. Through our Joy and P&H businesses, we have the
largest installed base of continuous miners, longwall shearers, shuttle cars and
electric mining shovels in the mining industry. We have built strong franchises
under the Joy and P&H trade names by providing equipment that is cost efficient
over its life cycle and by supporting our installed base of equipment through
the most extensive network of company-operated service centers and parts
distribution warehouses in our industry.
We derive a substantial portion of our sales from aftermarket activities,
including selling replacement parts and components, providing preventive
maintenance and repair services, refurbishing or rebuilding existing equipment
and providing diagnostic services, upgrades and training. Aftermarket support is
critical to maintaining machine productivity, availability, reliability and
durability in the field. Over the life of a mining machine, sales from
aftermarket parts and service often exceed the original purchase price. In
fiscal 2001, we derived 70% of our sales from aftermarket parts and service.
For fiscal 2001, we had net sales of $1,148.2 million and pro forma
adjusted EBITDA (as defined under Summary Historical Consolidated Financial and
Other Data) of $124.3 million.
OUR COMPETITIVE STRENGTHS
Our competitive strengths include:
- our large installed base of high productivity mining equipment;
- our stable aftermarket business;
- our extensive service and parts distribution networks;
- our position as a leading provider of new high productivity mining
equipment;
- our industry leading technology; and
- our strategic position in emerging markets.
OUR BUSINESS STRATEGY
Our strategy is to position ourselves as a service company focused on
lowering our customers' cost per unit of output by providing high productivity
equipment and comprehensive aftermarket support over our equipment's life cycle.
We describe this concept as Life Cycle Management.
1
We implement our Life Cycle Management strategy through a series of
interrelated operational and strategic initiatives designed to drive our revenue
growth and enhance our market position. These initiatives include:
- maintaining our market-driven approach;
- continuing to expand our aftermarket capabilities;
- continuing to globalize our operations;
- expanding into related products and services; and
- growing our sales in emerging markets.
2
SUMMARY OF THE EXCHANGE OFFER
The Initial Offering of
Outstanding Notes............. We sold the outstanding notes on March 18, 2002
to Credit Suisse First Boston Corporation and
Deutsche Banc Alex. Brown Inc. We collectively
refer to those parties in this prospectus as
the "initial purchasers." The initial
purchasers subsequently resold the outstanding
notes to qualified institutional buyers
pursuant to Rule 144A under the Securities Act
of 1933, as amended (the "Securities Act"), and
to certain non-U.S. persons in connection with
offshore transactions pursuant to Regulation S
of the Securities Act.
Registration Rights
Agreement..................... Simultaneously with the initial sale of the
outstanding notes, we entered into a
registration rights agreement for the exchange
offer. In the registration rights agreement, we
agreed, among other things, to use our
reasonable best efforts to file a registration
statement with the SEC and to complete this
exchange offer within 180 days after issuing
the outstanding notes. The exchange offer is
intended to satisfy your rights under the
registration rights agreement. After the
exchange offer is complete, you will no longer
be entitled to any exchange or registration
rights with respect to your outstanding notes.
The Exchange Offer............ We are offering to exchange the exchange notes,
which have been registered under the Securities
Act, for your outstanding notes, which were
issued on March 18, 2002 in the initial
offering. In order to be exchanged, an
outstanding note must be properly tendered and
accepted. All outstanding notes that are
validly tendered and not validly withdrawn will
be exchanged. We will issue exchange notes
promptly after the expiration of the exchange
offer.
Resales....................... We believe that the exchange notes issued in
the exchange offer may be offered for resale,
resold and otherwise transferred by you without
compliance with the registration and prospectus
delivery provisions of the Securities Act
provided that:
- the exchange notes are being acquired in the
ordinary course of your business;
- you are not participating, do not intend to
participate, and have no arrangement or
understanding with any person to participate,
in the distribution of the exchange notes
issued to you in the exchange offer; and
- you are not an affiliate of ours.
If any of these conditions are not satisfied
and you transfer any exchange notes issued to
you in the exchange offer without delivering a
prospectus meeting the requirements of the
Securities Act or without an exemption from
registration of your exchange notes from these
requirements, you may incur liability under the
Securities Act. We will not assume, nor will we
indemnify you against, any such liability.
3
Each broker-dealer that is issued exchange
notes in the exchange offer for its own account
in exchange for outstanding notes that were
acquired by that broker-dealer as a result of
market-making or other trading activities must
acknowledge that it will deliver a prospectus
meeting the requirements of the Securities Act
in connection with any resale of the exchange
notes. A broker-dealer may use this prospectus
for an offer to resell, resale or other
retransfer of the exchange notes issued to it
in the exchange offer.
Record Date................... We mailed this prospectus and the related
exchange offer documents to the registered
holders of outstanding notes on ,
2002.
Expiration Date............... The exchange offer will expire at 5:00 p.m.,
New York City time, , 2002, unless we
decide to extend the expiration date.
Conditions to the Exchange
Offer......................... The exchange offer is not subject to any
condition other than that the exchange offer
not violate applicable law or any applicable
interpretation of the Staff of the SEC.
Procedures for Tendering
Outstanding Notes............. If the notes you own are held of record by Cede
& Co., as nominee of The Depositary Trust
Company, or "DTC", in book-entry form, you may
tender your outstanding notes in accordance
with DTC's Automated Tender Offer Program,
known as "ATOP." In so doing, you will be
agreeing to be bound by the terms of the letter
of transmittal. ATOP allows you to
electronically transmit your acceptance of the
exchange offer to DTC instead of physically
completing and delivering a letter of
transmittal to the exchange agent. As part of
the book-entry transfer, DTC will facilitate
the exchange of your notes and update your
account to reflect the issuance of the exchange
notes to you.
To tender your outstanding notes by a means
other than book-entry transfer, a letter of
transmittal must be completed and signed
according to the instructions contained in the
letter of transmittal. The letter of
transmittal and any other documents required by
the letter of transmittal must be delivered to
the exchange agent by mail, facsimile, hand
delivery or overnight carrier. In addition, you
must deliver the outstanding notes to the
exchange agent or comply with the procedures
for guaranteed delivery. See "The Exchange
Offer -- Procedures for Tendering Outstanding
Notes" for more information.
Do not send letters of transmittal and
certificates representing outstanding notes to
us. Send these documents only to the exchange
agent. See "The Exchange Offer; Registration
Rights -- Exchange Agent" for more information.
Special Procedures for
Beneficial Owners............. If you are the beneficial owner of book-entry
interests and your name does not appear on a
security position listing of DTC as the holder
of the book-entry interests or if you are a
beneficial
4
owner of outstanding notes that are registered
in the name of a broker, dealer, commercial
bank, trust company or other nominee and you
wish to tender the book-entry interest or
outstanding notes in the exchange offer, you
should contact the person in whose name your
book-entry interests or outstanding notes are
registered promptly and instruct that person to
tender on your behalf.
Withdrawal Rights............. You may withdraw the tender of your outstanding
notes at any time prior to 5:00 p.m., New York
City time on , 2002.
Federal Income Tax
Considerations................ We believe that the exchange of outstanding
notes will not be a taxable event for U.S.
Federal income tax purposes.
Use of Proceeds............... We will not receive any proceeds from the
issuance of exchange notes pursuant to the
exchange offer. We will pay all of our expenses
incident to the exchange offer.
Exchange Agent................ Wells Fargo Bank Minnesota, N.A. is serving as
the exchange agent in connection with the
exchange offer.
SUMMARY OF TERMS OF THE EXCHANGE NOTES
The form and terms of the exchange notes are the same as the form and terms
of the outstanding notes, except that the exchange notes will be registered
under the Securities Act. As a result, the exchange notes will not bear legends
restricting their transfer and will not contain the registration rights and
additional interest provisions contained in the outstanding notes. The exchange
notes represent the same debt as the outstanding notes. Both the outstanding
notes and the exchange notes are governed by the same Indenture. We use the term
"notes" in this prospectus to collectively refer to the outstanding notes and
the exchange notes.
Issuer........................ Joy Global Inc.
Notes Offered................. $200.0 million aggregate principal amount of
8.75% Senior Subordinated Notes due 2012.
Maturity Date................. March 15, 2012
Interest...................... 8.75% per annum, payable semiannually in
arrears on March 15 and September 15,
commencing September 15, 2002.
Subsidiary Guarantees......... The notes are jointly and severally guaranteed
on an unsecured senior subordinated basis by
our current and future principal domestic
subsidiaries which also guarantee our senior
credit facility.
Ranking....................... The notes and the subsidiary guarantees rank:
- junior to all of our and the guarantors'
existing and future senior indebtedness and
secured indebtedness, including any
borrowings under our senior credit facility;
- equally with any of our and the guarantors'
future senior subordinated indebtedness;
- senior to any of our and the guarantors'
future subordinated indebtedness;
- effectively junior to all existing and future
liabilities, including trade payables, of our
non-guarantor subsidiaries;
5
At February 2, 2002, after giving effect to the
offering of the notes and the use of proceeds
therefrom, the notes and the guarantees would
have ranked junior to:
- $122.0 million of senior indebtedness, all of
which represents secured indebtedness; and
- $131.2 million of liabilities, including
trade payables but excluding intercompany
obligations, of our non-guarantor
subsidiaries.
Optional Redemption........... In addition, on or before March 15, 2005, we
are entitled to redeem up to 35% of the
aggregate principal amount of notes originally
issued, and any additional notes issued under
the same indenture governing the notes, at a
redemption price of 108.75% with the net
proceeds of public equity offerings.
We are entitled to redeem any of the notes at
any time on or after March 15, 2007 in whole or
in part, in cash at the redemption prices
described in this prospectus, plus accrued and
unpaid interest, if any, to the date of
redemption.
Change of Control............. If a change of control occurs, we will be
required to make an offer to purchase the notes
at a purchase price in cash of 101% of the
principal amount of the notes on the date of
purchase, plus accrued and unpaid interest, if
any, to the date of repurchase. See
"Description of the Notes -- Change of
Control."
Certain Covenants............. The indenture governing the notes contains
covenants that will, among other things, limit
our ability and the ability of our restricted
subsidiaries to:
- incur additional indebtedness;
- pay dividends or make other equity
distributions;
- purchase or redeem capital stock;
- make investments;
- sell assets or consolidate or merge with or
into other companies;
- engage in activities that are not related,
ancillary or complementary to our current
activities;
- engage in transactions with affiliates; and
- enter into arrangements that restrict
dividends from subsidiaries.
These limitations are subject to a number of
important qualifications and exceptions. See
"Description of the Notes -- Certain
Covenants."
YOU SHOULD REFER TO THE SECTION ENTITLED "RISK FACTORS" FOR AN EXPLANATION
OF CERTAIN RISKS OF PARTICIPATING IN THE EXCHANGE OFFER.
6
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL AND OTHER DATA
(IN MILLIONS)
We have derived the following summary historical consolidated financial and
other data as of and for the years ended October 31, 1997, 1998, 1999 and 2000,
for the period from November 1, 2000 to June 23, 2001 (Predecessor Company), for
the period from June 24, 2001 to October 31, 2001 and as of October 31, 2001
(Successor Company) from our audited consolidated financial statements. The
summary historical consolidated financial data for the three months ended
January 31, 2001 (Predecessor Company) (referred to as the "2001 First Quarter")
and the three months ended February 2, 2002 (Successor Company) (referred to as
the "2002 First Quarter") have been derived from our unaudited consolidated
financial statements. The summary historical consolidated financial and other
data below should be read in conjunction with "Selected Historical Consolidated
Financial and Other Data," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and our consolidated financial statements
and related notes included elsewhere in, or incorporated by reference into, this
prospectus. Our unaudited pro forma results of operations for fiscal 2001 and
the 2002 First Quarter assume that the offering of the notes, the application of
the proceeds of the notes and the adoption of fresh start accounting had all
occurred on November 1, 2000 and 2001, respectively. The adoption of fresh start
accounting resulted in significant charges to our Successor Company Four Months
and 2002 First Quarter results. You should read this information with "Unaudited
Pro Forma Consolidated Statement of Operations," which includes detailed
adjustments and assumptions used to prepare this information. While this pro
forma information is based on adjustments we deem appropriate and which are
factually supportable based on currently available data, the pro forma
information does not purport to be indicative of what actual results would have
been, nor does this information purport to present our financial results for
future periods.
<Table>
<Caption>
YEAR ENDED OCTOBER 31,
-------------------------------------------------------------------------------------
2001
-----------------------------------------
PREDECESSOR COMPANY PREDECESSOR SUCCESSOR
----------------------------------------- COMPANY COMPANY FOUR 2001
1997(1) 1998(1) 1999(1) 2000 EIGHT MONTHS MONTHS(2) PRO FORMA FIRST QUARTER
-------- -------- -------- -------- ------------ -------------- --------- -------------
STATEMENT OF
OPERATIONS DATA:
Net sales........... $1,471.7 $1,216.2 $1,119.1 $1,123.1 $740.5 $407.7 $1,148.2 $ 267.5
Cost of sales....... 1,095.3 920.8 927.7 858.5 556.0 307.1 872.0 204.6
Fresh start
inventory
charges........... -- -- -- -- -- 74.6 74.6 --
Product development,
selling and
administrative
expenses.......... 217.6 235.3 239.0 208.9 141.8 70.2 209.3 51.5
Amortization of
backlog intangible
assets............ -- -- -- -- -- 9.8 9.8 --
Other income........ (18.0) (1.3) (3.9) (6.8) (1.2) (1.7) (2.9) (0.5)
Restructuring and
other special
(credits)
charges........... -- -- 38.8 4.5 (0.1) -- (0.1) --
-------- -------- -------- -------- ------ ------ -------- --------
Operating income
(loss)............ 176.8 61.4 (82.5) 58.0 44.0 (52.3) (14.5) 11.9
OTHER FINANCIAL DATA:
Adjusted
EBITDA(3)......... $ 201.5 $ 105.8 $ 71.9 $ 121.4 $ 124.3 $ 22.9
Depreciation and
amortization...... 42.3 44.4 47.1 46.6 28.8 27.6 62.6 11.0
Capital
expenditures...... 72.8 53.6 26.6 32.4 12.7 9.6 22.3 5.1
<Caption>
2002 PRO FORMA 2002
FIRST QUARTER(2) FIRST QUARTER
---------------- --------------
STATEMENT OF
OPERATIONS DATA:
Net sales........... $ 286.4 $ 286.4
Cost of sales....... 223.9 223.9
Fresh start
inventory
charges........... 46.4 46.4
Product development,
selling and
administrative
expenses.......... 53.7 53.7
Amortization of
backlog intangible
assets............ 7.3 7.3
Other income........ (0.2) (0.2)
Restructuring and
other special
(credits)
charges........... (5.0) (5.0)
-------- --------
Operating income
(loss)............ (39.7) (39.7)
OTHER FINANCIAL DATA:
Adjusted
EBITDA(3)......... $ 22.3
Depreciation and
amortization...... 20.6 20.6
Capital
expenditures...... 3.3 3.3
</Table>
7
<Table>
<Caption>
YEAR ENDED OCTOBER 31,
-------------------------------------------------------------------------------------
2001
-----------------------------------------
PREDECESSOR COMPANY PREDECESSOR SUCCESSOR
----------------------------------------- COMPANY COMPANY FOUR 2001
1997(1) 1998(1) 1999(1) 2000 EIGHT MONTHS MONTHS(2) PRO FORMA FIRST QUARTER
-------- -------- -------- -------- ------------ -------------- --------- -------------
BALANCE SHEET DATA
(END OF PERIOD):
Cash and cash
equivalents....... $ 29.4 $ 30.0 $ 57.5 $ 72.1 $ 49.9 $ 39.7 $ 39.7 $ 60.0
Working capital..... 408.2 436.9 187.2 218.8 242.3 443.3 443.3 210.0
Total assets........ 2,924.5 2,787.3 1,711.8 1,292.9 1,314.5 1,371.7 1,371.7 1,299.7
Total debt.......... 939.3 1,119.2 1,506.2 1,332.6 1,418.0 289.9 301.1(5) 1,379.1
Shareholders' equity
(deficit)......... 749.7 666.9 (1,025.2) (794.7) (793.6) 483.7 481.1(5) (811.9)
SUPPLEMENTAL DATA:
Ratio of earnings to
fixed
charges(4)........ 2.4 -- -- -- 1.7 -- -- --
Deficiency of
earnings to cover
fixed
charges(4)........ -- 9.1 131.5 31.5 -- 62.1 32.6 3.1
<Caption>
2002 PRO FORMA 2002
FIRST QUARTER(2) FIRST QUARTER
---------------- --------------
BALANCE SHEET DATA
(END OF PERIOD):
Cash and cash
equivalents....... $ 46.9 $ 46.9
Working capital..... 421.3 421.3
Total assets........ 1,330.4 1,330.4
Total debt.......... 307.8 319.0(5)
Shareholders' equity
(deficit)......... 450.7 446.0(5)
SUPPLEMENTAL DATA:
Ratio of earnings to
fixed
charges(4)........ -- --
Deficiency of
earnings to cover
fixed
charges(4)........ 47.2 46.9
</Table>
- ---------------
(1) Beloit Corporation, a former subsidiary of the Predecessor Company, was
classified as a discontinued operation at October 31, 1999. The results of
operations for all prior periods have been restated accordingly.
(2) As more fully disclosed in the consolidated financial statements, we emerged
from bankruptcy on July 12, 2001 and adopted fresh start accounting pursuant
to the AICPA's Statement of Position (SOP) 90-7, "Financial Reporting by
Entities in Reorganization Under the Bankruptcy Code." Accordingly, the
Successor Company has been accounted for as a new entity with assets,
liabilities and capital structure having carrying values that are not
comparable with any prior periods of the Predecessor Company.
(3) Adjusted EBITDA is defined as operating income (loss), as adjusted for
certain items as summarized in the table below, plus depreciation and
amortization. Adjusted EBITDA and adjusted operating income are presented
solely as a supplemental disclosure because management believes it provides
useful information regarding our ability to service or incur debt. Adjusted
EBITDA and adjusted operating income (loss) should not be construed as
alternatives to earnings from operations as determined in accordance with
generally accepted accounting principles as an indication of our operating
performance, or as alternatives to cash flow from operating activities as
determined in accordance with generally accepted accounting principles as a
measure of liquidity.
8
<Table>
<Caption>
YEAR ENDED OCTOBER 31,
------------------------------------------
PREDECESSOR COMPANY PRO PRO FORMA
--------------------------------- FORMA 2001 2002
1997 1998 1999 2000 2001 FIRST QUARTER FIRST QUARTER
------ ------ ------ ------ ------ ------------- -------------
Operating income (loss)(a)...... $176.8 $ 61.4 $(82.5) $ 58.0 $(14.5) $11.9 $(39.7)
Other adjustments:
Mediation settlements(b)...... -- -- -- 12.3 -- -- --
Restructuring and other
special charges(c)......... (17.6) -- 12.0 4.5 -- -- --
Changes in accounting
estimates(d)............... -- -- 68.5 -- -- -- --
Executive changes(e).......... -- -- 19.1 -- -- -- --
Strategic and financing
initiatives(f)............. -- -- 7.7 -- -- -- --
Elimination of inventory step-
up(g)...................... -- -- -- -- 74.6 -- 46.4
Cost of sales adjustment(h)... -- -- -- -- 1.7 -- --
Amortization of backlog
intangible assets(i)....... -- -- -- -- 9.8 -- 7.3
Restructuring credits(j)...... -- -- -- -- (0.1) -- --
Reorganization plan
credits(k)................. -- -- -- -- -- -- (5.0)
------ ------ ------ ------ ------ ----- ------
Total other adjustments.... (17.6) -- 107.3 16.8 86.0 -- 48.7
------ ------ ------ ------ ------ ----- ------
Adjusted operating income
(loss)........................ 159.2 61.4 24.8 74.8 71.5 11.9 9.0
Add depreciation and
amortization.................. 42.3 44.4 47.1 46.6 52.8(l) 11.0 13.3(l)
------ ------ ------ ------ ------ ----- ------
Adjusted EBITDA................. $201.5 $105.8 $ 71.9 $121.4 $124.3 $22.9 $ 22.3
====== ====== ====== ====== ====== ===== ======
</Table>
- ---------------
(a) For each of the periods presented, EBITDA, or operating income (loss)
plus depreciation and amortization, is $219.1 million, $105.8 million,
$(35.4) million, $104.6 million, $48.1 million, $22.9 million and $(19.1)
million, respectively.
(b) This adjustment eliminates charges related to the settlement of
litigation during the Chapter 11 proceedings. Of these charges, $11.2
million were recorded at Underground Mining Machinery, $0.2 million at
Surface Mining Equipment, and $0.9 million were taken as corporate
expenses.
(c) The $17.6 million adjustment in fiscal 1997 eliminates gains recorded as
a result of favorable litigation settlements and the gain on the sale of
a business recorded at Underground Mining Machinery. The other
adjustments eliminate restructuring and other charges recorded at
Underground Mining Machinery in fiscal 1999 and the first quarter of
fiscal 2000 in connection with the elimination of manufacturing capacity
and a reduction in global headcount.
(d) This adjustment eliminates a $68.5 million non-cash charge related to
changes in accounting estimates for accounts receivable, inventories and
potential warranty expense. The changes in estimates resulted from
changes in our Predecessor Company's strategy as it related to specific
product lines. Of this charge, $63.5 million was recorded at Underground
Mining Machinery and $5.0 million at Surface Mining Equipment.
(e) This adjustment eliminates charges recorded in the third quarter of
fiscal 1999 associated with certain management organizational changes,
primarily related to supplemental retirement, restricted stock and
long-term compensation obligations related to some of the Predecessor
Company's officers. These charges were recorded as corporate expenses.
(f) This adjustment eliminates $7.7 million of charges related to certain
consulting and legal costs associated with strategic and financial
alternatives investigated prior to our bankruptcy filing. These charges
were recorded as corporate expenses.
(g) This adjustment eliminates the $74.6 million and $46.4 million cost of
sales increase related to the step-up in fair values to our inventory
resulting from fresh start accounting. For pro forma
9
2001 and pro forma 2002 First Quarter, $48.7 million and $29.1 million,
respectively, of the cost of sales increase was related to Underground
Mining Machinery and $25.9 and $17.3 million, respectively, was related
to Surface Mining Equipment.
(h) This reflects the elimination of $1.0 million of settlement costs related
to certain pre-petition lawsuits recorded at Underground Mining Machinery
and $0.7 million of other non-recurring charges recorded at Surface
Mining Equipment.
(i) This adjustment eliminates the $9.8 million and $7.3 million amortization
charge of our Successor Company, for pro forma 2001 and pro forma 2002
First Quarter, respectively, related to the backlog intangible assets as
a result of fresh start accounting and the adoption of SFAS No. 141 and
SFAS No. 142. For pro forma 2001 and pro forma 2002 First Quarter, $7.5
million and $5.6 million, respectively, of this charge was recorded at
Underground Mining Machinery and $2.3 million and $1.7 million,
respectively, at Surface Mining Equipment for pro forma 2001 and pro
forma 2002 First Quarter.
(j) This adjustment reflects the reversal of $0.1 million of unused
restructuring reserves recorded at Underground Mining Machinery.
(k) This adjustment reflects the elimination of a $5.0 million reorganization
plan credit. When we emerged from bankruptcy, we held a note receivable
from Beloit Corporation in the amount of $7.2 million. Due to uncertainty
as to the collectibility of the note, we reserved the entire $7.2
million. At February 2, 2002, we reduced this reserve to the remaining
outstanding balance of $2.2 million. The note was paid in full subsequent
to February 2, 2002 and the remaining $2.2 million reserve was reversed
in the 2002 Second Quarter.
(l) This amount reflects adjusted pro forma depreciation and amortization to
give effect to the above adjustments to the extent they impact
depreciation and amortization.
(4) For purposes of computing the ratio of earnings to fixed charges, earnings
are defined as income before income taxes, minority interest, income or
loss from discontinued operations and extraordinary gains or losses, plus
fixed charges. Fixed charges consist of interest expense, including
amortization of debt issuance costs and the interest component of rent
expense.
(5) The 2001 pro forma and pro forma 2002 First Quarter total debt and
shareholders' equity amounts assume that the offering of the notes and the
application of the proceeds of the notes occurred on November 1, 2000 and
November 1, 2001, respectively.
10
FORWARD-LOOKING STATEMENTS
This prospectus contains both historical and forward-looking statements
within the meaning of Section 27A of the Securities Act and Section 21E of the
Exchange Act. These forward-looking statements are not historical facts, but
only predictions and generally can be identified by use of statements that
include phrases such as "believe," "expect," "anticipate," "intend," "plan,"
"foresee" or other words or phrases of similar import. Similarly, statements
that describe our objectives, plans or goals also are forward-looking
statements. Such forward-looking statements may be contained in "Prospectus
Summary" and "Risk Factors." These forward-looking statements are subject to
risks and uncertainties which could cause actual results to differ materially
from those currently anticipated. In addition to any factors that may accompany
forward-looking statements, factors that could materially affect these
forward-looking statements can be found under "Risk Factors," including:
- 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 ore, gold, oil and other ores and minerals;
- 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
projects;
- consolidations among customers;
- work stoppages affecting our customers or providers of transportation;
and
- the timing, severity and duration of customer buying cycles.
- factors affecting our ability to capture available sales opportunities,
including:
- customers' perceptions of the quality and value of our products and
services as compared to competitors' products and services;
- whether we have successful reference installations to display to
customers;
- customers' perceptions of our health and stability as compared to our
competitors;
- our ability to assist customers with competitive financing programs; and
- the availability of manufacturing capacity at our factories.
- factors affecting general business levels, such as:
- political and economic turmoil in major markets such as the United
States, Canada, Europe, China, India, the Pacific Rim, South Africa,
Australia, Poland, Russia, Indonesia, Brazil and Chile;
- environmental and trade regulations;
- commodity prices; and
- the stability, rates of exchange and ease of exchange of currencies.
- factors affecting our ability to successfully manage sales we obtain,
such as:
- the accuracy of our cost and time estimates for major projects;
- the adequacy of our systems to manage major projects and its success in
completing projects on time and within budget;
- our success in recruiting and retaining managers and key employees;
- wage stability and cooperative labor relations;
11
- plant capacity and utilization; and
- whether acquisitions are assimilated and divestitures completed without
notable surprises or unexpected difficulties.
- factors affecting our general business, such as:
- unforeseen patent, tax, product, environmental, employee health and
benefit, or contractual liabilities;
- non-recurring restructuring and other special charges;
- changes in accounting or tax rules or regulations;
- assessments or reassessments of asset valuations for such assets as
receivables, inventories, fixed assets and intangible assets; and
- leverage and debt service.
- various other factors beyond our control.
Potential investors and other readers are urged to consider these factors
carefully in evaluating the forward-looking statements and are cautioned not to
place undue reliance on these forward-looking statements. The forward-looking
statements included in this document are made only as of the date of this
prospectus and we undertake no obligation to publicly update these
forward-looking statements to reflect new information, future events or
otherwise. In light of these risks, uncertainties and assumptions, the
forward-looking events might or might not occur. We cannot assure you that
projected results or events will be achieved.
12
RISK FACTORS
You should consider carefully the following risk factors, in addition to
the other information set forth in this prospectus, before deciding to
participate in the exchange offer.
RISKS ASSOCIATED WITH THE EXCHANGE OFFER
BECAUSE THERE IS NO ESTABLISHED TRADING MARKET FOR THE NOTES, YOU MAY NOT BE
ABLE TO RESELL YOUR NOTES.
The exchange notes will be registered under the Securities Act, but will
constitute a new issue of securities with no established trading market, and
there can be no assurance as to:
- the liquidity of any trading market that may develop;
- the ability of holders to sell their exchange notes; or
- the price at which the holders would be able to sell their exchange
notes.
If a trading market were to develop, the exchange notes might trade at higher or
lower prices than their principal amount or purchase price, depending on many
factors, including prevailing interest rates, the market for similar debentures
and our financial performance.
We understand that the initial purchasers presently intend to make a market
in the notes. However, they are not obligated to do so, and any market-making
activity with respect to the notes may be discontinued at any time without
notice. In addition, any market-making activity will be subject to the limits
imposed by the Securities Act and the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and may be limited during the exchange offer or the
pendency of an applicable shelf registration statement. There can be no
assurance that an active trading market will exist for the notes or that any
trading market that does develop will be liquid.
In addition, any outstanding note holder who tenders in the exchange offer
for the purpose of participating in a distribution of the exchange notes may be
deemed to have received restricted securities, and if so, will be required to
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction. For a description of
these requirements, see "Exchange Offer; Registration Rights."
YOUR OUTSTANDING NOTES WILL NOT BE ACCEPTED FOR EXCHANGE IF YOU FAIL TO FOLLOW
THE EXCHANGE OFFER PROCEDURES AND, AS A RESULT, YOUR NOTES WILL CONTINUE TO BE
SUBJECT TO EXISTING TRANSFER RESTRICTIONS AND YOU MAY NOT BE ABLE TO SELL YOUR
OUTSTANDING NOTES.
We will not accept your notes for exchange if you do not follow the
exchange offer procedures. We will issue exchange notes as part of this exchange
offer only after a timely receipt of your outstanding notes, a properly
completed and duly executed letter of transmittal and all other required
documents. Therefore, if you want to tender your outstanding notes, please allow
sufficient time to ensure timely delivery. If we do not receive your notes,
letter of transmittal and other required documents by the expiration date of the
exchange offer, we will not accept your notes for exchange. We are under no duty
to give notification of defects or irregularities with respect to the tenders of
outstanding notes for exchange. If there are defects or irregularities with
respect to your tender of notes, we will not accept your notes for exchange.
IF YOU DO NOT EXCHANGE YOUR OUTSTANDING NOTES, YOUR OUTSTANDING NOTES WILL
CONTINUE TO BE SUBJECT TO THE EXISTING TRANSFER RESTRICTIONS AND YOU MAY NOT BE
ABLE TO SELL YOUR OUTSTANDING NOTES.
We did not register the outstanding notes, nor do we intend to do so
following the exchange offer. Outstanding notes that are not tendered will
therefore continue to be subject to the existing transfer restrictions and may
be transferred only in limited circumstances under the securities laws. If you
do not exchange your outstanding notes, you will lose your right to have your
outstanding notes registered under
13
the federal securities laws. As a result, if you hold outstanding notes after
the exchange offer, you may not be able to sell your outstanding notes.
RISKS RELATING TO THE NOTES
OUR LEVEL OF INDEBTEDNESS MAY LIMIT CASH FLOW AVAILABLE TO INVEST IN THE
ONGOING NEEDS OF OUR BUSINESS WHICH COULD PREVENT US FROM FULFILLING OUR
OBLIGATIONS UNDER THE NOTES.
We have a significant amount of indebtedness. After giving effect to the
application of the proceeds of the note offering, as of February 2, 2002, our
total indebtedness would have been $322.0 million.
Our level of indebtedness could have important consequences to you. For
example, it could:
- require us to dedicate a substantial portion of our cash flow from
operations to the payment of debt service, reducing the availability of
our cash flow to fund working capital, capital expenditures and other
general corporate purposes;
- increase the amount of interest that we have to pay because certain of
our borrowings are at variable rates of interest;
- increase our vulnerability to adverse economic or industry conditions;
- limit our ability to obtain additional financing in the future to enable
us to react to changes in our business or industry;
- prevent us from raising the funds necessary to repurchase all notes
tendered to us upon the occurrence of specific changes of control in our
ownership, which could constitute a default under the indenture governing
the notes; or
- place us at a competitive disadvantage compared to businesses in our
industry that have less indebtedness. Additionally, any failure to comply
with covenants in the instruments governing our debt could result in an
event of default which, if not cured or waived, could have a material
adverse effect on us.
See "Description of Other Indebtedness" and "Description of the Notes."
DESPITE OUR LEVEL OF INDEBTEDNESS, WE AND OUR SUBSIDIARIES WILL BE ABLE TO
INCUR SUBSTANTIALLY MORE DEBT. THIS COULD EXACERBATE THE RISKS DESCRIBED
ABOVE.
We and our subsidiaries will be able to incur substantial additional
indebtedness in the future. Although the indenture governing the notes and the
credit agreement governing our senior credit facility contain restrictions on
the incurrence of additional indebtedness, these restrictions are subject to a
number of qualifications and exceptions, and the indebtedness incurred in
compliance with these restrictions could be substantial. As of February 2, 2002,
after giving effect to the application of the proceeds of the note offering, we
would have been able to borrow up to an additional $66.4 million under our
senior credit facility, subject to specific requirements, including our
maintaining certain levels of inventories and accounts receivable and our
compliance with financial covenants. To the extent new debt is added to our
currently anticipated debt levels, the substantial leverage risks described
above would increase. Also, these restrictions do not prevent us from incurring
obligations that do not constitute indebtedness. See "Description of the Notes"
and "Description of Other Indebtedness."
TO SERVICE OUR INDEBTEDNESS, WE WILL REQUIRE A SIGNIFICANT AMOUNT OF CASH. OUR
ABILITY TO GENERATE CASH DEPENDS ON MANY FACTORS BEYOND OUR CONTROL. IF WE
CANNOT GENERATE THE REQUIRED CASH, WE MAY NOT BE ABLE TO MAKE THE NECESSARY
PAYMENTS UNDER THE NOTES.
Our ability to make payments on our indebtedness, including the notes, and
to fund planned capital expenditures and research and development efforts will
depend on our ability to generate cash in the future. Our ability to generate
cash, to a certain extent, is subject to general economic, financial,
competitive, legislative, regulatory and other factors that are beyond our
control.
14
Our historical financial results have been, and we anticipate that our
future financial results will be, subject to fluctuations. We cannot assure you
that our business will generate sufficient cash flow from our operations or that
future borrowings will be available to us in an amount sufficient to enable us
to pay our indebtedness, including the notes, or to fund our other liquidity
needs. Our inability to pay our debts would require us to pursue one or more
alternative strategies, such as selling assets, refinancing or restructuring our
indebtedness or selling equity capital. However, we cannot assure you that any
alternative strategies will be feasible at the time or prove adequate, which
could cause us to default on our obligations and impair our liquidity. Also,
some alternative strategies would require the prior consent of our senior
secured lenders, which we may not be able to obtain.
YOUR RIGHT TO RECEIVE PAYMENTS ON THE NOTES IS JUNIOR TO OUR EXISTING SENIOR
INDEBTEDNESS AND THE EXISTING SENIOR INDEBTEDNESS OF OUR GUARANTORS AND
POSSIBLY ALL OF OUR AND THEIR FUTURE BORROWINGS. FURTHER, CLAIMS OF CREDITORS
OF OUR NON-GUARANTOR SUBSIDIARIES WILL GENERALLY HAVE PRIORITY WITH RESPECT TO
THE ASSETS AND EARNINGS OF THOSE SUBSIDIARIES OVER YOUR CLAIMS.
The notes and the guarantees will be subordinated to the prior payment in
full of our and the guarantors' respective current and future senior
indebtedness to the extent set forth in the indenture. As of February 2, 2002,
after applying the proceeds of the note offering, these notes and the guarantees
would have been subordinated to approximately $122.0 million of total senior
indebtedness, including $105.0 million of senior indebtedness under our senior
credit facility. Because of the subordination provisions of the notes, in the
event of the bankruptcy, liquidation or dissolution of our company or any
guarantor, our assets or the assets of the guarantors would be available to pay
obligations under the notes and our other senior subordinated obligations only
after all payments had been made on our or the guarantors' senior indebtedness.
Sufficient assets may not remain after all these payments have been made to make
required payments on the notes and any other senior subordinated obligations,
including payments of interest when due. In addition, we will be prohibited from
making all payments on the notes and the guarantees in the event of a payment
default on our senior indebtedness (including borrowings under our senior credit
facility) and, for limited periods, upon the occurrence of other defaults under
our senior credit facility.
In addition, none of our foreign subsidiaries is guaranteeing the notes,
and these non-guarantor subsidiaries are permitted to incur additional
indebtedness under the indenture. Claims of creditors of our non-guarantor
subsidiaries, including trade creditors, secured creditors and creditors holding
indebtedness or guaranties issued by those subsidiaries, will generally have
priority with respect to the assets and earnings of those subsidiaries over the
claims of our creditors, including holders of the notes, even if the obligations
of those subsidiaries do not constitute senior indebtedness. As of February 2,
2002, after applying the proceeds of this offering, our non-guarantor
subsidiaries would have had approximately $131.2 million of liabilities
(excluding intercompany liabilities) and would have held approximately 29.1% of
our consolidated assets. During the 2002 First Quarter, the non-guarantor
subsidiaries generated approximately 37.7% of our consolidated revenues.
THE NOTES ARE NOT SECURED.
In addition to being subordinated to all of our and our guarantors'
existing and future senior indebtedness, the notes and the guarantees are not
secured by any of our assets or those of our subsidiaries. Our obligations under
our senior credit facility are secured by substantially all of our assets, and
those of our existing and subsequently acquired or organized material domestic
subsidiaries (and, to the extent no adverse tax consequences will result,
foreign subsidiaries). If we become insolvent or are liquidated, or if payment
under the senior credit facility or any other secured senior indebtedness is
accelerated, the lenders under the senior credit facility or holders of other
secured senior indebtedness will be entitled to exercise the remedies available
to a secured lender under applicable law (in addition to any remedies that may
be available under documents pertaining to the senior credit facility or our
other senior
15
indebtedness). Upon the occurrence of any default under the senior credit
facility (and even without accelerating the indebtedness under the senior credit
facility), the lenders may be able to prohibit the payment of the notes and
guarantees under the subordination provisions contained in the indenture
governing the notes. See "Description of Other Indebtedness" and "Description of
the Notes -- Ranking."
RESTRICTIONS IMPOSED BY OUR SENIOR CREDIT FACILITY AND THE INDENTURE GOVERNING
THE NOTES LIMIT OUR ABILITY TO OBTAIN ADDITIONAL FINANCING AND TO PURSUE
BUSINESS OPPORTUNITIES.
The operating and financial restrictions and covenants in our debt
instruments, including our senior credit facility and the notes, may adversely
affect our ability to finance our future operations or capital needs or to
pursue certain business activities. In particular, our senior credit facility
requires us to maintain certain financial ratios. Our ability to comply with
these ratios may be affected by events beyond our control. A breach of any of
these covenants or our inability to comply with the required financial ratios
could result in a default under our senior credit facility. In the event of any
default under our senior credit facility, the lenders under that facility could
elect to declare all borrowings outstanding, together with accrued and unpaid
interest and other fees, to be due and payable, to require us to apply all of
our available cash to repay these borrowings or to prevent us from making debt
service payments on the notes, any of which would be an event of default under
the notes. See "Description of the Notes" and "Description of Other
Indebtedness -- Certain Covenants."
IT MAY NOT BE POSSIBLE FOR US TO PURCHASE NOTES ON THE OCCURRENCE OF A CHANGE
IN CONTROL.
Upon the occurrence of certain specific change of control events, we will
be required to offer to repurchase all of the notes. We cannot assure you that
there will be sufficient funds available for us to make any required repurchase
of the notes upon a change of control. In addition, our senior credit facility
will prohibit us from purchasing any notes and provide that the occurrence of a
change of control constitutes a default. If we do not repay all borrowings under
our senior credit facility or obtain a consent of our lenders under our senior
credit facility to repurchase the notes, we will be prohibited from purchasing
the notes. Our failure to purchase tendered notes would constitute a default
under the indenture governing the notes, which, in turn, would constitute a
default under our senior credit facility. See "Description of the
Notes -- Change of Control."
FEDERAL AND STATE STATUTES ALLOW COURTS, UNDER SPECIFIC CIRCUMSTANCES, TO VOID
GUARANTEES AND REQUIRE NOTEHOLDERS TO RETURN PAYMENTS RECEIVED FROM
GUARANTORS.
Under U.S. bankruptcy law and comparable provisions of state fraudulent
transfer laws, a subsidiary guarantee can be voided, or claims under a
subsidiary guarantee may be subordinated to all other debts of that subsidiary
guarantor if, among other things, the subsidiary guarantor, at the time it
incurred the indebtedness evidenced by its guarantee:
- intended to hinder, delay or defraud any present or future creditor or
received less than reasonably equivalent value or fair consideration for
the issuance of the guarantee; and
- the subsidiary guarantor:
- was insolvent or rendered insolvent by reason of issuing the guarantee;
- was engaged in a business or transaction for which the subsidiary
guarantor's remaining assets constituted unreasonably small capital; or
- intended to incur, or believed that it would incur, debts beyond its
ability to pay those debts as they become due.
In addition, any payment by that subsidiary guarantor under a guarantee could be
voided and required to be returned to the subsidiary guarantor or to a fund for
the benefit of the creditors of the subsidiary guarantor under such
circumstances.
16
The measures of insolvency for purposes of fraudulent transfer laws will
vary depending upon the governing law. Generally, a guarantor would be
considered insolvent if:
- the sum of its debts, including contingent liabilities, was greater than
the fair salable value of all of its assets;
- the present fair salable value of its assets was less than the amount
that would be required to pay its probable liability on its existing
debts, including contingent liabilities, as they become absolute and
mature; or
- it could not pay its debts as they become due.
In the event the guarantee of the notes by a subsidiary guarantor is voided
as a fraudulent conveyance, holders of the notes would effectively be
subordinated to all indebtedness and other liabilities of that guarantor.
RISKS ASSOCIATED WITH OUR BUSINESS
THE CYCLICAL NATURE OF OUR ORIGINAL EQUIPMENT MANUFACTURING BUSINESS COULD
CAUSE FLUCTUATIONS IN OPERATING RESULTS.
Our business, in particular our original equipment manufacturing business,
is cyclical in nature. The cyclicality of Joy's original equipment sales is
driven primarily by product life cycles, new product introductions, competitive
pressures and other economic factors affecting the mining industry such as coal
prices and company consolidation in the coal mining industry. P&H's original
equipment sales are subject to cyclical movements based in large part on changes
in coal, copper, iron ore and other commodity prices. Falling commodity prices
have in the past and may in the future lead to reductions in the production
levels of existing mines, a contraction in the number of existing mines and the
closure of less efficient mines. Decreased surface mining activity is likely to
lead to a decrease in demand for new mining machinery.
As a result of this cyclicality, we have experienced, and in the future we
will experience, significant fluctuation in our sales and operating income,
which may affect our ability to service the notes and our other debt
obligations.
OUR INTERNATIONAL OPERATIONS ARE SUBJECT TO MANY UNCERTAINTIES, AND A
SIGNIFICANT REDUCTION IN INTERNATIONAL SALES OF OUR PRODUCTS COULD HAVE A
MATERIAL ADVERSE EFFECT ON US.
Our international operations are subject to various political, economic and
other uncertainties which could adversely affect our business. A significant
reduction of our international business due to any of these risks would
adversely affect our sales. In fiscal 2001, approximately 45% of our sales was
derived from customers outside the United States. Risks faced by our
international operations include:
- periodic economic downturns;
- fluctuations in currency exchange rates;
- customs matters and changes in trade policy or tariff regulations;
- unexpected changes in regulatory requirements;
- higher tax rates and potentially adverse tax consequences including
restrictions on repatriating earnings, adverse tax withholding
requirements and "double taxation;"
- intellectual property protection difficulties;
- longer payment cycles and difficulty in collecting accounts receivable;
- complications in complying with a variety of foreign laws and
regulations;
- costs and difficulties in integrating, staffing and managing
international operations;
17
- transportation delays and interruptions; and
- natural disasters and the greater difficulty in recovering from them in
some of the foreign countries in which we operate.
In addition, foreign operations involve uncertainties arising from local
business practices, cultural considerations and international political and
trade tensions. If we are unable to successfully manage the risks associated
with expanding our global business or to adequately manage operational
fluctuations internationally, it could have a material adverse effect on our
business, financial condition or results of operations.
WE OPERATE IN A HIGHLY COMPETITIVE ENVIRONMENT.
Our domestic and foreign manufacturing and servicing operations are subject
to significant competitive pressures. We compete directly and indirectly with
other manufacturers of surface and underground mining equipment and with
manufacturers of parts and components for such products. Some of our competitors
are larger, have greater access to financial resources, and may be less
leveraged than us. See "Business -- Competitive Conditions."
DEMAND FOR OUR PRODUCTS MAY BE ADVERSELY IMPACTED BY REGULATIONS AFFECTING THE
MINING INDUSTRY OR ELECTRIC UTILITIES.
Our principal customers are surface and underground mining companies. Many
of these customers supply coal as a power generating source for the production
of electricity in the United States and other industrialized regions. The
operations of these mining companies are geographically diverse and are subject
to or impacted by a wide array of regulations in the jurisdictions where they
operate, including those directly impacting mining activities and those
indirectly affecting their businesses, such as applicable environmental laws and
an array of regulations governing the operation of electric utilities. As a
result of changes in regulations and laws relating to the operation of mines,
our customers' mining operations could be disrupted or curtailed by governmental
authorities. The high cost of compliance with mining and environmental
regulations may also induce customers to discontinue or limit their mining
operations, and may discourage companies from developing new mines.
Additionally, government regulation of electric utilities may adversely impact
the demand for coal to the extent that such regulations cause electric utilities
to select alternative energy sources and technologies as a source of electric
power. As a result of these factors, demand for our mining equipment could be
substantially affected by regulations adversely impacting the mining industry or
altering the consumption patterns of electric utilities.
LABOR DISPUTES AND INCREASING LABOR COSTS COULD HAVE A MATERIAL ADVERSE EFFECT
ON OUR BUSINESS.
Many of our principal domestic and foreign operating subsidiaries are
parties to collective bargaining agreements with their employees. We cannot
assure you that any disputes, work stoppages or strikes will not arise in the
future. In 1998, a strike involving 600 P&H employees, which continued for 90
consecutive days, resulted in operating losses for us. We have experienced
other, less significant strikes since 1998, and there could be other strikes in
the future. In addition, when existing collective bargaining agreements expire,
we cannot assure you that we will be able to reach new agreements with our
employees. Such new agreements may be on substantially different terms and may
result in increased labor costs. Future disputes with our employees could have a
material adverse effect upon our results of our operations and financial
position.
OUR CONTINUED SUCCESS DEPENDS ON OUR ABILITY TO PROTECT OUR INTELLECTUAL
PROPERTY.
Our future success depends in part upon our ability to protect our
intellectual property. We rely principally on nondisclosure agreements and other
contractual arrangements and trade secret law and, to a lesser extent, trademark
and patent law, to protect our intellectual property. However, these measures
may be inadequate to protect our intellectual property from infringement by
others or prevent misappropriation of our proprietary rights. In addition, the
laws of some foreign countries do not protect proprietary rights to
18
the same extent as do U.S. laws. Our inability to protect our proprietary
information and enforce our intellectual property rights through infringement
proceedings could have a material adverse effect on our business, financial
condition and results of operations.
IF WE ARE UNABLE TO RETAIN QUALIFIED EMPLOYEES, OUR GROWTH MAY BE HINDERED.
Our ability to provide high-quality products and services depends in part
on our ability to retain our skilled personnel in the areas of management,
product engineering, servicing and sales. Competition for such personnel is
intense and our competitors can be expected to attempt to hire our skilled
employees from time to time. In particular, our results of operations could be
materially and adversely affected if we are unable to retain the customer
relationships and technical expertise provided by our management team and our
professional personnel.
PRODUCT LIABILITY CLAIMS COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS.
The sale of mining equipment entails an inherent risk of product liability
claims. Although we maintain product liability insurance covering certain types
of claims, our policies are subject to substantial deductibles. We cannot assure
you that the coverage limits of our insurance policies will be adequate or that
our policies will cover any particular loss. Insurance can be expensive, and we
may not always be able to purchase insurance on commercially acceptable terms,
if at all. Claims brought against us that are not covered by insurance or that
result in recoveries in excess of insurance coverage could have a material
adverse effect on our results and financial condition.
WE ARE SUBJECT TO VARIOUS ENVIRONMENTAL LAWS, AND ANY VIOLATION OF, OR OUR
LIABILITIES UNDER, THESE LAWS COULD ADVERSELY AFFECT US.
Our operations necessitate the use and handling of hazardous materials and,
as a result, we are subject to various federal, state, local and foreign laws,
regulations and ordinances relating to the protection of health, safety and the
environment, including those governing discharges to air and water, handling and
disposal practices for solid and hazardous wastes, the cleaning up of
contaminated sites and the maintaining of a safe work place. These laws impose
penalties, fines and other sanctions for non-compliance and liability for
response costs, property damages and personal injury resulting from past and
current spills, disposals or other releases of, or the exposure to, hazardous
materials. We could incur substantial costs as a result of noncompliance with or
liability for cleanup or other costs or damages under these laws. We may be
subject to more stringent environmental laws in the future. If more stringent
environmental laws are enacted in the future, these laws could have a material
adverse effect on our business, financial condition and results of operations.
EXCHANGE OFFER; REGISTRATION RIGHTS
We, along with certain of our domestic subsidiaries which are guarantors of
the notes, entered into a registration rights agreement with the initial
purchasers in connection with the original issuance of the notes. The
registration rights agreement provides that we will take the following actions
at our expense, for the benefit of the holders of the notes:
- within 45 days after the date on which the outstanding notes were issued,
we will file the exchange offer registration statement, of which this
prospectus is a part, relating to the exchange offer. The exchange notes
will have terms substantially identical in all material respects to the
outstanding notes except that the exchange notes will not contain
transfer restrictions;
- we will use our reasonable best efforts to cause the exchange offer
registration statement to be declared effective under the Securities Act
within 150 days after the date on which the outstanding notes were
issued; and
- we will keep the exchange offer open for at least 20 business days, or
longer if required by applicable law, after the date on which notice of
the exchange offer is mailed to the holders.
19
For each of the outstanding notes surrendered in the exchange offer, the
holder who surrendered the note will receive an exchange note having a principal
amount equal to that of the surrendered note. Interest on each exchange note
will accrue from the later of (1) the last interest payment date on which
interest was paid on the outstanding note surrendered or (2) if no interest has
been paid on the outstanding note, from the date on which the outstanding notes
were issued.
Under existing interpretations of the SEC contained in several no-action
letters to third parties, we believe that the exchange notes will be freely
transferable by holders of the notes, other than our affiliates, after the
exchange offer without further registration under the Securities Act. However,
each holder that wishes to exchange its outstanding notes for exchange notes
will be required to make the following representations at the time of the
consummation of the exchange offer:
- any exchange notes to be received by the holder will be acquired in the
ordinary course of its business;
- the holder has no arrangement or understanding with any person to
participate in the distribution of the exchange notes;
- the holder is not our affiliate as defined in Rule 405 promulgated under
Securities Act, or if it is an affiliate, that it will comply with the
registration and prospectus delivery requirements of the Securities Act
to the extent applicable;
- if the holder is not a broker-dealer, it is not engaged in, and does not
intend to engage in, the distribution of exchange notes; and
- if the holder is a broker-dealer that will receive exchange notes for its
own account in exchange for outstanding notes that were acquired as a
result of market-making activities or other trading activities, the
holder will deliver a prospectus in connection with any resale of the
exchange notes. We refer to these broker-dealers as participating
broker-dealers.
We will agree to make available, during the period required by the
Securities Act, a prospectus meeting the requirements of the Securities Act for
use by participating broker-dealers and any other persons with similar
prospectus delivery requirements for use in connection with any resale of
exchange notes.
If:
- because of any change in law or in applicable interpretations of the
law by the staff of the SEC, we are not permitted to effect an
exchange offer;
- the exchange offer is not consummated within 180 days of the date on
which the outstanding notes were issued;
- in some circumstances, the holders of unregistered exchange notes so
request; or
- in the case of any holder that participates in the exchange offer
and meets all of the requirements for participation, the holder does
not receive freely tradeable exchange notes on the date of exchange,
then we will file with the SEC as promptly as practicable, but in no event more
than 45 days after so required or requested, which we refer to as the shelf
filing date, a shelf registration statement relating to the offer and sale of
the outstanding notes by those holders who agree in writing to be bound by all
of the terms of the registration rights agreement applicable to the holders.
In addition, we have agreed to use our best efforts to keep effective the
shelf registration statement for a period of two years from the date of its
effectiveness, or a shorter period that will terminate when all of the notes
covered by the shelf registration statement have been either sold under the
shelf registration statement or are no longer restricted securities (as defined
in Rule 144 of the Securities Act).
20
We will, in the event that a shelf registration statement is filed, provide
to each holder copies of the prospectus that is a part of the shelf registration
statement, notify each holder when the shelf registration statement for the
outstanding notes has become effective and take other actions as are required to
permit unrestricted resales of the outstanding notes. A holder that sells
outstanding notes pursuant to the shelf registration statement generally will be
required to be named as a selling securityholder in the related prospectus and
to deliver a prospectus to purchasers, will be subject to applicable civil
liability provisions under the Securities Act in connection with these sales,
and will be bound by the provisions of the registration rights agreement that
are applicable to the holder, including indemnification rights and obligations.
If any of the following events occur, each of which we refer to as a
registration default:
- the exchange offer registration statement is not filed with the SEC
on or before 45 days after the date of issuance of the notes or the
shelf registration statement is not filed with the SEC on or before
the shelf filing date; or
- the exchange offer registration statement is not declared effective
within 150 days after the date of issuance of the notes or the shelf
registration statement is not declared effective on or prior to the
relevant effectiveness date required by the registration rights
agreement; or
- the exchange offer is not consummated within 30 days after the date
the exchange offer registration statement is declared effective; or
- a registration statement that is filed and declared effective
thereafter ceases to be effective, or the registration statement (or
the related prospectus) ceases to be usable during the periods
described in the registration rights agreement,
then, in each case, we will be obligated to pay additional interest to each
holder of notes in an amount equal to 0.25% per annum for the first 90-day
period immediately following the occurrence of a registration default, and such
rate will increase by an additional 0.25% per annum with respect to each
subsequent 90-day period until all registration defaults have been cured up to a
maximum additional interest rate of 1.5% per annum. We will pay such additional
interest on regular interest payment dates. Such additional interest will be in
addition to any other interest payable from time to time with respect to the
notes and the exchange notes.
Following the consummation of the exchange offer, holders of the
outstanding notes who were eligible to participate in the exchange offer but who
did not tender outstanding notes will not have any further registration rights
and the outstanding notes will continue to be subject to certain restrictions on
transfer. Accordingly, the liquidity of the market for the outstanding notes
could be adversely affected.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this prospectus
and in the letter of transmittal, we will accept any and all outstanding notes
validly tendered and not withdrawn prior to 5:00 p.m., New York City time, on
the expiration date of the exchange offer. We will issue $1,000 principal amount
of exchange notes in exchange for each $1,000 principal amount of outstanding
notes accepted in the exchange offer. Any holder may tender some or all of its
outstanding notes pursuant to the exchange offer. However, outstanding notes may
be tendered only in integral multiples of $1,000.
The form and terms of the exchange notes are the same as the form and terms
of the outstanding notes except that:
(1) the exchange notes bear a Series B designation and a different
CUSIP Number from the outstanding notes;
(2) the exchange notes have been registered under the Securities Act
and hence will not bear legends restricting their transfer; and
21
(3) the holders of the exchange notes will not be entitled to certain
rights under the registration rights agreement, including the provisions
providing for an increase in the interest rate on the outstanding notes in
certain circumstances relating to the timing of the exchange offer, all of
which rights will terminate when the exchange offer is terminated.
The exchange notes will evidence the same debt as the outstanding notes and will
be entitled to the benefits of the indenture.
As of the date of this prospectus, $200,000,000 aggregate principal amount
of the outstanding notes were outstanding. We have fixed the close of business
on , 2002 as the record date for the exchange offer for purposes of
determining the persons to whom this prospectus and the letter of transmittal
will be mailed initially.
Holders of outstanding notes do not have any appraisal or dissenters'
rights under the General Corporation Law of Delaware, or the indenture relating
to the notes in connection with the exchange offer. We intend to conduct the
exchange offer in accordance with the applicable requirements of the Exchange
Act and the rules and regulations of the SEC thereunder.
We will be deemed to have accepted validly tendered outstanding notes when,
as and if we have given oral or written notice of our acceptance to the exchange
agent. The exchange agent will act as agent for the tendering holders for the
purpose of receiving the exchange notes from us.
If any tendered outstanding notes are not accepted for exchange because of
an invalid tender, the occurrence of specified other events set forth in this
prospectus or otherwise, the certificates for any unaccepted outstanding notes
will be returned, without expense, to the tendering holder as promptly as
practicable after the expiration date of the exchange offer.
Holders who tender outstanding notes in the exchange offer will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the letter of transmittal, transfer taxes with respect to the exchange of
outstanding notes pursuant to the exchange offer. We will pay all charges and
expenses, other than transfer taxes in certain circumstances, in connection with
the exchange offer. See "-- Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "expiration date" will mean 5:00 p.m., New York City time, on
, 2002, unless we, in our sole discretion, extend the exchange offer,
in which case the term "expiration date" will mean the latest date and time to
which the exchange offer is extended.
In order to extend the exchange offer, we will notify the exchange agent of
any extension by oral or written notice and will mail to the registered holders
an announcement thereof, each prior to 9:00 a.m., New York City time, on the
next business day after the previously scheduled expiration date.
We reserve the right, in our sole discretion, (1) to delay accepting any
outstanding notes, to extend the exchange offer or to terminate the exchange
offer if any of the conditions set forth below under "-- Conditions" have not
been satisfied, by giving oral or written notice of any delay, extension or
termination to the exchange agent or (2) to amend the terms of the exchange
offer in any manner. Any delay in acceptance, extension, termination or
amendment will be followed as promptly as practicable by oral or written notice
thereof to the registered holders.
INTEREST ON THE EXCHANGE NOTES
The exchange notes will bear interest from their date of issuance. Holders
of outstanding notes that are accepted for exchange will receive, in cash,
accrued interest thereon to, but not including, the date of issuance of the
exchange notes. Such interest will be paid with the first interest payment on
the exchange notes on September 15, 2002. Interest on the outstanding notes
accepted for exchange will cease to accrue upon issuance of the exchange notes.
22
Interest on the exchange notes is payable semi-annually on each March 15
and September 15, commencing on September 15, 2002.
PROCEDURES FOR TENDERING
Only a holder of outstanding notes may tender outstanding notes in the
exchange offer. To tender in the exchange offer, a holder must complete, sign
and date the letter of transmittal, or a facsimile thereof, have the signatures
thereon guaranteed if required by the letter of transmittal or transmit an
agent's message in connection with a book-entry transfer, and mail or otherwise
deliver the letter of transmittal or the facsimile, together with the
outstanding notes and any other required documents, to the exchange agent prior
to 5:00 p.m., New York City time, on the expiration date. To be tendered
effectively, the outstanding notes, letter of transmittal or an agent's message
and other required documents must be completed and received by the exchange
agent at the address set forth below under "Exchange Agent" prior to 5:00 p.m.,
New York City time, on the expiration date. Delivery of the outstanding notes
may be made by book-entry transfer in accordance with the procedures described
below. Confirmation of the book-entry transfer must be received by the exchange
agent prior to the expiration date.
Each broker-dealer that receives exchange notes for its own account in
exchange for outstanding notes, where such outstanding notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such exchange notes. See "Plan of Distribution."
The term "agent's message" means a message, transmitted by a book-entry
transfer facility to, and received by, the exchange agent forming a part of a
confirmation of a book-entry, which states that the book-entry transfer facility
has received an express acknowledgment from the participant in the book-entry
transfer facility tendering the outstanding notes that the participant has
received and agrees: (1) to participate in ATOP; (2) to be bound by the terms of
the letter of transmittal; and (3) that we may enforce the agreement against the
participant.
By executing the letter of transmittal, each holder will make to us the
representations set forth above under the heading "Exchange Offer; Registration
Rights."
The tender by a holder and our acceptance thereof will constitute agreement
between the holder and us in accordance with the terms and subject to the
conditions set forth in this prospectus and in the letter of transmittal or
agent's message.
THE METHOD OF DELIVERY OF OUTSTANDING NOTES AND THE LETTER OF TRANSMITTAL
OR AGENT'S MESSAGE AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT
THE ELECTION AND SOLE RISK OF THE HOLDER. AS AN ALTERNATIVE TO DELIVERY BY MAIL,
HOLDERS MAY WISH TO CONSIDER OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT
BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT
TO US. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS,
TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR THEM.
Any beneficial owner whose outstanding notes are registered in the name of
a broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact the registered holder promptly and instruct the
registered holder to tender on the beneficial owner's behalf. See "Instructions
to Registered Holder and/or Book-Entry Transfer Facility Participant from
Beneficial Owner" included with the letter of transmittal.
Signatures on a letter of transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by a member of the Securities Transfer Agents
Medallion Program, the New York Stock Exchange Medallion Signature Program or
the Stock Exchange Medallion Program (the "Medallion System") unless the
outstanding notes tendered pursuant to the letter of transmittal are tendered
(1) by a registered holder who has not completed the box entitled "Special
Registration Instructions" or "Special Delivery Instructions" on the letter of
transmittal or (2) for the account of a member firm of the Medallion System. In
the event that signatures on a letter of transmittal or a notice of withdrawal,
as the
23
case may be, are required to be guaranteed, the guarantee must be by a member
firm of the Medallion System.
If the letter of transmittal is signed by a person other than the
registered holder of any outstanding notes listed in this prospectus, the
outstanding notes must be endorsed or accompanied by a properly completed bond
power, signed by the registered holder as the registered holder's name appears
on the outstanding notes with the signature thereon guaranteed by a member firm
of the Medallion System.
If the letter of transmittal or any outstanding notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
offices of corporations or others acting in a fiduciary or representative
capacity, the person signing should so indicate when signing, and evidence
satisfactory to us of its authority to so act must be submitted with the letter
of transmittal.
We understand that the exchange agent will make a request promptly after
the date of this prospectus to establish accounts with respect to the
outstanding notes at DTC for the purpose of facilitating the exchange offer, and
subject to the establishment thereof, any financial institution that is a
participant in DTC's system may make book-entry delivery of outstanding notes by
causing DTC to transfer the outstanding notes into the exchange agent's account
with respect to the outstanding notes in accordance with DTC's procedures for
the transfer. Although delivery of the outstanding notes may be effected through
book-entry transfer into the exchange agent's account at DTC, unless an agent's
message is received by the exchange agent in compliance with ATOP, an
appropriate letter of transmittal properly completed and duly executed with any
required signature guarantee and all other required documents must in each case
be transmitted to and received or confirmed by the exchange agent at its address
set forth below on or prior to the expiration date, or, if the guaranteed
delivery procedures described below are complied with, within the time period
provided under the procedures. Delivery of documents to DTC does not constitute
delivery to the exchange agent.
All questions as to the validity, form, eligibility, including time of
receipt, acceptance of tendered outstanding notes and withdrawal of tendered
outstanding notes will be determined by us in our sole discretion, which
determination will be final and binding. We reserve the absolute right to reject
any and all outstanding notes not properly tendered or any outstanding notes our
acceptance of which would, in the opinion of our counsel, be unlawful. We also
reserve the right in our sole discretion to waive any defects, irregularities or
conditions of tender as to particular outstanding notes. Our interpretation of
the terms and conditions of the exchange offer, including the instructions in
the letter of transmittal, will be final and binding on all parties. Unless
waived, any defects or irregularities in connection with tenders of outstanding
notes must be cured within the time we determine. Although we intend to notify
holders of defects or irregularities with respect to tenders of outstanding
notes, neither we, the exchange agent nor any other person will incur any
liability for failure to give the notification. Tenders of outstanding notes
will not be deemed to have been made until the defects or irregularities have
been cured or waived. Any outstanding notes received by the exchange agent that
are not properly tendered and as to which the defects or irregularities have not
been cured or waived will be returned by the exchange agent to the tendering
holders, unless otherwise provided in the letter of transmittal, as soon as
practicable following the expiration date.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their outstanding notes and (1) whose
outstanding notes are not immediately available, (2) who cannot deliver their
outstanding notes, the letter of transmittal or any other required documents to
the exchange agent or (3) who cannot complete the procedures for book-entry
transfer, prior to the expiration date, may effect a tender if:
- the tender is made through a member firm of the Medallion System;
- prior to the expiration date, the exchange agent receives from a member
firm of the Medallion System a properly completed and duly executed
Notice of Guaranteed Delivery by facsimile transmission, mail or hand
delivery setting forth the name and address of the holder, the
certificate
24
number(s) of the outstanding notes and the principal amount of
outstanding notes tendered, stating that the tender is being made thereby
and guaranteeing that, within three New York Stock Exchange trading days
after the expiration date, the letter of transmittal or facsimile
thereof, together with the certificate(s) representing the outstanding
notes or a confirmation of book-entry transfer of the outstanding notes
into the exchange agent's account at DTC, and any other documents
required by the letter of transmittal will be deposited by the member
firm of the Medallion System with the exchange agent; and
- the properly completed and executed letter of transmittal of facsimile
thereof, as well as the certificate(s) representing all tendered
outstanding notes in proper form for transfer or a confirmation of
book-entry transfer of the outstanding notes into the exchange agent's
account at DTC, and all other documents required by the letter of
transmittal are received by the exchange agent within five New York Stock
Exchange trading days after the expiration date.
Upon request to the exchange agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their outstanding notes according to the
guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided in this prospectus, tenders of outstanding
notes may be withdrawn at any time prior to 5:00 p.m., New York City time, on
the expiration date.
To withdraw a tender of outstanding notes in the exchange offer, a
telegram, telex, letter or facsimile transmission notice of withdrawal must be
received by the exchange agent at its address set forth in this prospectus prior
to 5:00 p.m., New York City time, on the expiration date of the exchange offer.
Any notice of withdrawal must:
- specify the name of the person having deposited the outstanding notes to
be withdrawn;
- identify the outstanding notes to be withdrawn, including the certificate
number(s) and principal amount of the outstanding notes, or, in the case
of outstanding notes transferred by book-entry transfer, the name and
number of the account at DTC to be credited;
- be signed by the holder in the same manner as the original signature on
the letter of transmittal by which the outstanding notes were tendered,
including any required signature guarantees, or be accompanied by
documents of transfer sufficient to have the trustee with respect to the
outstanding notes register the transfer of the outstanding notes into the
name of the person withdrawing the tender; and
- specify the name in which any outstanding notes are to be registered, if
different from that of the person depositing the outstanding notes to be
withdrawn.
All questions as to the validity, form and eligibility, including time of
receipt, of the notices will be determined by us, and our determination will be
final and binding on all parties. Any outstanding notes so withdrawn will be
deemed not to have been validly tendered for purposes of the exchange offer and
no exchange notes will be issued with respect thereto unless the outstanding
notes so withdrawn are validly retendered. Any outstanding notes which have been
tendered but which are not accepted for exchange will be returned to the holder
thereof without cost to the holder as soon as practicable after withdrawal,
rejection of tender or termination of the exchange offer. Properly withdrawn
outstanding notes may be retendered by following one of the procedures described
above under "-- Procedures for Tendering" at any time prior to the expiration
date.
25
CONDITIONS
Notwithstanding any other term of the exchange offer, we will not be
required to accept for exchange, or exchange notes for, any outstanding notes,
and may terminate or amend the exchange offer as provided in this prospectus
before the acceptance of the outstanding notes, if:
- any action or proceeding is instituted or threatened in any court or by
or before any governmental agency with respect to the exchange offer
which, in our sole judgment, might materially impair our ability to
proceed with the exchange offer or any material adverse development has
occurred in any existing action or proceeding with respect to us or any
of our subsidiaries; or
- any law, statute, rule, regulation or interpretation by the Staff of the
SEC is proposed, adopted or enacted, which, in our sole judgment, might
materially impair our ability to proceed with the exchange offer or
materially impair the contemplated benefits of the exchange offer to us;
or
- any governmental approval has not been obtained, which approval we, in
our sole discretion, deem necessary for the consummation of the exchange
offer as contemplated by this prospectus.
If we determine in our sole discretion that any of the conditions are not
satisfied, we may (1) refuse to accept any outstanding notes and return all
tendered outstanding notes to the tendering holders, (2) extend the exchange
offer and retain all outstanding notes tendered prior to the expiration of the
exchange offer, subject, however, to the rights of holders to withdraw the
outstanding notes (see "-- Withdrawal of Tenders") or (3) waive the unsatisfied
conditions with respect to the exchange offer and accept all properly tendered
outstanding notes which have not been withdrawn.
EXCHANGE AGENT
Wells Fargo Bank Minnesota, N.A. has been appointed as exchange agent for
the exchange offer. Questions and requests for assistance, requests for
additional copies of this prospectus or of the letter of transmittal and
requests for Notice of Guaranteed Delivery should be directed to the exchange
agent addressed as follows:
By Registered or Certified Mail:
Wells Fargo Bank Minnesota, N.A.
MAC No. N9303-121
Corporate Trust Operations
P.O. Box 1517
Minneapolis, MN 55480-1517
By Overnight Courier or Regular Mail:
Wells Fargo Bank Minnesota, N.A.
MAC No. N9303-121
Corporate Trust Operations
6th and Marquette Avenue
Minneapolis, MN 55479
By Hand Prior to 4:30 p.m., New York City time:
Wells Fargo Bank Minnesota, N.A.
608 Second Avenue South
Corporate Trust Operations, 12th Floor
Minneapolis, MN 55402
Facsimile Transmission:
(612) 667-4927
For Information Telephone (call toll-free):
(800) 344-5128
DELIVERY TO AN ADDRESS OTHER THAN SET FORTH ABOVE WILL NOT CONSTITUTE A
VALID DELIVERY.
FEES AND EXPENSES
We will bear the expenses of soliciting tenders. The principal solicitation
is being made by mail; provided, however, additional solicitation may be made by
telecopy, telephone, electronic mail or in person by our and our affiliates'
officers and regular employees.
We have not retained any dealer-manager in connection with the exchange
offer and will not make any payments to brokers, dealers or others soliciting
acceptances of the exchange offer. We will, however, pay the exchange agent
reasonable and customary fees for its services and will reimburse it for its
reasonable out-of-pocket expenses incurred in connection with these services.
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We will pay the cash expenses to be incurred in connection with the
exchange offer. Such expenses include fees and expenses of the exchange agent
and trustee, accounting and legal fees and printing costs, among others.
ACCOUNTING TREATMENT
The exchange notes will be recorded at the same carrying value as the
outstanding notes, which is face value, as reflected in our accounting records
on the date of exchange. Accordingly, we will not recognize any gain or loss for
accounting purposes as a result of the exchange offer. The expenses of the
exchange offer will be deferred and charged to expense over the term of the
exchange notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
The outstanding notes that are not exchanged for exchange notes pursuant to
the exchange offer will remain restricted securities. Accordingly, the
outstanding notes may be resold only:
- to us upon redemption thereof or otherwise;
- so long as the outstanding notes are eligible for resale pursuant to Rule
144A, to a person inside the United States whom the seller reasonably
believes is a qualified institutional buyer within the meaning of Rule
144A under the Securities Act in a transaction meeting the requirements
of Rule 144A, in accordance with Rule 144 under the Securities Act, or
pursuant to another exemption from the registration requirements of the
Securities Act, which other exemption is based upon an opinion of counsel
reasonably acceptable to us;
- outside the United States to a foreign person in a transaction meeting
the requirements of Rule 904 under the Securities Act; or
- pursuant to an effective registration statement under the Securities Act,
in each case in accordance with any applicable securities laws of any
state of the United States.
RESALE OF THE EXCHANGE NOTES
With respect to resales of exchange notes, based on interpretations by the
Staff of the SEC set forth in no-action letters issued to third parties, we
believe that a holder or other person who receives exchange notes, whether or
not the person is the holder, other than a person that is our affiliate within
the meaning of Rule 405 under the Securities Act, in exchange for outstanding
notes in the ordinary course of business and who is not participating, does not
intend to participate, and has no arrangement or understanding with any person
to participate, in the distribution of the exchange notes, will be allowed to
resell the exchange notes to the public without further registration under the
Securities Act and without delivering to the purchasers of the exchange notes a
prospectus that satisfies the requirements of Section 10 of the Securities Act.
However, if any holder acquires exchange notes in the exchange offer for the
purpose of distributing or participating in a distribution of the exchange
notes, the holder cannot rely on the position of the Staff of the SEC expressed
in the no-action letters or any similar interpretive letters, and must comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with any resale transaction, unless an exemption from registration
is otherwise available. Further, each broker-dealer that receives exchange notes
for its own account in exchange for outstanding notes, where the outstanding
notes were acquired by the broker-dealer as a result of market-making activities
or other trading activities, must acknowledge that it will deliver a prospectus
in connection with any resale of the exchange notes.
27
USE OF PROCEEDS
This exchange offer is intended to satisfy certain of our obligations under
the registration rights agreement. We will not receive any cash proceeds from
the issuance of the exchange notes. In consideration for issuing the exchange
notes contemplated in this prospectus, we will receive outstanding notes in like
principal amount, the form and terms of which are the same as the form and terms
of the exchange notes, except as otherwise described in this prospectus.
The net proceeds from the issuance of the notes were approximately $193.2
million, after deducting discounts, commissions and estimated offering expenses.
We used the net proceeds from the notes to (1) repay our term loan under our
senior credit facility, consisting of approximately $100.5 million in principal
and accrued interest, and (2) redeem the principal, accrued interest and
prepayment premium due under our 10.75% Senior Notes Due 2006. Completing these
refinancing transactions required us to draw approximately $24.6 million from
our revolver under our senior credit facility.
28
CAPITALIZATION
The following table sets forth our consolidated cash and cash equivalents
and capitalization as of February 2, 2002 on an actual basis and as adjusted to
give effect to the application of the net proceeds of the offering of the notes.
You should read this table in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations," "Description of
Other Indebtedness," "Unaudited Pro Forma Consolidated Statement of Operations"
and our audited financial statements, the related notes and the other financial
information included elsewhere in, or incorporated by reference into, this
prospectus.
<Table>
<Caption>
(IN THOUSANDS)
FEBRUARY 2, 2002
----------------------
ACTUAL AS ADJUSTED
-------- -----------
Cash and cash equivalents(1)................................ $ 46,867 $ 46,867
======== ========
Debt:
Revolving credit facility(2).............................. $ 82,000 $105,000
Term loan................................................. 100,000 --
10.75% Senior Notes....................................... 108,836 --
Other debt(3)............................................. 16,978 16,978
8.75% Senior Subordinated Notes due 2012.................. -- 200,000
-------- --------
Total debt........................................ 307,814 321,978
Minority interest........................................... 8,979 8,979
Shareholders' equity(4)..................................... 450,661 446,038
-------- --------
Total capitalization.............................. $767,454 $776,995
======== ========
</Table>
- ---------------
(1) Excludes approximately $6.4 million of restricted cash.
(2) Our revolving credit facility provides for up to $250.0 million of
borrowings, approximately $66.4 million of which would have been available
on February 2, 2002 after giving effect to the application of the proceeds
of this offering and our borrowing base at that date and to $60.9 million of
outstanding letters of credit on such date.
(3) Other debt includes industrial revenue bonds of approximately $12.6 million,
capital leases of approximately $3.1 million and borrowings under foreign
credit facilities of approximately $1.3 million.
(4) Shareholders' equity as adjusted reflects the impact of the $4.4 million
($2.6 million net of income taxes) prepayment premium and the $3.6 million
($2.2 million net of income taxes) write-off of the unamortized finance fees
in connection with the early redemption of the 10.75% Senior Notes. Also
included is a $0.3 million ($0.2 million net of income taxes) reduction in
interest expense that would result from the issuance of the notes and
repayment of existing debt.
29
SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OTHER DATA
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
The following table sets forth our selected consolidated financial and
other data as of and for the years ended October 31, 1997, 1998, 1999 and 2000,
for the period from November 1, 2000 to June 23, 2001 (Predecessor Company), for
the period from June 24, 2001 to October 31, 2001 (Successor Company) and as of
October 31, 2001 (Successor Company) as derived from our audited consolidated
financial statements. The summary historical financial data as of and for the
2001 First Quarter and the 2002 First Quarter have been derived from our
unaudited consolidated financial statements. The selected consolidated financial
and other data set forth below should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
our consolidated financial statements and related notes included elsewhere in,
or incorporated by reference into, this prospectus.
<Table>
<Caption>
YEAR ENDED OCTOBER 31,
--------------------------------------------------------------------------
2001
-----------------------------
PREDECESSOR COMPANY PREDECESSOR SUCCESSOR
------------------------------------------ COMPANY COMPANY 2001
1997(1) 1998(1) 1999(1) 2000 EIGHT MONTHS FOUR MONTHS(2) FIRST QUARTER
-------- -------- --------- -------- ------------ -------------- -------------
STATEMENT OF OPERATIONS
AND OTHER DATA:
Net sales............... $1,471.7 $1,216.2 $ 1,119.1 $1,123.1 $ 740.5 $ 407.7 $ 267.5
Cost of sales........... 1,095.3 920.8 927.7 858.5 556.0 381.7 204.6
Product development,
selling and
administrative
expenses.............. 217.6 235.3 239.0 208.9 141.8 80.0 51.5
Other income............ (18.0) (1.3) (3.9) (6.8) (1.2) (1.7) (0.5)
Restructuring and other
special (credits)
charges............... -- -- 38.8 4.5 (0.1) -- --
-------- -------- --------- -------- -------- -------- --------
Operating income
(loss)................ 176.8 61.4 (82.5) 58.0 44.0 (52.3) 11.9
Interest income......... 1.6 3.8 2.2 4.6 1.6 1.2 0.6
Interest expense........ (71.9) (74.4) (31.1) (28.5) (29.3) (11.0) (4.3)
-------- -------- --------- -------- -------- -------- --------
Income (loss) before
reorganization items
and fresh start
accounting
adjustments........... 106.5 (9.2) (111.4) 34.1 16.3 (62.1) 8.2
Reorganization items.... -- -- (20.3) (65.4) (36.4) -- (11.3)
Fresh start accounting
adjustments........... -- -- -- -- 45.1 -- --
-------- -------- --------- -------- -------- -------- --------
Income (loss) before
income taxes and
minority interest..... 106.5 (9.2) (131.7) (31.3) 25.0 (62.1) (3.1)
(Provision) benefit for
income taxes.......... (36.5) 24.6 (220.4) 3.0 26.8 (13.2) (3.0)
Minority interest....... (2.1) (1.0) (1.0) (1.3) (1.2) (1.2) (0.2)
-------- -------- --------- -------- -------- -------- --------
Income (loss) from
continuing operations,
before discontinued
operations and
extraordinary items... 67.9 14.4 (353.1) (29.6) 50.6 (76.5) (6.3)
Income (loss) from
discontinued
operations, net of
applicable income
taxes................. 70.4 (184.4) (798.2) 66.2 (3.2) -- (9.0)
Gain (loss) on disposal
of discontinued
operations, net of
applicable income
taxes................. -- 151.5 (529.0) 228.0 256.4 -- --
Extraordinary gain
(loss) on debt
discharge............. (13.0) -- -- -- 1,124.1 -- --
-------- -------- --------- -------- -------- -------- --------
Net income (loss)....... $ 125.3 $ (18.5) $(1,680.3) $ 264.6 $1,427.9 $ (76.5) $ (15.3)
======== ======== ========= ======== ======== ======== ========
<Caption>
2002
FIRST QUARTER(2)
----------------
STATEMENT OF OPERATIONS
AND OTHER DATA:
Net sales............... $ 286.4
Cost of sales........... 270.3
Product development,
selling and
administrative
expenses.............. 61.0
Other income............ (0.2)
Restructuring and other
special (credits)
charges............... (5.0)
--------
Operating income
(loss)................ (39.7)
Interest income......... 0.5
Interest expense........ (8.0)
--------
Income (loss) before
reorganization items
and fresh start
accounting
adjustments........... (47.2)
Reorganization items.... --
Fresh start accounting
adjustments........... --
--------
Income (loss) before
income taxes and
minority interest..... (47.2)
(Provision) benefit for
income taxes.......... 18.5
Minority interest....... (0.4)
--------
Income (loss) from
continuing operations,
before discontinued
operations and
extraordinary items... (29.1)
Income (loss) from
discontinued
operations, net of
applicable income
taxes................. --
Gain (loss) on disposal
of discontinued
operations, net of
applicable income
taxes................. --
Extraordinary gain
(loss) on debt
discharge............. --
--------
Net income (loss)....... $ (29.1)
========
</Table>
30
<Table>
<Caption>
YEAR ENDED OCTOBER 31,
--------------------------------------------------------------------------
2001
-----------------------------
PREDECESSOR COMPANY PREDECESSOR SUCCESSOR
------------------------------------------ COMPANY COMPANY 2001
1997(1) 1998(1) 1999(1) 2000 EIGHT MONTHS FOUR MONTHS(2) FIRST QUARTER
-------- -------- --------- -------- ------------ -------------- -------------
Ratio of earnings to
fixed charges(3)...... 2.4 -- -- -- 1.7 -- --
Deficiency of earnings
to cover fixed
charges(3)............ -- 9.1 131.5 31.5 -- 62.1 3.1
Earnings (Loss) Per
Share -- Basic
Income (loss) from
continuing
operations.......... $ 1.42 $ 0.31 $ (7.62) $ (0.63) $ 1.08 $ (1.53) $ (0.13)
Income (loss) from and
net gain (loss) on
disposal of
discontinued
operations.......... 1.47 (0.71) (28.65) 6.30 5.41 -- (0.19)
Extraordinary gain
(loss).............. (0.27) -- -- -- 24.01 -- --
-------- -------- --------- -------- -------- -------- --------
Net income (loss) per
common share........ $ 2.62 $ (0.40) $ (36.27) $ 5.67 $ 30.50 $ (1.53) $ (0.32)
======== ======== ========= ======== ======== ======== ========
Earnings (Loss) Per
Share -- Diluted
Income (loss) from
continuing
operations.......... $ 1.41 $ 0.31 $ (7.62) $ (0.63) $ 1.08 $ (1.53) $ (0.13)
Income (loss) from and
net gain (loss) on
disposal of
discontinued
operations.......... 1.45 (0.71) (28.65) 6.30 5.41 -- (0.19)
Extraordinary gain
(loss).............. (0.27) -- -- -- 24.01 -- --
-------- -------- --------- -------- -------- -------- --------
Net income (loss) per
common share........ $ 2.59 $ (0.40) $ (36.27) $ 5.67 $ 30.50 $ (1.53) $ (0.32)
======== ======== ========= ======== ======== ======== ========
Dividends per Common
Share................. $ 0.40 $ 0.40 $ 0.10 $ -- $ -- $ -- $ --
BALANCE SHEET DATA (END OF
PERIOD):
Cash and cash
equivalents........... $ 29.4 $ 30.0 $ 57.5 $ 72.1 $ 49.9 $ 39.7 $ 60.0
Working capital......... 408.2 436.9 187.2 218.8 242.3 443.3 210.0
Total assets............ 2,924.5 2,787.3 1,711.8 1,292.9 1,314.5 1,371.7 1,299.7
Total debt.............. 939.3 1,119.2 1,506.2 1,332.6 1,418.0 289.9 1,379.1
Shareholders' equity
(deficit)............. 749.7 666.9 (1,025.2) (794.7) (793.6) 483.7 (811.9)
<Caption>
2002
FIRST QUARTER(2)
----------------
Ratio of earnings to
fixed charges(3)...... --
Deficiency of earnings
to cover fixed
charges(3)............ 47.2
Earnings (Loss) Per
Share -- Basic
Income (loss) from
continuing
operations.......... $ (0.58)
Income (loss) from and
net gain (loss) on
disposal of
discontinued
operations.......... --
Extraordinary gain
(loss).............. --
--------
Net income (loss) per
common share........ $ (0.58)
========
Earnings (Loss) Per
Share -- Diluted
Income (loss) from
continuing
operations.......... $ (0.58)
Income (loss) from and
net gain (loss) on
disposal of
discontinued
operations.......... --
Extraordinary gain
(loss).............. --
--------
Net income (loss) per
common share........ $ (0.58)
========
Dividends per Common
Share................. $ --
BALANCE SHEET DATA (END OF
PERIOD):
Cash and cash
equivalents........... $ 46.9
Working capital......... 421.3
Total assets............ 1,330.4
Total debt.............. 307.8
Shareholders' equity
(deficit)............. 450.7
</Table>
- ---------------
(1) Beloit Corporation, a former subsidiary of the Predecessor Company, was
classified as a discontinued operation at October 31, 1999. The results of
operations for all prior periods have been restated accordingly.
(2) As more fully disclosed in our consolidated financial statements, we emerged
from bankruptcy on July 12, 2001 and adopted fresh start accounting pursuant
to the AICPA's Statement of Position (SOP) 90-7, "Financial Reporting by
Entities in Reorganization Under the Bankruptcy Code." Accordingly, the
Successor Company has been accounted for as a new entity with assets,
liabilities and capital structure having carrying values that are not
comparable with any prior periods of the Predecessor Company.
(3) For purposes of computing the ratio of earnings to fixed charges, earnings
are defined as income before income taxes, minority interest, income or loss
from discontinued operations and extraordinary gains or losses, plus fixed
charges. Fixed charges consist of interest expense, including amortization
of debt issuance costs and the interest component of rent expense.
31
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Our discussion and analysis should be read in conjunction with, and is
qualified in its entirety by reference to, our consolidated financial statements
and accompanying notes included elsewhere in, or incorporated by reference into,
this prospectus. Except for historical information, the discussions in this
section contain forward-looking statements that involve risks and uncertainties.
Future results could differ materially from those discussed below for many
reasons, including the risks described in "Risk Factors," "Forward-Looking
Statements" and elsewhere in this prospectus.
There are differences between combined adjusted operating income as
reported in management's discussion and analysis of financial condition and
results of operations ("MD&A") and pro forma adjusted operating income as
reported elsewhere in this prospectus. In calculating combined adjusted
operating income as described in MD&A, we have eliminated from combined
operating income (loss) as reported both the non-recurring and recurring
expenses related to the adoption of fresh start accounting and other
reorganization-related items, as well as, in 1999, changes in accounting
estimates. In calculating pro forma adjusted operating income as used elsewhere
in this prospectus, we have (1) eliminated from operating income (loss) only the
non-recurring items related to the adoption of fresh start accounting and other
reorganization-related items and (2) assumed that the adoption of fresh start
accounting, the offering of the notes and the application of the proceeds from
the sale of the notes had occurred on November 1, 2000 or 2001, as appropriate,
thus reflecting the inclusion of a full year of certain recurring fresh start
expenses.
OVERVIEW
We are the direct successor to businesses that have been manufacturing
mining equipment for over 75 years. We operate in two business segments:
Underground Mining Machinery, comprised of our Joy Mining Machinery business
("Joy"), and Surface Mining Equipment, comprised of our P&H Mining Equipment
business ("P&H"). Joy is the world's largest producer of high productivity
electric-powered underground mining equipment used primarily for the extraction
of coal. P&H is the world's largest producer of high productivity electric
mining shovels and walking draglines, and a leading producer of large rotary
blasthole drills, used primarily for surface mining copper, coal, iron ore, oil
sands and other minerals. Over 80% of our sales are to the coal and copper
mining industries.
In addition to selling new equipment, we provide parts, components,
repairs, rebuilds, diagnostic analysis, fabrication, training and other
aftermarket services for our installed base of machines. In the case of Surface
Mining Equipment, we also provide aftermarket services for equipment
manufactured by other companies, including over 30 manufacturers with which we
have ongoing relationships and which we refer to as "Alliance Partners." We
emphasize our aftermarket products and services as an integral part of lowering
our customers' cost per unit of production and are focused on continuing to grow
this part of our business.
Demand for new equipment is cyclical in nature, being driven by commodity
prices and other factors. Our new equipment sales over the last five years have
ranged from a high of $720.3 million in fiscal 1997 to a low of $341.1 million
in fiscal 2001. In contrast, our aftermarket sales are more stable and help
moderate the effects of changes in new equipment demand on our financial
performance. Our aftermarket sales over the last five years have ranged from a
low of $730.5 million in fiscal 1998 to a high of $807.1 million in fiscal 2001.
Approximately 85% of our sales in fiscal 2001 was recorded at the time of
shipment of the product or delivery of the service. The remaining 15% of sales
was recorded using percentage of completion accounting, a practice we follow in
recognizing revenue on the sale of long lead-time equipment such as electric
mining shovels, walking draglines and roof supports. Under percentage of
completion accounting, revenue is recognized on firm orders from customers as
the product is manufactured based on the ratio of actual costs incurred to
estimated total costs to be incurred. We generally receive progress payments on
long lead-time equipment.
32
The major components of our cost of sales are manufacturing overhead, labor
and raw materials such as steel. We have taken significant steps since 1998 to
reduce manufacturing overhead. Between fiscal 1998 and 2000, our Joy business
implemented initiatives that resulted in annual cost savings of approximately
$48 million. In recent years, we have not been adversely affected by increases
in the cost of labor or raw materials. Our operating profit is affected by the
mix of original equipment and aftermarket sales. Our aftermarket products and
services generally carry higher margins than our original equipment and
increases in our aftermarket sales have a favorable impact on our profitability.
In fiscal 2001, approximately 55% of our sales was made to customers in the
United States. With the exception of South Africa, our domestic and
international sales are largely denominated in U.S. dollars or pounds sterling.
From time to time, we hedge specifically identified committed cash flows using
foreign currency sale or purchase contracts. In South Africa, our sales are
denominated in South African rand. The declining value of the rand in recent
years has adversely affected our profitability when converting South African
rand operating profit into U.S. dollar denominated financial results.
BANKRUPTCY REORGANIZATION
On June 7, 1999, our predecessor company, Harnischfeger Industries, Inc.,
and its domestic subsidiaries filed voluntary petitions for reorganization under
Chapter 11 of the U.S. Bankruptcy Code. Prior to the reorganization, our
predecessor operated in two business segments: Pulp and Papermaking Machinery,
comprised of Beloit and its operating subsidiaries, and Mining Equipment,
comprised of Joy and P&H and their operating subsidiaries. In 1998 and 1999,
Beloit suffered significant operating losses in its pulp and papermaking
machinery business due to adverse market conditions, severe price competition
and substantial cost overruns on major contracts in Indonesia. Our predecessor's
bankruptcy resulted from the significant operating losses at Beloit, exacerbated
by unfavorable economic conditions affecting Joy and P&H. During the bankruptcy
proceedings, our predecessor operated its businesses as a debtor-in-possession,
and with the permission of the U.S. Bankruptcy Court, sold substantially all of
its pulp and papermaking machinery business.
We emerged from bankruptcy on July 12, 2001. As a result of the U.S.
Bankruptcy Court's confirmation order of May 18, 2001 which approved our Third
Amended Joint Plan of Reorganization (the "Reorganization Plan"), substantially
all of our predecessor's liabilities outstanding on June 7, 1999 were cancelled.
In connection with our emergence, we obtained a $350 million senior credit
facility, issued $108.8 million in 10.75% Senior Notes due 2006, cancelled all
of our predecessor's capital stock and agreed to issue 50 million shares of new
common stock, $1.00 par value per share, in consideration for the cancellation
of allowed pre-petition claims. These shares are being issued in installments
over time. We issued 43,140,688 shares of our common stock from the time of our
emergence from bankruptcy through May 14, 2002.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
We believe the following accounting policies are the most critical to aid
in fully understanding and evaluating our reported financial results:
REVENUE RECOGNITION
We generally recognize revenue at the time of shipment and passage of title
for most products and services. We recognize revenue on long-term contracts,
such as the manufacture of mining shovels, drills, draglines and roof support
systems, using the percentage-of-completion method. Provisions for estimated
future costs relating to warranty expense are recorded based on original
equipment sales levels and known warranty exposures.
INVENTORIES
Our inventories are carried at the lower of cost or market using the FIFO
method for all inventories. Our policy is to evaluate all inventory, including
manufacturing raw material, work-in-process, finished
33
goods, and spare parts for impairment on a regular basis. Inventory in excess of
our estimated usage requirements is written down to its estimated net realizable
value. Inherent in the estimates of net realizable value is management's
estimates related to our future manufacturing schedules, customer demand,
possible alternative uses and ultimate realization of potentially excess
inventory.
VALUATION OF INTANGIBLE ASSETS
Intangible assets include software, drawings, patents, trademarks, excess
reorganization value and other specifically identifiable assets. We review the
carrying value of our intangible assets on an annual basis or more frequently as
circumstances warrant. This review is based upon our projections of anticipated
future cash flows. While we believe that our estimates of future cash flows are
reasonable, different assumptions regarding cash flows could materially affect
our evaluations.
INCOME TAXES
We recognize deferred income taxes by applying enacted statutory rates
against temporary differences between the financial statement carrying amounts
and the tax basis of existing assets and liabilities, and for tax basis
carryforwards. We provide valuation allowances for deferred tax assets where it
is considered more likely than not that we will not realize the benefit of such
assets.
The utilization of tax benefits that arose prior to our emergence from
bankruptcy will reduce income taxes paid to federal, state, and foreign
jurisdictions, but will not reduce our income tax expense. Realization of these
benefits first reduces excess reorganization value until exhausted, then other
intangibles until exhausted and thereafter is reported as additional paid in
capital.
RESULTS OF OPERATIONS
Upon our emergence from bankruptcy during the third quarter of fiscal 2001,
we adopted fresh start accounting pursuant to the American Institute of
Certified Public Accountant's Statement of Position 90-7, "Financial Reporting
by Entities in Reorganization Under Bankruptcy Code" ("SOP 90-7"). The adoption
of SOP 90-7 resulted in a change in the basis of accounting in our underlying
assets and liabilities as of our emergence from bankruptcy. Accordingly, the
financial statements of the Successor Company and the Predecessor Company are
not comparable. For purposes of this discussion of the results of operations, we
have combined the actual results of operations for the Successor Company 2001
Four Months and the Predecessor Company 2001 Eight Months as Combined 2001
operating results ("Combined 2001") in order to present a meaningful comparative
analysis to prior fiscal year operating results. The Successor Company 2001 Four
Months and the Predecessor Company 2001 Eight Months financial information is
derived from the Consolidated Financial Statements. In addition to the basis in
accounting differences noted above, our operating results for Combined 2001 and
fiscal 2000 and fiscal 1999 were significantly impacted by items associated with
the Predecessor Company's bankruptcy, including extraordinary debt forgiveness,
restructuring activities, pre-petition lawsuit settlements, other charges
related to certain bankruptcy activities and certain changes in accounting
estimates recorded in the third quarter of fiscal 1999, and by the Successor
Company charges related to recognizing the effects of additional depreciation,
amortization and cost of sales arising from the revaluation of our assets as of
our emergence from bankruptcy.
34
2002 FIRST QUARTER AS COMPARED TO 2001 FIRST QUARTER
The following table sets forth our 2002 First Quarter and 2001 First
Quarter net sales as derived from the Consolidated Statement of Operations:
<Table>
<Caption>
SUCCESSOR PREDECESSOR
COMPANY COMPANY
2002 2001
IN THOUSANDS FIRST QUARTER FIRST QUARTER
- ------------ ------------- -------------
Net Sales
Underground Mining Machinery.............................. $197,518 $155,079
Surface Mining Equipment.................................. 88,853 112,427
-------- --------
Total............................................. $286,371 $267,506
======== ========
</Table>
Total net sales for the 2002 First Quarter were 7% greater than total net
sales in the 2001 First Quarter.
Net sales for Underground Mining Machinery for the 2002 First Quarter were
$42.4 million higher than net sales in the 2001 First Quarter. The increase was
attributed to an increase in new machine sales and an increase in the sales of
aftermarket products and services. The improvement in new machine sales this
year as compared to last year was primarily due to the depressed levels of new
machine sales last year and an increase in activity for continuous miners and
shuttle cars in the United States and United Kingdom this year. Higher
aftermarket product and service sales compared to a year ago continued to
reflect the strength that was reported throughout fiscal 2001. Aftermarket parts
shipments in the United States and from the United Kingdom continued to be
higher than a year ago. While aftermarket product and service sales in South
Africa increased from prior year levels, weakness in the South African Rand as
compared to the U.S. Dollar caused such sales to decline when translated into
U.S. Dollars. The stronger demand for coal and the associated higher prices coal
producers are receiving have benefited new machine sales in the United States
while the growing population of Joy equipment in operation in China has resulted
in higher levels of repair parts and rebuild sales into that country.
Net sales for Surface Mining Equipment in the 2002 First Quarter were $23.6
million lower than net sales in the 2001 First Quarter. The decrease was due to
lower new machine sales, partially offset by an increase in aftermarket product
and service sales. The decrease in new machine sales this year as compared to
last year was primarily due to severe weakness in the global market for electric
mining shovels. No electric mining shovels were booked in the mining marketplace
during the 2002 First Quarter. The increase in aftermarket product and service
sales was due to higher parts and service sales in North America, Australia and
the Pacific Rim.
35
The following table sets forth the operating income (loss) included in our
Consolidated Statement of Operations, adjustments due to fresh start accounting,
reorganization plan credits and the resulting adjusted operating income:
<Table>
<Caption>
SUCCESSOR PREDECESSOR
COMPANY COMPANY
2002 2001
IN THOUSANDS FIRST QUARTER FIRST QUARTER
- ------------ ------------- -------------
Operating income (loss):
Underground Mining Machinery................................ $(20,619) $ 7,819
Surface Mining Equipment.................................... (19,532) 7,684
Corporate Expense........................................... 434 (3,591)
-------- -------
Total............................................. $(39,717) $11,912
======== =======
Adjustments to operating income (loss):
Fresh Start Accounting Items................................ $ 58,740 $ --
Reorganization Plan Credits................................. (4,963) --
Predecessor goodwill amortization........................... -- 2,354
-------- -------
Total............................................. $ 53,777 $ 2,354
======== =======
Adjusted operating income:
Underground Mining Machinery................................ $ 16,759 $ 9,866
Surface Mining Equipment.................................... 1,830 7,991
Corporate Expense........................................... (4,529) (3,591)
-------- -------
Total............................................. $ 14,060 $14,266
======== =======
</Table>
The 2002 First Quarter fresh start accounting items consist of a $46.4
million charge for the increase to fair value of inventory that was charged to
cost of sales, $3.3 million of additional depreciation expense associated with
the revalued property, plant and equipment, and $9.0 million of amortization
expense related to the valuation of certain identifiable finite-lived intangible
assets. The reorganization plan credits of $5.0 million represent the adjustment
of the allowance for the collectibility of the note due from the Beloit
Corporation to the balance outstanding at the end of the 2002 First Quarter. The
2001 First Quarter adjustments to operating income consist of $2.4 million of
amortization expense related to goodwill. Since goodwill is no longer amortized,
this amount is removed from prior year operating income for comparative
purposes.
Adjusted operating income for the 2002 First Quarter was $0.2 million less
than adjusted operating income for the 2001 First Quarter. Adjusted EBITDA was
$22.3 million for the 2002 First Quarter compared to $22.9 million for the 2001
First Quarter.
Adjusted operating income from Underground Mining Machinery for the 2002
First Quarter was $16.8 million compared to $9.9 million for the 2001 First
Quarter. The improvement in operating income was due to the increase in sales
volumes and the favorable impact of increased manufacturing burden absorption
and continued cost controls.
Adjusted operating income for surface mining equipment for the 2002 First
Quarter was $1.8 million compared to $8.0 million for the 2001 First Quarter.
This decrease resulted from lower levels of new equipment shipments during the
quarter and a reduction in manufacturing overhead absorption. In addition, lower
production volumes resulted in workforce reductions that increased spending by
approximately $2.0 million at our Milwaukee manufacturing facility.
Product development, selling and administrative expense increased to $61.0
million in the 2002 First Quarter compared to $51.5 million in the 2001 First
Quarter, due primarily to $9.0 million of fresh start accounting items. The
fresh start accounting items consist of amortization expense related to the
valuation
36
of certain identifiable finite-lived intangible assets. Product development,
selling and administrative expense as a percentage of sales for the 2002 First
Quarter was 21.3% compared to 19.3% for the prior year period. Excluding the
2002 First Quarter fresh start accounting item and the $2.4 million predecessor
goodwill amortization in the 2001 First Quarter, adjusted product development,
selling and administrative expense increased to $52.0 million in the 2002 First
Quarter from $49.2 million in the 2001 First Quarter. As a percentage of sales,
adjusted product development, selling and administrative expense decreased to
18.2% in the 2002 First Quarter as compared to 18.4% for the 2001 First Quarter.
Interest expense for the 2002 First Quarter increased to $8.0 million as
compared to $4.3 million in the 2001 First Quarter. This increase was
principally due to interest expense on the Senior Notes and the Credit Facility
included in the 2002 First Quarter, whereas the 2001 First Quarter only included
interest expense on the debtor-in-possession facility and not on the liabilities
classified as subject to compromise.
2001 COMPARED WITH 2000
The following table sets forth our fiscal 2001 and fiscal 2000 net sales as
derived from the Consolidated Statement of Operations:
<Table>
<Caption>
SUCCESSOR PREDECESSOR
COMPANY COMPANY
2001 2001 COMBINED
IN THOUSANDS FOUR MONTHS EIGHT MONTHS 2001 FISCAL 2000
- ------------ ----------- ------------ ---------- -----------
Net Sales
Underground Mining Machinery...... $238,548 $436,045 $ 674,593 $ 614,356
Surface Mining Equipment.......... 169,167 304,413 473,580 508,785
-------- -------- ---------- ----------
Total..................... $407,715 $740,458 $1,148,173 $1,123,141
======== ======== ========== ==========
</Table>
Net sales in 2001 were 2.2% higher than net sales in fiscal 2000. A $60.2
million increase in shipments in the Underground Mining Machinery segment was
partially offset by a $35.2 million decrease in net sales for the Surface Mining
Equipment segment.
The increase in the Underground Mining Machinery segment's net sales in
fiscal 2001 resulted from a slight improvement in new machine shipments combined
with strong performance for replacement parts sales and component repairs. The
improved new machine sales were due primarily to the beginning of the recovery
from the depressed markets for continuous miners and shuttle cars in the United
States and South Africa, while the sales of longwall equipment remained at about
the same level as fiscal 2000. In the aftermarket, favorable results for
replacement parts were achieved in the United States where coal producers saw an
improvement in the price they received for their coal production, and in the
Chinese market, served out of the United Kingdom, where the mining equipment
that has been placed over the last decade has begun to be rebuilt and to use
replacement parts for the rebuilding process.
The decrease in the Surface Mining Equipment segment's net sales in fiscal
2001 was due to a decrease in the shipment of new equipment, primarily electric
mining shovels, partially offset by an increase in replacement parts sales. The
decrease in electric mining shovels was due to the depressed market for copper
and iron ore, which resulted in lower new machine sales to North and South
American customers. In the aftermarket, increased sales for replacement parts
were achieved in North and South America as equipment was rebuilt and sales of
other equipment suppliers' products continued to increase. In addition, the sale
of refurbished electric mining shovels to customers served by the Australian
operation benefited fiscal 2001.
37
The following table sets forth the elements of our Combined 2001 operating
income (loss) as compared with fiscal 2000. Actual operating results, as derived
from our Consolidated Statement of Operations, have been adjusted to reflect the
impacts of fresh start accounting charges, pre-petition lawsuit settlements, and
restructuring and other special charges:
<Table>
<Caption>
SUCCESSOR PREDECESSOR
COMPANY COMPANY
2001 2001 COMBINED FISCAL
IN THOUSANDS FOUR MONTHS EIGHT MONTHS 2001 2000
- ------------ ----------- ------------ -------- --------
Operating income (loss):
Underground Mining Machinery........... $(28,426) $ 30,269 $ 1,843 $ 16,956
Surface Mining Equipment............... (17,738) 23,902 6,164 57,432
Corporate expense...................... (6,091) (10,215) (16,306) (16,368)
-------- -------- -------- --------
Total........................ $(52,255) $ 43,956 $ (8,299) $ 58,020
======== ======== ======== ========
Adjustments to operating income (loss):
Fresh start accounting items........... $ 87,724 $ --
Pre-petition lawsuit settlements....... 975 11,365
Restructuring and other special
charges.............................. (58) 4,518
-------- --------
Total........................ $ 88,641 $ 15,883
======== ========
Adjusted operating income (loss):
Underground Mining Machinery........... $ 59,583 $ 32,639
Surface Mining Equipment............... 37,065 57,632
Corporate expense...................... (16,306) (16,368)
-------- --------
Total........................ $ 80,342 $ 73,903
======== ========
</Table>
The fresh start accounting charges consist of a $74.6 million charge for
the increase to fair value of inventory that was taken to cost of sales, $4.4
million of additional depreciation expense associated with the revalued
property, plant and equipment, and $8.7 million of amortization expense related
to the valuation of certain identifiable finite-lived intangible assets.
The following discussion is based on combined adjusted operating income
(loss) for fiscal 2001 as compared with fiscal 2000 as presented in the above
table. Combined adjusted operating income increased from $73.9 million in fiscal
2000 to $80.3 million in fiscal 2001. This improvement resulted from a $26.9
million increase in combined adjusted operating income for the Underground
Mining Machinery segment that was largely offset by a $20.6 million decrease in
combined adjusted operating income for the Surface Mining Equipment segment.
The increase in combined adjusted operating income for Underground Mining
Machinery was due to an increase in net sales, a favorable sales mix that
included a larger percentage of replacement parts sales, an increase in
manufacturing overhead absorption, and continued benefits of cost reduction
programs put in place over the last several years. The improvement in the sales
mix, combined with the increase in manufacturing overhead absorption associated
with an increase in manufacturing activities in this segment's manufacturing
facilities, resulted in an increase in gross profit percentage from 23.2% in
fiscal 2000 to 27.8% in fiscal 2001. Despite a 10% increase in net sales and the
impact of general inflation around the world, the Underground Mining Machinery
business was able to limit the increase in spending for selling, engineering,
and administrative expense to 1.3% in fiscal 2001 compared to fiscal 2000.
Combined adjusted operating income for Surface Mining Equipment decreased
from $57.6 million in fiscal 2000 to $37.1 million in fiscal 2001. This decrease
was the result of the decrease in net sales, lower manufacturing overhead
absorption, and a slight increase in administrative expense, all of which were
partially offset by an improvement in sales mix to include a larger percentage
of parts sales during fiscal 2001 compared with a year ago. The benefits of the
improvement in the sales mix were more than offset
38
by the decrease in manufacturing overhead absorption associated with the
decrease in the production of new machines in this segment's manufacturing
facilities and resulted in a decrease in gross profit as a percentage of net
sales from 23.3% in fiscal 2000 to 21.5% in fiscal 2001. Administrative expense
was slightly higher in fiscal 2001 than in fiscal 2000 due to initiatives
associated with expanding distribution capabilities and a small charge in the
fourth quarter of fiscal 2001 for headcount reductions which will continue into
the first quarter of fiscal 2002 as the business responds to the near term
softness in the market for electric mining shovels.
During the third quarter of fiscal 2001, we completed our reorganization
under Chapter 11 of the U.S. Bankruptcy Code. As a result of emerging from
bankruptcy, the Predecessor Company 2001 Eight Months includes a number of
charges and credits associated with the implementation of our Reorganization
Plan and the application of fresh start accounting. The following table provides
a summary of these charges and credits and the respective line on the
Consolidated Statement of Operations for the Predecessor Company 2001 Eight
Months that were affected:
<Table>
<Caption>
IN MILLIONS INTEREST FRESH START INCOME TAX DEBT DISCONTINUED
EXPENSE (INCOME) EXPENSE ACCOUNTING BENEFIT DISCHARGE OPERATIONS
- ---------------- -------- ----------- ---------- --------- ------------
Interest on pre-petition
claims........................ $14.9 $ -- $ -- $ -- $ --
Reinstated pre-petition IRB's... 2.5 -- -- -- --
Inventory revaluation........... -- (156.8) -- -- --
Fixed asset revaluation......... -- (93.3) -- -- --
Eliminate previous goodwill..... -- 310.1 -- -- --
Record value of intangibles..... -- (234.4) -- -- --
Record excess reorganization
value......................... -- (22.5) -- -- --
Pension liabilities
revaluation................... -- 141.9 -- -- --
Post-retirement benefits
revaluation................... -- 8.5 -- -- --
Revised tax liability
estimate...................... -- 1.4 (35.0) -- --
Gain on debt discharge.......... -- -- -- (1,124.1) --
Gain on divestiture of Beloit,
net........................... -- -- -- -- (253.2)
----- ------- ------ --------- -------
Total................. $17.4 $ (45.1) $(35.0) $(1,124.1) $(253.2)
===== ======= ====== ========= =======
</Table>
2000 COMPARED WITH 1999
The following table sets forth our net sales included in the Consolidated
Statement of Operations:
<Table>
<Caption>
IN THOUSANDS FISCAL 2000 FISCAL 1999
- ------------ ----------- -----------
Net Sales
Underground Mining Machinery.............................. $ 614,356 $ 617,543
Surface Mining Equipment.................................. 508,785 501,509
---------- ----------
Total............................................. $1,123,141 $1,119,052
========== ==========
</Table>
Net sales in fiscal 2000 were approximately the same amount as net sales in
fiscal 1999, with a slight increase in Surface Mining Equipment shipments being
substantially offset by a slight decrease in Underground Mining Machinery net
sales.
In the Underground Mining Machinery business, higher sales of new equipment
in the United States substantially offset lower sales of new equipment in
markets outside of the United States. The increase in new equipment sales in the
United States was attributable to increases in the sales of longwall mining
related equipment. The decrease in non-U.S. new equipment sales was due to a
decrease in the sales of longwall mining related equipment. Even though the
global market for the segment's new equipment did not improve significantly,
market conditions stabilized from the conditions that caused the reduction in
new equipment sales
39
in fiscal 1999. Aftermarket sales were flat in fiscal 2000 as compared to fiscal
1999. Increases in complete machine rebuilds in the United States and increases
in replacement part sales into China were partially offset by lower aftermarket
sales in South Africa. The decrease in aftermarket sales in South Africa was due
to the strengthening of the U.S. dollar relative to the South African rand and
the corresponding impact on the translation of South African aftermarket sales
denominated in rand into U.S. dollars for financial reporting purposes.
Net sales for Surface Mining Equipment were slightly higher in fiscal 2000
compared to fiscal 1999. There was in increase in new equipment shipments,
primarily electric shovels, partially offset by a decrease in aftermarket sales.
The increase in electric mining shovels was the result of product innovation and
high levels of support for customers. The decrease in aftermarket sales was
primarily due to mine closures and production cutbacks.
The following table sets forth the elements of adjusted operating income
(loss) for fiscal 2000 compared with fiscal 1999 adjusted to reflect the impacts
of change in accounting estimates, pre-petition lawsuit settlements, and
restructuring and other special charges:
<Table>
<Caption>
FISCAL FISCAL
IN THOUSANDS 2000 1999
- ------------ -------- --------
Operating income (loss):
Underground Mining Machinery................................ $ 16,956 $(65,893)
Surface Mining Equipment.................................... 57,432 33,976
Corporate expense........................................... (16,368) (50,597)
-------- --------
Total............................................. $ 58,020 $(82,514)
======== ========
Adjustments to operating income (loss):
Change in accounting estimates.............................. $ -- $ 68,520
Pre-petition lawsuit settlements............................ 11,365 --
Restructuring and other special charges..................... 4,518 38,811
-------- --------
Total............................................. $ 15,883 $107,331
======== ========
Adjusted operating income (loss):
Underground Mining Machinery................................ $ 32,639 $ 9,624
Surface Mining Equipment.................................... 57,632 38,976
Corporate expense........................................... (16,368) (23,783)
-------- --------
Total............................................. $ 73,903 $ 24,817
======== ========
</Table>
During the bankruptcy process, we attempted to resolve outstanding
litigation issues and arrive at settlements before we emerged from bankruptcy.
The amounts in the preceding table reflect the charges that were associated with
these settlements. During the third quarter of fiscal 1999, we filed for
protection under the U.S. Bankruptcy Code, and as a result, incurred
approximately $68.5 million of charges associated with changes in accounting
estimates for accounts receivable, inventories, and potential warranty expense.
In addition, during fiscal 1999 and the first quarter of fiscal 2000, the
Underground Mining Machinery business incurred costs associated with the
elimination of manufacturing capacity and the restructuring of its global
operations to be more consistent with the existing level of market
opportunities. After the adjustments listed in the table above, adjusted
operating income increased from approximately $24.8 million in fiscal 1999 to
approximately $73.9 million in fiscal 2000. This increase in adjusted operating
income was due to the improved operating results for both of our business
segments combined with a reduction in corporate expense.
The improvement in Underground Mining Machinery adjusted operating income,
despite a slight decline in net sales in fiscal 2000 compared to a year earlier,
was the result of the cost reduction programs that were initiated late in fiscal
1998. Gross profit as a percentage of net sales was approximately 23% for
40
both years as the business was able to maintain its price realization in soft
markets for underground mining machinery. The results of the business' ongoing
cost reduction efforts during fiscal 2000 were an approximately $24 million
reduction in the spending for selling, engineering, administration, and
manufacturing overhead in fiscal 2000 compared with fiscal 1999.
The increase in adjusted operating income for Surface Mining Equipment from
$39 million in fiscal 1999 to approximately $57.6 million in fiscal 2000 was the
result of the increase in new machine shipments and the increase in
manufacturing overhead absorption that was associated with the increase in the
production of new machines in the business's manufacturing facility. The
increase in this overhead absorption contributed to the increase in the gross
profit percentage from 20.4% in fiscal 1999 to 23.3% in fiscal 2000. In
addition, spending for selling, engineering, and administration was
approximately $7 million less in fiscal 2000 than spending in fiscal 1999, as
the business was successful in controlling these expenses.
FUTURE EFFECTS OF FRESH START ACCOUNTING
The charges reflected in our statement of operations related to the effects
of fresh start accounting adjustments are non-cash items and, accordingly, do
not affect our cash flows from operations. We estimate the effects of fresh
start accounting on fiscal 2002 operating results will include charges of $51.3
million related to the revalued inventory (approximately $46.4 of which was
recorded in the 2002 First Quarter), $13.3 million for depreciation of revalued
property, plant and equipment (approximately $3.3 million of which was recorded
in the 2002 First Quarter), and $13.9 million for amortization of finite-lived
intangible assets (approximately $9.0 million of which was recorded in the 2002
First Quarter). We estimate total fresh start accounting charges in fiscal 2003
and several years thereafter will be approximately $20 million annually.
RESTRUCTURING AND OTHER SPECIAL CHARGES
During fiscal 1999, we recorded $12.0 million of restructuring charges
related to rationalization of certain of Joy's original equipment manufacturing
facilities, our reorganization and the reduction of Joy's world-wide operating
structure. Costs of $7.3 million were charged in the third quarter of fiscal
1999, primarily related to the impairment of certain assets related to a
facility rationalization, and $4.7 million ($0.9 million third quarter and $3.8
million fourth quarter) were made for severance of approximately 240 employees.
During fiscal 2000, we recorded $6.1 million in additional charges related
to our reorganization and rationalization primarily related to employee
severance. A prior reserve of $1.6 million was reversed during fiscal 2000 as it
was no longer needed for facility rationalization. The residual reserve of $1.7
million at October 31, 2000 was utilized prior to our emergence from bankruptcy.
During fiscal 1999, we incurred $7.7 million of charges related to certain
consulting and legal costs associated with strategic financing and business
alternatives investigated prior to our bankruptcy filing. We recorded a charge
of $19.1 million during the third quarter of fiscal 1999 in connection with
certain management organizational changes. The charge was primarily associated
with supplemental retirement, restricted stock, and long-term compensation
obligations related to our former officers.
Also, during the third quarter of fiscal 1999, we recorded certain charges
related to changes in accounting estimates for provisions for excess and
obsolete inventory, warranties and doubtful accounts receivable based upon
changes in the business environment resulting from our bankruptcy filing,
including our decision to discontinue certain equipment models and increased
collection difficulties. We recorded a $5.3 million provision for doubtful
accounts receivable, $25.0 million provision for warranty and other liabilities
and $38.2 million provision for excess and obsolete inventory.
41
REORGANIZATION ITEMS
Reorganization expenses are items of income, expense and loss that were
realized or incurred by the Predecessor Company as a result of our decision to
reorganize under Chapter 11 of the Bankruptcy Code.
Net reorganization expenses for the Predecessor Company 2001 Eight Months,
fiscal 2000 and fiscal 1999 consisted of the following:
<Table>
<Caption>
PREDECESSOR
COMPANY
2001 FISCAL FISCAL
IN THOUSANDS EIGHT MONTHS 2000 1999
- ------------ ------------ ------- -------
Professional fees directly related to the filing..... $30,639 $39,061 $14,457
Amortization of debtor-in-possession financing
costs.............................................. 4,148 10,602 3,125
Accrued retention plan costs......................... 2,228 3,603 730
Write-down of property to be sold.................... -- 9,000 --
Settlement of performance guarantees................. -- 2,991 --
Rejected equipment leases............................ -- 1,399 2,322
Interest earned on DIP proceeds...................... (581) (1,268) (330)
------- ------- -------
$36,434 $65,388 $20,304
======= ======= =======
</Table>
Cash payments made for reorganization items were $34,481, $40,280 and
$17,237 for the Predecessor Company 2001 Eight Months, fiscal 2000 and fiscal
1999, respectively.
INCOME TAXES
Due to our emergence from bankruptcy and the resulting impacts on pre- and
post-emergence operating results, an analysis of the overall effective income
tax rates for the year ended October 31, 2001 and prior years and the major
drivers of the tax rates would not be meaningful. As of October 31, 2001, we did
not meet the requirements that would allow recording the future benefits of any
U.S. net operating loss, tax credits or net deferred tax assets for financial
reporting purposes. As a result, we recorded valuation reserves to offset any
future U.S. income tax benefits. Beginning in the 2002 First Quarter, we met
these requirements and began recording deferred tax assets. Our Reorganization
Plan created a significantly modified capital structure that required the
application of fresh start accounting pursuant to SOP 90-7. Under fresh start
accounting, recognition of any deferred tax asset subject to a valuation reserve
will require the reduction in valuation reserves to first reduce any excess
reorganization value until exhausted, then other intangibles until exhausted,
and thereafter be reported as additional paid in capital. Consequently, a net
tax charge will be incurred in future years when these tax assets are recognized
as the reversal of the valuation reserves related to said assets will not be
credited against income tax expense.
From a cash flow perspective, even though the potential future tax benefits
were not recorded on the balance sheet as of October 31, 2001, we have the
opportunity to utilize these tax benefits in our U.S. federal income tax return
filing to offset anticipated U.S. federal taxable income beginning in fiscal
2002 and beyond. However, because our Reorganization Plan provided for
substantial changes in our ownership, there will be annual limitations on the
amount of the U.S. federal and certain state net operating loss carryforwards
which we will be able to utilize on our federal and state income tax returns.
This annual limitation is currently estimated to be approximately $46 million.
Income tax expense for the 2002 First Quarter decreased to a net income tax
benefit of $18.5 million as compared to a $3.0 million income tax expense in the
2001 First Quarter. This decrease was principally due to the projected ability
to benefit from certain current year losses and deductions while similar items
were not recognized in the prior year.
42
DISCONTINUED OPERATIONS
Our predecessor classified Beloit and its subsidiaries as a discontinued
operation in its Consolidated Financial Statements as of October 31, 1999. Most
of the pulp and papermaking machinery assets of Beloit and its operating
subsidiaries were sold pursuant to procedures approved by the U.S. Bankruptcy
Court prior to our emergence from bankruptcy. Our predecessor's equity interest
in Beloit was transferred to a liquidating trust on the date of our emergence
from bankruptcy as provided for in our Reorganization Plan.
Our predecessor recorded a gain from discontinued operations of $253.2
million for the Predecessor Company 2001 Eight Months. This gain was primarily
attributable to the write-off of a negative investment in Beloit of
approximately $1,063.4 million offset by the write off of Beloit receivables of
approximately $809.7 million.
LIQUIDITY AND CAPITAL RESOURCES
Working capital and cash flows are two financial measurements which provide
an indication of our ability to meet our obligations. We currently use cash
generated by operations and borrowings under our senior credit facility to fund
continuing operations.
WORKING CAPITAL
The following table summarizes the major elements of our working capital at
the end of the periods indicated:
<Table>
<Caption>
2002 FIRST FISCAL FISCAL
IN MILLIONS QUARTER 2001 2000
- ----------- ---------- ------- -------
Cash.................................................... $ 46.9 $ 39.7 $ 72.1
Restricted cash......................................... 6.4 19.4 --
Accounts receivable, net................................ 196.6 209.5 177.2
Inventories............................................. 481.7 513.9 410.3
Short-term debt......................................... (2.2) (1.7) (108.8)
Accounts payable........................................ (72.6) (75.6) (72.5)
Other, net.............................................. (235.5) (261.9) (259.5)
------- ------- -------
Working Capital......................................... $ 421.3 $ 443.3 $ 218.8
======= ======= =======
</Table>
Working capital as of the 2002 First Quarter was $421.3 million as compared
to $443.3 million as of October 31, 2001. The decrease in working capital of
$22.0 million is primarily attributed to a reduction in the inventory balance as
a result of the $46.4 million fresh start inventory adjustment. Before giving
consideration to the fresh start adjustment, our inventory balance increased by
$14.2 million as a result of a weakness in the global market for electric
shovels. Our net receivable balance decreased by $12.9 million as a result of a
more aggressive approach in collections. In addition to the items discussed
above, working capital improved as a result of decreases in employee
compensation and benefits, advance payments and progress billings and other
accrued liabilities, but was partially offset by a decrease in restricted cash.
Working capital as of October 31, 2001 was $443.3 million as compared to
$218.8 million as of October 31, 2000. The change in working capital of $224.5
million primarily consisted of: (1) an increase in accounts receivable of $32.3
million due to the timing of our sales near the end of fiscal 2001; (2) an
increase in inventory of $103.6 million, which includes $51.3 million of the
remaining balance of the non-cash write-up of inventories associated with fresh
start accounting and an increase of $51.8 million from the elimination of LIFO
reserves as a result of the revaluation of inventories at the time of emergence;
and (3) a decrease of $107.1 million associated with the elimination of
short-term borrowings upon emergence.
43
CASH FLOW
Net cash flow used by continuing operations was $1.8 million for the 2002
First Quarter compared to net cash used by continuing operations of $30.6
million for the 2001 First Quarter. The use of cash in the 2002 First Quarter,
before giving effect to currency translation adjustments, was primarily the
result of a $20.7 million increase in inventories and a $17.1 million decrease
in accounts payable, employee compensation and other accrued liabilities offset
by a decrease of $13.0 million in restricted cash and a $10.3 million decrease
in accounts receivable. The increase in inventories is primarily the result of
the delay in receiving orders for new equipment anticipated to be received
during the 2002 First Quarter while the decrease in the accrued liabilities was
primarily associated with the payment of professional fees and year-end bonuses.
The decrease in the restricted cash account resulted from the payment of
professional fees associated with implementation of the Reorganization Plan and
the decrease in accounts receivable was attributed to cash collection
activities.
During the 2002 First Quarter we increased our borrowings under our senior
credit facility by $18.1 million.
Cash provided by continuing operations for the Successor Company 2001 Four
Months was $62.6 million and, combined with the $104.3 million of cash that was
used by continuing operations for the Predecessor Company 2001 Eight Months,
resulted in a Combined 2001 $41.7 million use of cash by continuing operations
for 2001 compared to $36.7 million of cash provided by continuing operations
during fiscal 2000. The $78.4 million additional usage of cash in fiscal 2001
was primarily associated with changes in working capital. The two most
significant working capital changes related to accounts receivable and
inventories. During fiscal 2000, the timing of year end sales resulted in a
$14.0 million reduction in accounts receivable balances while at the end of
fiscal 2001 the timing of the collection of year end sales resulted in a $37
million increase in outstanding accounts receivable. In addition, inventory
reduction programs were effective during fiscal 2000 and resulted in a $14
million decrease in inventories during the year, while at the end of fiscal 2001
the shipment of a large longwall equipment system slipped into the first quarter
of fiscal 2002 and several anticipated electric shovel orders were delayed until
fiscal 2002 which resulted in a $33.9 million increase in inventories at the end
of fiscal 2001.
Capital expenditures totaled $22.3 million for the Combined 2001, $9.6
million for the Successor Company 2001 Four Months, and $12.7 million for the
Predecessor Company 2001 Eight Months and were $32.4 million during fiscal 2000.
For fiscal 2002, we anticipate capital expenditures of approximately $30 million
primarily for maintenance of existing facilities. In the absence of acquisitions
and other special events, we expect to incur annual capital expenditures of $25
million to $30 million for maintenance of existing facilities in the next
several years.
Our ability to make scheduled payments of principal or to pay interest on,
or to refinance our indebtedness, depends on our future performance, which, to a
certain extent, is subject to general economic, financial, competitive and other
factors beyond our control. See "Risk Factors." Based upon the current level of
operations, we believe that cash flow from operations, together with available
borrowings under our senior credit facility, as amended in connection with this
offering, will be adequate to meet our anticipated future requirements for
capital expenditures and debt service for at least the next twelve months. There
can be no assurance that our business will generate sufficient cash flow from
operations or that future borrowings will be available in an amount sufficient
to enable us to service our indebtedness, or to make necessary capital
expenditures. We continuously evaluate potential acquisitions of businesses
which complement our existing operations. Depending on various factors,
including, among others, the cash consideration required in such potential
acquisitions, we may determine to finance any such transaction with existing
sources of liquidity.
CREDIT FACILITIES
On June 29, 2001, we entered into a $350 million senior credit facility,
consisting of a $250 million revolver and a $100 million term loan in connection
with our emergence from bankruptcy. We used this facility to pay off the
Predecessor Company's debtor-in-possession financing facility and certain
foreign
44
credit facilities and to fund our ongoing operations. On March 18, 2002 in
connection with completing the offering of the notes, we paid off the $100
million term loan. See "Description of Other Indebtedness." In addition to our
senior credit facility, our operating subsidiaries in Chile and South Africa can
borrow up to $40 million in the aggregate under local borrowing facilities.
Additionally, in connection with our emergence from bankruptcy, we entered
into an indenture governing the terms of approximately $108.8 million in 10.75%
Senior Notes due 2006. Effective April 22, 2002, we redeemed the 10.75% Senior
Notes due 2006 and the related indenture was cancelled.
Our senior credit facility requires that we maintain certain financial
ratios and balances. As of February 2, 2002, the latest measurement date, we
were in compliance with all of the covenants of the agreement. We also have
outstanding letters of credit with our customers which reduce the amount that
may be borrowed under our senior credit facility.
OFF-BALANCE SHEET ARRANGEMENTS
We lease various assets under operating leases. The aggregate payments
under operating leases as of February 2, 2002 are disclosed in the table of
Disclosures about Contractual Obligations and Commercial Commitments below. No
significant changes to lease commitments have occurred since February 2, 2002.
We have no other off-balance sheet arrangements.
DISCLOSURES ABOUT CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS
The following table lists our contractual obligations and commercial
commitments as of February 2, 2002:
<Table>
<Caption>
LESS THAN 1 AFTER 5
CONTRACTUAL OBLIGATIONS TOTAL YEAR 1 - 3 YEARS 4 - 5 YEARS YEARS
- ----------------------- -------- ----------- ----------- ----------- -------------
Long-Term Debt................. $303,450 $ -- -- -- $303,450
Short-Term Note Payable........ 1,300 1,300 -- -- --
Capital Lease Obligations...... 3,064 899 587 512 1,066
Operating Leases............... 32,054 12,720 15,811 2,139 1,384
-------- ------- ------- ------ --------
Total.......................... $339,868 $14,919 $16,398 $2,651 $305,900
======== ======= ======= ====== ========
</Table>
EFFECTS OF INFLATION
The impact of inflation on our operations has not been significant in
recent years. However, there can be no assurance that a high rate of inflation
in the future would not have an adverse effect on our operating results.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Volatility in interest rates and foreign exchange rates can impact our
earnings, equity and cash flow. From time to time we undertake transactions to
hedge this impact. Under Financial Accounting Statement No. 133, "Accounting for
Derivative Instruments and Hedging Activities", a hedge instrument is considered
effective if it offsets partially or completely the negative impact on earnings,
equity and cash flow due to fluctuations in interest and foreign exchange rates.
In accordance with our policy, we do not execute derivatives that are
speculative or that increase our risk from either interest rate or foreign
exchange rate fluctuations. At February 2, 2002, we were not party to any
interest rate derivative contracts. Foreign exchange derivatives at that date
were exclusively in the form of forward exchange contracts executed
over-the-counter. The counterparties to these contracts are several commercial
banks, all of which hold investment grade ratings. There is a concentration of
these contracts at JPMorgan Chase Bank.
45
Our Foreign Exchange Risk Management Policy is a risk-average policy under
which most exposures that impact earnings and cash flow are fully hedged,
subject to a net $5 million equivalent of permitted exposures per currency.
Exposures that impact only equity or that do not have a cash flow impact are
generally not hedged with derivatives. There are two categories of foreign
exchange exposures that are hedged: assets and liabilities denominated in a
foreign currency and future committed receipts or payments denominated in a
foreign currency. These exposures normally arise from imports and exports of
goods and from intercompany trade and lending activity.
The fair value of our forward exchange contracts as of February 2, 2002 is
described in the following table of dollar equivalent terms:
<Table>
<Caption>
IN THOUSANDS OF U.S. DOLLARS MATURING IN 2002
---------------------------- -----------------
BUY SELL
------- ------
U.S. Dollar................................................. 1,034 (98)
Australian Dollar........................................... (76) 3
German Deutschemark......................................... -- --
British Pound............................................... (581) 59
Euro........................................................ 40 188
</Table>
RECENT ACCOUNTING PRONOUNCEMENTS
In July 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 143, "Accounting for Asset Retirement
Obligations" which addresses the accounting and reporting for obligations
associated with the retirement of tangible long-lived assets and the associated
retirement costs. SFAS No. 143 requires that the fair value of a liability for
an asset retirement obligation be recognized in the period in which it is
incurred if a reasonable estimate of fair value can be made. SFAS No. 143 is
effective for financial statements issued for fiscal years beginning after June
15, 2002. We do not expect SFAS No. 143 to have a material effect on our
consolidated financial condition or cash flows.
In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." SFAS No. 144 generally establishes
a standard framework from which to measure impairment of long-lived assets and
expands the Accounting Principles Board ("APB") 30, "Reporting the Results of
Operations -- Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions" to
include a component of the entity (rather than a segment of the business). SFAS
No. 144 is effective for financial statements issued for fiscal years beginning
after December 15, 2001. We do not expect SFAS No. 144 to have a material effect
on our consolidated financial condition or cash flows.
46
BUSINESS
GENERAL
We are the world's leading manufacturer and servicer of high productivity
mining equipment for the extraction of coal and other minerals and ores. Our
equipment is used in major mining centers throughout the world to mine coal,
copper, iron ore, oil sands and other minerals. We operate in two business
segments: Underground Mining Machinery, comprised of our Joy Mining Machinery
business, and Surface Mining Equipment, comprised of our P&H Mining Equipment
business. Joy is the world's largest producer of high productivity underground
mining machinery for the extraction of coal and other bedded materials. P&H is
the world's largest producer of electric mining shovels and walking draglines,
and a leading producer of rotary blasthole drills for open-pit mining
operations. Through our Joy and P&H businesses, we have the largest installed
base of continuous miners, longwall shearers, shuttle cars and electric mining
shovels in the mining industry. We have built strong franchises under the Joy
and P&H trade names by providing equipment that is cost efficient over its life
cycle and by supporting our installed base of equipment through the most
extensive network of company-operated service centers and parts distribution
warehouses in our industry.
We derive a substantial portion of our sales from aftermarket activities,
including selling replacement parts and components, providing preventive
maintenance and repair services, refurbishing or rebuilding existing equipment
and providing diagnostic services, upgrades and training. Aftermarket support is
critical to maintaining machine productivity, availability, reliability and
durability in the field. Over the life of a mining machine, sales from
aftermarket parts and service often significantly exceed the original purchase
price. In fiscal 2001, we derived 70% of our sales from aftermarket parts and
service. We believe our aftermarket business is more stable than our new
equipment business and supports consistency in our financial performance.
For fiscal 2001, we had net sales of $1,148.2 million and pro forma
adjusted EBITDA of $124.3 million. Our shares are traded on the Nasdaq national
market (ticker: JOYG).
UNDERGROUND MINING MACHINERY -- JOY MINING MACHINERY
Joy is the world's largest manufacturer of high productivity electric
underground mining machinery used primarily for the extraction of coal. Joy's
products include: continuous miners, longwall shearers, roof supports, armored
face conveyors, complete longwall systems, shuttle cars, continuous haulage
systems, battery haulers, flexible conveyor trains and roof bolters. Joy also
maintains an extensive network of service centers and parts distribution
warehouses to rebuild, repair and exchange equipment and to provide replacement
parts and components in support of its installed base. This network is
strategically located in major underground mining regions and includes eight
service centers in the United States as well as service centers in Australia,
China (currently customer-owned), Poland, South Africa, and the United Kingdom.
In fiscal 2001, Underground Mining Machinery generated net sales of $674.6
million, representing 58.8% of our net sales, and pro forma adjusted EBITDA of
$88.8 million, representing 63.4% of our pro forma adjusted EBITDA (before
corporate expense).
SURFACE MINING EQUIPMENT -- P&H MINING EQUIPMENT
P&H is the world's largest producer of high productivity electric mining
shovels and walking draglines and a leading producer of large diameter blasthole
drills and dragline bucket products. P&H products are used in surface mines for
removing soil and other overburden and digging and loading copper, coal, iron
ore, oil sands, gold, lead, zinc, bauxite, uranium, phosphate and other minerals
and ores. P&H is also a leading provider of fabrication, erection, repair and
support services for the surface mining industry through its P&H MinePro
Services group. P&H MinePro Services provides parts, service, repairs, component
exchanges, diagnostics, upgrades and rebuilds for both P&H and competing
products through 15 facilities strategically located in major mining centers
around the world. In addition, P&H MinePro Services distributes products and
provides service support for over 30 manufacturers of complementary mining
47
products, parts, components and supplies. These manufacturers, which we refer to
as our "Alliance Partners," use P&H MinePro Services to distribute and service
their products because of the efficiency of our network and the close proximity
of our locations to most of the world's high productivity surface mines. In
fiscal 2001, Surface Mining Equipment generated net sales of $473.6 million,
representing 41.2% of our net sales, and pro forma adjusted EBITDA of $51.2
million, representing 36.6% of our pro forma adjusted EBITDA (before corporate
expense).
INDUSTRY OVERVIEW
The mining equipment industry consists of two primary segments: (1)
original equipment manufacturing and (2) aftermarket products and services. The
mining industry uses our original equipment to extract, dig and load various
minerals and ores. Mining operations are conducted both on the surface and
underground. Our principal customers operate mines in the United States, Canada,
Australia, Brazil, Chile, China, South Africa and the United Kingdom.
Sales of new equipment are more cyclical in nature than those of
aftermarket products and services and are substantially influenced by commodity
price fluctuations for mined minerals. Historically, during periods of declining
commodity prices, mine operators have delayed purchases of new equipment.
Conversely, during periods of rising commodity prices, mine operators have
expanded their operations and increased their production capabilities by
replacing aging equipment. Offsetting the cyclical nature of the original
equipment segment is the demand for aftermarket parts, service and support.
Because of their high fixed cost structures, mining companies typically operate
their equipment twenty-four hours per day, seven days per week, under extremely
demanding operating conditions. Since downtime is very costly for them, mining
companies strive to keep their equipment in productive operating condition at
all times. Mining equipment is large, complex and expensive, and its useful life
ranges from several years to 40 years, depending on the type of machinery and
its application. Our customers use complex equipment that requires a substantial
amount of preventive maintenance, repairs and component rebuilds to minimize
operational downtime and extend the useful life of such equipment. As a result
of these factors, the demand for aftermarket parts and services is more steady
than the demand for new equipment, and accordingly, our emphasis on aftermarket
parts and services helps add stability to our sales.
UNDERGROUND MINING
Sales of new underground mining machinery are cyclical and depend
substantially upon the competitive position of coal as a fuel for electric power
generation and, in turn, underground coal production levels and prices.
Historically, 85% to 90% of the coal mined in the United States has been used in
the production of electricity. In addition, coal has provided greater than 50%
of electric power in the United States for decades. The EIA has projected that
coal will continue to remain the largest fuel source for electrical generation
through 2010. Historically, due to concerns over the environment, energy sources
other than coal (such as oil, gas, nuclear, thermal and other sources) have been
increasingly viewed as alternative power sources for the electrical generation
market. As such, the demand for coal-fired power generation depends in part upon
its ability to remain competitive with other energy generation sources and
technologies. We believe that the energy crisis recently experienced in parts of
the United States and a more favorable political environment towards reliable
energy sources contributed to a stronger market for coal in the United States in
2001.
48
The following table describes the amount of electricity generated by
various energy sources during the last decade in the United States, as reported
by EIA.
<Table>
<Caption>
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
% of Electricity Net
Generation:
Coal.......................... 52.6% 51.8% 52.6% 52.9% 52.0% 50.9% 52.1% 52.8% 51.8% 50.8% 51.8%
Nuclear....................... 19.0 19.8 20.0 19.1 19.7 20.2 19.5 17.9 18.7 19.7 19.9
Natural Gas................... 12.5 12.8 13.6 13.4 14.3 14.8 13.2 13.9 14.9 15.0 15.7
Hydro......................... 9.6 9.3 8.1 8.6 7.9 9.2 10.0 10.2 8.8 8.5 7.1
Petroleum..................... 4.1 3.9 3.2 3.5 3.2 2.2 2.4 2.7 3.5 3.3 2.9
Other......................... 2.2 2.4 2.5 2.5 2.9 2.7 2.8 2.5 2.3 2.7 2.6
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total......................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== ===== ===== ===== ===== ===== ===== =====
</Table>
Aftermarket parts, service and support sales represent a significant
component of the industry that has generally experienced more stability than
sales of original underground equipment. Our mining machinery is often
long-lived. During its life cycle, the machinery receives substantial preventive
maintenance and repair services and important components must be rebuilt.
Underground mining equipment operates under harsh, demanding conditions, and is
crucial for a mining operation. For example, if a mine's longwall system were to
not function properly, the mine operations would be disrupted and potentially
shut down. It is, therefore, critical to keep underground mining equipment in
productive operating condition, which requires regular maintenance and repair
throughout its life. As a result, our underground mining customers depend upon
our service and maintenance programs, an approach we refer to as Life Cycle
Management, to sustain their mining machinery throughout its useful life.
The principal customers for high productivity underground mining machinery
have historically been in the United States, the United Kingdom, Germany,
Australia and South Africa. Taken together, sales to these markets account for
the majority of all original equipment orders, although in any given year
markets in other regions may assume greater importance.
Underground coal mine production historically has accounted for
approximately 35% to 40% of total coal production levels in the United States.
However, underground coal production levels can be adversely affected by, among
other things, changes that reduce the need for electrical generating capacity,
regulatory changes, labor negotiations between miners and operators, changes in
mine ownership and the relative prices of competing fuels.
SURFACE MINING
Large-scale surface mining equipment is primarily used by large mining
operations engaged in the mining of coal, copper, iron ore and other
commodities. Until the late 1980's, the coal mining industry accounted for the
largest percentage of demand for surface mining machinery.
Sales of new surface mining equipment are cyclical in nature due to
fluctuations in the prices of coal, copper, iron ore and other commodities.
However, the aftermarket for parts and services is more stable because these
expensive, complex machines are typically operated for 10 to 40 years, requiring
regular maintenance and repair throughout their productive lives.
The principal customers for surface mining equipment have been in Chile,
Australia, Canada and the United States. Taken together, these markets account
for the majority of all original equipment sales, although in any given year
markets in other regions may assume greater importance.
Current U.S. federal and state laws regulate surface mining and mine
reclamation and may affect some of our mining company customers, principally
with respect to the cost of complying with, and delays resulting from,
reclamation, permitting and environmental requirements. As our customers'
compliance costs rise, they may discontinue existing mining operations and
determine that it is not economical to open new mines, thereby negatively
impacting our sales.
49
MARKETS SERVED
Our mining equipment is used in major mining centers throughout the world
in the mining of metal and mineral commodities, including coal, copper, iron
ore, oil sands, gold, silver, aluminum and zinc. Demand for these commodities is
a function of the overall global economy, population growth and improvements in
living standards. The breakdown of our net sales by commodity end-market for
fiscal 2001 is 70% coal, 16% copper, and 14% other minerals, which includes oil
sands, iron ore, gold, borax, diamonds and phosphate.
COMPETITIVE STRENGTHS
We believe that our large installed base of equipment, stable aftermarket
business, extensive service and parts distribution network, leading position in
new equipment sales, industry leading technology and strategic position in
emerging markets will allow us to continue to grow our sales and earnings and
enhance our global market position.
Large Installed Base of Equipment. We have served the underground and
surface mining industries for over 75 years. We believe that our continuous
miners and shuttle cars represent about 90% of the total installed base of these
types of high productivity mining equipment in service today in the principal
areas in which we have historically sold our products and that our longwall
shearers, roof support systems, armored face conveyors and electric mining
shovels represent 60% or more of the total installed base of these types of high
productivity mining equipment in service today in the principal areas in which
we have historically sold our products. Our installed base of large rotary
blasthole drills and walking draglines is smaller, but still significant. Our
large installed base supports our aftermarket parts and service business and
strengthens our relationship with customers, positioning us for new equipment
orders. The following table sets forth our installed base of equipment in each
of our key product categories:
<Table>
<Caption>
JOY GLOBAL
INSTALLED
BASE
(UNITS)
----------
UNDERGROUND MINING MACHINERY
Continuous Miners...................................... 1,234
Longwall Shearers...................................... 76
Shuttle Cars........................................... 2,285
Roof Support Systems................................... 77
Armored Face Conveyers................................. 72
SURFACE MINING EQUIPMENT
Electric Mining Shovels................................ 930
Large Rotary Blasthole Drills(1)....................... 173
Walking Draglines...................................... 76
</Table>
- ---------------
(1) Defined as drills having bore diameters exceeding 8 5/8 inches.
Stable Aftermarket Business. Mining is a demanding process involving the
application of high forces to cut, load and move vast amounts of rugged
materials. Mining equipment is used around the clock; a typical mine will
operate its equipment twenty-four hours a day, seven days a week. The high fixed
costs associated with mining operations make equipment downtime extremely
expensive; the failure of a key machine can lead to losses of thousands of
dollars per minute. This high utilization under harsh operating conditions,
combined with the high cost of downtime, generates consistent aftermarket sales
for original equipment manufacturers as customers require regular replacement
parts and service in order to keep their equipment operating. Customers
generally prefer to source critical parts and service from the original
equipment manufacturer, even at a price premium, to avoid potential quality
issues and longer lead times associated with sourcing products and services from
third-party manufacturers. Our worldwide service and
50
parts distribution network positions us to capture a substantial portion of the
aftermarket business for our machines and, in surface mining, additional
aftermarket business from other manufacturers, primarily through our Alliance
Partner relationships. Over the past five years, our sales of aftermarket parts
and service represented an average of 62% of our sales. We believe our
aftermarket business is more stable than our new equipment business and supports
consistency in our financial performance.
Extensive Service and Parts Distribution Network. We have developed an
extensive field service and parts distribution network strategically located
around major mining centers. Our service and parts distribution network includes
eight Joy service centers in the United States, as well as service centers in
Australia, South Africa, the United Kingdom, Poland and China (currently
customer-owned), and six P&H MinePro Services service centers in the United
States, three in Australia, three in Chile and one in South Africa. At our
service centers, customers can have major components of their equipment repaired
or exchanged and, in the case of Joy equipment, can have their machines
completely rebuilt. We have more service centers and offer a broader array of
services than other manufacturers in our industry. We believe the comprehensive
aftermarket support that we provide through our service and parts distribution
network facilitates close relationships with our customers and significantly
enhances our ability to generate aftermarket sales. Without the benefit of a
large installed base, we believe that our service and parts distribution network
would be difficult for others to replicate.
Leading Provider of New Equipment. We are the leading provider of new
equipment in our principal product categories:
- Joy supplied approximately 77% of the continuous miners, 96% of the
longwall shearers and 90% of the new shuttle cars sold in the United
States over the past five years.
- Joy produced approximately 54% of the roof support systems and
approximately 54% of the armored face conveyors sold in the United States
during the last five years.
- P&H supplied over 75% of the electric mining shovels and approximately
42% of the large rotary blasthole drills sold globally over the past five
years.
- P&H produced five of the eight large walking draglines delivered
worldwide over the last ten years.
We believe that our leading position in new equipment sales is supported by
the high availability, reliability and durability of our machines which results
from their high productive capacity and the comprehensive aftermarket support we
provide.
Industry Leading Technology. We design and manufacture innovative,
technologically advanced products to reinforce our leading position in new
equipment sales. We have focused our new product development on delivering
products, upgrades and services that reduce our customers' cost of output per
unit mined over the life cycle of their equipment, and we continually invest in
research and development to refine and enhance the performance of our existing
products in our customers' operations. We have introduced many innovations to
the mining equipment industry over the past several years, including:
- the first integrated longwall mining systems which provide customers with
high levels of productivity and single source accountability;
- the 4100 BOSS (Big Oil Sands Shovel), a new electric mining shovel
designed specifically to operate in soft oil sands;
- high voltage continuous miners which develop significantly more cutting
force than previous models and competing alternatives;
- digital drive software and hardware that enable our customers to improve
electric mining shovel cycle times (the amount of time required to fully
load a surface mining truck) through process analysis and optimization;
and
51
- JNA II underground mining machinery control systems that provide enhanced
control features, new diagnostic capabilities and allow above ground
remote monitoring of equipment performance by mine management.
Strategically Positioned in Emerging Markets. We are strategically
positioned in key emerging markets, including China, India and Russia, where we
believe increasing quantities of high productivity mining equipment will be
purchased either to support increased mining activity or to replace existing
equipment in order to improve productivity. China, India and Russia represent
approximately 35% of the world's coal production, but produce up to 95% less
coal per miner than mining operations in the United States. We believe that as
these countries continue their industrial development, they will seek to expand
and enhance the productivity of their coal mining operations to satisfy their
increased demand for stable, low-cost electric power. According to the EIA,
China and India are projected to account for 97% of the world's total increase
in coal consumption through 2020. We have established relationships in China,
India, and Russia that we believe position us for sales growth as these
countries seek to upgrade their coal mining equipment. We have been selling
mining equipment in China for over 20 years, and we were recently awarded a
major new equipment contract for longwall shearers and continuous miners. To
support our installed base of underground mining machinery in China, we have
supported a customer-owned service center since 1999, and we anticipate opening
our own service center within the next two years. P&H has a 50 year operating
history in India and benefits from an installed base of equipment and well-
established relationships with Indian mining companies. As India transitions to
high productivity underground mining, we believe that there will be significant
opportunities for our underground mining machinery business. Earlier this year,
we sold and shipped our first major order consisting of a continuous miner and
two shuttle cars to Coal India, the state run coal authority. Over the last
several years, we have installed a number of longwall systems in Russia and
introduced continuous mining there.
OUR BUSINESS STRATEGY
Traditional capital goods manufacturers are frequently product-driven
businesses that operate on the principle of selling lower margin original
equipment in order to be able to later sell higher margin parts in the
aftermarket. They typically seek new applications for their products to achieve
growth and have centralized operating structures.
Our strategy is fundamentally different in that we position ourselves as a
service company focused on lowering our customers' cost per unit of output by
providing high productivity equipment and comprehensive aftermarket support over
the equipment's entire life cycle. We describe this concept as Life Cycle
Management. Life Cycle Management focuses on keeping equipment operating
continuously, at a high level of productive capacity, and requires high service
levels and a full range of aftermarket capabilities. The value we provide
through Life Cycle Management allows us to price our products at a premium to
competing alternatives, enjoy greater price stability through the business cycle
and develop "sole source" relationships with our customers. In combination, we
believe these factors contribute to stronger financial performance.
We implement our Life Cycle Management strategy through a series of
interrelated operational and strategic initiatives designed to drive our revenue
growth and enhance our market position. These initiatives include:
Maintaining Our Market-Driven Approach. Our market-driven approach is a
highly decentralized sales and service strategy that focuses on our customers'
needs on a mine-by-mine basis. Our service centers and parts distribution
warehouses are located close to the mines we serve and we work to apply our
product and service offerings to suit our customers' individual requirements. We
go to market with a concept we call "one face to the customer." This is a team
approach in which the same sales and service personnel work with a given mine on
a continuing basis. The team often works with the mine as it plans its
operations and identifies those Joy or P&H products and services that will
maximize the mine's productivity and efficiency. The team directs our global
resources and aftermarket support, frequently supervising or providing
maintenance for the equipment. The close relationships that our sales and
service
52
teams develop with the mines they serve provide us with a unique understanding
of our customers' operations that allows us to closely align our products,
services and decision processes with their individual requirements. Our
market-driven approach has positioned our aftermarket business for continued
growth as our customers increasingly outsource the maintenance and repair of
their equipment in order to reduce costs and improve productivity.
Continuing to Expand Our Aftermarket Capabilities. We have placed our
service resources close to the mines we serve. This allows us to deliver
customized aftermarket solutions designed to minimize the mine's high cost of
equipment downtime and lower its cost per unit of output. Our solutions range
from traditional sales transactions to component and whole machine exchanges to
complete "cost per ton" agreements that include a range of contracted services
for a fixed cost per ton of the commodity produced. Our broad range of services
includes parts, rebuilds, exchanges as well as diagnostics, preventive
maintenance and technology upgrades. We believe our ability to provide custom
aftermarket solutions is a significant competitive advantage and allows us to
create more sole source relationships with our customers as we increasingly
become a full service supplier. Continuing to expand our aftermarket
capabilities should drive continued growth in our aftermarket business.
Continuing to Globalize Our Operations. Mining companies have become
increasingly global and require the same level of equipment productivity,
quality and service capability wherever in the world they operate. At the same
time, original equipment volumes are relatively small and the machines are
generally custom built using standard components. These two factors make it
critical to standardize component design, eliminate duplicate resources, reduce
cycle times and build efficient supply chains to source raw materials and
components on a global basis in order to meet customer requirements as well as
to maintain efficient, low cost manufacturing. Historically, our machine designs
differed depending on the region where they were produced and raw materials and
components were sourced on a local basis. Over the past several years, we have
implemented programs to consolidate original equipment and parts manufacturing
operations, standardize engineering design, create standard processes in all of
our operations and consolidate our supplier base. The continuation of these
programs should allow us to further improve cycle times and lead times in our
factories and generate improved margins for our original equipment, parts and
components.
Expand into Related Products and Services. We are continually evaluating
complementary products and services to offer to our customers through our
service and parts distribution network. Our existing infrastructure in key
mining centers allows us to offer new products and services to our customers
with relatively little incremental distribution cost. These new products and
services can come from internal development, external acquisitions or from our
Alliance Partners. For example, we recently formed an alliance with General
Electric to service their electric motors used in surface mining equipment. This
alliance has positioned us to better service our own equipment as well as to
service the equipment of our competitors and other types of equipment that we do
not manufacture.
Grow Our Sales in Emerging Markets. We intend to grow by expanding our
presence in emerging markets that have not historically embraced high
productivity mining. These emerging markets produce vast quantities of mined
commodities at low levels of productivity. China, India and Russia are the
largest emerging markets for coal, accounting for approximately 35% of worldwide
coal production. We believe that as these countries continue their economic
development, they will seek to both expand and enhance the productivity of their
coal mining operations to ensure access to reliable, low-cost electric power. We
have developed strong relationships and have significant operating experience in
China, India and Russia and other emerging markets and view these markets as
important future growth opportunities. We are also pursuing new applications for
our products. The most important of these is the extraction of oil sands in
northern Canada where we believe continuing development of mining operations
will require a significant number of electric mining shovels. We recently
developed a specialized electric mining shovel for use in these oil sands and
are developing the aftermarket capabilities to support a growing fleet of this
type of equipment.
53
PRODUCTS AND PRODUCT FEATURES
UNDERGROUND MINING MACHINERY
Through our Joy business, we are the world's leading manufacturer of high
productivity electric underground mining machinery for the underground
extraction of coal and other bedded materials.
Joy's principal products are:
Continuous miners. Electric, self-propelled continuous miners cut coal
using carbide-tipped bits on a horizontal rotating drum. Once cut, the coal is
gathered onto an internal conveyor and loaded into a shuttle car or continuous
haulage system for transportation to the main mine belt. Our continuous miners
typically sell for $1.0 to $2.0 million and have useful lives of approximately
eight years.
Longwall shearers. A longwall shearer moves back and forth on a conveyor
parallel to the coal face. Using carbide-tipped bits on cutting drums at each
end, the shearer cuts a meter or more of coal on each pass and simultaneously
loads the coal onto an armored face conveyor for transport to the main mine
belt. A longwall face may range up to 300 meters in length. Our longwall
shearers typically sell for $1.5 to $2.5 million and have useful lives of
approximately five years.
Roof support systems. Roof support systems support the roof of the mine
during longwall mining. These supports advance with the longwall shearer,
resulting in controlled roof falls behind the supports. Our roof support systems
are typically comprised of 100 to 150 units and sell for $10.0 to $25.0 million.
A roof support system has a useful life of approximately ten years.
Armored face conveyors. Armored face conveyers are used in longwall mining
to transport coal cut by the shearer to the main mine belt. Our armored face
conveyors typically sell for $2.5 to $5.0 million and have useful lives of
approximately five years.
Shuttle cars. Shuttle cars are electric, rubber-tired vehicles used to
transport coal from continuous miners to the main mine belt where self-contained
chain conveyors in the shuttle cars unload the coal onto the belt. Some models
of Joy shuttle cars can carry up to 20 metric tons of coal. New shuttle cars
typically sell for $250,000 to $400,000 and have useful lives of approximately
eight years.
Joy also offers:
Flexible conveyor trains ("FCT"). FCT's are electric powered,
self-propelled conveyor systems to provide continuous haulage of coal from a
continuous miner to the main mine belt. The coal conveyor operates independently
from the track chain propulsion system, allowing the FCT to move and convey coal
simultaneously. Available in lengths of up to 420 feet, the FCT is able to
negotiate multiple 90-degree turns in an underground mine infrastructure.
Battery haulers. Battery haulers perform a similar function to shuttle
cars. Shuttle cars are powered by electricity and battery haulers are powered by
portable batteries.
Continuous haulage systems. The continuous haulage system transports coal
from the continuous miner to the main mine belts on a continuous basis versus
the batch process used by shuttle cars and battery haulers. It is made up of a
series of connected bridge structures that utilize chain conveyors that
transport the coal from one bridge structure to the next bridge structure and
ultimately to the main mine belt.
Roof bolters. Roof bolters are roof drills that bore holes in the roof of
the mine and insert long metal bolts into the holes to prevent roof falls.
SURFACE MINING EQUIPMENT
Through our P&H business, we are the world's largest producer of electric
mining shovels and walking draglines. In addition, P&H is a significant producer
of large diameter blasthole drills and dragline bucket products. P&H has a
relationship in its electric mining shovel business with Kobelco Construction
Machinery Co., Ltd. ("Kobe") pursuant to which P&H licenses Kobe to manufacture
certain electric
54
mining shovels and related replacement parts in Japan. P&H has the exclusive
right to market Kobe-manufactured mining shovels and parts outside Japan. In
addition, P&H is party to an agreement with a company in China whereby it
licenses the manufacture and sale of two models of our electric mining shovels
and related components. This relationship provides P&H with an opportunity to
sell component parts for shovels built in China. P&H products are used in
surface mines in the digging and loading of copper, coal, iron ore, oil sands,
gold, lead, zinc, bauxite, uranium, phosphate, and other minerals and ores.
P&H's principal products are:
Electric mining shovels. Mining shovels are primarily used to load copper
ore, iron ore, coal, other mineral-bearing materials, overburden, or rock into
trucks. There are two basic types of mining shovels, electric and hydraulic.
Electric mining shovels are able to handle larger buckets, allowing them to load
greater volumes of rock and minerals, while hydraulic shovels are smaller and
more maneuverable. We believe the electric mining shovels offer the lowest cost
per ton of mineral mined. P&H manufactures only electric mining shovels. Buckets
can range in size from 14 cubic yards up to 76 cubic yards. Our electric mining
shovels typically sell for $8.0 to $10.0 million and have useful lives of
approximately 20 years.
Walking draglines. Draglines are primarily used to remove overburden,
which is the earth located over a coal or mineral deposit, by dragging a large
bucket through the overburden, carrying it away and depositing it in a remote
spoil pile. P&H's draglines weigh from 500 to 7,500 tons, and are typically
described in terms of their "bucket size" which can range from 30 to 160 cubic
yards. Our walking draglines sell for $40.0 to $50.0 million and have useful
lives of approximately 40 years.
Blasthole drills. Most surface mines require breakage or blasting of rock,
overburden or ore by explosives. To accomplish this, it is necessary to bore out
a pattern of holes into which the explosives are placed. Rotary blasthole drills
are used to drill these holes and are usually described in terms of the diameter
of the hole they bore. The boreholes range in size from 8 5/8 inches in diameter
to 22 inches in diameter. Our blasthole drills sell for $1.0 to $3.0 million and
have useful lives of approximately ten years.
AFTERMARKET PRODUCTS AND SERVICES
We have an extensive service and parts distribution network that provides a
wide range of aftermarket parts and services to the underground and surface
mining industries. While the majority of our aftermarket parts and services are
sold in support of our large installed base of equipment, we also manufacture
parts and provide services for other manufacturers' equipment and distribute the
parts of our Alliance Partners.
In fiscal 2001, we generated $807.1 million, or 70% of our total revenues,
from the sale of aftermarket parts and services. There is more consistent demand
for our aftermarket parts and services because of the: (1) high utilization
rates, long operating life and complexity associated with mining machinery; (2)
harsh conditions under which the machines are operated; and (3) high costs to a
mine operator for downtime related to equipment failure. These factors typically
lead to revenues from the sale of aftermarket parts and services over the life
of a machine that exceed its initial cost. As a result, our aftermarket business
provides a relatively stable base of revenues. In general, our aftermarket
business realizes higher margins than our original equipment business.
UNDERGROUND MINING MACHINERY
Joy's aftermarket business includes the sale of spare parts, the repair and
exchange of individual components of its original equipment and the complete
refurbishment of its original equipment as well as equipment diagnostics,
training and technology upgrades. We operate our aftermarket business on a
global basis through a network of service centers and parts distribution
warehouses located in principal mining regions throughout the world. Our
aftermarket infrastructure consists of warehouses, service centers, and a fleet
of trucks for customer deliveries and internal material distribution. The
warehouses and service centers are strategically located near our customers in
order to facilitate high levels of customer service and product availability.
Our service centers range from approximately 45,000 square feet to 185,000
square feet, and include equipment that provides the capability to perform
equipment disassembly, inspection,
55
steel fabrication, electric motor repair, high-tolerance machining, and final
machine assembly. In addition to performing component repairs and machine
rebuilds, our service centers can complete the assembly of new mining machines.
Virtually all of our aftermarket services are sold directly to our customers
through our facilities and employees, and spare parts are sold and distributed
through our warehouses. Component repairs and machine rebuilds are performed in
our service centers, and upon their completion, repaired machines are delivered
to our customers.
SURFACE MINING EQUIPMENT
P&H has a comprehensive aftermarket business that provides parts, repair
and support services to the surface mining industry. Our surface mining
equipment have long productive lives, ranging from 10 to 40 years, depending
upon the type of equipment. P&H MinePro Services, P&H's distribution and
aftermarket service business, provides comprehensive aftermarket support
throughout the life cycle of our surface mining equipment. P&H MinePro Services
also distributes the parts of over 30 Alliance Partners and in certain cases
provides parts for our competitors' equipment.
P&H MinePro Services provides aftermarket service to its customers on a
global basis through an extensive network of parts distribution centers, service
centers and on-site personnel. Our parts distribution and repair centers are
strategically located throughout the major mining centers in North and South
America, South Africa and Australia. Our close proximity to our customers allows
us to quickly deliver repair parts and services, which helps us to develop
strong relationships with our customers. Our distribution network is enhanced by
a computer-linked field and stock management system for parts inventory and a
data base system that records field performance of our equipment and customer
feedback. We provide parts service and support 24 hours a day, seven days a week
to meet the needs of our customers.
Through its service centers, P&H MinePro Services provides an array of
repair and rebuild services, including motor and gearbox rebuilds and repairs or
returns. Our service centers also perform brake, saddle block and shipper shaft
rebuilds for P&H original equipment, haul truck repairs, and the rebuilding of
gearboxes, pumps, and industrial components. Our rebuild centers are modern
facilities with overhead cranes, testing equipment, large presses, boring
machines, lathes, cleaning equipment and a variety of other machine tools.
P&H MinePro Services also performs used equipment trade-ins and marketing
services, retrofit upgrades and modernization packages, component exchange
programs, electrical recommissioning, maintenance planning, parts per hour
contracts, and remote communications and data collection. We also provide a
variety of field services, including machine erections, relocations and
rebuilds, field welding services, machine inspections and audits, predictive
diagnostic services, operator training, truck bed-liner installations and mine
maintenance labor support.
SALES AND MARKETING
We sell our products and services directly to our customers through a
global network of over 400 sales and marketing personnel. We provide performance
studies and promotional materials that highlight the advantages of our products
and services in several key performance categories. We have developed
proprietary, innovative products in response to the needs of our customers. As
part of our sales and marketing efforts, we enlist the services of our engineers
and technicians to develop custom product solutions to meet individual customer
requirements. In addition to the sales capacities offered at many of our
strategically located service centers, we have expanded our presence in emerging
markets by opening Joy sales offices in Poland, India, Russia and China, and P&H
sales offices in Russia and China.
As part of our Life Cycle Management strategy, we aggressively promote the
quality of our aftermarket products and service and focus our customers on our
ability to reduce their cost per unit of output by providing high productivity
equipment and comprehensive aftermarket support. Our sales personnel benefit
from the long-term customer relationships associated with our large installed
base of equipment.
56
COMPETITIVE CONDITIONS
We conduct our domestic and foreign operations under highly competitive
market conditions, requiring that our products and services be competitive in
price, quality, service and delivery. Our customers are generally large
international mining companies with substantial purchasing power. We compete on
the basis of providing superior product design, productivity, reliability,
delivery, service and lower overall cost to our customers.
UNDERGROUND MINING MACHINERY COMPETITORS
Joy's continuous miners, longwall shearers, continuous haulage equipment,
roof support systems and armored face conveyors compete with a number of
worldwide manufacturers of such equipment, including DBT Deutsche
Bergbau-Tecknik GmbH, a subsidiary of RAG AG, that sells continuous miners,
longwall shearers, continuous haulage equipment, roof support systems and
armored face conveyors; VA-EIMCO, a division of Sandvik AB, that sells
continuous miners and continuous haulage equipment; Fairchild International,
that sells continuous miners and continuous haulage equipment; Eickhoff Holding,
that sells longwall shearers; and Stamler Corporation, a subsidiary of the
Oldenburg Group, that sells continuous haulage equipment. Joy's rebuild services
compete with a large number of local repair shops. Joy competes with various
regional suppliers in the sale of replacement parts for Joy equipment.
SURFACE MINING EQUIPMENT COMPETITORS
P&H's shovels and draglines compete with similar products and with
hydraulic excavators, large rubber-tired front-end loaders and bucket wheel
excavators made by several international manufacturers. Shovels and draglines
are also supplied by Bucyrus International; hydraulic excavators are supplied by
several worldwide manufacturers, including Terex, Caterpillar, Komatsu, Hitachi
and Liebherr; and large rubber-tired front-end loader manufacturers include,
among others, Caterpillar and Komatsu. Large rotary blasthole drills are
supplied by several other worldwide drill manufacturers, including Bucyrus
International, Ingersoll-Rand, Driltech Mission, a subsidiary of Sandvik AB, and
Svedala. P&H's aftermarket services compete with a large number of primarily
regional suppliers. Manufacturer location is not a significant advantage in this
industry.
BACKLOG AND BOOKINGS
Backlog represents unfilled customer orders for our products and services.
The customer orders that are included in the backlog represent legal commitments
by customers, who have satisfied our credit review procedures, to purchase
specific products or services from us. Our backlog as of February 2, 2002 was
$247.1 million compared to $232.6 million at the beginning of the fiscal year.
This backlog included $193.0 million related to the Underground Mining Machinery
segment as compared to $186.7 million at the end of October 2001, and $54.1
million related to the Surface Mining Equipment segment as of February 2, 2002
as compared to $45.9 million at the end of October 2001. This increase in
backlog was primarily the result of an increase in aftermarket parts orders for
surface mining equipment. These backlog amounts exclude customer arrangements
under long-term equipment Life Cycle Management programs that extend for up to
thirteen years.
New order bookings for the 2002 First Quarter totaled $300.9 million, an
increase of $39.3 million or 15% from the 2001 First Quarter. Increased bookings
for the 2002 First Quarter resulted from increases in bookings for both original
equipment as well as aftermarket products and services for the Underground
Mining Machinery segment and increases in bookings for aftermarket parts, offset
by lower bookings for original equipment, for the Surface Mining Equipment
segment.
The following table provides backlog by business segment for our continuing
operations as of October 31 for the respective years. These backlog amounts
exclude customer arrangements under long-
57
term equipment Life Cycle Management programs that extend for up to thirteen
years and totaled approximately $430.0 million as of October 31, 2001.
<Table>
<Caption>
FISCAL FISCAL FISCAL
IN THOUSANDS 2001 2000 1999
- ------------ -------- -------- --------
Underground Mining Machinery................................ $186,705 $151,220 $190,775
Surface Mining Equipment.................................... 45,855 75,734 93,798
-------- -------- --------
Total Backlog..................................... $232,560 $226,954 $284,573
======== ======== ========
</Table>
The change in backlog from October 31, 2000 to October 31, 2001 reflects an
increase in orders for continuous miners for the Underground Mining Machinery
segment and a decrease in orders for electric mining shovels for the Surface
Mining Equipment segment.
As of October 31, 2000, backlog for both of our business segments was less
than the backlog as of October 31, 1999. For the Underground Mining Machinery
segment, there were fewer unfilled orders for new equipment associated with
longwall mining. For the Surface Mining Equipment segment, the decrease in
backlog was primarily due to fewer unfilled orders for electric mining shovels
as a result of the increase in shovel sales during fiscal 2000 compared to the
prior year.
We believe that bookings and backlog are not necessarily good indicators of
the underlying strength of our business. This is due to several factors,
including the mix of original equipment and aftermarket business, the
"lumpiness" of original equipment business and how original equipment sales flow
through backlog, and the variability of unit prices and margins of our various
products and services.
RAW MATERIALS
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. We believe that we have adequate sources of supply for
components parts and raw materials for our manufacturing requirements. No single
source is dominant.
P&H purchases raw and semi-processed steel, castings, forgings, copper and
other materials from a number of suppliers. In addition, component parts, such
as engines, bearings, controls, hydraulic components and a wide variety of
mechanical and electrical items are purchased from a large number of outside
suppliers. Purchases of materials and components are made on a competitive basis
with no single source being dominant.
PATENTS, TRADEMARKS AND LICENSES
We own numerous patents and trademarks and have patent licenses from others
relating to our respective products and manufacturing methods. Also, we grant
patent and trademark licenses to others and receive royalties under most of
these licenses. While we do not consider any particular patent or license or
group of patents or licenses to be essential to our business, we consider our
patents and licenses significant to the conduct of our business in certain
product areas.
RESEARCH AND DEVELOPMENT
We maintain strong commitments to research and development and pursue
technological development through the engineering of new products and systems,
and synergistic acquisitions of technology by segment. Research and development
expenses were $2.8 million, $4.8 million, $6.5 million and $11.1 million for the
Successor Company 2001 Four Months, Predecessor Company 2001 Eight Months,
fiscal 2000 and fiscal 1999, respectively, exclusive of application engineering.
We actively enhance and refine our product offerings by working with customers
to address specific needs and applications.
58
ENVIRONMENTAL, HEALTH AND SAFETY MATTERS
Our domestic activities are regulated by federal, state and local statutes,
regulations and ordinances relating to both environmental protection and worker
health and safety. The 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. Our foreign operations are subject to
similar requirements as established by their respective countries.
We expend substantial managerial and financial resources in developing and
implementing actions for continued compliance with these requirements. We
believe that we have substantially satisfied these diverse requirements. 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. However, these laws have not had, and are not
presently expected to have, a material adverse effect on our business.
Our 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 regulatory
agencies and have often resulted in corrective actions or abatement programs.
However, in some cases, fines or other penalties have been paid by us. In
addition, we have incurred, and continue to incur, costs resulting from cleanup
obligations relating to our current and former sites and operations and sites at
which we have historically disposed of hazardous wastes. Past costs relating to
these matters have not had, and current cleanup obligations are not expected to
have, a material adverse effect on our operations. However, it is possible that
the imposition of additional remedial obligations in the future could result in
substantial costs.
EMPLOYEES
As of October 31, 2001, we employed approximately 7,340 people in our
continuing operations. Of this number, approximately 3,930 were employed in the
United States, 1,560 of which were represented by local unions under collective
bargaining agreements. We believe that we maintain generally good relationships
with our employees.
LEGAL PROCEEDINGS
BELOIT LITIGATION
The Official Committee of Unsecured Creditors of Beloit, purportedly suing
in its own right and in the name and on behalf of Beloit, filed suit in the
Milwaukee County Circuit Court on June 5, 2001 against certain of our present
and former officers and against certain officers of Beloit seeking both money
damages in excess of $300 million and declaratory relief. Among other things,
the plaintiff alleges that the defendants should be held liable for "waste and
mismanagement of Beloit's assets." Plaintiff also alleges that settlement
agreements reached with certain of our former officers constituted fraudulent
transfers and should be deemed null and void. The defendants have filed motions
for judgment on the pleadings. Our plan of reorganization provides that, and the
plaintiff has agreed that, any judgment will be limited to and satisfied out of
our available insurance.
The Beloit Liquidating Trust has also filed a motion in the U.S. Bankruptcy
Court for reallocation and reimbursement of professional fees and intercompany
expenses. The U.S. Bankruptcy Court has requested briefing on this matter.
SECURITIES LAW LITIGATION
Along with certain of our present and former senior executives, we were
named as defendants in a class action, captioned In re: Harnischfeger
Industries, Inc. Securities Litigation, filed in the United States District
Court for the Eastern District of Wisconsin on June 5, 1998. This action seeks
damages in an
59
unspecified amount on behalf of a class of purchasers of our Predecessor
Company's common stock, based principally on allegations that our disclosures
with respect to certain contracts of a former business unit violated the federal
securities laws. Together with the individual defendants, we have reached an
agreement in principle to settle this matter subject to court approval. The
settlement amount should be satisfied out of our available insurance.
OTHER MATTERS
John G. Kling, purportedly on his own behalf and "in a representative
capacity for the Harnischfeger Industries Employees' Savings Plan," filed suit
in the United States District Court for the District of Massachusetts on
November 9, 2001, against certain of our present and former employees, officers
and directors. This action seeks damages in an unspecified amount based, among
other things, on allegations that the members of our Pension Investment
Committee, the Pension Committee of our Board of Directors and Fidelity
Management Trust Company failed to properly discharge their fiduciary
obligations under the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") with respect to the "Harnischfeger Common Stock Fund" in the
Harnischfeger Industries Employees' Savings Plan.
Along with our operating subsidiaries, we are parties to litigation matters
and claims that are normal in the course of our operations. As a routine part of
our operations, our operating 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 the results of
operations on a quarter-to-quarter basis, we believe that the results of the
above noted litigation and other pending litigation will not have a materially
adverse effect on our consolidated financial position, results of operations or
liquidity.
The sale of mining equipment entails an inherent risk of product liability
claims. We handle these claims in the ordinary course of our business and
maintain product liability insurance covering certain types of claims.
We are involved in a number of proceedings and potential proceedings
relating to environmental matters. Although it is difficult to estimate our
potential exposure to these environmental matters, we believe that the
resolution of these matters will not have a material adverse effect on our
consolidated financial position, results of operations or liquidity.
PROPERTIES
The following principal properties of our operations are owned, except as
otherwise indicated below. All of these properties are suitable for operations.
Our worldwide corporate headquarters consists of 10,000 square feet of
leased space located in Milwaukee, Wisconsin.
The following table summarizes our principal Underground Mining Machinery
locations:
<Table>
<Caption>
FLOOR SPACE LAND AREA
LOCATION (SQ. FT.) (ACRES) PRINCIPAL OPERATIONS
- -------- ----------- --------- --------------------
Franklin, Pennsylvania........ 739,000 58 Underground mining machinery,
components and parts
Reno, Pennsylvania............ 121,400 22 Components and parts for
mining machinery
Brookpark, Ohio............... 85,000 4 Components and parts for
mining machinery
Solon, Ohio................... 101,200 10.6 Components and parts for
mining machinery
*Abingdon, Virginia........... 63,400 22 Underground mining machinery
and components
</Table>
60
<Table>
<Caption>
FLOOR SPACE LAND AREA
LOCATION (SQ. FT.) (ACRES) PRINCIPAL OPERATIONS
- -------- ----------- --------- --------------------
*Bluefield, Virginia.......... 102,160 15 Mining machinery rebuild,
service and parts sales
*Duffield, Virginia........... 90,000 11 Mining machinery rebuild,
service and parts sales
*Homer City, Pennsylvania..... 79,920 10 Mining machinery rebuild,
service and parts sales
*Meadowlands, Pennsylvania.... 117,900 13 Mining machinery rebuild,
service and parts sales
*Mt. Vernon, Illinois......... 107,130 12 Mining machinery rebuild,
service and parts sales
Price, Utah................... 44,200 6 Mining machinery rebuild,
service and parts sales
Wellington, Utah.............. 68,000 60 Mining machinery rebuild,
service and parts sales
*McCourt Road, Australia...... 101,450 33 Underground mining machinery,
components and parts
Parkhurst, Australia.......... 48,570 15 Rebuild service center
Cardiff, Australia............ 22,600(1) 3 Rebuild service center
Wollongong, Australia......... 27,000(1) 4 Roof bolting equipment
*Steeledale, South Africa..... 285,140 12.6 Underground mining machinery,
components and parts
*Wadeville, South Africa...... 185,140 28.6 Underground mining machinery
assembly and service
Pinxton, England.............. 76,000 10 Service and rebuild
Mikolow, Poland............... 40,000(2) 1 Mining machinery, rebuild and
service
Wigan, England................ 60,000(3) 3 Engineering and administration
*Worcester, England........... 178,000 13.5 Mining machinery, components
and parts
</Table>
- ---------------
(1) Under a month-to-month lease.
(2) Under a year-to-year lease.
(3) Under a lease expiring in 2010.
* Property includes a warehouse.
61
The following table summarizes our principal Surface Mining Equipment
locations:
<Table>
<Caption>
FLOOR SPACE LAND AREA
LOCATION (SQ. FT.) (ACRES) PRINCIPAL OPERATIONS
- -------- ----------- --------- --------------------
Milwaukee, Wisconsin.......... 1,067,000 46 Electric mining shovels,
electric and diesel-electric
draglines and large diameter
rotary blasthole drills
*Milwaukee, Wisconsin......... 180,000 13 Electrical products
Cleveland, Ohio............... 270,000 8 Gearing manufacturing
Cleveland, Ohio............... 70,000(1) 2 Rebuild service center
*Gillette, Wyoming............ 60,000 6 Rebuild service center
Evansville, Wyoming........... 25,000 6 Rebuild service center
*Mesa, Arizona................ 40,000 5 Rebuild service center
*Elko, Nevada................. 30,000 5 Rebuild service center
Kilgore, Texas................ 12,400 4 Rebuild service center
Calgary, Canada............... 6,000(1) 1 Climate control system
manufacturing
*Bassendean, Australia........ 72,500 5 Components and parts for
mining machinery
*Mt. Thorley, Australia....... 81,800 11 Components and parts for
mining machinery
*Mackay, Australia............ 35,500 3 Components and parts for
mining machinery
Johannesburg, South Africa.... 44,000(2) 1 Rebuild service center
*Belo Horizonte, Brazil....... 37,700 1 Components and parts for
mining shovels
*Santiago, Chile.............. 6,800 1 Rebuild service center
*Antofagasta, Chile........... 21,000 1 Rebuild service center
*Calama, Chile................ 5,500 1 Rebuild service center
</Table>
- ---------------
(1) Under a lease expiring in 2002.
(2) Under a lease expiring in 2005.
* Property includes a warehouse.
Joy operates warehouses in Green River, Wyoming; Pineville, West Virginia;
Brookwood, Alabama; Carlsbad, New Mexico; Norton, Virginia; Lovely and
Henderson, Kentucky; Cardiff, Emerald, Kurri Kurri, Moranbah and Lithgow,
Australia; and Hendrina and Secunda, South Africa. All warehouses are owned
except for the warehouses in Lovely and Henderson, Kentucky, and Secunda, South
Africa, which are leased. Joy also operates sales offices in Poland, India,
Russia and China.
P&H operates warehouses in Cleveland, Ohio; Hibbing and Virginia,
Minnesota; Charleston, West Virginia; Negaunee, Michigan; Hinton, Sparwood,
Labrador City and Baie-Comeau, Canada; Iquique, Chile; Johannesburg, South
Africa; and Puerto Ordaz, Venezuela. The warehouses in Hibbing and Johannesburg
are owned; the others are leased. In addition, P&H leases sales offices
throughout the United States and in principal surface mining locations in other
countries. P&H also operates sales offices in Russia, Mexico and China.
62
DESCRIPTION OF OTHER INDEBTEDNESS
SENIOR CREDIT FACILITY
GENERAL
On June 29, 2001, we entered into a Credit Agreement with Deutsche Banc
Alex. Brown Inc. and a group of lenders (the "Credit Agreement") consisting of a
$100 million term loan facility and a $250 million revolving credit facility. We
have used the proceeds of this senior credit facility to make certain cash
payments in connection with our emergence from bankruptcy, to refinance our
debtor-in-possession financing facility and certain foreign credit facilities,
and to fund our ongoing business operations in the United States, Australia,
Canada and the United Kingdom. On December 26, 2001, we amended the Credit
Agreement to provide us greater flexibility with respect to certain financial
covenants. On March 18, 2002, we paid off our $100 million term loan in
connection with the closing of the offering of the notes.
INTEREST RATES
Outstanding borrowings under our senior credit facility bear interest equal
to either LIBOR plus the applicable margin (3.25% to 2.25%), or the Base Rate
(defined as the higher of the Prime Rate or the Federal Funds Effective Rate
plus 0.50%) plus the applicable margin (2.25% to 1.25%) at our option, depending
on certain of our financial ratios. We pay a commitment fee ranging from 0.5% to
0.75% on the unused portion of our revolver. The weighted average rate on the
outstanding balance of our revolver was 5.07% at February 2, 2002.
SECURITY AND GUARANTEES
Our obligations under our senior credit facility are secured by a pledge of
substantially all of our tangible and intangible assets and those of our
principal subsidiaries. See "Description of Other Indebtedness -- Inter-Company
Indebtedness." Our obligations under our senior credit facility are guaranteed
by substantially all of our present and future domestic subsidiaries.
COVENANTS
Our senior credit facility contains certain customary covenants, including:
- reporting and other affirmative covenants;
- financial covenants, including required levels of interest coverage,
fixed charge coverage and leverage ratios, in each case calculated based
upon Consolidated EBITDA (as defined in our Credit Agreement);
- restrictive covenants, including restrictions on the incurrence of
additional indebtedness, capital expenditures, dividends, transactions
with affiliates, asset sales, acquisitions, mergers, prepayments of other
indebtedness, liens and encumbrances and other matters customarily
restricted in loan agreements.
EVENTS OF DEFAULT
Our senior credit facility contains customary events of default, including,
but not limited to, payment defaults, breaches of representations and
warranties, covenant defaults, certain events of bankruptcy and insolvency,
judgment defaults and a change of control. Certain of the defaults are subject
to exceptions, materiality qualifiers and baskets.
OTHER FOREIGN SUBSIDIARY CREDIT FACILITIES
In addition to the Credit Agreement, our subsidiaries in Chile and South
Africa have various lines of credit which allow for borrowings of up to $25
million and $15 million, respectively, in the aggregate. As
63
of February 2, 2002, our Chilean and South African subsidiaries had total
borrowings of approximately $1.3 million under these credit facilities.
INTEREST RATES
These credit facilities bear interest at the lender's prime rate or such
other rates as may be agreed upon between the parties as of the date of
borrowing.
OBLIGATIONS
These credit facilities contain some restrictions which may, under certain
circumstances, inhibit our ability to distribute income from our subsidiaries to
us or our domestic subsidiaries. Our obligations under the facilities are
generally secured by a pledge of receivables by our foreign subsidiary borrower.
Standard reporting, financial and other restrictive covenants are generally
applicable to these facilities.
INTER-COMPANY INDEBTEDNESS
We provide financing to our principal domestic and foreign operating
subsidiaries through a series of inter-company notes. These obligations are
secured by a pledge of substantially all of the tangible and intangible assets
of our principal foreign operating subsidiaries in Australia, Canada and the
United Kingdom and these obligations are guaranteed by present and future
principal foreign operating subsidiaries. We have assigned this inter-company
indebtedness and security to Bankers Trust Company, in its capacity as agent, as
collateral for our obligations under our senior credit facility.
64
DESCRIPTION OF THE NOTES
The outstanding Notes were issued under an Indenture (the "Indenture")
among Joy Global Inc., the Subsidiary Guarantors and Wells Fargo Bank Minnesota,
N.A., as Trustee, in a private transaction that is not subject to the
registration requirements of the Securities Act. The terms of the Notes include
those stated in the Indenture and those made part of the Indenture by reference
to the Trust Indenture Act. Any Notes that remain outstanding after completion
of the exchange offer, together with the Exchange Notes issued in the exchange
offer, will be treated as a single class of securities under the Indenture.
You can find certain terms used in this description under the subheading
"-- Certain Definitions." In this description, the word "Company" refers only to
Joy Global Inc. and not to any of its subsidiaries.
The following description is only a summary of the material provisions of
the Indenture and the Registration Rights Agreement. We urge you to read the
Indenture and the Registration Rights Agreement because they, not this
description, define your rights as holders of these Notes. You may request
copies of these agreements at our address set forth under the heading "Where You
Can Find Additional Information." Unless otherwise required by the context,
references in this "Description of the Notes" includes the Notes issued to the
initial purchasers in a private transaction that are not registered under the
Securities Act and the Exchange Notes, which have been registered under the
Securities Act.
BRIEF DESCRIPTION OF THE NOTES
The Notes
- are unsecured senior subordinated obligations of the Company;
- are subordinated in right of payment to all existing and future Senior
Indebtedness of the Company;
- are senior in right of payment to any future Subordinated Obligations of
the Company;
- are guaranteed by each Subsidiary Guarantor; and
- are subject to registration with the SEC pursuant to the Registration
Rights Agreement.
Each Subsidiary Guaranty
- unconditionally guarantees the obligations of the Company under the
Notes; and
- is a senior subordinated obligation of the relevant Subsidiary Guarantor.
PRINCIPAL, MATURITY AND INTEREST
The Company issued the Notes initially with a maximum aggregate principal
amount of $200 million. The Company issued the Notes in denominations of $1,000
and any integral multiple of $1,000. The Notes will mature on March 15, 2012.
Subject to our compliance with the covenant described under the subheading
"-- Certain Covenants -- Limitation on Indebtedness," we are entitled to,
without the consent of the holders, issue more Notes under the Indenture on the
same terms and conditions and with the same CUSIP numbers as the Notes being
offered hereby in an unlimited aggregate principal amount (the "Additional
Notes"). The Notes and the Additional Notes, if any, will be treated as a single
class for all purposes of the Indenture, including waivers, amendments,
redemptions and offers to purchase. Unless the context otherwise requires, for
all purposes of the Indenture and this "Description of the Notes," references to
the Notes include any Additional Notes actually issued.
Interest on these Notes will accrue at the rate of 8.75% per annum and will
be payable semi-annually in arrears on March 15 and September 15, commencing on
September 15, 2002. We will make each interest payment to the holders of record
of these Notes on the immediately preceding March 1 and September 1. We will pay
interest on overdue principal at the above rate and will pay interest on overdue
installments of interest at such rate to the extent lawful.
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Interest on these Notes will accrue from the date of original issuance.
Interest will be computed on the basis of a 360-day year comprised of twelve
30-day months.
Additional interest may accrue on the Notes in certain circumstances
pursuant to the Registration Rights Agreement.
OPTIONAL REDEMPTION
Except as set forth below, we will not be entitled to redeem the Notes at
our option prior to March 15, 2007. The Company is not prohibited, however, from
acquiring the Notes by means other than a redemption, whether pursuant to a
tender offer, open market purchase or otherwise, provided that such acquisition
does not otherwise violate the terms of the Indenture.
On and after March 15, 2007, we will be entitled at our option to redeem
all or a portion of these Notes upon not less than 30 nor more than 60 days'
notice, at the redemption prices (expressed in percentages of principal amount
on the redemption date), plus accrued interest to the redemption date (subject
to the right of Holders of record on the related record date to receive interest
due on the relevant interest payment date), if redeemed during the 12-month
period commencing on March 15 of the years set forth below:
<Table>
<Caption>
REDEMPTION
PERIOD PRICE
- ------ ----------
2007........................................................ 104.375%
2008........................................................ 102.917%
2009........................................................ 101.458%
2010 and thereafter......................................... 100.000%
</Table>
In addition, before March 15, 2005, we may at our option on one or more
occasions redeem Notes (which includes Additional Notes, if any) in an aggregate
principal amount not to exceed 35% of the aggregate principal amount of the
Notes (which includes Additional Notes, if any) originally issued at a
redemption price (expressed as a percentage of principal amount) of 108.75%,
plus accrued and unpaid interest to the redemption date, with the net cash
proceeds from one or more Public Equity Offerings; provided that
(1) at least 65% of such aggregate principal amount of Notes (which
includes Additional Notes, if any) remains outstanding immediately
after the occurrence of each such redemption (other than Notes
held, directly or indirectly, by the Company or its Affiliates);
and
(2) each such redemption occurs within 90 days after the date of the
related Public Equity Offering.
SELECTION AND NOTICE OF REDEMPTION
If we are redeeming less than all the Notes at any time, the Trustee will
select Notes on a pro rata basis, by lot or by such other method as the Trustee
in its sole discretion shall deem to be fair and appropriate.
We will redeem Notes of $1,000 or less in whole and not in part. We will
cause notices of redemption to be mailed by first-class mail at least 30 but not
more than 60 days before the redemption date to each holder of Notes to be
redeemed at its registered address.
If any Note is to be redeemed in part only, the notice of redemption that
relates to that Note will state the portion of the principal amount thereof to
be redeemed. We will issue a new Note in a principal amount equal to the
unredeemed portion of the original Note in the name of the Holder thereof upon
cancelation of the original Note. Notes called for redemption become due on the
date fixed for redemption. On and after the redemption date, interest ceases to
accrue on Notes or portions of them called for redemption.
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MANDATORY REDEMPTION; OFFERS TO PURCHASE; OPEN MARKET PURCHASES
We are not required to make any mandatory redemption or sinking fund
payments with respect to the Notes. However, under certain circumstances, we may
be required to offer to purchase Notes as described under the captions
"-- Change of Control" and "Certain Covenants -- Limitation on Sales of Assets
and Subsidiary Stock." We may at any time and from time to time purchase Notes
in the open market or otherwise.
GUARANTIES
The Subsidiary Guarantors have agreed to jointly and severally guarantee,
on a senior subordinated basis, our obligations under these Notes. The
obligations of each Subsidiary Guarantor under its Subsidiary Guaranty will be
limited as necessary to prevent that Subsidiary Guaranty from constituting a
fraudulent conveyance under applicable law. See "Risk Factors -- Risks Relating
to the Notes." Federal and state statutes allow courts, under specific
circumstances, to void guarantees and require noteholders to return payments
received from guarantors."
Each Subsidiary Guarantor that makes a payment under its Subsidiary
Guaranty will be entitled upon payment in full of all guarantied obligations
under the Indenture to a contribution from each other Subsidiary Guarantor in an
amount equal to such other Subsidiary Guarantor's pro rata portion of such
payment based on the respective net assets of all the Subsidiary Guarantors at
the time of such payment determined in accordance with GAAP.
If a Subsidiary Guaranty were rendered voidable, it could be subordinated
by a court to all other indebtedness (including guarantees and other contingent
liabilities) of the applicable Subsidiary Guarantor, and, depending on the
amount of such indebtedness, a Subsidiary Guarantor's liability on its
Subsidiary Guaranty could be reduced to zero. See "Risk Factors -- Risks
Relating to the Notes." Federal and state statutes allow courts, under specific
circumstances, to void guarantees and require noteholders to return payments
received from guarantors."
The Subsidiary Guaranty of a Subsidiary Guarantor will be released:
(1) upon the sale or other disposition (including by way of
consolidation or merger) of a Subsidiary Guarantor;
(2) upon the sale or disposition of all or substantially all the
assets of such Subsidiary Guarantor; or
(3) if the Company properly designates any Restricted Subsidiary that
is a Subsidiary Guarantor as an Unrestricted Subsidiary in
accordance with the applicable provisions of the Indentures;
in the case of paragraphs (1) and (2), other than to the Company or an Affiliate
of the Company and as permitted by the Indenture.
RANKING
SENIOR INDEBTEDNESS VERSUS NOTES
The payment of the principal of, premium, if any, and interest on the Notes
and the payment of any Subsidiary Guaranty will be subordinate in right of
payment to the prior payment in full in cash of all Senior Indebtedness of the
Company or the relevant Subsidiary Guarantor, as the case may be, including the
obligations of the Company and such Subsidiary Guarantor under the Credit
Agreement.
As of February 2, 2002, after giving pro forma effect to the refinancing in
connection with this offering:
(1) the Company's Senior Indebtedness would have been approximately
$122.0 million, all of which represents secured indebtedness; and
(2) the Senior Indebtedness of the Subsidiary Guarantors would have been
approximately $117.6 million, all of which represents secured
indebtedness. $105.0 million of the Senior
67
Indebtedness of the Subsidiary Guarantors consists of their
respective guaranties of Senior Indebtedness of the Company under
the Credit Agreement.
Although the Indenture contains limitations on the amount of additional
Indebtedness that the Company and the Subsidiary Guarantors may incur, under
certain circumstances the amount of such Indebtedness could be substantial and,
in any case, such Indebtedness may be Senior Indebtedness. See "-- Certain
Covenants -- Limitation on Indebtedness."
LIABILITIES OF NON-GUARANTOR SUBSIDIARIES VERSUS NOTES
A substantial portion of our operations is conducted through our
subsidiaries. Some of our subsidiaries are not guaranteeing the Notes. Claims of
creditors of such non-guarantor subsidiaries, including trade creditors owed
amounts or holding guarantees issued by such non-guarantor subsidiaries, and
claims of preferred stockholders, if any, of such non-guarantor subsidiaries,
generally will have priority with respect to the assets and earnings of such
non-guarantor subsidiaries over the claims of our creditors, including holders
of the Notes, even if such claims do not constitute Senior Indebtedness.
Accordingly, the Notes will be effectively subordinated to creditors (including
trade creditors) and preferred stockholders, if any, of such non-guarantor
subsidiaries.
At February 2, 2002, after giving pro forma effect to the refinancing in
connection with this offering, the total liabilities of our subsidiaries (other
than the Subsidiary Guarantors) would have been approximately $131.2 million,
including trade payables. Although the Indenture limits the incurrence of
Indebtedness and preferred stock of certain of our subsidiaries, such limitation
is subject to a number of significant qualifications. Moreover, the Indenture
does not impose any limitation on the incurrence by such subsidiaries of
liabilities that are not considered Indebtedness under the Indenture. See
"-- Certain Covenants -- Limitation on Indebtedness".
OTHER SENIOR SUBORDINATED INDEBTEDNESS VERSUS NOTES
Only Indebtedness of the Company or a Subsidiary Guarantor that is Senior
Indebtedness will rank senior to the Notes and the relevant Subsidiary Guaranty
in accordance with the provisions of the Indenture. The Notes and each
Subsidiary Guaranty will in all respects rank pari passu with all other Senior
Subordinated Indebtedness of the Company and the relevant Subsidiary Guarantor,
respectively.
We and the Subsidiary Guarantors have agreed in the Indenture that we and
they will not Incur, directly or indirectly, any Indebtedness that is
contractually subordinate or junior in right of payment to our Senior
Indebtedness or the Senior Indebtedness of such Subsidiary Guarantors, unless
such Indebtedness is Senior Subordinated Indebtedness of the Company or the
Subsidiary Guarantors, as applicable, or is expressly subordinated in right of
payment to Senior Subordinated Indebtedness of the Company or the Subsidiary
Guarantors, as applicable. The Indenture does not treat unsecured Indebtedness
as subordinated or junior to Secured Indebtedness merely because it is
unsecured.
PAYMENT OF NOTES
We are not permitted to pay principal of, premium, if any, or interest on
the Notes or make any deposit pursuant to the provisions described under
"-- Defeasance" below and may not purchase, redeem or otherwise retire any Notes
(collectively, "pay the Notes") if either of the following occurs (a "Payment
Default"):
(1) any Designated Senior Indebtedness of the Company is not paid in
full in cash when due; or
(2) any other default on Designated Senior Indebtedness of the Company
occurs and the maturity of such Designated Senior Indebtedness is
accelerated in accordance with its terms;
unless, in either case, the Payment Default has been cured or waived and any
such acceleration has been rescinded or such Designated Senior Indebtedness has
been paid in full in cash. Regardless of the foregoing, we are permitted to pay
the Notes if we and the Trustee receive written notice approving such
68
payment from the Representatives of all Designated Senior Indebtedness with
respect to which the Payment Default has occurred and is continuing.
During the continuance of any default (other than a Payment Default) with
respect to any Designated Senior Indebtedness of the Company pursuant to which
the maturity thereof may be accelerated without further notice (except such
notice as may be required to effect such acceleration) or the expiration of any
applicable grace periods, we are not permitted to pay the Notes for a period (a
"Payment Blockage Period") commencing upon the receipt by the Trustee (with a
copy to us) of written notice (a "Blockage Notice") of such default from the
Representative of such Designated Senior Indebtedness specifying an election to
effect a Payment Blockage Period and ending 179 days thereafter. The Payment
Blockage Period will end earlier if such Payment Blockage Period is terminated:
(1) by written notice to the Trustee and us from the Person or Persons
who gave such Blockage Notice;
(2) because the default giving rise to such Blockage Notice is cured,
waived or otherwise no longer continuing; or
(3) because such Designated Senior Indebtedness has been discharged or
repaid in full in cash.
Notwithstanding the provisions described above, unless a Payment Default
then exists on such Designated Senior Indebtedness, we are permitted to resume
paying the Notes after the end of such Payment Blockage Period. The Notes shall
not be subject to more than one Payment Blockage Period in any consecutive
360-day period irrespective of the number of defaults with respect to Designated
Senior Indebtedness of the Company during such period.
Upon any payment or distribution of the assets of the Company upon a total
or partial liquidation or dissolution or reorganization of or similar proceeding
relating to the Company or its property:
(1) the holders of Senior Indebtedness of the Company will be entitled
to receive payment in full in cash of such Senior Indebtedness
before the holders of the Notes are entitled to receive any payment;
(2) until the Senior Indebtedness of the Company is paid in full in
cash, any payment or distribution to which holders of the Notes
would be entitled but for the subordination provisions of the
Indenture will be made to holders of such Senior Indebtedness as
their interests may appear, except that holders of Notes may receive
certain Capital Stock and subordinated debt obligations; and
(3) if a distribution is made to holders of the Notes that, due to the
subordination provisions, should not have been made to them, such
holders of the Notes are required to hold it in trust for the
holders of Senior Indebtedness of the Company and pay it over to
them as their interests may appear.
If payment of the Notes is accelerated because of an Event of Default, the
Company or the Trustee must promptly notify the holders of Designated Senior
Indebtedness of the Company or the Representative of such Designated Senior
Indebtedness of the acceleration.
A Subsidiary Guarantor's obligations under its Subsidiary Guaranty are
senior subordinated obligations. As such, the rights of Noteholders to receive
payment by a Subsidiary Guarantor pursuant to its Subsidiary Guaranty will be
subordinated in right of payment to the rights of holders of Senior Indebtedness
of such Subsidiary Guarantor. The terms of the subordination provisions
described above with respect to the Company's obligations under the Notes apply
equally to a Subsidiary Guarantor and the obligations of such Subsidiary
Guarantor under its Subsidiary Guaranty.
By reason of the subordination provisions contained in the Indenture, in
the event of a liquidation or insolvency proceeding, creditors of the Company or
a Subsidiary Guarantor who are holders of Senior Indebtedness of the Company or
a Subsidiary Guarantor, as the case may be, may recover more, ratably, than the
holders of the Notes, and creditors of ours who are not holders of Senior
Indebtedness may
69
recover less, ratably, than holders of our Senior Indebtedness and may recover
more, ratably, than the holders of the Notes.
The terms of the subordination provisions described above will not apply to
payments from money or the proceeds of U.S. Government Obligations held in trust
by the Trustee for the payment of principal of and interest on the Notes
pursuant to the provisions described under "-- Defeasance."
BOOK-ENTRY, DELIVERY AND FORM
The Notes are being offered and sold to qualified institutional buyers in
reliance on Rule 144A ("Rule 144A Notes"). Notes also may be offered and sold in
offshore transactions in reliance on Regulation S ("Regulation S Notes"). Except
as set forth below, Notes will be issued in registered, global form in minimum
denominations of $1,000 and integral multiples of $1,000 in excess of $1,000.
Notes will be issued at the closing of this offering only against payment in
immediately available funds.
Rule 144A Notes initially will be represented by one or more notes in
registered, global form without interest coupons (collectively, the "Rule 144A
Global Notes"). Regulation S Notes initially will be represented by one or more
notes in registered, global form without interest coupons (collectively, the
"Regulation S Global Notes" and, together with the Rule 144A Global Notes, the
"Global Notes"). The Global Notes will be deposited upon issuance with the
trustee as custodian for The Depository Trust Company ("DTC"), in New York, New
York, and registered in the name of DTC or its nominee, in each case, for credit
to an account of a direct or indirect participant in DTC as described below.
Through and including the 40th day after the later of the commencement of this
offering and the closing of this offering (such period through and including
such 40th day, the "Restricted Period"), beneficial interests in the Regulation
S Global Notes may be held only through the Euroclear System ("Euroclear") and
Clearstream Banking, S.A. ("Clearstream") (as indirect participants in DTC),
unless transferred to a person that takes delivery through a Rule 144A Global
Note in accordance with the certification requirements described below.
Beneficial interests in the Rule 144A Global Notes may not be exchanged for
beneficial interests in the Regulation S Global Notes at any time except in the
limited circumstances described below. See "-- Exchanges between Regulation S
Notes and Rule 144A Notes."
Except as set forth below, the Global Notes may be transferred, in whole
and not in part, only to another nominee of DTC or to a successor of DTC or its
nominee. Beneficial interests in the Global Notes may not be exchanged for Notes
in certificated form except in the limited circumstances described below. See
"-- Exchange of Global Notes for Certificated Notes." Except in the limited
circumstances described below, owners of beneficial interests in the Global
Notes will not be entitled to receive physical delivery of Notes in certificated
form.
Rule 144A Notes (including beneficial interests in the Rule 144A Global
Notes) will be subject to certain restrictions on transfer and will bear a
restrictive legend as described under "Transfer Restrictions." Regulation S
Notes will also bear the legend as described under "Transfer Restrictions." In
addition, transfers of beneficial interests in the Global Notes will be subject
to the applicable rules and procedures of DTC and its direct or indirect
participants (including, if applicable, those of Euroclear and Clearstream),
which may change from time to time.
DEPOSITORY PROCEDURES
The following description of the operations and procedures of DTC,
Euroclear and Clearstream are provided solely as a matter of convenience. These
operations and procedures are solely within the control of the respective
settlement systems and are subject to changes by them. We take no responsibility
for these operations and procedures and urge investors to contact the system or
their participants directly to discuss these matters.
DTC has advised us that DTC is a limited-purpose trust company created to
hold securities for its participating organizations (collectively, the
"Participants") and to facilitate the clearance and settlement of transactions
in those securities between Participants through electronic book-entry changes
in accounts
70
of its Participants. The Participants include securities brokers and dealers
(including the initial purchasers), banks, trust companies, clearing
corporations and certain other organizations. Access to DTC's system is also
available to other entities such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a Participant,
either directly or indirectly (collectively, the "Indirect Participants").
Persons who are not Participants may beneficially own securities held by or on
behalf of DTC only through the Participants or the Indirect Participants. The
ownership interests in, and transfers of ownership interests in, each security
held by or on behalf of DTC are recorded on the records of the Participants and
Indirect Participants.
DTC has also advised us that, pursuant to procedures established by it:
(1) upon deposit of the Global Notes, DTC will credit the accounts of
Participants designated by the Initial Purchasers with portions of
the principal amount of the Global Notes; and
(2) ownership of these interests in the Global Notes will be shown on,
and the transfer of ownership of these interests will be effected
only through, records maintained by DTC (with respect to the
Participants) or by the Participants and the Indirect Participants
(with respect to other owners of beneficial interests in the Global
Notes).
Investors in the Rule 144A Global Notes who are Participants in DTC's
system may hold their interests therein directly through DTC. Investors in the
Rule 144A Global Notes who are not Participants may hold their interests therein
indirectly through organizations (including Euroclear and Clearstream) which are
Participants in such system. Investors in the Regulation S Global Notes must
initially hold their interests therein through Euroclear or Clearstream, if they
are participants in such systems, or indirectly through organizations that are
participants in such systems. After the expiration of the Restricted Period (but
not earlier), investors may also hold interests in the Regulation S Global Notes
through Participants in the DTC system other than Euroclear and Clearstream.
Euroclear and Clearstream will hold interests in the Regulation S Global Notes
on behalf of their participants through customers' securities accounts in their
respective names on the books of their respective depositories, which are
Euroclear Bank S.A./N.V., as operator of Euroclear, and Citibank, N.A., as
operator of Clearstream. All interests in a Global Note, including those held
through Euroclear or Clearstream, may be subject to the procedures and
requirements of DTC. Those interests held through Euroclear or Clearstream may
also be subject to the procedures and requirements of such systems. The laws of
some states require that certain Persons take physical delivery in definitive
form of securities that they own. Consequently, the ability to transfer
beneficial interests in a Global Note to such Persons will be limited to that
extent. Because DTC can act only on behalf of Participants, which in turn act on
behalf of Indirect Participants, the ability of a Person having beneficial
interests in a Global Note to pledge such interests to Persons that do not
participate in the DTC system, or otherwise take actions in respect of such
interests, may be affected by the lack of a physical certificate evidencing such
interests.
EXCEPT AS DESCRIBED BELOW, OWNERS OF INTERESTS IN THE GLOBAL NOTES WILL NOT
HAVE NOTES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE PHYSICAL DELIVERY OF
NOTES IN CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE REGISTERED OWNERS OR
"HOLDERS" THEREOF UNDER THE INDENTURE FOR ANY PURPOSE.
Payments in respect of the principal of, and interest and premium and
additional interest, if any, on a Global Note registered in the name of DTC or
its nominee will be payable to DTC in its capacity as the registered Holder
under the Indenture. Under the terms of the Indenture, the Company and the
Trustee will treat the Persons in whose names the notes, including the Global
Notes, are registered as the owners of the notes for the purpose of receiving
payments and for all other purposes. Consequently, neither the Company, the
Trustee nor any agent of the Company or the Trustee has or will have any
responsibility or liability for:
(1) any aspect of DTC's records or any Participant's or Indirect
Participant's records relating to or payments made on account of
beneficial ownership interest in the Global Notes or for
maintaining, supervising or reviewing any of DTC's records or any
Participant's or Indirect Participant's records relating to the
beneficial ownership interests in the Global Notes; or
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(2) any other matter relating to the actions and practices of DTC or any
of its Participants or Indirect Participants.
DTC has advised us that its current practice, upon receipt of any payment
in respect of securities such as the Notes (including principal and interest),
is to credit the accounts of the relevant Participants with the payment on the
payment date unless DTC has reason to believe it will not receive payment on
such payment date. Each relevant Participant is credited with an amount
proportionate to its beneficial ownership of an interest in the principal amount
of the relevant security as shown on the records of DTC. Payments by the
Participants and the Indirect Participants to the beneficial owners of notes
will be governed by standing instructions and customary practices and will be
the responsibility of the Participants or the Indirect Participants and will not
be the responsibility of DTC, the Trustee or the Company. Neither the Company
nor the Trustee will be liable for any delay by DTC or any of its Participants
in identifying the beneficial owners of the Notes, and the Company and the
Trustee may conclusively rely on and will be protected in relying on
instructions from DTC or its nominee for all purposes.
Subject to the transfer restrictions set forth under "-- Transfer
Restrictions," transfers between Participants in DTC will be effected in
accordance with DTC's procedures, and will be settled in same-day funds, and
transfers between participants in Euroclear and Clearstream will be effected in
accordance with their respective rules and operating procedures.
Subject to compliance with the transfer restrictions applicable to the
Notes described herein, cross-market transfers between the Participants in DTC,
on the one hand, and Euroclear or Clearstream participants, on the other hand,
will be effected through DTC in accordance with DTC's rules on behalf of
Euroclear or Clearstream, as the case may be, by its respective depositary;
however, such cross-market transactions will require delivery of instructions to
Euroclear or Clearstream, as the case may be, by the counter-party in such
system in accordance with the rules and procedures and within the established
deadlines (Brussels time) of such system. Euroclear or Clearstream, as the case
may be, will, if the transaction meets its settlement requirements, deliver
instructions to its respective depositary to take action to effect final
settlement on its behalf of delivering or receiving interests in the relevant
Global Note in DTC, and making or receiving payment in accordance with normal
procedures for same-day funds settlement applicable to DTC. Euroclear
participants and Clearstream participants may not deliver instructions directly
to the depositories for Euroclear or Clearstream.
DTC has advised the Company that it will take any action permitted to be
taken by a Holder of Notes only at the direction of one or more Participants to
whose account DTC has credited the interests in the Global Notes and only in
respect of such portion of the aggregate principal amount of the Notes as to
which such Participant or Participants has or have given such direction.
However, if there is an Event of Default under the Notes, DTC reserves the right
to exchange the Global Notes for legended Notes in certificated form, and to
distribute such Notes to its Participants.
Although DTC, Euroclear and Clearstream have agreed to the foregoing
procedures to facilitate transfers of interests in the Rule 144A Global Notes
and the Regulation S Global Notes among participants in DTC, Euroclear and
Clearstream, they are under no obligation to perform or to continue to perform
such procedures, and may discontinue such procedures at any time. Neither the
Company nor the Trustee nor any of their respective agents will have any
responsibility for the performance by DTC, Euroclear or Clearstream or their
respective participants or indirect participants of their respective obligations
under the rules and procedures governing their operations.
EXCHANGE OF GLOBAL NOTES FOR CERTIFICATED NOTES
A Global Note is exchangeable for definitive Notes in registered
certificated form ("Certificated Notes") if:
(1) DTC (a) notifies the Company that it is unwilling or unable to
continue as depositary for the Global Notes and DTC fails to appoint
a successor depositary or (b) has ceased to be a clearing agency
registered under the Exchange Act;
72
(2) the Company, at its option, notifies the Trustee in writing that
it elects to cause the issuance of the Certificated Notes; or
(3) there has occurred and is continuing a Default or Event of Default
with respect to the Notes.
In addition, beneficial interests in a Global Note may be exchanged for
Certificated Notes upon prior written notice given to the trustee by or on
behalf of DTC in accordance with the indenture. In all cases, Certificated Notes
delivered in exchange for any Global Note or beneficial interests in Global
Notes will be registered in the names, and issued in any approved denominations,
requested by or on behalf of the depositary (in accordance with its customary
procedures) and will bear the applicable restrictive legend referred to in "--
Transfer Restrictions," unless that legend is not required by applicable law.
EXCHANGE OF CERTIFICATED NOTES FOR GLOBAL NOTES
Certificated Notes may not be exchanged for beneficial interests in any
Global Note unless the transferor first delivers to the trustee a written
certificate (in the form provided in the indenture) to the effect that such
transfer will comply with the appropriate transfer restrictions applicable to
such Notes. See "Transfer Restrictions."
EXCHANGES BETWEEN REGULATION S NOTES AND RULE 144A NOTES
Prior to the expiration of the Restricted Period, beneficial interests in
the Regulation S Global Note may be exchanged for beneficial interests in the
Rule 144A Global Note only if:
(1) such exchange occurs in connection with a transfer of the Notes
pursuant to Rule 144A; and
(2) the transferor first delivers to the trustee a written certificate
(in the form provided in the Indenture) to the effect that the
Notes are being transferred to a Person:
(a) who the transferor reasonably believes to be a qualified
institutional buyer within the meaning of Rule 144A;
(b) purchasing for its own account or the account of a qualified
institutional buyer in a transaction meeting the requirements
of Rule 144A; and
(c) in accordance with all applicable securities laws of the states
of the United States and other jurisdictions.
Beneficial interest in a Rule 144A Global Note may be transferred to a
Person who takes delivery in the form of an interest in the Regulation S Global
Note, whether before or after the expiration of the Restricted Period, only if
the transferor first delivers to the Trustee a written certificate (in the form
provided in the Indenture) to the effect that such transfer is being made in
accordance with Rule 903 or 904 of Regulation S or Rule 144 (if available) and
that, if such transfer occurs prior to the expiration of the Restricted Period,
the interest transferred will be held immediately thereafter through Euroclear
or Clearstream.
Transfers involving exchanges of beneficial interests between the
Regulation S Global Notes and the Rule 144A Global Notes will be effected in DTC
by means of an instruction originated by the Trustee through the DTC
Deposit/Withdraw at Custodian system. Accordingly, in connection with any such
transfer, appropriate adjustments will be made to reflect a decrease in the
principal amount of the Regulation S Global Note and a corresponding increase in
the principal amount of the Rule 144A Global Note or vice versa, as applicable.
Any beneficial interest in one of the Global Notes that is transferred to a
Person who takes delivery in the form of an interest in the other Global Note
will, upon transfer, cease to be an interest in such Global Note and will become
an interest in the other Global Note and, accordingly, will thereafter be
subject to all transfer restrictions and other procedures applicable to
beneficial interest in such other Global Note for so long as it remains such an
interest. The policies and practices of DTC may
73
prohibit transfers of beneficial interests in the Regulation S Global Note prior
to the expiration of the Restricted Period.
SAME DAY SETTLEMENT AND PAYMENT
The Company will make payments in respect of the Notes represented by the
Global Notes (including principal, premium, if any, interest and additional
interest, if any) by wire transfer of immediately available funds to the
accounts specified by the Global Note Holder. The Company will make all payments
of principal, interest and premium and additional interest, if any, with respect
to Certificated Notes by wire transfer of immediately available funds to the
accounts specified by the Holders of the Certificated Notes or, if no such
account is specified, by mailing a check to each such Holder's registered
address. The Notes represented by the Global Notes are eligible to trade in the
PORTAL market and to trade in DTC's Same-Day Funds Settlement System, and any
permitted secondary market trading activity in such Notes will, therefore, be
required by DTC to be settled in immediately available funds. The Company
expects that secondary trading in any Certificated Notes will also be settled in
immediately available funds.
Because of time zone differences, the securities account of a Euroclear or
Clearstream participant purchasing an interest in a Global Note from a
Participant in DTC will be credited, and any such crediting will be reported to
the relevant Euroclear or Clearstream participant, during the securities
settlement processing day (which must be a business day for Euroclear and
Clearstream) immediately following the settlement date of DTC. DTC has advised
the Company that cash received in Euroclear or Clearstream as a result of sales
of interests in a Global Note by or through a Euroclear or Clearstream
participant to a Participant in DTC will be received with value on the
settlement date of DTC but will be available in the relevant Euroclear or
Clearstream cash account only as of the business day for Euroclear or
Clearstream following DTC's settlement date.
REGISTERED EXCHANGE OFFER; REGISTRATION RIGHTS
We have agreed pursuant to the Registration Rights Agreement that we will,
subject to certain exceptions,
(1) within 45 days after the Issue Date, file a registration statement
(the "Exchange Offer Registration Statement") with the SEC with
respect to a registered offer (the "Registered Exchange Offer") to
exchange the Notes for new notes of the Company (the "Exchange
Notes") having terms substantially identical in all material
respects to the Notes (except that the Exchange Notes will not
contain terms with respect to transfer restrictions);
(2) use our reasonable best efforts to cause the Exchange Offer
Registration Statement to be declared effective under the Securities
Act within 150 days after the Issue Date;
(3) as soon as practicable after the effectiveness of the Exchange Offer
Registration Statement (the "Effectiveness Date"), offer the
Exchange Notes in exchange for surrender of the Notes; and
(4) keep the Registered Exchange Offer open for not less than 20
Business Days (or longer if required by applicable law) after the
date notice of the Registered Exchange Offer is mailed to the
Holders of the Notes.
For each Note tendered to us pursuant to the Registered Exchange Offer, we
will issue to the Holder of such Note an Exchange Note having a principal amount
equal to that of the surrendered Note. Interest on each Exchange Note will
accrue from the last interest payment date on which interest was paid on the
Note surrendered in exchange therefor, or, if no interest has been paid on such
Note, from the date of its original issue.
Under existing SEC interpretations, the Exchange Notes will be freely
transferable by holders other than our affiliates after the Registered Exchange
Offer without further registration under the Securities Act
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if the holder of the Exchange Notes represents to us in the Registered Exchange
Offer that it is acquiring the Exchange Notes in the ordinary course of its
business, that it has no arrangement or understanding with any person to
participate in the distribution of the Exchange Notes and that it is not an
affiliate of the Company, as such terms are interpreted by the SEC; provided,
however, that broker-dealers ("Participating Broker-Dealers") receiving Exchange
Notes in the Registered Exchange Offer will have a prospectus delivery
requirement with respect to resales of such Exchange Notes. The SEC has taken
the position that Participating Broker-Dealers may fulfill their prospectus
delivery requirements with respect to Exchange Notes (other than a resale of an
unsold allotment from the original sale of the Notes) with the prospectus
contained in the Exchange Offer Registration Statement.
Under the Registration Rights Agreement, the Company is required to allow
Participating Broker-Dealers and other persons, if any, with similar prospectus
delivery requirements to use the prospectus contained in the Exchange Offer
Registration Statement in connection with the resale of such Exchange Notes for
180 days following the effective date of such Exchange Offer Registration
Statement (or such shorter period during which Participating Broker-Dealers are
required by law to deliver such prospectus).
A Holder of Notes (other than certain specified holders) who wishes to
exchange such Notes for Exchange Notes in the Registered Exchange Offer will be
required to represent that any Exchange Notes to be received by it will be
acquired in the ordinary course of its business and that at the time of the
commencement of the Registered Exchange Offer it has no arrangement or
understanding with any person to participate in the distribution (within the
meaning of the Securities Act) of the Exchange Notes and that it is not an
"affiliate" of the Company, as defined in Rule 405 of the Securities Act, or if
it is an affiliate, that it will comply with the registration and prospectus
delivery requirements of the Securities Act to the extent applicable.
In the event that:
(1) applicable interpretations of the staff of the SEC do not permit us
to effect such a Registered Exchange Offer; or
(2) for any other reason we do not consummate the Registered Exchange
Offer within 180 days of the Issue Date; or
(3) an Initial Purchaser shall notify us following consummation of the
Registered Exchange Offer that Notes held by it are not eligible to
be exchanged for Exchange Notes in the Registered Exchange Offer; or
(4) certain Holders are prohibited by law or SEC policy from
participating in the Registered Exchange Offer or may not resell the
Exchange Notes acquired by them in the Registered Exchange Offer to
the public without delivering a prospectus,
then, we will, subject to certain exceptions,
(1) promptly file a shelf registration statement (the "Shelf
Registration Statement") with the SEC covering resales of the Notes
or the Exchange Notes, as the case may be;
(2) (A) in the case of clause (1) above, use our reasonable best efforts
to cause the Shelf Registration Statement to be declared effective
under the Securities Act on or prior to the 180th day after the
Issue Date and (B) in the case of clause (2), (3) or (4) above, use
our reasonable best efforts to cause the Shelf Registration
Statement to be declared effective under the Securities Act on or
prior to the 60th day after the date on which the Shelf Registration
Statement is required to be filed; and
(3) keep the Shelf Registration Statement effective until the earliest
of (A) the time when the Notes covered by the Shelf Registration
Statement can be sold pursuant to Rule 144 without any limitations
under clauses (c), (e), (f) and (h) of Rule 144, (B) two years from
the effective date of the Shelf Registration Statement and (C) the
date on which all Notes registered thereunder are disposed of in
accordance therewith.
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We will, in the event a Shelf Registration Statement is filed, among other
things, provide to each holder for whom such Shelf Registration Statement was
filed copies of the prospectus which is a part of the Shelf Registration
Statement, notify each such holder when the Shelf Registration Statement has
become effective and take certain other actions as are required to permit
unrestricted resales of the Notes or the Exchange Notes, as the case may be. A
holder selling such Notes or Exchange Notes pursuant to the Shelf Registration
Statement generally would be required to be named as a selling security holder
in the related prospectus and to deliver a prospectus to purchasers, will be
subject to certain of the civil liability provisions under the Securities Act in
connection with such sales and will be bound by the provisions of the
Registration Rights Agreement that are applicable to such holder (including
certain indemnification obligations).
We will pay additional cash interest on the applicable Notes and Exchange
Notes, subject to certain exceptions,
(1) if the Company fails to file an Exchange Offer Registration
Statement with the SEC on or prior to the 45th day after the Issue
Date,
(2) if the Exchange Offer Registration Statement is not declared
effective by the SEC on or prior to the 150th day after the Issue
Date or, if obligated to file a Shelf Registration Statement
pursuant to clause 2(A) above, a Shelf Registration Statement is not
declared effective by the SEC on or prior to the 150th day after the
Issue Date,
(3) if the Exchange Offer is not consummated on or before the 30th day
after the Exchange Offer Registration Statement is declared
effective,
(4) if obligated to file the Shelf Registration Statement, the Company
fails to file the Shelf Registration Statement with the SEC on or
prior to the 45th day after the date (the "Shelf Filing Date") on
which the obligation to file a Shelf Registration Statement arises,
(5) if obligated to file a Shelf Registration Statement pursuant to
clause 2(B) above, the Shelf Registration Statement is not declared
effective on or prior to the 60th day after the Shelf Filing Date,
or
(6) if after the Exchange Offer Registration Statement or the Shelf
Registration Statement, as the case may be, is declared effective,
such Registration Statement thereafter ceases to be effective or
usable (subject to certain exceptions) (each such event referred to
in the preceding clauses (1) through (6) a "Registration Default");
from and including the date on which any such Registration Default shall occur
to but excluding the date on which all Registration Defaults have been cured.
The rate of the additional interest will be 0.25% per annum for the first
90-day period immediately following the occurrence of a Registration Default,
and such rate will increase by an additional 0.25% per annum with respect to
each subsequent 90-day period until all Registration Defaults have been cured,
up to a maximum additional interest rate of 1.5% per annum. We will pay such
additional interest on regular interest payment dates. Such additional interest
will be in addition to any other interest payable from time to time with respect
to the Notes and the Exchange Notes.
All references in the Indenture, in any context, to any interest or other
amount payable on or with respect to the Notes shall be deemed to include any
additional interest pursuant to the Registration Rights Agreement.
If we effect the Registered Exchange Offer, we will be entitled to close
the Registered Exchange Offer 20 Business Days after the commencement thereof
provided that we have accepted all Notes theretofore validly tendered in
accordance with the terms of the Registered Exchange Offer.
76
CHANGE OF CONTROL
Upon the occurrence of any of the following events (each, a "Change of
Control"), each Holder shall have the right to require that the Company
repurchase such Holder's Notes at a purchase price in cash equal to 101% of the
principal amount thereof on the date of purchase plus accrued and unpaid
interest, if any, to the date of purchase (subject to the right of holders of
record on the relevant record date to receive interest due on the relevant
interest payment date):
(1) any "person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act) is or becomes the "beneficial owner" (as defined
in Rules 13d-3 and 13d-5 under the Exchange Act, except that for
purposes of this clause (1) such person shall be deemed to have
"beneficial ownership" of all shares that any such person has the
right to acquire, whether such right is exercisable immediately or
only after the passage of time), directly or indirectly, of more
than 50% of the total voting power of the Voting Stock of the
Company (for the purposes of this clause (1), such other person
shall be deemed to beneficially own any Voting Stock of a Person
(the "Specified Person") held by any other Person (the "Parent
Entity"), if such other person is the beneficial owner (as defined
above in this clause (1)), directly or indirectly, of more than 50%
of the voting power of the Voting Stock of such Parent Entity;
(2) individuals who on the Issue Date constituted the Board of Directors
(together with any new directors whose election by such Board of
Directors or whose nomination for election by the shareholders of
the Company was approved by a vote of a majority of the directors of
the Company then still in office who were either directors on the
Issue Date or whose election or nomination for election was
previously so approved) cease for any reason to constitute a
majority of the Board of Directors then in office;
(3) the adoption of a plan relating to the liquidation or dissolution of
the Company; or
(4) the merger or consolidation of the Company with or into another
Person or the merger of another Person with or into the Company, or
the sale of all or substantially all the assets of the Company
(determined on a consolidated basis) to another Person, other than a
transaction following which (A) in the case of a merger or
consolidation transaction, holders of securities that represented
100% of the Voting Stock of the Company immediately prior to such
transaction (or other securities into which such securities are
converted as part of such merger or consolidation transaction) own
directly or indirectly at least a majority of the voting power of
the Voting Stock of the surviving Person in such merger or
consolidation transaction immediately after such transaction and in
substantially the same proportion as before the transaction and (B)
in the case of a sale of assets transaction, the transferee Person
becomes the obligor in respect of the Notes and a Subsidiary of the
transferor of such assets.
Within 30 days following any Change of Control, we will mail a notice to
each Holder with a copy to the Trustee (the "Change of Control Offer") stating:
(1) that a Change of Control has occurred and that such Holder has the
right to require us to purchase such Holder's Notes at a purchase
price in cash equal to 101% of the principal amount thereof on the
date of purchase, plus accrued and unpaid interest, if any, to the
date of purchase (subject to the right of Holders of record on the
relevant record date to receive interest on the relevant interest
payment date);
(2) the circumstances and relevant facts regarding such Change of
Control;
(3) the purchase date (which shall be no earlier than 30 days nor later
than 60 days from the date such notice is mailed); and
(4) the instructions, as determined by us, consistent with the covenant
described hereunder, that a Holder must follow in order to have its
Notes purchased.
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We will not be required to make a Change of Control Offer following a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the Indenture applicable to a Change of Control Offer made by us and
purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
We will comply, to the extent applicable, with the requirements of Section
14(e) of the Exchange Act and any other securities laws or regulations in
connection with the repurchase of Notes as a result of a Change of Control. To
the extent that the provisions of any securities laws or regulations conflict
with the provisions of the covenant described hereunder, we will comply with the
applicable securities laws and regulations and shall not be deemed to have
breached our obligations under the covenant described hereunder by virtue of our
compliance with such securities laws or regulations.
The Change of Control purchase feature of the Notes may in certain
circumstances make more difficult or discourage a sale or takeover of the
Company and, thus, the removal of incumbent management. The Change of Control
purchase feature is a result of negotiations between the Company and the Initial
Purchaser. We have no present intention to engage in a transaction involving a
Change of Control, although it is possible that we could decide to do so in the
future. Subject to the limitations discussed below, we could, in the future,
enter into certain transactions, including acquisitions, refinancings or other
recapitalizations, that would not constitute a Change of Control under the
Indenture, but that could increase the amount of indebtedness outstanding at
such time or otherwise affect our capital structure or credit ratings.
Restrictions on our ability to Incur additional Indebtedness are contained in
the covenants described under "-- Certain Covenants -- Limitation on
Indebtedness". Such restrictions can only be waived with the consent of the
Holders of a majority in principal amount of the Notes then outstanding. Except
for the limitations contained in such covenants, however, the Indenture will not
contain any covenants or provisions that may afford Holders of the Notes
protection in the event of a highly leveraged transaction.
Our Credit Agreement provides that the occurrence of certain change of
control events with respect to the Company would constitute a default
thereunder. In the event that at the time of a Change of Control under the
Indenture or the terms of any Senior Indebtedness of the Company (including the
Credit Agreement) restrict or prohibit the purchase of Notes following such
Change of Control, then prior to the mailing of the notice to Holders but in any
event within 30 days following any Change of Control, we undertake to (1) repay
in full all such Senior Indebtedness or (2) obtain the requisite consents under
the agreements governing such Senior Indebtedness to permit the repurchase of
the Notes. If we do not repay such Senior Indebtedness or obtain such consents,
we will remain prohibited from purchasing Notes. In such case, our failure to
comply with the foregoing undertaking, after appropriate notice and lapse of
time would result in an Event of Default under the Indenture, which would, in
turn, constitute a default under the Credit Agreement. In such circumstances,
the subordination provisions in the Indenture would likely restrict payment to
the Holders of the Notes.
Future indebtedness that we may incur may contain prohibitions on the
occurrence of certain events that would constitute a Change of Control or
require the repurchase of such indebtedness upon a Change of Control. Moreover,
the exercise by the Holders of their right to require us to repurchase the Notes
could cause a default under such indebtedness, even if the Change of Control
itself does not, due to the financial effect of such repurchase on us. Finally,
our ability to pay cash to the Holders of Notes following the occurrence of a
Change of Control may be limited by our then existing financial resources. There
can be no assurance that sufficient funds will be available when necessary to
make any required repurchases.
The definition of "Change of Control" includes a disposition of all or
substantially all of the assets of the Company to any Person. Although there is
a limited body of case law interpreting the phrase "substantially all," there is
no precise established definition of the phrase under applicable law.
Accordingly, in certain circumstances there may be a degree of uncertainty as to
whether a particular transaction would involve a disposition of "all or
substantially all" of the assets of the Company. As a result, it may be unclear
as to whether a Change of Control has occurred and whether a Holder of the Notes
may require the Company to make an offer to repurchase the Notes as described
above.
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The provisions under the Indenture relative to our obligation to make an
offer to repurchase the Notes as a result of a Change of Control may be waived
or modified with the written consent of the holders of a majority in principal
amount of the Notes.
CERTAIN COVENANTS
The Indenture contains covenants including, among others, the following:
LIMITATION ON INDEBTEDNESS
(a) The Company will not, and will not permit any Restricted Subsidiary to,
Incur, directly or indirectly, any Indebtedness; provided, however, that the
Company will be entitled to Incur Indebtedness if, on the date of such
Incurrence and after giving effect thereto on a pro forma basis, no Default has
occurred and is continuing and the Consolidated Coverage Ratio exceeds 2.5 to 1.
(b) Notwithstanding the foregoing paragraph (a), the Company and the
Restricted Subsidiaries will be entitled to Incur any or all of the following
Indebtedness:
(1) Indebtedness Incurred by the Company and its Restricted
Subsidiaries pursuant to any Credit Facility; provided, however,
that, after giving effect to any such Incurrence, the aggregate
principal amount of all Indebtedness Incurred under this clause (1)
and clause (13) below and then outstanding does not exceed the
total of the greater of (i) $290 million less the sum of all
principal payments with respect to such Indebtedness pursuant to
paragraph (a)(3)(A) of the covenant described under "-- Limitation
on Sales of Assets and Subsidiary Stock" and (ii) the sum of (x)
50% of the book value of the inventory of the Company and its
Restricted Subsidiaries and (y) 80% of the book value of the
accounts receivables of the Company and its Restricted
Subsidiaries; provided further, however, that in the case of
Indebtedness to be Incurred pursuant to this clause (1) by a
Restricted Subsidiary that is not a Subsidiary Guarantor, the
aggregate principal amount of such Indebtedness, when added
together with all other then outstanding Indebtedness Incurred
pursuant to clause (1) and (13) below by Restricted Subsidiaries
that are not Subsidiary Guarantors, does not exceed $60 million;
(2) Indebtedness owed to and held by the Company or a Restricted
Subsidiary; provided, however, that (A) any subsequent issuance or
transfer of any Capital Stock which results in any such Restricted
Subsidiary ceasing to be a Restricted Subsidiary or any subsequent
transfer of such Indebtedness (other than to the Company or a
Restricted Subsidiary) shall be deemed, in each case, to constitute
the Incurrence of such Indebtedness by the obligor thereon and (B)
if the Company is the obligor on such Indebtedness, such
Indebtedness is expressly subordinated to the prior payment in full
in cash of all obligations with respect to the Notes;
(3) the Notes and the Exchange Notes (other than any Additional Notes);
(4) Indebtedness outstanding on the Issue Date (other than Indebtedness
described in clause (1), (2) or (3) of this covenant);
(5) Indebtedness of a Restricted Subsidiary Incurred and outstanding on
or prior to the date on which such Subsidiary was acquired by the
Company (other than Indebtedness Incurred in connection with, or to
provide all or any portion of the funds or credit support utilized
to consummate, the transaction or series of related transactions
pursuant to which such Subsidiary became a Subsidiary or was
acquired by the Company); provided, however, that on the date of
such acquisition and after giving pro forma effect thereto, the
Company would have been able to Incur at least $1.00 of additional
Indebtedness pursuant to paragraph (a) of this covenant;
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(6) Refinancing Indebtedness in respect of Indebtedness Incurred
pursuant to paragraph (a) or pursuant to clause (3), (4) or (5) or
this clause (6); provided, however, that to the extent such
Refinancing Indebtedness directly or indirectly Refinances
Indebtedness of a Subsidiary Incurred pursuant to clause (5), such
Refinancing Indebtedness shall be Incurred only by such Subsidiary;
(7) Hedging Obligations consisting of (1) Interest Rate Agreements
directly related to Indebtedness permitted to be Incurred by the
Company or its Restricted Subsidiaries pursuant to the Indenture
and (2) Currency Rate Agreements directly related to (x)
Indebtedness permitted to be Incurred by the Company and its
Restricted Subsidiaries pursuant to the Indenture or (y) the
ordinary operations of the Company and its Restricted Subsidiaries;
(8) obligations in respect of performance, bid and surety bonds,
customer contracts or other similar obligations and completion
guarantees provided by the Company or any Restricted Subsidiary in
the ordinary course of business;
(9) Indebtedness arising from the honoring by a bank or other financial
institution of a check, draft or similar instrument drawn against
insufficient funds in the ordinary course of business; provided,
however, that such Indebtedness is extinguished within two Business
Days of its Incurrence;
(10) Indebtedness consisting of the Subsidiary Guaranty of a Subsidiary
Guarantor, a Guarantee of a Restricted Subsidiary that is not a
Subsidiary Guarantor to the extent it Guarantees Indebtedness
permitted to be Incurred under the Indenture by any other
Restricted Subsidiary that is also not a Subsidiary Guarantor, and
any Guarantee by a Subsidiary Guarantor of Indebtedness Incurred
pursuant to paragraph (a) or pursuant to clause (1), (2), (3) or
(4) or pursuant to clause (6) to the extent the Refinancing
Indebtedness Incurred thereunder directly or indirectly Refinances
Indebtedness Incurred pursuant to paragraph (a) or pursuant to
clause (3) or (4);
(11) Indebtedness of the Company or the Subsidiary Guarantors
represented by Capital Lease Obligations, mortgage financings or
purchase money obligations, in each case, Incurred for the purpose
of financing all or any part of the purchase price or cost of
construction or improvement of property, plant or equipment used in
a Related Business, including Refinancing Indebtedness Incurred to
Refinance in whole or in part any Indebtedness Incurred pursuant to
this clause (11), in an amount which, when added together with all
Indebtedness Incurred pursuant to this clause (11) and then
outstanding, does not exceed the greater of 2.5% of the Total Net
Tangible Assets as of the date of Incurrence and $25 million;
(12) Indebtedness Incurred by any Foreign Subsidiary in an amount that,
when added together with the amount of all other Indebtedness
Incurred pursuant to this clause (12) and then outstanding, does
not exceed $10 million;
(13) Indebtedness Incurred by a Receivables Subsidiary in a Qualified
Receivables Transaction that is not recourse to the Company or any
of its Subsidiaries (except for Standard Securitization
Undertakings) in an amount which, when added together with the
aggregate amount of all Indebtedness Incurred pursuant to this
clause (13) and then outstanding, does not exceed the lesser of (i)
$100 million and (ii) the maximum principal amount of Indebtedness
that could be Incurred pursuant to clause (1) above at such time
after taking into account all Indebtedness theretofor Incurred
pursuant to clause (1) above and then outstanding;
(14) Indebtedness of the Company or any Restricted Subsidiary consisting
of obligations (including reimbursement obligations in respect of
letters of credit) Incurred in the
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ordinary course of business in order to provide security for
workers' compensation, in connection with self-insurance or similar
requirements;
(15) Indebtedness consisting of customary indemnification, adjustment of
purchase price or similar obligations, including title insurance,
of the Company or any Restricted Subsidiary, in each case, Incurred
in connection with the acquisition or disposition of any assets by
the Company or any Restricted Subsidiary (other than Guarantees of
Indebtedness Incurred by any Person acquiring all or any portion of
such assets);
(16) Indebtedness consisting of take-or-pay obligations of the Company
or a Restricted Subsidiary contained in supply agreements entered
into in the ordinary course of business; and
(17) Indebtedness of the Company and the Subsidiary Guarantors in an
aggregate principal amount which, when taken together with all
other Indebtedness of the Company and its Restricted Subsidiaries
outstanding on the date of such Incurrence (other than Indebtedness
permitted by clauses (1) through (16) above or paragraph (a)) does
not exceed $50 million.
(c) Notwithstanding the foregoing, neither the Company nor any Subsidiary
Guarantor will Incur any Indebtedness pursuant to the foregoing paragraph (b) if
the proceeds thereof are used, directly or indirectly, to Refinance any
Subordinated Obligations of the Company or any Subsidiary Guarantor unless such
Indebtedness shall be subordinated to the Notes or the applicable Subsidiary
Guaranty to at least the same extent as such Subordinated Obligations.
(d) For purposes of determining compliance with this covenant, (1) in the
event that an item of Indebtedness meets the criteria of more than one of the
types of Indebtedness described above, the Company, in its sole discretion, will
classify such item of Indebtedness at the time of Incurrence and only be
required to include the amount and type of such Indebtedness in one of the above
clauses, (2) the Company will be entitled to divide and classify an item of
Indebtedness in more than one of the types of Indebtedness described above and
(3) the Company will be entitled from time to time to reclassify any
Indebtedness Incurred pursuant to any clause in paragraph (b) above such that it
will be deemed as having been Incurred under another clause in paragraph (b).
For the avoidance of doubt, and without limiting the generality of the
foregoing, Indebtedness Incurred pursuant to any Credit Facility can be
classified by the Company at the time of Incurrence under any of paragraph (a)
and clauses (1), (5), (6), (7), (11), (12), (13), (14) and (17) of paragraph
(b).
(e) Notwithstanding paragraphs (a) and (b) above, neither the Company nor
any Subsidiary Guarantor will Incur (1) any Indebtedness if such Indebtedness is
subordinate or junior in ranking in any respect to any Senior Indebtedness of
the Company or such Subsidiary Guarantor, as applicable, unless such
Indebtedness is Senior Subordinated Indebtedness or is expressly subordinated in
right of payment to Senior Subordinated Indebtedness of the Company or such
Subsidiary Guarantor, as applicable, or (2) any Secured Indebtedness that is not
Senior Indebtedness of such Person unless contemporaneously therewith such
Person makes effective provision to secure the Notes or the relevant Subsidiary
Guaranty, as applicable, equally and ratably with such Secured Indebtedness for
so long as such Secured Indebtedness is secured by a Lien.
(f) For purposes of determining compliance with any U.S. dollar restriction
on the Incurrence of Indebtedness where the Indebtedness Incurred is denominated
in a different currency, the amount of such Indebtedness will be the U.S. Dollar
Equivalent, determined on the date of the Incurrence of such Indebtedness,
provided, however, that if any such Indebtedness denominated in a different
currency is subject to a Currency Agreement with respect to U.S. dollars,
covering all principal, premium, if any, and interest payable on such
Indebtedness, the amount of such Indebtedness expressed in U.S. dollars will be
as provided in such Currency Agreement. The principal amount of any Refinancing
Indebtedness Incurred in the same currency as the Indebtedness being Refinanced
will be the U.S. Dollar Equivalent, of the Indebtedness Refinanced, except to
the extent that (1) such U.S. Dollar Equivalent was determined based
81
on a Currency Agreement, in which case the Refinancing Indebtedness will be
determined in accordance with the preceding sentence, and (2) the principal
amount of the Refinancing Indebtedness exceeds the principal amount of the
Indebtedness being Refinanced, in which case the U.S. Dollar Equivalent of such
excess will be determined on the date such Refinancing Indebtedness is Incurred.
LIMITATION ON RESTRICTED PAYMENTS
(a) The Company will not, and will not permit any Restricted Subsidiary,
directly or indirectly, to make a Restricted Payment if at the time the Company
or such Restricted Subsidiary makes such Restricted Payment:
(1) a Default shall have occurred and be continuing (or would result
therefrom);
(2) the Company is not entitled to Incur an additional $1.00 of
Indebtedness pursuant to paragraph (a) of the covenant described
under "-- Limitation on Indebtedness"; or
(3) the aggregate amount of such Restricted Payment and all other
Restricted Payments since the Issue Date would exceed the sum of
(without duplication):
(A) 50% of the Consolidated Net Income accrued during the period
(treated as one accounting period) from the beginning of the
fiscal quarter during which the Issue Date occurs to the end of
the most recent fiscal quarter prior to such Restricted Payment
for which financial statements have been made publicly available
(or, in case such Consolidated Net Income shall be a deficit,
minus 100% of such deficit); plus
(B) 100% of the aggregate Net Cash Proceeds received by the Company
from the issuance or sale of its Capital Stock (other than
Disqualified Stock) subsequent to the Issue Date (other than an
issuance or sale to a Subsidiary of the Company and other than an
issuance or sale to an employee stock ownership plan or to a
trust established by the Company or any of its Subsidiaries for
the benefit of their employees) and 100% of any cash capital
contribution received by the Company from its shareholders
subsequent to the Issue Date; plus
(C) the amount by which Indebtedness of the Company is reduced on the
Company's balance sheet upon the conversion or exchange (other
than by a Subsidiary of the Company) subsequent to the Issue Date
of any Indebtedness of the Company convertible or exchangeable
for Capital Stock (other than Disqualified Stock) of the Company
(less the amount of any cash, or the fair value of any other
property, distributed by the Company upon such conversion or
exchange); plus
(D) an amount equal to the sum of (x) the net reduction in the
Investments (other than Permitted Investments) made by the
Company or any Restricted Subsidiary in any Person resulting from
repurchases, repayments or redemptions of such Investments by
such Person, proceeds realized on the sale of such Investment and
proceeds representing the return of capital (excluding dividends
and distributions), in each case received by the Company or any
Restricted Subsidiary, and (y) to the extent such Person is an
Unrestricted Subsidiary, the portion (proportionate to the
Company's equity interest in such Subsidiary) of the fair market
value of the net assets of such Unrestricted Subsidiary at the
time such Unrestricted Subsidiary is designated (or is merged or
liquidated into) a Restricted Subsidiary; provided, however, that
the foregoing sum shall not exceed, in the case of any such
Person or Unrestricted Subsidiary, the amount of Investments
(excluding Permitted Investments) previously made (and treated as
a Restricted Payment) by the Company or any Restricted Subsidiary
in such Person or Unrestricted Subsidiary.
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(b) The preceding provisions will not prohibit:
(1) any Restricted Payment made out of the Net Cash Proceeds of the
substantially concurrent sale of, or made by exchange for, Capital
Stock of the Company (other than Disqualified Stock and other than
Capital Stock issued or sold to a Subsidiary of the Company or an
employee stock ownership plan or to a trust established by the
Company or any of its Subsidiaries for the benefit of their
employees to the extent that the purchase by such plan or trust is
financed by Indebtedness of such plan or trust to the Company or any
Restricted Subsidiary or Indebtedness Guaranteed by the Company or a
Restricted Subsidiary) or a substantially concurrent cash capital
contribution received by the Company from its shareholders;
provided, however, that (A) such Restricted Payment shall be
excluded in the calculation of the amount of Restricted Payments and
(B) the Net Cash Proceeds from such sale or such cash capital
contribution (to the extent so used for such Restricted Payment)
shall be excluded from the calculation of amounts under clause
(3)(B) of paragraph (a) above;
(2) any purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value of Subordinated Obligations of
the Company or any Subsidiary Guarantor made by exchange for, or out
of the proceeds of the substantially concurrent sale of,
Indebtedness which is permitted to be Incurred pursuant to the
covenant described under "-- Limitation on Indebtedness"; provided,
however, that such purchase, repurchase, redemption, defeasance or
other acquisition or retirement for value shall be excluded in the
calculation of the amount of Restricted Payments;
(3) dividends paid within 60 days after the date of declaration thereof
if at such date of declaration such dividend would have complied
with this covenant; provided, however, that at the time of payment
of such dividend, no other Default shall have occurred and be
continuing (or result therefrom); provided further, however, that
such dividend shall be included in the calculation of the amount of
Restricted Payments;
(4) so long as no Default has occurred and is continuing, the repurchase
or other acquisition of shares of Capital Stock of the Company or
any of its Subsidiaries from employees, former employees,
consultants, former consultants, directors or former directors of
the Company or any of its Subsidiaries (or permitted transferees of
such employees, former employees, consultants, former consultants,
directors or former directors), pursuant to the terms of the
agreements (including employment agreements) or plans (or amendments
thereto) approved by the Board of Directors under which such
individuals purchase or sell or are granted the option to purchase
or sell, shares of such Capital Stock; provided, however, that the
aggregate amount of such repurchases and other acquisitions shall
not exceed $2 million in any calendar year plus the Net Cash
Proceeds received during such calendar year by the Company upon the
exercise of options to purchase, or the purchase of Capital Stock by
any such employees, former employees, consultants, former
consultants, directors or former directors; provided further,
however, that (A) such repurchases and other acquisitions shall be
excluded in the calculation of the amount of Restricted Payments and
(B) the Net Cash Proceeds received by the Company upon such exercise
or purchase shall be excluded from the calculation of amounts under
clause (3)(B) of paragraph (a) above;
(5) acquisitions of Capital Stock deemed to occur upon the exercise of
stock options or warrants if such Capital Stock represents a portion
of the exercise price thereof and acquisitions of Capital Stock
deemed to occur upon the withholding of a portion of the Capital
Stock granted or awarded to an employee to pay for the taxes payable
by such employee upon the grant or exercise of a stock option or
upon the award or vesting of restricted stock; provided, however,
that such amount shall be excluded in the calculation of the amount
of Restricted Payments; and
83
(6) so long as no Default has occurred and is continuing, Restricted
Payments in an amount which, when added together with all Restricted
Payments made pursuant to this clause (6) to the extent they shall
not have at the time been repaid, repurchased, redeemed, sold or
returned, does not exceed $25 million; provided, however, that such
payment shall be included in the calculation of the amount of
Restricted Payments.
LIMITATION ON RESTRICTIONS ON DISTRIBUTIONS FROM RESTRICTED SUBSIDIARIES
The Company will not, and will not permit any Restricted Subsidiary to,
create or otherwise cause or permit to exist or become effective any consensual
encumbrance or restriction on the ability of any Restricted Subsidiary to (a)
pay dividends or make any other distributions on its Capital Stock to the
Company or a Restricted Subsidiary or pay any Indebtedness owed to the Company,
(b) make any loans or advances to the Company or (c) transfer any of its
property or assets to the Company, except:
(1) with respect to clauses (a), (b) and (c),
(i) any encumbrance or restriction pursuant to an agreement in effect
at or entered into on the Issue Date (including the Indenture and
any Credit Facilities as they are in effect on the Issue Date);
(ii) any encumbrance or restriction with respect to a Restricted
Subsidiary pursuant to an agreement relating to any Indebtedness
Incurred by such Restricted Subsidiary on or prior to the date
on which such Restricted Subsidiary was acquired by the Company
(other than Indebtedness Incurred as consideration in, or to
provide all or any portion of the funds or credit support
utilized to consummate, the transaction or series of related
transactions pursuant to which such Restricted Subsidiary became
a Restricted Subsidiary or was acquired by the Company) and
outstanding on such date;
(iii) any encumbrance or restriction pursuant to an agreement
effecting a Refinancing of Indebtedness Incurred pursuant to an
agreement referred to in clause (i) or (ii) of clause (1) of
this covenant or this clause (iii) or contained in any
amendment to an agreement referred to in clause (i) or (ii) of
clause (1) of this covenant or this clause (iii); provided,
however, that the encumbrances and restrictions with respect to
such Restricted Subsidiary contained in any such refinancing
agreement or amendment are no less favorable to the Noteholders
than encumbrances and restrictions with respect to such
Restricted Subsidiary contained in such predecessor agreements;
(iv) any restriction with respect to a Restricted Subsidiary imposed
pursuant to an agreement entered into for the sale or
disposition of all or substantially all the Capital Stock or
assets of such Restricted Subsidiary pending the closing of such
sale or disposition;
(v) any encumbrance or restriction with respect to a Purchase Money
Note or other Indebtedness or other contractual requirements of a
Receivables Subsidiary in connection with a Qualified Receivables
Transaction; provided, however, that such restrictions apply only
to such Receivables Subsidiary; and
(2) with respect to clause (c) only,
(i) any such encumbrance or restriction consisting of customary
nonassignment provisions in leases governing leasehold interests
to the extent such provisions restrict the transfer of the lease
or the property leased thereunder; and
(ii) restrictions contained in security agreements or mortgages
securing Indebtedness of a Restricted Subsidiary to the extent
such restrictions restrict the transfer of the property subject
to such security agreements or mortgages.
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LIMITATION ON SALES OF ASSETS AND SUBSIDIARY STOCK
(a) The Company will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, consummate any Asset Disposition unless:
(1) the Company or such Restricted Subsidiary receives consideration at
the time of such Asset Disposition at least equal to the fair market
value (including as to the value of all non-cash consideration), as
determined in good faith by the Board of Directors, of the shares
and assets subject to such Asset Disposition;
(2) at least 75% of the consideration thereof received by the Company or
such Restricted Subsidiary is in the form of cash or cash
equivalents; and
(3) an amount equal to 100% of the Net Available Cash from such Asset
Disposition is applied by the Company (or such Restricted
Subsidiary, as the case may be) pursuant to one or more of the
following:
(A) to the extent the Company elects (or is required by the terms of
any Indebtedness, after giving effect to any consents or waivers
received thereunder), to prepay, repay, redeem or purchase Senior
Indebtedness of the Company or Indebtedness (other than any
Disqualified Stock) of a Restricted Subsidiary (in each case,
other than Indebtedness owed to the Company or an Affiliate of
the Company) within one year from the later of the date of such
Asset Disposition or the receipt of such Net Available Cash;
(B) to the extent the Company elects, to acquire Additional Assets
within one year from the later of the date of such Asset
Disposition or the receipt of such Net Available Cash; and
(C) to the extent of the balance of such Net Available Cash after
application in accordance with clauses (A) and (B), to make an
offer to the Holders of the Notes (and to holders of other Senior
Subordinated Indebtedness of the Company designated by the
Company) to purchase Notes (and such other Senior Subordinated
Indebtedness of the Company) pursuant to and subject to the
conditions contained in the Indenture;
provided, however, that in connection with any prepayment, repayment or
purchase of Indebtedness pursuant to clause (A) or (C) above, the Company
or such Restricted Subsidiary shall permanently retire such Indebtedness
and shall cause the related loan commitment (if any) to be permanently
reduced in an amount equal to the principal amount so prepaid, repaid or
purchased.
Notwithstanding the foregoing provisions of this covenant, the Company and
the Restricted Subsidiaries will not be required to apply any Net Available Cash
in accordance with this covenant except to the extent that the aggregate Net
Available Cash from all Asset Dispositions which is not applied in accordance
with this covenant exceeds $10 million. Pending application of Net Available
Cash pursuant to this covenant, such Net Available Cash shall be invested in
Temporary Cash Investments or applied to temporarily reduce revolving credit
indebtedness.
For the purposes of this covenant, any of the following are deemed to be
cash or cash equivalents:
(1) the assumption of Indebtedness of the Company or any Restricted
Subsidiary and the release of the Company or such Restricted
Subsidiary from all liability on such Indebtedness in connection
with such Asset Disposition; and
(2) securities received by the Company or any Restricted Subsidiary from
the transferee that are converted by the Company or such Restricted
Subsidiary into cash within 150 days after such Asset Disposition
(to the extent of cash received).
(b) In the event of an Asset Disposition that requires the purchase of
Notes (and other Senior Subordinated Indebtedness of the Company) pursuant to
clause (a)(3)(C) above, the Company will
85
purchase Notes tendered pursuant to an offer by the Company for the Notes (and
such other Senior Subordinated Indebtedness) at a purchase price of 100% of
their principal amount (or, in the event such other Senior Subordinated
Indebtedness of the Company was issued with original issue discount, 100% of the
accreted value thereof) without premium, plus accrued but unpaid interest (or,
in respect of such other Senior Subordinated Indebtedness of the Company, such
lesser price, if any, as may be provided for by the terms of such Senior
Subordinated Indebtedness) in accordance with the procedures (including
prorating in the event of oversubscription) set forth in the Indenture. If the
aggregate purchase price of the Notes tendered exceeds the Net Available Cash
allotted to their purchase, the Company will select the Notes to be purchased on
a pro rata basis but in round denominations, which in the case of the Notes will
be denominations of $1,000 principal amount or multiples thereof. The Company
shall not be required to make such an offer to purchase Notes (and other Senior
Subordinated Indebtedness of the Company) pursuant to this covenant if the Net
Available Cash available therefor is less than $10 million (which lesser amount
shall be carried forward for purposes of determining whether such an offer is
required with respect to the Net Available Cash from any subsequent Asset
Disposition).
(c) The Company will comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Notes pursuant to this
covenant. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this covenant, the Company will comply
with the applicable securities laws and regulations and will not be deemed to
have breached its obligations under this covenant by virtue of its compliance
with such securities laws or regulations.
LIMITATION ON AFFILIATE TRANSACTIONS
(a) The Company will not, and will not permit any Restricted Subsidiary to,
enter into or permit to exist any transaction (including the purchase, sale,
lease or exchange of any property, employee compensation arrangements or the
rendering of any service) with, or for the benefit of, any Affiliate of the
Company (an "Affiliate Transaction") unless:
(1) the terms of the Affiliate Transaction are no less favorable to the
Company or such Restricted Subsidiary than those that could be
obtained at the time of the Affiliate Transaction in arm's-length
dealings with a Person who is not an Affiliate;
(2) if such Affiliate Transaction involves an amount in excess of $2.5
million, the terms of the Affiliate Transaction are set forth in
writing and a majority of the non-employee directors of the Company
disinterested with respect to such Affiliate Transaction have
determined in good faith that the criteria set forth in clause (1)
are satisfied and have approved the relevant Affiliate Transaction
as evidenced by a resolution of the Board of Directors; and
(3) if such Affiliate Transaction involves an amount in excess of $10
million, the Board of Directors shall also have received a written
opinion from an Independent Qualified Party to the effect that such
Affiliate Transaction is fair, from a financial standpoint, to the
Company and its Restricted Subsidiaries or is not less favorable to
the Company and its Restricted Subsidiaries than could reasonably be
expected to be obtained at the time in an arm's-length transaction
with a Person who was not an Affiliate.
(b) The provisions of the preceding paragraph (a) will not prohibit:
(1) any Investment (other than a Permitted Investment) or other
Restricted Payment, in each case permitted to be made pursuant to
the covenant described under "-- Limitation on Restricted Payments";
(2) any issuance of securities, or other payments, awards or grants in
cash, securities or otherwise pursuant to, or the funding of,
employment arrangements, stock options and stock ownership plans
approved by the Board of Directors;
86
(3) loans or advances to employees in the ordinary course of business in
accordance with the past practices of the Company or its Restricted
Subsidiaries, but in any event not to exceed $3.5 million in the
aggregate outstanding at any one time;
(4) the payment of reasonable fees to directors of the Company and its
Restricted Subsidiaries who are not employees of the Company or its
Restricted Subsidiaries;
(5) any Qualified Receivables Transaction, and the Incurrence of
obligations and acquisitions of Permitted Investments and other
rights or assets in connection with a Qualified Receivables
Transaction;
(6) any transaction between or among the Company, a Restricted
Subsidiary or joint venture or similar entity which would constitute
an Affiliate Transaction solely because the Company or a Restricted
Subsidiary owns an equity interest in or otherwise controls such
Restricted Subsidiary, joint venture or similar entity; and
(7) the issuance or sale of any Capital Stock (other than Disqualified
Stock) of the Company.
LIMITATION ON THE SALE OR ISSUANCE OF CAPITAL STOCK OF RESTRICTED SUBSIDIARIES
The Company
(1) will not, and will not permit any Restricted Subsidiary to, sell,
lease, transfer or otherwise dispose of any Capital Stock of any
Restricted Subsidiary to any Person (other than the Company or a
Wholly Owned Subsidiary); and
(2) will not permit any Restricted Subsidiary to issue any of its
Capital Stock (other than, if necessary, shares of its Capital Stock
constituting directors' or other legally required qualifying shares)
to any Person (other than to the Company or a Wholly Owned
Subsidiary),
unless
(A) immediately after giving effect to such issuance, sale or other
disposition, neither the Company nor any of its Subsidiaries own
any Capital Stock of such Restricted Subsidiary;
(B) immediately after giving effect to such issuance, sale or other
disposition, such Restricted Subsidiary would no longer
constitute a Restricted Subsidiary and any Investment in such
Person remaining after giving effect thereto is treated as a new
Investment by the Company and such Investment would be permitted
to be made under the covenant described under "-- Limitation on
Restricted Payments" if made on the date of such issuance, sale
or other disposition;
(C) such issuance or sale is made by a Person that will, upon the
making of a substantially concurrent Investment by the Company or
a Restricted Subsidiary in such Person, become a Restricted
Subsidiary; or
(D) in the case of Subsidiaries of Harnischfeger of Australia Pty.
Ltd in existence on the Issue Date, immediately after giving
effect to such issuance, sale or other disposition, the Company's
aggregate direct or indirect beneficial ownership in such
Subsidiary (or its successors) is not reduced below the aggregate
direct or indirect beneficial ownership immediately before such
issuance, sale or other disposition.
LIMITATION ON LINE OF BUSINESS
The Company will not, and will not permit any Restricted Subsidiary, to
engage in any business other than a Related Business.
87
MERGER AND CONSOLIDATION
The Company will not consolidate with or merge with or into, or convey,
transfer or lease, in one transaction or a series of transactions, directly or
indirectly, all or substantially all its assets to, any Person, unless:
(1) the resulting, surviving or transferee Person (the "Successor
Company") shall be a Person organized and existing under the laws of
the United States of America, any State thereof or the District of
Columbia and the Successor Company (if not the Company) shall
expressly assume, by an indenture supplemental thereto, executed and
delivered to the Trustee, in form satisfactory to the Trustee, all
the obligations of the Company under the Notes and the Indenture;
(2) immediately after giving pro forma effect to such transaction (and
treating any Indebtedness which becomes an obligation of the
Successor Company or any Subsidiary as a result of such transaction
as having been Incurred by such Successor Company or such Subsidiary
at the time of such transaction), no Default shall have occurred and
be continuing;
(3) immediately after giving pro forma effect to such transaction, the
Successor Company would be able to Incur an additional $1.00 of
Indebtedness pursuant to paragraph (a) of the covenant described
under "-- Limitation on Indebtedness";
(4) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental indenture
(if any) comply with the Indenture; and
(5) the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that the Holders will not recognize income,
gain or loss for Federal income tax purposes as a result of such
transaction and will be subject to Federal income tax on the same
amounts, in the same manner and at the same times as would have been
the case if such transaction had not occurred.
provided, however, that clause (3) will not be applicable to (A) a Restricted
Subsidiary consolidating with, merging into or transferring all or part of its
properties and assets to the Company or (B) the Company merging with an
Affiliate of the Company solely for the purpose and with the sole effect of
reincorporating the Company in another jurisdiction.
The Successor Company will be the successor to the Company and shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company under the Indenture, and the predecessor Company, except in the case
of a lease, shall be released from the obligation to pay the principal of and
interest on the Notes.
The Company will not permit any Subsidiary Guarantor to consolidate with or
merge with or into, or convey, transfer or lease, in one transaction or a series
of transactions, all or substantially all of its assets to any Person unless:
(1) except in the case of a Subsidiary Guarantor that has been disposed
of in its entirety to another Person (other than to the Company or
an Affiliate of the Company), whether through a merger,
consolidation or sale of Capital Stock or assets, if in connection
therewith the Company provides an Officers' Certificate to the
Trustee to the effect that the Company will comply with its
obligations under the covenant described under "-- Limitation on
Sales of Assets and Subsidiary Stock" in respect of such
disposition, the resulting, surviving or transferee Person (if not
such Subsidiary) shall be a Person organized and existing under the
laws of the jurisdiction under which such Subsidiary was organized
or under the laws of the United States of America, or any State
thereof or the District of Columbia, and such Person shall expressly
assume, by a Guaranty Agreement, in a form satisfactory to the
Trustee, all the obligations of such Subsidiary, if any, under its
Subsidiary Guaranty;
88
(2) immediately after giving effect to such transaction or transactions
on a pro forma basis (and treating any Indebtedness which becomes an
obligation of the resulting, surviving or transferee Person as a
result of such transaction as having been issued by such Person at
the time of such transaction), no Default shall have occurred and be
continuing; and
(3) the Company delivers to the Trustee an Officers' Certificate and an
Opinion of Counsel, each stating that such consolidation, merger or
transfer and such Guaranty Agreement, if any, complies with the
Indenture.
FUTURE GUARANTORS
The Company will cause each domestic Restricted Subsidiary that Incurs any
Indebtedness to, at the same time, execute and deliver to the Trustee a Guaranty
Agreement pursuant to which such Restricted Subsidiary will Guarantee payment of
the Notes on the same terms and conditions as those set forth in the Indenture.
Such Restricted Subsidiary shall be released from such Guaranty at such time
that such Restricted Subsidiary is released from all of its obligations with
respect to such Indebtedness (and any additional Indebtedness it may Incur).
SEC REPORTS
Notwithstanding that the Company may not be subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act, the Company will file
with the SEC and provide the Trustee and Noteholders with such annual reports
and such information, documents and other reports as are specified in Sections
13 and 15(d) of the Exchange Act and applicable to a U.S. corporation subject to
such Sections, such information, documents and other reports to be so filed at
the times specified for the filings, and provided to the Trustee and Noteholders
not more than 5 days thereafter, of such information, documents and reports
under such Sections.
In addition, the Company will furnish to the Holders of the Notes and to
prospective investors, upon the requests of such Holders, any information
required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act so
long as the Notes are not freely transferable under the Securities Act.
DEFAULTS
Each of the following is an Event of Default:
(1) a default in the payment of interest on the Notes when due,
continued for 30 days;
(2) a default in the payment of principal of any Note when due at its
Stated Maturity, upon optional redemption, upon required purchase,
upon declaration of acceleration or otherwise;
(3) the failure by the Company to comply with its obligations under
"-- Certain Covenants -- Merger and Consolidation" above;
(4) the failure by the Company to comply for 30 days after notice with
any of its obligations in the covenants described above under
"Change of Control" (other than a failure to purchase Notes) or
under "-- Certain Covenants" under "-- Limitation on Indebtedness,"
"-- Limitation on Restricted Payments," "-- Limitation on
Restrictions on Distributions from Restricted Subsidiaries,"
"-- Limitation on Sales of Assets and Subsidiary Stock" (other than
a failure to purchase Notes), "-- Limitation on Affiliate
Transactions," "-- Limitation on the Sale or Issuance of Capital
Stock of Restricted Subsidiaries," "-- Limitation on Line of
Business --," "-- Future Guarantors," or "-- SEC Reports";
(5) the failure by the Company or any Subsidiary Guarantor to comply for
60 days after notice with its other agreements contained in the
Indenture;
(6) Indebtedness of the Company, any Subsidiary Guarantor or any
Significant Subsidiary is not paid within any applicable grace
period after final maturity or is accelerated by the holders
89
thereof because of a default and the total amount of such
Indebtedness unpaid or accelerated exceeds $10 million (the "Cross
Acceleration Provision");
(7) certain events of bankruptcy, insolvency or reorganization of the
Company, a Subsidiary Guarantor or any Significant Subsidiary (the
"Bankruptcy Provisions");
(8) any judgment or decree of a court having jurisdiction over the
Company, a Subsidiary Guarantor or a Significant Subsidiary for the
payment of money in excess of $15 million is entered against the
Company, a Subsidiary Guarantor or any Significant Subsidiary,
remains outstanding for a period of 60 consecutive days following
such judgment and is not discharged, waived or stayed (the "Judgment
Default Provision"); or
(9) a Subsidiary Guaranty ceases to be in full force and effect (other
than in accordance with the terms of such Subsidiary Guaranty) or a
Subsidiary Guarantor denies or disaffirms its obligations under its
Subsidiary Guaranty (the "Guaranty Default Provision").
However, a default under clauses (4) and (5) will not constitute an Event of
Default until the Trustee or the Holders of 25% in principal amount of the
outstanding Notes notify the Company of the default and the Company does not
cure such default within the time specified after receipt of such notice.
If an Event of Default occurs and is continuing, the Trustee or the Holders
of at least 25% in principal amount of the outstanding Notes may declare the
principal of and accrued but unpaid interest on all the Notes to be due and
payable. Upon such a declaration, such principal and interest shall be due and
payable immediately. If an Event of Default relating to certain events of
bankruptcy, insolvency or reorganization of the Company occurs and is
continuing, the principal of and interest on all the Notes will ipso facto
become and be immediately due and payable without any declaration or other act
on the part of the Trustee or any holders of the Notes. Under certain
circumstances, the Holders of a majority in principal amount of the outstanding
Notes may rescind any such acceleration with respect to the Notes and its
consequences.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default occurs and is continuing, the Trustee will
be under no obligation to exercise any of the rights or powers under the
Indenture at the request or direction of any of the Holders of the Notes unless
such Holders have offered to the Trustee reasonable indemnity or security
against any loss, liability or expense. Except to enforce the right to receive
payment of principal, premium (if any) or interest when due, no Holder of a Note
may pursue any remedy with respect to the Indenture or the Notes unless:
(1) such Holder has previously given the Trustee notice that an Event of
Default is continuing;
(2) Holders of at least 25% in principal amount of the outstanding Notes
have requested the Trustee to pursue the remedy;
(3) such Holders have offered the Trustee reasonable security or
indemnity against any loss, liability or expense;
(4) the Trustee has not complied with such request within 60 days after
the receipt thereof and the offer of security or indemnity; and
(5) Holders of a majority in principal amount of the outstanding Notes
have not given the Trustee a direction inconsistent with such
request within such 60-day period.
Subject to certain restrictions, the Holders of a majority in principal amount
of the outstanding Notes are given the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. The Trustee, however,
may refuse to follow any direction that conflicts with law or the Indenture or
that the Trustee determines is unduly prejudicial to the rights of any other
holder of a Note or that would involve the Trustee in personal liability.
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If a Default occurs, is continuing and is known to the Trustee, the Trustee
must mail to each Holder of the Notes notice of the Default within 90 days after
it occurs. Except in the case of a Default in the payment of principal of or
interest on any Note, the Trustee may withhold notice if and so long as a
committee of its Trust Officers determines that withholding notice is not
opposed to the interest of the holders of the Notes. In addition, we are
required to deliver to the Trustee, within 120 days after the end of each fiscal
year, a certificate indicating whether the signers thereof know of any Default
that occurred during the previous year. We are required to deliver to the
Trustee, within 30 days after the occurrence thereof, written notice of any
event which would constitute certain Defaults, their status and what action we
are taking or propose to take in respect thereof.
AMENDMENTS AND WAIVERS
Subject to certain exceptions, the Indenture may be amended with the
consent of the Holders of a majority in principal amount of the Notes then
outstanding (including consents obtained in connection with a tender offer or
exchange for the Notes) and any past default or compliance with any provisions
may also be waived with the consent of the Holders of a majority in principal
amount of the Notes then outstanding. However, without the consent of each
Holder of an outstanding Note affected thereby, an amendment or waiver may not,
among other things:
(1) reduce the amount of Notes whose holders must consent to an
amendment;
(2) reduce the rate of or extend the time for payment of interest on any
Note;
(3) reduce the principal of or extend the Stated Maturity of any Note;
(4) reduce the amount payable upon the redemption of any Note or change
the time at which any Note may be redeemed as described under
"-- Optional Redemption" above;
(5) make any Note payable in money other than that stated in the Note;
(6) impair the right of any holder of the Notes to receive payment of
principal of and interest on such Holder's Notes on or after the due
dates therefor or to institute suit for the enforcement of any
payment on or with respect to such Holder's Notes;
(7) make any change in the amendment provisions which require each
Holder's consent or in the waiver provisions;
(8) make any change in the ranking or priority of any Note that would
adversely affect the Noteholders; or
(9) make any change in any Subsidiary Guaranty that would adversely
affect the Noteholders.
Notwithstanding the preceding, without the consent of any Noteholder, the
Company, the Subsidiary Guarantors and Trustee may amend the Indenture:
(1) to cure any ambiguity, omission, defect or inconsistency;
(2) to provide for the assumption by a successor corporation of the
obligations of the Company or any Subsidiary Guarantor under the
Indenture;
(3) to provide for uncertificated Notes in addition to or in place of
certificated Notes (provided that the uncertificated Notes are
issued in registered form for purposes of Section 163(f) of the
Code, or in a manner such that the uncertificated Notes are
described in Section 163(f)(2)(B) of the Code);
(4) to add guarantees with respect to the Notes, including any
Subsidiary Guaranties, or to secure the Notes;
(5) to add to the covenants of the Company or a Subsidiary Guarantor for
the benefit of the holders of the Notes or to surrender any right or
power conferred upon the Company or a Subsidiary Guarantor;
91
(6) to make any change that does not adversely affect the rights of any
Holder of the Notes; or
(7) to comply with any requirement of the SEC in connection with the
qualification of the Indenture under the Trust Indenture Act.
However, no amendment may be made to the subordination provisions of the
Indenture that adversely affects the rights of any holder of Senior Indebtedness
of the Company or a Subsidiary Guarantor then outstanding unless the holders of
such Senior Indebtedness (or their Representative) consent to such change.
The consent of the Holders of the Notes is not necessary under the
Indenture to approve the particular form of any proposed amendment. It is
sufficient if such consent approves the substance of the proposed amendment.
After an amendment under the Indenture becomes effective, we are required
to mail to holders of the Notes a notice briefly describing such amendment.
However, the failure to give such notice to all Holders of the Notes, or any
defect therein, will not impair or affect the validity of the amendment.
TRANSFER
The Notes will be issued in registered form and will be transferable only
upon the surrender of the Notes being transferred for registration of transfer.
We may require payment of a sum sufficient to cover any tax, assessment or other
governmental charge payable in connection with certain transfers and exchanges.
DEFEASANCE
At any time, we may terminate all our obligations under the Notes, the
Subsidiary Guarantees and the Indenture ("Legal Defeasance"), except for certain
obligations, including those respecting the defeasance trust and obligations to
register the transfer or exchange of the Notes, to replace mutilated, destroyed,
lost or stolen Notes and to maintain a registrar and paying agent in respect of
the Notes.
In addition, at any time we may terminate our obligations under "-- Change
of Control" and under the covenants described under "-- Certain Covenants"
(other than the covenant described under "-- Merger and Consolidation"), the
operation of the cross acceleration provision, the bankruptcy provisions with
respect to Significant Subsidiaries, the judgment default provision and the
guaranty default provision described under "-- Defaults" above and the
limitation contained in clause (3) of the first paragraph under "-- Certain
Covenants -- Merger and Consolidation" above ("Covenant Defeasance").
We may exercise our Legal Defeasance option notwithstanding our prior
exercise of our covenant defeasance option. If we exercise our Legal Defeasance
option, payment of the Notes may not be accelerated because of an Event of
Default with respect thereto. If we exercise our Covenant Defeasance option,
payment of the Notes may not be accelerated because of an Event of Default
specified in clause (4), (6), (7) (with respect only to Significant
Subsidiaries), (8) or (9) under "-- Defaults" above or because of the failure of
the Company to comply with clause (3) of the first paragraph under "-- Certain
Covenants -- Merger and Consolidation" above. If we exercise our Legal
Defeasance option or our Covenant Defeasance option, each Subsidiary Guarantor
will be released from all of its obligations with respect to its Subsidiary
Guaranty.
In order to exercise either of our defeasance options, we must irrevocably
deposit in trust (the "Defeasance Trust") with the Trustee money or U.S.
Government Obligations for the payment of principal and interest on the Notes to
redemption or maturity, as the case may be, and must comply with certain other
conditions, including delivery to the Trustee of an Opinion of Counsel to the
effect that holders of the Notes will not recognize income, gain or loss for
Federal income tax purposes as a result of such deposit and defeasance and will
be subject to Federal income tax on the same amounts and in the same manner and
at the same times as would have been the case if such deposit and defeasance had
not
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occurred (and, in the case of Legal Defeasance only, such Opinion of Counsel
must be based on a ruling of the Internal Revenue Service or other change in
applicable Federal income tax law).
CONCERNING THE TRUSTEE
Wells Fargo Bank Minnesota, N.A. is the Trustee under the Indenture. We
have appointed Wells Fargo Bank Minnesota, N.A. as Registrar and Paying Agent
with regard to the Notes.
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim as security or otherwise. The Trustee will be permitted to engage in other
transactions; provided, however, if it acquires any conflicting interest it must
either eliminate such conflict within 90 days, or apply to the SEC for
permission to continue or resign.
The Holders of a majority in principal amount of the outstanding Notes will
have the right to direct the time, method and place of conducting any proceeding
for exercising any remedy available to the Trustee, subject to certain
exceptions. If an Event of Default occurs (and is not cured), the Trustee will
be required, in the exercise of its power, to use the degree of care of a
prudent man in the conduct of his own affairs. Subject to such provisions, the
Trustee will be under no obligation to exercise any of its rights or powers
under the Indenture at the request of any Holder of Notes, unless such Holder
shall have offered to the Trustee security and indemnity satisfactory to it
against any loss, liability or expense and then only to the extent required by
the terms of the Indenture.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of the Company
or any Subsidiary Guarantor will have any liability for any obligations of the
Company or any Subsidiary Guarantor under the Notes, any Subsidiary Guaranty or
the Indenture or for any claim based on, in respect of, or by reason of such
obligations or their creation. Each Holder of the Notes, by accepting a Note,
waives and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes. Such waiver and release may not be
effective to waive liabilities under the U.S. Federal securities laws, and it is
the view of the SEC that such a waiver is against public policy.
GOVERNING LAW
The Indenture and the Notes will be governed by, and construed in
accordance with, the laws of the State of New York without giving effect to
applicable principles of conflicts of law to the extent that the application of
the law of another jurisdiction would be required thereby.
CERTAIN DEFINITIONS
"Additional Assets" means:
(1) any property, plant or equipment or other non-current tangible
assets used in or useful in the operation of a Related Business;
(2) the Capital Stock of a Person that becomes a Restricted Subsidiary
as a result of the acquisition of such Capital Stock by the Company
or another Restricted Subsidiary; or
(3) Capital Stock constituting a minority interest in any Person that at
such time is a Restricted Subsidiary;
provided, however, that any such Restricted Subsidiary described in clause (2)
or (3) above is primarily engaged in a Related Business.
"Affiliate" of any specified Person means any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management
93
and policies of such Person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing. For
purposes of the covenants described under "-- Certain Covenants -- Limitation on
Restricted Payments," "-- Certain Covenants -- Limitation on Affiliate
Transactions" and "-- Certain Covenants -- Limitation on Sales of Assets and
Subsidiary Stock" only, "Affiliate" shall also mean any beneficial owner (1) of
Capital Stock representing 10% or more of the total voting power of the Voting
Stock (on a fully diluted basis) of the Company or (2) of rights or warrants to
purchase such amount of Capital Stock (whether or not currently exercisable) and
any Person who would be an Affiliate of any such beneficial owner pursuant to
the first sentence hereof.
"Asset Disposition" means any sale, lease, transfer or other disposition
(or series of related sales, leases, transfers or dispositions) by the Company
or any Restricted Subsidiary, including any disposition by means of a merger,
consolidation or similar transaction (each referred to for the purposes of this
definition, as a "Disposition") of:
(1) any shares of Capital Stock of a Restricted Subsidiary (other than
directors' qualifying shares or shares required by applicable law to
be held by a Person other than the Company or a Restricted
Subsidiary);
(2) all or substantially all the assets of any division or line of
business of the Company or any Restricted Subsidiary; or
(3) any other assets of the Company or any Restricted Subsidiary outside
of the ordinary course of business of the Company or such Restricted
Subsidiary,
other than, in the case of clauses (1), (2) and (3) above,
(A) a Disposition or transfer by a Restricted Subsidiary to the Company
or another Restricted Subsidiary or by the Company to a Restricted
Subsidiary;
(B) for purposes of the covenant described under "-- Certain
Covenants -- Limitation on Sales of Assets and Subsidiary Stock"
only, (x) a Disposition that constitutes a Restricted Payment
permitted by the covenant described under "-- Certain
Covenants -- Limitation on Restricted Payments" or a Permitted
Investment or (y) a Disposition of all or substantially all the
assets of the Company in accordance with the covenant described
under "-- Certain Covenants -- Merger and Consolidation";
(C) sales of accounts receivable and related assets of the type
specified in the definition of "Qualified Receivables Transaction"
to a Receivables Subsidiary for the fair market thereof; provided
that at least 75% of the consideration therefor consists of cash or
cash equivalents;
(D) any single transaction or a series of related transactions that
involves the Disposition of assets with a fair market value of less
than $3.5 million;
(E) the sale or other Disposition of Temporary Cash Investments or
Marketable Securities;
(F) any sale, without recourse, of any account receivable at a discount
or for less than the face value thereof (i) if such account
receivable is supported by an irrevocable commercial letter of
credit or similar financial instrument in the face amount of the
full face value of such account, or (ii) if such account receivable
reflects the purchase price component of equipment sold in
connection with the aftermarket services of the Company or any of
its Subsidiaries; and
(G) the sale or other disposition of the Company's former headquarters
building and related real property in St. Francis, Wisconsin.
"Attributable Debt" in respect of a Sale/Leaseback Transaction means, as of
the time of determination, the present value (discounted at the interest rate
borne by the Notes, compounded annually) of the total obligations of the lessee
for rental payments during the remaining term of the lease
94
included in such Sale/Leaseback Transaction (including any period for which such
lease has been extended); provided, however, that if such Sale/Leaseback
Transaction results in a Capital Lease Obligation, the amount of Indebtedness
represented thereby will be determined in accordance with the definition of
"Capital Lease Obligation."
"Average Life" means, as of the date of determination, with respect to any
Indebtedness, the quotient obtained by dividing:
(1) the sum of the products of the numbers of years from the date of
determination to the dates of each successive scheduled principal
payment of or redemption or similar payment with respect to such
Indebtedness multiplied by the amount of such payment by
(2) the sum of all such payments.
"Bank Indebtedness" means all Obligations pursuant to the Credit Agreement.
"Board of Directors" means, with respect to any Person, the Board of
Directors of such Person or any committee thereof duly authorized to act on
behalf of such Board.
"Business Day" means each day which is not a Legal Holiday.
"Capital Lease Obligation" means an obligation that is required to be
classified and accounted for as a capital lease for financial reporting purposes
in accordance with GAAP, and the amount of Indebtedness represented by such
obligation shall be the capitalized amount of such obligation determined in
accordance with GAAP; and the Stated Maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease prior to the first
date upon which such lease may be terminated by the lessee without payment of a
penalty.
"Capital Stock" of any Person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including any Preferred
Stock, but excluding any debt securities convertible into such equity.
"Code" means the Internal Revenue Code of 1986, as amended.
"Consolidated Coverage Ratio" as of any date of determination means the
ratio of (x) the aggregate amount of EBITDA for the period of the most recent
four consecutive fiscal quarters for which financial statements have been made
publicly available prior to the date of such determination to (y) Consolidated
Interest Expense for such four fiscal quarters; provided, however, that:
(1) if the Company or any Restricted Subsidiary has Incurred any
Indebtedness since the beginning of such period that remains
outstanding or if the transaction giving rise to the need to
calculate the Consolidated Coverage Ratio is an Incurrence of
Indebtedness, or both, EBITDA and Consolidated Interest Expense for
such period shall be calculated after giving effect on a pro forma
basis to such Indebtedness as if such Indebtedness had been Incurred
on the first day of such period (provided that if such Indebtedness
is Incurred under a revolving credit facility (or similar
arrangement under any predecessor revolving credit or similar
arrangement) only that portion of such Indebtedness that constitutes
the one year projected average balance of such Indebtedness (as
determined in good faith by senior management of the Company and
assuming a constant level of sales) shall be deemed outstanding for
purposes of this calculation);
(2) if the Company or any Restricted Subsidiary has repaid, repurchased,
defeased or otherwise discharged any Indebtedness since the
beginning of such period or if any Indebtedness is to be repaid,
repurchased, defeased or otherwise discharged (in each case other
than Indebtedness Incurred under any revolving credit facility
unless such Indebtedness has been permanently repaid and has not
been replaced) on the date of the transaction giving rise to the
need to calculate the Consolidated Coverage Ratio, EBITDA and
Consolidated Interest Expense for such period shall be calculated on
a pro forma basis as if such discharge had occurred on the first day
of such period and as if the Company or such Restricted
95
Subsidiary has not earned the interest income actually earned during
such period in respect of cash or Temporary Cash Investments used to
repay, repurchase, defease or otherwise discharge such Indebtedness;
(3) if since the beginning of such period the Company or any Restricted
Subsidiary shall have made any Asset Disposition, EBITDA for such
period shall be reduced by an amount equal to EBITDA (if positive)
directly attributable to the assets which are the subject of such
Asset Disposition for such period, or increased by an amount equal
to EBITDA (if negative), directly attributable thereto for such
period and Consolidated Interest Expense for such period shall be
reduced by an amount equal to the Consolidated Interest Expense
directly attributable to any Indebtedness of the Company or any
Restricted Subsidiary repaid, repurchased, defeased or otherwise
discharged with respect to the Company and its continuing Restricted
Subsidiaries in connection with such Asset Disposition for such
period (or, if the Capital Stock of any Restricted Subsidiary is
sold, the Consolidated Interest Expense for such period directly
attributable to the Indebtedness of such Restricted Subsidiary to
the extent the Company and its continuing Restricted Subsidiaries
are no longer liable for such Indebtedness after such sale);
(4) if since the beginning of such period the Company or any Restricted
Subsidiary (by merger or otherwise) shall have made an Investment in
any Restricted Subsidiary (or any person which becomes a Restricted
Subsidiary) or an acquisition of assets, including any acquisition
of assets occurring in connection with a transaction requiring a
calculation to be made hereunder, which constitutes all or
substantially all of an operating unit of a business, EBITDA and
Consolidated Interest Expense for such period shall be calculated
after giving pro forma effect thereto (including the Incurrence of
any Indebtedness) as if such Investment or acquisition occurred on
the first day of such period; and
(5) if since the beginning of such period any Person (that subsequently
became a Restricted Subsidiary or was merged with or into the
Company or any Restricted Subsidiary since the beginning of such
period) shall have made any Asset Disposition, any Investment or
acquisition of assets that would have required an adjustment
pursuant to clause (3) or (4) above if made by the Company or a
Restricted Subsidiary during such period, EBITDA and Consolidated
Interest Expense for such period shall be calculated after giving
pro forma effect thereto as if such Asset Disposition, Investment or
acquisition occurred on the first day of such period.
For purposes of this definition, whenever pro forma effect is to be given to an
acquisition of assets, the amount of income or earnings relating thereto and the
amount of Consolidated Interest Expense associated with any Indebtedness
Incurred in connection therewith, the pro forma calculations shall be determined
in good faith by a responsible financial or accounting Officer of the Company.
If any Indebtedness bears a floating rate of interest and is being given
pro forma effect, the interest on such Indebtedness shall be calculated as if
the rate in effect on the date of determination had been the applicable rate for
the entire period (taking into account any Interest Rate Agreement applicable to
such Indebtedness if such Interest Rate Agreement has a remaining term in excess
of 12 months).
"Consolidated Interest Expense" means, for any period, the total interest
expense of the Company and its consolidated Restricted Subsidiaries, plus, to
the extent not included in such total interest expense, and to the extent
incurred by the Company or its Restricted Subsidiaries, without duplication:
(1) interest expense attributable to Capital Lease Obligations and the
interest expense attributable to leases constituting part of a
Sale/Leaseback Transaction;
(2) amortization of debt discount and debt issuance cost;
(3) capitalized interest;
(4) non-cash interest expense;
96
(5) commissions, discounts and other fees and charges owed with respect
to letters of credit and bankers' acceptance financing;
(6) net payments pursuant to Hedging Obligations;
(7) Preferred Stock dividends in respect of all Preferred Stock held by
Persons other than the Company or a Wholly Owned Subsidiary (other
than dividends payable solely in Capital Stock (other than
Disqualified Stock) of the Company); provided, however, that such
dividends will be multiplied by a fraction the numerator of which
is one and the denominator of which is one minus the effective
combined tax rate of the issuer of such Preferred Stock (expressed
as a decimal) for such period (as estimated by the Chief Financial
Officer of the Company in good faith);
(8) interest incurred in connection with Investments in discontinued
operations;
(9) interest accruing on any Indebtedness of any other Person to the
extent such Indebtedness is Guaranteed by (or secured by the assets
of) the Company or any Restricted Subsidiary; and
(10) the cash contributions to any employee stock ownership plan or
similar trust to the extent such contributions are used by such
plan or trust to pay interest or fees to any Person (other than the
Company) in connection with Indebtedness Incurred by such plan or
trust,
and less, to the extent included in such total interest expense, any
amortization or write-offs of debt issuance costs and prepayment premiums
realized during such period to the extent attributable to the Indebtedness being
Refinanced by the Notes on the Issue Date.
"Consolidated Net Income" means, for any period, the net income of the
Company and its consolidated Subsidiaries; provided, however, that there shall
not be included in such Consolidated Net Income:
(1) any net income of any Person (other than the Company) if such Person
is not a Restricted Subsidiary, except that:
(A) subject to the exclusion contained in clause (4) below, the
Company's equity in the net income of any such Person for such
period shall be included in such Consolidated Net Income up to
the aggregate amount of cash actually distributed by such Person
during such period to the Company or a Restricted Subsidiary as a
dividend or other distribution (subject, in the case of a
dividend or other distribution paid to a Restricted Subsidiary,
to the limitations contained in clause (3) below); and
(B) the Company's equity in a net loss of any such Person for such
period shall be included in determining such Consolidated Net
Income but only to the extent the Company or Restricted
Subsidiary funded such net loss with cash;
(2) any net income (or loss) of any Person acquired by the Company or a
Subsidiary in a pooling of interests transaction for any period
prior to the date of such acquisition;
(3) any net income of any Restricted Subsidiary if such Restricted
Subsidiary is subject to restrictions, directly or indirectly, on
the payment of dividends or the making of distributions by such
Restricted Subsidiary, directly or indirectly, to the Company,
except that:
(A) subject to the exclusion contained in clause (4) below, the
Company's equity in the net income of any such Restricted
Subsidiary for such period shall be included in such Consolidated
Net Income up to the aggregate amount of cash which could have
been distributed by such Restricted Subsidiary during such period
to the Company or another Restricted Subsidiary as a dividend or
other distribution or as the repayment of an intercompany payable
to the Company or a Subsidiary Guarantor, to the extent such
payable existed on the Issue Date (subject, in the case of a
dividend or other
97
distribution or repayment paid to another Restricted Subsidiary,
to the limitation contained in this clause); and
(B) the Company's equity in a net loss of any such Restricted
Subsidiary for such period shall be included in determining such
Consolidated Net Income;
(4) any gain or loss realized upon the sale or other disposition of any
assets of the Company, its consolidated Subsidiaries or any other
Person (including pursuant to any sale-and-leaseback arrangement)
which is not sold or otherwise disposed of in the ordinary course of
business and any gain or loss realized upon the sale or other
disposition of any Capital Stock of any Person and related tax
effects;
(5) extraordinary gains or losses;
(6) to the extent included in such total interest expense, any
amortization or write-offs of debt issuance costs and prepayment
premiums realized during such period to the extent attributable to
the Indebtedness being Refinanced by the Notes; and
(7) the cumulative effect of a change in accounting principles.
Notwithstanding the foregoing, for the purposes of the covenant described under
"-- Certain Covenants -- Limitation on Restricted Payments" only, there shall be
excluded from Consolidated Net Income any repurchases, repayments or redemptions
of Investments, proceeds realized on the sale of Investments or return of
capital to the Company or a Restricted Subsidiary to the extent such
repurchases, repayments, redemptions, proceeds or returns increase the amount of
Restricted Payments permitted under such covenant pursuant to clause (a)(3)(D)
thereof.
"Credit Agreement" means the Credit Agreement, dated as of June 29, 2001
and as amended as of December 26, 2001 and as amended and restated from time to
time thereafter, among the Company, Bankers Trust Company, as Administrative
Agent, and Heller Financial, Inc. and Fleet Capital Corporation, as
Co-Syndication Agents, and CIT Group/Business Credit, as Documentation Agent,
together with the related documents thereto (including the term loans, revolving
loans and letters of credit thereunder, any guarantees and security documents),
as amended, extended, renewed, restated, replaced, supplemented or otherwise
modified (in whole or in part, and without limitation as to amount, terms,
conditions, covenants and other provisions) from time to time, and any agreement
(and related document) governing Indebtedness incurred to Refinance, in whole or
in part, the borrowings and commitments then outstanding or permitted to be
outstanding under such Credit Agreement or a successor Credit Agreement, whether
by the same or any other lender or group of lenders.
"Credit Facility" means one or more debt facilities (including the Credit
Agreement), with banks or other institutional lenders providing for revolving
credit loans, term loans, receivables financing or letters of credit, in each
case, as amended, restated, modified, renewed, refunded, replaced or refinanced
in whole or in part from time to time (including any increase in principal
amount).
"Currency Agreement" means in respect of a Person any foreign exchange
contract, currency swap agreement or other similar agreement designed to protect
such Person against fluctuations in currency values.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Designated Senior Indebtedness" with respect to a Person means:
(1) the Bank Indebtedness; and
(2) any other Senior Indebtedness of such Person which, at the date of
determination, has an aggregate principal amount outstanding of, or
under which, at the date of determination, the holders thereof are
committed to lend up to, at least $25 million and is specifically
98
designated by such Person in the instrument evidencing or governing
such Senior Indebtedness as "Designated Senior Indebtedness" for
purposes of the Indenture.
"Disqualified Stock" means, with respect to any Person, any Capital Stock
which by its terms (or by the terms of any security into which it is convertible
or for which it is exchangeable at the option of the holder) or upon the
happening of any event:
(1) matures or is mandatorily redeemable (other than redeemable only for
Capital Stock of such Person which is not itself Disqualified Stock)
pursuant to a sinking fund obligation or otherwise;
(2) is convertible or exchangeable at the option of the holder for
Indebtedness or Disqualified Stock; or
(3) is mandatorily redeemable or must be purchased upon the occurrence
of certain events or otherwise, in whole or in part;
in each case on or prior to the first anniversary of the Stated Maturity of the
Notes; provided, however, that any Capital Stock that would not constitute
Disqualified Stock but for provisions thereof giving holders thereof the right
to require such Person to purchase or redeem such Capital Stock upon the
occurrence of an "asset sale" or "change of control" occurring prior to the
first anniversary of the Stated Maturity of the Notes shall not constitute
Disqualified Stock if:
(1) the "asset sale" or "change of control" provisions applicable to
such Capital Stock are not more favorable to the holders of such
Capital Stock than the terms applicable to the Notes and described
under "-- Certain Covenants--Limitation on Sales of Assets and
Subsidiary Stock" and "-- Certain Covenants -- Change of Control";
and
(2) any such requirement only becomes operative after compliance with
such terms applicable to the Notes, including the purchase of any
Notes tendered pursuant thereto.
The amount of any Disqualified Stock that does not have a fixed redemption,
repayment or repurchase price will be calculated in accordance with the terms of
such Disqualified Stock as if such Disqualified Stock were redeemed, repaid or
repurchased on any date on which the amount of such Disqualified Stock is to be
determined pursuant to the Indenture; provided, however, that if such
Disqualified Stock could not be required to be redeemed, repaid or repurchased
at the time of such determination, the redemption, repayment or repurchase price
will be the book value of such Disqualified Stock as reflected in the most
recent financial statements of such Person.
"EBITDA" for any period means the sum of Consolidated Net Income, plus the
following to the extent deducted in calculating such Consolidated Net Income:
(1) all income tax expense of the Company and its consolidated
Restricted Subsidiaries;
(2) Consolidated Interest Expense;
(3) depreciation and amortization expense of the Company and its
consolidated Restricted Subsidiaries (excluding amortization
expense attributable to a prepaid operating activity item that was
paid in cash in a prior period);
(4) all non-recurring expenses in connection with the introduction of
fresh start accounting, the Company's July 2001 reorganization and
the Refinancing, all as recorded in the Company's financial
statements as "Fresh start inventory charges," "Amortization of
backlog intangible assets," "Reorganization Plan Items," "Fresh
start accounting adjustments" or similar headings; and
(5) all other non-cash charges of the Company and its consolidated
Restricted Subsidiaries (excluding any such non-cash charge to the
extent that it represents an accrual of or reserve for cash
expenditures in any future period);
99
in each case for such period. Notwithstanding the foregoing, the provision for
taxes based on the income or profits of, and the depreciation and amortization
and non-cash charges of, a Restricted Subsidiary shall be added to Consolidated
Net Income to compute EBITDA only to the extent (and in the same proportion,
including by reason of minority interest) that the net income of such Restricted
Subsidiary was included in calculating Consolidated Net Income and only if a
corresponding amount could have been distributed by such Restricted Subsidiary
at the date of determination to the Company or another Restricted Subsidiary as
a dividend or other distribution or as the repayment of an intercompany payable
to the Company or a Subsidiary Guarantor, to the extent such payable existed on
the Issue Date without prior approval (that has not been obtained), pursuant to
the terms of its charter and all agreements, instruments, judgments, decrees,
orders, statutes, rules and governmental regulations applicable to such
Restricted Subsidiary or its stockholders.
"Exchange Act" means the U.S. Securities Exchange Act of 1934, as amended.
"Exchange Notes" means the debt securities of the Company issued pursuant
to the Indenture in exchange for, and in an aggregate principal amount equal to,
the Notes, in compliance with the terms of the Registration Rights Agreement.
"Foreign Subsidiary" means a Restricted Subsidiary that is incorporated in
a jurisdiction other than the United States, a state thereof or the District of
Columbia and with respect to which more than 80% of any of its sales, earnings
or assets (determined on a consolidated basis in accordance with GAAP) are
located in, generated from or derived from operations located in territories and
jurisdictions outside the United States.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the Issue Date, including those set forth in:
(1) the opinions and pronouncements of the Accounting Principles Board
of the American Institute of Certified Public Accountants;
(2) statements and pronouncements of the Financial Accounting Standards
Board;
(3) such other statements by such other entity as approved by a
significant segment of the accounting profession; and
(4) the rules and regulations of the SEC governing the inclusion of
financial statements (including pro forma financial statements) in
periodic reports required to be filed pursuant to Section 13 of the
Exchange Act, including opinions and pronouncements in staff
accounting bulletins and similar written statements from the
accounting staff of the SEC.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness of any Person and any
obligation, direct or indirect, contingent or otherwise, of such Person:
(1) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Indebtedness of such Person (whether arising by
virtue of partnership arrangements, or by agreements to keep-well,
to purchase assets, goods, securities or services, to take-or-pay or
to maintain financial statement conditions or otherwise); or
(2) entered into for the purpose of assuring the obligee of such
Indebtedness of the payment thereof or to protect such obligee
against loss in respect thereof (in whole or in part);
provided, however, that the term "Guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning.
"Guaranty Agreement" means a supplemental indenture, in a form satisfactory
to the Trustee, pursuant to which a Subsidiary Guarantor guarantees the
Company's obligations with respect to the Notes on the terms provided for in the
Indenture.
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"Hedging Obligations" of any Person means the obligations of such Person
pursuant to any Interest Rate Agreement or Currency Agreement.
"Holder" or "Noteholder" means the Person in whose name a Note is
registered on the Registrar's books.
"Incur" means issue, assume, Guarantee, incur or otherwise become liable
for; provided, however, that any Indebtedness or Capital Stock of a Person
existing at the time such Person becomes a Restricted Subsidiary (whether by
merger, consolidation, acquisition or otherwise) shall be deemed to be Incurred
by such Person at the time it becomes a Restricted Subsidiary. The term
"Incurrence" when used as a noun shall have a correlative meaning. Solely for
purposes of determining compliance with "-- Certain Covenants -- Limitation on
Indebtedness," (1) amortization of debt discount or the accretion of principal
with respect to a non-interest bearing or other discount security and (2) the
payment of regularly scheduled interest in the form of additional Indebtedness
of the same instrument or the payment of regularly scheduled dividends on
Capital Stock in the form of additional Capital Stock of the same class and with
the same terms will not be deemed to be the Incurrence of Indebtedness.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication):
(1) the principal in respect of (A) indebtedness of such Person for
money borrowed and (B) indebtedness evidenced by notes, debentures,
bonds or other similar instruments for the payment of which such
Person is responsible or liable, including, in each case, any
premium on such indebtedness to the extent such premium has become
due and payable;
(2) all Capital Lease Obligations of such Person and all Attributable
Debt in respect of Sale/ Leaseback Transactions entered into by such
Person;
(3) all obligations of such Person issued or assumed as the deferred
purchase price of property, all conditional sale obligations of such
Person and all obligations of such Person under any title retention
agreement (but excluding trade accounts payable arising in the
ordinary course of business);
(4) all obligations of such Person for the reimbursement of any obligor
on any letter of credit, banker's acceptance or similar credit
transaction (other than obligations with respect to letters of
credit securing obligations (other than obligations described in
clauses (1) through (3) above) entered into in the ordinary course
of business of such Person to the extent such letters of credit are
not drawn upon or, if and to the extent drawn upon, such drawing is
reimbursed no later than the tenth Business Day following payment on
the letter of credit);
(5) the amount of all obligations of such Person with respect to the
redemption, repayment or other repurchase of any Disqualified Stock
of such Person or, with respect to any Preferred Stock of any
Subsidiary of such Person, the principal amount of such Preferred
Stock to be determined in accordance with the Indenture (but
excluding, in each case, any accrued dividends);
(6) all obligations of the type referred to in clauses (1) through (5)
of other Persons and all dividends of other Persons for the payment
of which, in either case, such Person is responsible or liable,
directly or indirectly, as obligor, guarantor or otherwise,
including by means of any Guarantee;
(7) all obligations of the type referred to in clauses (1) through (6)
of other Persons secured by any Lien on any property or asset of
such Person (whether or not such obligation is assumed by such
Person), the amount of such obligation being deemed to be the lesser
of the value of such property or assets and the amount of the
obligation so secured; and
(8) to the extent not otherwise included in this definition, Hedging
Obligations of such Person.
Notwithstanding the foregoing, in connection with the purchase or sale by the
Company or any Restricted Subsidiary of any business or other assets, the term
"Indebtedness" will exclude indemnification or
101
post-closing payment adjustments to which the seller or purchaser may become
entitled to the extent such payment is determined by a final closing balance
sheet or such payment depends on the performance of such business after the
closing; provided, however, that, at the time of closing, the amount of any such
payment is not determinable and, to the extent such payment thereafter becomes
fixed and determined, the amount is paid within 45 days thereafter.
The amount of Indebtedness of any Person at any date shall be the
outstanding balance at such date of all unconditional obligations as described
above and the maximum liability, upon the occurrence of the contingency giving
rise to the obligation, of any contingent obligations at such date; provided,
however, that in the case of Indebtedness sold at a discount, the amount of such
Indebtedness at any time will be the accreted value thereof at such time.
"Independent Qualified Party" means an investment banking firm, accounting
firm or appraisal firm of national standing; provided, however, that such firm
is not an Affiliate of the Company.
"Interest Rate Agreement" means, in respect of a Person, any interest rate
swap agreement, interest rate cap agreement or other financial agreement or
arrangement designed to protect such Person against fluctuations in interest
rates.
"Investment" in any Person means any direct or indirect advance, loan
(other than advances to customers in the ordinary course of business that are
recorded as accounts receivable on the balance sheet of the lender) or other
extensions of credit (including by way of Guarantee or similar arrangement) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition of Capital Stock, Indebtedness or other
similar instruments issued by such Person. Except as otherwise provided for
herein, the amount of an Investment shall be its fair value at the time the
Investment is made and without giving effect to subsequent changes in value.
For purposes of the definition of "Unrestricted Subsidiary", the definition
of "Restricted Payment" and the covenant described under "-- Certain
Covenants -- Limitation on Restricted Payments":
(1) "Investment" shall include the portion (proportionate to the
Company's equity interest in such Subsidiary) of the fair market
value of the net assets of any Subsidiary of the Company at the time
that such Subsidiary is designated an Unrestricted Subsidiary;
provided, however, that upon a redesignation of such Subsidiary as a
Restricted Subsidiary, the Company shall be deemed to continue to
have a permanent "Investment" in an Unrestricted Subsidiary equal to
an amount (if positive) equal to (A) the Company's "Investment" in
such Subsidiary at the time of such redesignation less (B) the
portion (proportionate to the Company's equity interest in such
Subsidiary) of the fair market value of the net assets of such
Subsidiary at the time of such redesignation; and
(2) any property transferred to or from an Unrestricted Subsidiary shall
be valued at its fair market value at the time of such transfer, in
each case as determined in good faith by the Board of Directors.
"Issue Date" means the date on which the Notes are originally issued.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions are not required to be open in the State of New York.
"Lenders" has the meaning specified in the Credit Agreement.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof).
"Marketable Securities" means publicly traded debt or equity securities
that are listed for trading on a national securities exchange and that were
issued by a corporation whose debt securities are rated in one of the three
highest rating categories by either Standard & Poor's Rating Services or Moody's
Investors Service, Inc.
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"Net Available Cash" from an Asset Disposition means cash payments received
therefrom (including any cash payments received by way of deferred payment of
principal pursuant to a note or installment receivable or otherwise and proceeds
from the sale or other disposition of any securities received as consideration,
but only as and when received, but excluding any other consideration received in
the form of assumption by the acquiring Person of Indebtedness or other
obligations relating to such properties or assets or received in any other
non-cash form), in each case net of:
(1) all legal, title and recording tax expenses, underwriting, discounts
and commissions and other reasonable fees and expenses (including
fees and expenses of counsel, accountants and investment bankers)
and other fees and expenses incurred, and all Federal, state,
provincial, foreign and local taxes required to be accrued as a
liability under GAAP, as a consequence of such Asset Disposition;
(2) all payments made on any Indebtedness which is secured by any assets
subject to such Asset Disposition, in accordance with the terms of
any Lien upon or other security agreement of any kind with respect
to such assets, or which must by its terms, or in order to obtain a
necessary consent to such Asset Disposition, or by applicable law,
be repaid out of the proceeds from such Asset Disposition;
(3) all distributions and other payments required to be made to minority
interest holders in Restricted Subsidiaries as a result of such
Asset Disposition; and
(4) the deduction of appropriate amounts provided by the seller as a
reserve, in accordance with GAAP, against any current or contingent
liabilities associated with the property or other assets disposed in
such Asset Disposition and retained by the Company or any Restricted
Subsidiary after such Asset Disposition.
"Net Cash Proceeds", means with respect to any issuance or sale of Capital
Stock, the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
"Obligations" means, with respect to any Indebtedness, all obligations for
principal, premium, interest, penalties, fees, indemnifications, reimbursements,
and other amounts payable pursuant to the documentation governing such
Indebtedness.
"Officer" means the Chairman of the Board, the President, any Vice
President, the Treasurer, any Assistant Treasurer, the Secretary of the Company
or any Assistant Secretary of the Company.
"Officers' Certificate" means a certificate signed by two Officers.
"Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the Trustee. The counsel may be an employee of or counsel to the
Company or the Trustee.
"Permitted Investment" means an Investment by the Company or any Restricted
Subsidiary in:
(1) the Company, a Restricted Subsidiary or a Person that will, upon
the making of such Investment, become a Restricted Subsidiary;
provided, however, that the primary business of such Restricted
Subsidiary is a Related Business;
(2) another Person if as a result of such Investment such other Person
is merged or consolidated with or into, or transfers or conveys all
or substantially all its assets to, the Company or a Restricted
Subsidiary; provided, however, that such Person's primary business
is a Related Business;
(3) cash, cash equivalents and Temporary Cash Investments;
(4) receivables owing to the Company or any Restricted Subsidiary if
created or acquired in the ordinary course of business and payable
or dischargeable in accordance with customary trade terms;
provided, however, that such trade terms may include such
concessionary trade
103
terms as the Company or any such Restricted Subsidiary deems
reasonable under the circumstances;
(5) payroll, travel and similar advances to cover matters that are
expected at the time of such advances ultimately to be treated as
expenses for accounting purposes and that are made in the ordinary
course of business;
(6) loans or advances to officers, directors, employees or consultants
made in the ordinary course of business consistent with past
practices of the Company or such Restricted Subsidiary not to
exceed $3.5 million in the aggregate outstanding at any time;
(7) stock, obligations or securities received in settlement of debts
created in the ordinary course of business and owing to the Company
or any Restricted Subsidiary or in satisfaction of any judgment;
(8) any Person to the extent such Investment represents the non-cash
portion of the consideration received for an Asset Disposition as
permitted pursuant to the covenant described under "-- Certain
Covenants -- Limitation on Sales of Assets and Subsidiary Stock";
(9) a Receivables Subsidiary or any Investment by a Receivables
Subsidiary in any other Person, in each case, in connection with a
Qualified Receivables Transaction, provided, however, that any
Investment in a Receivables Entity is in the form of (a) a Purchase
Money Note; (b) any equity interest; (c) obligations of the
Receivables Subsidiary to pay the purchase price for assets
transferred to it; or (d) interests in accounts receivable
generated by the Company or a Restricted Subsidiary and transferred
to any Person in connection with a Qualified Receivables
Transaction or any such Person owning such accounts receivable;
(10) any Person where such Investment was acquired by the Company or any
of its Restricted Subsidiaries (a) in exchange for any other
Investment or accounts receivable held by the Company or any such
Restricted Subsidiary in connection with or as a result of a
bankruptcy, workout, reorganization or recapitalization of the
issuer of such other Investment or accounts receivable or (b) as a
result of a foreclosure by the Company or any of its Restricted
Subsidiaries with respect to any secured Investment or other
transfer of title with respect to any secured Investment in
default;
(11) Hedging Obligations;
(12) negotiable instruments held for deposit or collection in the
ordinary course of business;
(13) any Investment in a Person engaged in a Related Business acquired
solely in exchange for Capital Stock (other than Disqualified
Stock) of the Company;
(14) any Investment in existence on the Issue Date; and
(15) other Investments in any Person having an aggregate fair market
value (measured on the date each such Investment was made and
without giving effect to subsequent changes in value) which, when
taken together with all other Investments made pursuant to this
clause (15) that are at the time outstanding (measured on the date
each such Investment was made and without giving effect to
subsequent changes in value), does not exceed the greater of $25
million and 2.5% of Total Net Tangible Assets.
"Person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated
organization, government or any agency or political subdivision thereof or any
other entity.
"Preferred Stock," as applied to the Capital Stock of any Person, means
Capital Stock of any class or classes (however designated) which is preferred as
to the payment of dividends or distributions, or as to
104
the distribution of assets upon any voluntary or involuntary liquidation or
dissolution of such Person, over shares of Capital Stock of any other class of
such Person.
"principal" of a Note means the principal of the Note plus the premium, if
any, payable on the Note which is due or overdue or is to become due at the
relevant time.
"Public Equity Offering" means an underwritten primary public offering of
common stock of the Company pursuant to an effective registration statement
under the Securities Act.
"Purchase Money Note" means a promissory note evidencing a line of credit,
which may be irrevocable, from, or evidencing other Indebtedness owed to, the
Company or any Restricted Subsidiary in connection with a Qualified Receivables
Transaction, which note shall be repaid from cash available to the maker of such
note, other than amounts required to be established as reserves pursuant to
agreements, amounts paid to investors in respect of interest, principal and
other amounts owing to such investors and amounts paid in connection with the
purchase of newly generated receivables.
"Qualified Receivables Transaction" means any transaction or series of
transactions that may be entered into by the Company or any Restricted
Subsidiary pursuant to which the Company or any Restricted Subsidiary may sell,
convey or otherwise transfer to (1) a Receivables Subsidiary (in the case of a
transfer by the Company or any Restricted Subsidiary), and (2) any other Person
(in the case of a transfer by a Receivables Subsidiary), or may grant a security
interest in, any accounts receivable (whether now existing or arising in the
future) of the Company or any Restricted Subsidiary of the Company, and any
assets related thereto, including all collateral securing such accounts
receivable, all contracts and all guarantees or other obligations in respect of
such accounts receivable, proceeds of such accounts receivable and other assets
that are customarily transferred, or in respect of which security interests are
customarily granted, in connection with asset securitization transactions
involving accounts receivable.
"Receivables Subsidiary" means a Wholly Owned Subsidiary of the Company
that engages in no activities other than in connection with the financing of
accounts receivable and that is designated by the Board of Directors of the
Company (as provided below) as a Receivables Subsidiary and (1) has no
Indebtedness or other Obligations (contingent or otherwise) that (a) are
guaranteed by the Company or any Restricted Subsidiary, other than contingent
liabilities pursuant to Standard Securitization Undertakings, (b) are recourse
to or obligate the Company or any Restricted Subsidiary of the Company in any
way other than pursuant to Standard Securitization Undertakings or (c) subjects
any property or asset of the Company or any Restricted Subsidiary of the
Company, directly or indirectly, contingently or otherwise, to the satisfaction
thereof, other than pursuant to Standard Securitization Undertakings; (2) has no
contract, agreement, arrangement or undertaking (except in connection with a
Purchase Money Note or Qualified Receivables Transaction) with the Company or
its Restricted Subsidiaries other than on terms no less favorable to the Company
or such Restricted Subsidiaries than those that might be obtained at the time
from Persons that are not Affiliates of the Company, other than fees payable in
the ordinary course of business in connection with servicing accounts
receivable; and (3) neither the Company nor any Restricted Subsidiary has any
obligation to maintain or preserve the Receivables Subsidiary's financial
condition or cause the Receivables Subsidiary to achieve certain levels of
operating results.
Any such designation by the Board of Directors shall be evidenced to the
Trustee by filing with the Trustee a certified copy of the resolution of the
Board of Directors giving effect to such designation and an Officer's
Certificate certifying, to the best of such officer's knowledge and belief after
consulting with counsel, that such designation complied with the foregoing
conditions.
"Refinance" means, in respect of any Indebtedness, to refinance, extend,
renew, refund, repay, prepay, redeem, defease or retire, or to issue other
Indebtedness in exchange or replacement for, such Indebtedness. "Refinanced" and
"Refinancing" shall have correlative meanings.
105
"Refinancing Indebtedness" means Indebtedness that Refinances any
Indebtedness of the Company or any Restricted Subsidiary existing on the Issue
Date or Incurred in compliance with the Indenture, including Indebtedness that
Refinances Refinancing Indebtedness; provided, however, that:
(1) such Refinancing Indebtedness has a Stated Maturity no earlier than
the Stated Maturity of the Indebtedness being Refinanced;
(2) such Refinancing Indebtedness has an Average Life at the time such
Refinancing Indebtedness is Incurred that is equal to or greater
than the Average Life of the Indebtedness being Refinanced; and
(3) such Refinancing Indebtedness has an aggregate principal amount (or
if Incurred with original issue discount, an aggregate issue price)
that is equal to or less than the aggregate principal amount (or if
Incurred with original issue discount, the aggregate accreted value)
then outstanding or committed (plus fees and expenses, including any
premium and defeasance costs) under the Indebtedness being
Refinanced;
provided further, however, that Refinancing Indebtedness shall not include (A)
Indebtedness of a Subsidiary that Refinances Indebtedness of the Company or (B)
Indebtedness of the Company or a Restricted Subsidiary that Refinances
Indebtedness of an Unrestricted Subsidiary.
"Registration Rights Agreement" means the Registration Rights Agreement
dated March 13, 2002, among the Company, the Subsidiary Guarantors, Credit
Suisse First Boston Corporation and Deutsche Banc Alex. Brown Inc.
"Related Business" means any business in which the Company or its
Subsidiaries was engaged on the Issue Date and any business related, ancillary
or complementary to any business of the Company or its Subsidiaries in which the
Company or its Subsidiaries was engaged on the Issue Date or a reasonable
extension, development or expansion of the business in which the Company or its
Subsidiaries was engaged as of the Issue Date.
"Representative" means with respect to a Person, any trustee, agent or
representative (if any) for an issue of Senior Indebtedness of such Person.
"Restricted Payment" with respect to any Person means:
(1) the declaration or payment of any dividends or any other
distributions of any sort in respect of its Capital Stock (including
any payment in connection with any merger or consolidation involving
such Person) or similar payment to the direct or indirect holders of
its Capital Stock (other than dividends or distributions payable
solely in its Capital Stock (other than Disqualified Stock) and
dividends or distributions payable solely to the Company or a
Restricted Subsidiary, and other than pro rata dividends or other
distributions made by a Subsidiary that is not a Wholly Owned
Subsidiary to minority stockholders (or owners of an equivalent
interest in the case of a Subsidiary that is an entity other than a
corporation));
(2) the purchase, redemption or other acquisition or retirement for
value of any Capital Stock of the Company held by any Person or of
any Capital Stock of a Restricted Subsidiary held by any Affiliate
of the Company (other than a Restricted Subsidiary), including the
exercise of any option to exchange any Capital Stock (other than
into Capital Stock of the Company that is not Disqualified Stock);
(3) the purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value, prior to scheduled maturity,
scheduled repayment or scheduled sinking fund payment of any
Subordinated Obligations of such Person (other than intercompany
indebtedness subordinated in accordance with clause (b)(2) of
"Certain Covenants-- Limitation on Indebtedness," the purchase,
repurchase or other acquisition of Subordinated Obligations
purchased in anticipation of satisfying a sinking fund obligation,
principal installment or final maturity, in each case due within one
year of the date of such purchase, repurchase or other acquisition);
or
(4) the making of any Investment (other than a Permitted Investment) in
any Person.
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"Restricted Subsidiary" means any Subsidiary of the Company that is not an
Unrestricted Subsidiary.
"Sale/Leaseback Transaction" means an arrangement relating to property
owned by the Company or a Restricted Subsidiary on the Issue Date or thereafter
acquired by the Company or a Restricted Subsidiary whereby the Company or a
Restricted Subsidiary transfers such property to a Person and the Company or a
Restricted Subsidiary leases it from such Person.
"SEC" means the U.S. Securities and Exchange Commission.
"Secured Indebtedness" means any Indebtedness of the Company secured by a
Lien.
"Securities Act" means the U.S. Securities Act of 1933, as amended.
"Senior Indebtedness" means with respect to any Person:
(1) Obligations in respect of Indebtedness (including all reimbursement
obligations in respect of letters of credit) of such Person, whether
outstanding on the Issue Date or thereafter Incurred; and
(2) accrued and unpaid interest (including interest accruing on or after
the filing of any petition in bankruptcy or for reorganization
relating to such Person whether or not post-filing interest is
allowed in such proceeding) in respect of (A) indebtedness of such
Person for money borrowed and (B) indebtedness evidenced by notes,
debentures, bonds or other similar instruments for the payment of
which such Person is responsible or liable,
unless, in the case of clauses (1) and (2), in the instrument creating or
evidencing the same or pursuant to which the same is outstanding, it is provided
that such obligations are subordinate or pari passu in right of payment to the
Notes or the Subsidiary Guaranty of such Person, as the case may be; provided,
however, that Senior Indebtedness shall not include:
(1) any obligation of such Person to any Subsidiary;
(2) any liability for Federal, state, local or other taxes owed or owing
by such Person;
(3) any accounts payable or other liability to trade creditors arising
in the ordinary course of business (including guarantees thereof or
instruments evidencing such liabilities);
(4) any Indebtedness of such Person (and any accrued and unpaid interest
in respect thereof) which is subordinate or junior in any respect to
any other Indebtedness or other obligation of such Person; or
(5) that portion of any Indebtedness which at the time of Incurrence is
Incurred in violation of the Indenture.
"Senior Subordinated Indebtedness" means, with respect to a Person, the
Notes (in the case of the Company), the Subsidiary Guaranty (in the case of a
Subsidiary Guarantor) and any other Indebtedness of such Person that
specifically provides that such Indebtedness is to rank pari passu with the
Notes or such Subsidiary Guaranty, as the case may be, in right of payment and
is not subordinated by its terms in right of payment to any Indebtedness or
other obligation of such Person which is not Senior Indebtedness of such Person.
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"Significant Subsidiary" of the Company within the meaning of Article 1, Rule
1-02 under Regulation S-X promulgated by the SEC pursuant to the Securities Act,
as such Regulation is in effect on the Issue Date.
"Standard Securitization Undertakings" means representations, warranties,
covenants and indemnities entered into by the Company or any Restricted
Subsidiary that are reasonably customary in securitization transactions
involving accounts receivables in connection with any servicing obligations
assumed by the Company or any Restricted Subsidiary in respect of such accounts
receivable.
"Stated Maturity" means, with respect to any security, the date specified
in such security as the fixed date on which the final payment of principal of
such security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
security
107
at the option of the holder thereof upon the happening of any contingency unless
such contingency has occurred).
"Subordinated Obligation" means, with respect to a Person, any Indebtedness
of such Person (whether outstanding on the Issue Date or thereafter Incurred)
which is subordinate or junior in right of payment to the Notes or a Subsidiary
Guaranty of such Person, as the case may be, pursuant to a written agreement to
that effect.
"Subsidiary" means, with respect to any Person, any corporation,
association, partnership or other business entity of which more than 50% of the
total voting power of shares of Voting Stock is at the time owned or controlled,
directly or indirectly, by:
(1) such Person;
(2) such Person and one or more Subsidiaries of such Person; or
(3) one or more Subsidiaries of such Person.
"Subsidiary Guarantor" means Harnischfeger Corporation, a Delaware
corporation, Joy Technologies Inc., a Delaware corporation, and each other
Subsidiary listed on the Schedule attached to the Indenture, each of their
respective successors and each other Subsidiary of the Company that thereafter
Guarantees the Notes pursuant to the terms of the Indenture.
"Subsidiary Guaranty" means a Guarantee by a Subsidiary Guarantor of the
Company's obligations with respect to the Notes.
"Temporary Cash Investments" means any of the following:
(1) any investment in direct obligations of the United States or any
agency thereof or obligations guaranteed by the United States of
America or any agency thereof;
(2) investments in time deposit accounts, certificates of deposit,
eurodeposits and money market deposits maturing within 180 days of
the date of acquisition thereof issued by a bank or trust company
which is organized under the laws of the United States, any State
thereof or any foreign country recognized by the United States, and
which bank or trust company has capital, surplus and undivided
profits aggregating in excess of $50.0 million (or the foreign
currency equivalent thereof) and has outstanding debt which is rated
"A" (or such similar equivalent rating) or higher by at least one
nationally recognized statistical rating organization (as defined in
Rule 436 under the Securities Act) or any money-market fund
sponsored by a registered broker dealer or mutual fund distributor;
(3) repurchase obligations with a term of not more than 30 days for
underlying securities of the types described in clause (1) above
entered into with a bank meeting the qualifications described in
clause (2) above;
(4) investments in commercial paper, maturing not more than 180 days
after the date of acquisition, issued by a corporation (other than
an Affiliate of the Company) organized and in existence under the
laws of the United States or any foreign country recognized by the
United States with a rating at the time as of which any investment
therein is made of "P-1" (or higher) according to Moody's Investors
Service, Inc. or "A-1" (or higher) according to Standard and Poor's
Ratings Group;
(5) investments in securities with maturities of 180 days or less from
the date of acquisition issued or fully guaranteed by any state,
commonwealth or territory of the United States of America, or by any
political subdivision or taxing authority thereof, and rated at
least "A" by Standard & Poor's Ratings Group or "A" by Moody's
Investors Service, Inc.; and
(6) money market funds at least 95% of the assets of which constitute
Temporary Cash Investments described in clauses (1) through (5)
above.
"Total Net Tangible Assets" as of any date means the total consolidated
assets of the Company and its Restricted Subsidiaries, as set forth on the
Company's consolidated balance sheet as of the end of the most recent fiscal
quarter, less the following: (i) current liabilities of the Company and its
Restricted
108
Subsidiaries, (ii) goodwill, unamortized debt issuance costs and original issue
discount expense and other unamortized deferred charges, patents, trademarks,
service marks, trade names, copyrights, licenses, organization or development
expenses and other intangible items set forth on such balance sheet, (iii) all
outstanding Investments by the Company and its Restricted Subsidiaries in
Persons other than Restricted Subsidiaries, and (iv) net deferred income tax
assets of the Company and its Restricted Subsidiaries.
"Trustee" means Wells Fargo Bank Minnesota, N.A. until a successor replaces
it and, thereafter, means the successor.
"Trust Indenture Act" means the Trust Indenture Act of 1939 (15 U.S.C.
sec.sec. 77aaa-77bbbb) as in effect on the Issue Date.
"Trust Officer" means the Chairman of the Board, the President or any other
officer or assistant officer of the Trustee assigned by the Trustee to
administer its corporate trust matters.
"U.S. Dollar Equivalent" means with respect to any monetary amount in a
currency other than U.S. dollars, at any time for determination thereof, the
amount of U.S. dollars obtained by converting such foreign currency involved in
such computation into U.S. dollars at the spot rate for the purchase of U.S.
dollars with the applicable foreign currency as published in The Wall Street
Journal in the "Exchange Rates" column under the heading "Currency Trading" on
the date two Business Days prior to such determination.
Except as described under "-- Certain Covenants -- Limitation on
Indebtedness," whenever it is necessary to determine whether the Company has
complied with any covenant in the Indenture or a Default has occurred and an
amount is expressed in a currency other than U.S. dollars, such amount will be
treated as the U.S. Dollar Equivalent determined as of the date such amount is
initially determined in such currency.
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States
(including any agency or instrumentality thereof) for the payment of which the
full faith and credit of the United States is pledged and which are not callable
at the issuer's option.
"Unrestricted Subsidiary" means:
(1) any Subsidiary of the Company that at the time of determination
shall be designated an Unrestricted Subsidiary by the Board of
Directors in the manner provided below; and
(2) any Subsidiary of an Unrestricted Subsidiary.
The Board of Directors may designate any Subsidiary of the Company (including
any newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary
unless such Subsidiary or any of its Subsidiaries owns any Capital Stock or
Indebtedness of, or holds any Lien on any property of, the Company or any other
Subsidiary of the Company that is not a Subsidiary of the Subsidiary to be so
designated; provided, however, that either (A) the Subsidiary to be so
designated has total assets of $1,000 or less or (B) if such Subsidiary has
assets greater than $1,000, such designation would be permitted under the
covenant described under "-- Certain Covenants -- Limitation on Restricted
Payments."
The Board of Directors may designate any Unrestricted Subsidiary to be a
Restricted Subsidiary; provided, however, that immediately after giving effect
to such designation (A) the Company could Incur $1.00 of additional Indebtedness
under paragraph (a) of the covenant described under "-- Certain
Covenants -- Limitation on Indebtedness" and (B) no Default shall have occurred
and be continuing. Any such designation by the Board of Directors shall be
evidenced to the Trustee by promptly filing with the Trustee a copy of the
resolution of the Board of Directors giving effect to such designation and an
Officers' Certificate certifying that such designation complied with the
foregoing provisions.
109
"Voting Stock" of a Person means all classes of Capital Stock or other
interests (including partnership interests) of such Person then outstanding and
normally entitled (without regard to the occurrence of any contingency) to vote
in the election of directors, managers or trustees thereof.
"Wholly Owned Subsidiary" means a Restricted Subsidiary all the Capital
Stock of which (other than directors' qualifying shares) is owned by the Company
or one or more Wholly Owned Subsidiaries.
110
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material United States federal income tax
consequences of the purchase, ownership and disposition of the notes. Unless
otherwise stated, this summary deals only with the notes purchased for cash on
original issue and held as capital assets.
This summary does not deal with special classes of holders such as banks,
thrifts, real estate investment trusts, regulated investment companies,
insurance companies, dealers in securities or currencies, or tax-exempt
investors and does not discuss securities held as part of a hedge, straddle,
"synthetic security" or other integrated transaction.
This summary also does not address the tax consequences to persons that
have a functional currency other than the U.S. dollar or the tax consequences to
shareholders, partners or beneficiaries of a holder of securities. Further, it
does not include any description of any alternative minimum tax consequences or
the tax laws of any state or local government or of any foreign government that
may be applicable to the notes.
This summary is based on the Internal Revenue Code of 1986, as amended (the
"Code"), the Treasury regulations promulgated thereunder and administrative and
judicial interpretations thereof, all as of the date hereof, and all of which
are subject to change, possibly on a retroactive basis.
YOU SHOULD CONSULT WITH YOUR OWN TAX ADVISOR REGARDING THE FEDERAL, STATE,
LOCAL AND FOREIGN INCOME, FRANCHISE, PERSONAL PROPERTY, AND ANY OTHER TAX
CONSEQUENCES OF THE PURCHASE, OWNERSHIP, AND DISPOSITION OF THE NOTES.
This subsection describes the material United States federal income tax
consequences of owning, selling, and disposing of the notes we are offering.
This subsection assumes that the notes will not be offered at a discount.
U.S. HOLDERS OF NOTES
For purposes of this summary, U.S. holders are holders of notes that are:
(1) citizens or residents of the United States;
(2) corporations or other entities taxable as corporations created or
organized in or under the laws of the United States, any state thereof
or the District of Columbia;
(3) estates, the income of which is subject to United States federal income
taxation regardless of its source; or
(4) trusts if (A) a court within the United States is able to exercise
primary supervision over the administration of the trust and (B) one or
more United States persons have the authority to control all
substantial decisions of the trust.
If a partnership or other entity treated as a partnership for United States
federal income tax purposes holds notes, the tax treatment of a partner will
generally depend on the status of the partner and the activities of the
partnership. If you are a partner of a partnership holding notes, we suggest
that you consult your own tax advisor.
INTEREST INCOME
Payments of interest on a note generally will be taxable to a U.S. holder
as ordinary interest income at the time such payments are accrued or are
received (in accordance with the holder's regular method of tax accounting).
Because we are obligated to pay an additional amount to the holders of the
notes under certain circumstances described under "Description of the
Notes -- Principal, Maturity and Interest" and "-- Registered Exchange Offer;
Registration Rights," the notes may be subject to special rules under Treasury
regulations that are applicable to debt instruments that provide for one or more
contingent
111
payments. Under the Treasury regulations, however, the special rules applicable
to contingent payment debt instruments will not apply if, as of the issue date,
the contingency is either "remote" or "incidental". We intend to take the
position that, solely for these purposes, the payment of the additional amount
is a remote or incidental contingency. Our determination that such payments are
a remote or incidental contingency for these purposes is binding on a holder,
unless such holder discloses in the proper manner to the Internal Revenue
Service (the "IRS") that it is taking a different position. Prospective
investors should consult their tax advisors as to the tax considerations
relating to the payment of the additional amount, in particular in connection
with the Treasury regulations relating to contingent payment interests.
SALE OR EXCHANGE OF NOTES
A holder will generally recognize taxable gain or loss equal to the
difference between the amount realized on the sale, exchange or other
disposition of the note and the holder's adjusted tax basis in the note. A
holder's adjusted tax basis in the note generally will be the initial purchase
price paid therefor. Gain recognized on the sale of a note generally will be
long term capital gain provided the holder's holding period for the note exceeds
one year. In the case of a holder other than a corporation, the current maximum
marginal United States federal income tax rate applicable to long term capital
gain recognized on the sale of a note is 20%.
If the selling price is less than the holder's adjusted tax basis, the
holder will recognize a capital loss. Subject to certain limited exceptions,
capital losses cannot be applied to offset ordinary income for United States
federal income tax purposes.
THE EXCHANGE OFFER
The exchange of the notes for exchange notes pursuant to the Registered
Exchange Offer should not constitute a significant modification of the terms of
the notes, and, accordingly, such exchange should not constitute an exchange for
federal income tax purposes. Therefore, a holder will not recognize gain or loss
upon receipt of an exchange note in the Registered Exchange Offer. A holder's
holding period for such note will include the holding period of the note
surrendered and such holder's adjusted basis in such note will be the same as
such holder's basis in the note surrendered. In addition, each holder of notes
would continue to be required to include interest on the notes in its gross
income in accordance with its method of accounting for federal income tax
purposes.
INFORMATION REPORTING AND BACKUP WITHHOLDING TAX
We will, where required, report to the holders and the Internal Revenue
Service the amount of any interest paid on the notes in each calendar year and
the amounts of federal tax withheld, if any, with respect to payments. In
general, information reporting requirements will apply to payments of principal
and interest on the notes and payments of the proceeds of the sale of the notes,
and a backup withholding tax, currently at a rate of 30%, may apply to those
payments if:
(1) the holder fails to furnish or certify its correct taxpayer
identification number to us in the manner required;
(2) we are notified by the Internal Revenue Service that the holder has
failed to report payments of interest and dividends properly; or
(3) under certain circumstances, the holder fails to certify that the
holder has not been notified by the Internal Revenue Service that the
holder is subject to backup withholding for failure to report interest
and dividend payments.
Any amounts withheld under the backup withholding rules from a payment to a
holder will be allowed as a credit against the holder's United States federal
income tax and may entitle the holder to a refund, provided that the required
information is furnished to the Internal Revenue Service.
112
NON-U.S. HOLDERS OF NOTES
For purposes of this summary, non-U.S. holders are holders of notes who are
not U.S. holders.
The rules governing United States federal income taxation of a beneficial
owner of notes that, for United States federal income tax purposes, is a holder
who is not a United States person as that term is defined in the Code are
complex and no attempt will be made herein to provide more than a summary of
those rules. Non-U.S. holders should consult with their own tax advisors to
determine the effect of federal, state, local and foreign income tax laws, as
well as treaties, with regard to an investment in the notes, including any
reporting requirements.
This discussion assumes that the note or interest payment is not subject to
the rules of Section 871(h)(4)(A) of the Code, relating to interest payments
that are determined by reference to income, profits, changes in value of
property or other attributes of the issuer or a related party.
INTEREST INCOME
Generally, interest income of a non-U.S. holder that is not effectively
connected with a United States trade or business will be subject to a
withholding tax at a 30% rate (or, if applicable, a lower tax rate specified by
a treaty). However, interest income earned on a note held by a non-U.S. holder
will qualify for the "portfolio interest" exemption and therefore will not be
subject to United States federal income tax or withholding tax, provided that
the interest income is not effectively connected with a United States trade or
business of the non-U.S. holder and provided that:
(1) the non-U.S. holder does not actually or constructively own 10% or more
of the total combined voting power of all classes of our stock entitled
to vote;
(2) the non-U.S. holder is not a controlled foreign corporation that is
related to us through stock ownership;
(3) the non-U.S. holder is not a bank which acquired the note in
consideration for an extension of credit made pursuant to a loan
agreement entered into in the ordinary course of business; and
(4) either (A) the non-U.S. holder certifies to us or our or its agent,
under penalties of perjury, by submitting a properly executed IRS Form
W-8BEN (or successor form), that it is not a United States person or
(B) an authorized representative of a securities clearing organization,
bank or other financial institution that holds customer securities in
the ordinary course of its trade or business and holds the notes in
that capacity, certifies to us or our agent, under penalties of
perjury, that such a statement on Form W-8BEN (or successor form) or a
similar substitute has been received from the beneficial owner by it or
by a financial institution between it and the beneficial owner and
furnishes to us or our agent a copy thereof.
Except to the extent that an applicable treaty otherwise provides, a
non-U.S. holder generally will be taxed with respect to interest in the same
manner as a holder that is a United States person if the interest is effectively
connected with a United States trade or business of the non-U.S. holder.
Effectively connected interest income received or accrued by a corporate
non-U.S. holder may also, under certain circumstances, be subject to an
additional "branch profits" tax at a 30% rate (or, if applicable, at a lower tax
rate specified by a treaty). Even though such effectively connected income is
subject to income tax, and may be subject to the branch profits tax, it is not
subject to withholding tax if the non-U.S. holder delivers a properly executed
Internal Revenue Service Form W-8ECI (or successor form) to the payor.
SALE OR EXCHANGE OF NOTES
A non-U.S. holder generally will not be subject to United States federal
income tax or withholding tax on any gain realized on the sale, exchange or
other disposition of a note unless:
(1) the gain is effectively connected with the conduct of a United States
trade or business of the non-U.S. holder;
113
(2) in the case of a non-U.S. holder who is an individual, such holder is
present in the United States for a period or periods aggregating 183
days or more during the taxable year of the disposition and certain
other conditions are met; or
(3) the non-U.S. holder is subject to tax pursuant to the provisions of the
Code applicable to certain United States expatriates.
With respect to a non-U.S. holder, subject to U.S. federal income tax as
described in the preceding paragraph, an exchange of a note for an exchange note
will not be treated as a taxable exchange of the note. As described under "U.S.
Holders of Notes -- Interest Income," the notes provide for the payment of an
additional amount in certain circumstances. Non-U.S. holders should consult
their own tax advisors as to the tax considerations relating to debt instruments
that provide for one or more contingent payments, in particular as to the
availability of the exemption for portfolio interest, and the ability of
non-U.S. holders to claim the benefits of income tax treaty exemptions from U.S.
withholding tax on interest, in respect of such additional amounts.
INFORMATION REPORTING AND BACKUP WITHHOLDING TAX
United States backup withholding tax will not apply to payments on the
notes to a non-U.S. holder if the statement described above in "-- Interest
Income" is duly provided by such holder, provided that the payor does not have
actual knowledge that the holder is a United States person. Information
reporting may still apply with respect to payments of interest. Information
reporting and backup withholding tax will not apply to payments of the proceeds
of the sale of notes to a non-U.S. holder effected by a broker, provided that
either a sale occurs through a foreign office of a foreign broker that has no
connection with the United States, as described in applicable regulations or
such broker has in its records certain documentary evidence allowed by Treasury
regulations that the beneficial owner is a non-U.S. holder, certain other
conditions are met, and the broker does not have actual knowledge that the
holder is a United States person.
ESTATE TAX
If interest on the notes is exempt from withholding of United States
federal income tax under the Portfolio Interest Exemption (without regard to the
certification requirement), the notes will not be included in the estate of a
deceased non-U.S. holder for United States federal estate tax purposes.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR
GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE TO YOU, DEPENDING UPON YOUR
PARTICULAR SITUATION. YOU SHOULD CONSULT YOUR OWN TAX ADVISORS WITH RESPECT TO
THE TAX CONSEQUENCES TO YOU OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE
NOTES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX
LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN UNITED STATES FEDERAL OR OTHER TAX
LAWS.
114
PLAN OF DISTRIBUTION
Each broker-dealer that receives exchange notes for its own account
pursuant to the exchange offer must acknowledge that it will deliver a
prospectus in connection with any resale of such exchange notes. This
prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of exchange notes received in
exchange for outstanding notes where such outstanding notes were acquired as a
result of market-making activities or other trading activities. We have agreed
that for a period of 180 days after the consummation of the registered exchange
offer, we will make this prospectus, as amended or supplemented, available to
any broker-dealer for use in connection with any such resale. In addition, until
, 2002, all dealers affecting transactions in the exchange notes
may be required to deliver a prospectus.
We will not receive any proceeds from any sales of the exchange notes by
broker-dealers. Exchange notes received by broker-dealers for their own account
pursuant to the exchange offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the exchange notes or a combination of such methods of
resale, at prices related to such prevailing market prices or negotiated prices.
Any such resale may be made directly to purchasers or to or through brokers or
dealers who may receive compensation in the form of commissions or concessions
from any such broker-dealer or the purchasers of any such exchange notes. Any
broker-dealer that resells the exchange notes that were received by it for its
own account pursuant to the exchange offer and any broker or dealer that
participates in a distribution of such exchange notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of exchange notes and any commissions or concessions received by any
such persons may be deemed to be underwriting compensation under the Securities
Act. The letter of transmittal states that by acknowledging that it will deliver
and by delivering a prospectus, a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act.
For a period of 180 days after the consummation of the registered exchange
offer, we will promptly send additional copies of this prospectus and any
amendment or supplement to this prospectus to any broker-dealer that requests
such documents in the letter of transmittal. We have agreed to pay all expenses
incident to the exchange offer (including the expenses of one counsel for the
holders of the notes) other than commissions or concessions of any brokers or
dealers and will indemnify the holders of the notes (including any
broker-dealers) against certain liabilities, including liabilities under the
Securities Act.
Prior to the exchange offer, there has not been any public market for the
outstanding notes. The outstanding notes have not been registered under the
Securities Act and will be subject to restrictions on transferability to the
extent that they are not exchanged for exchange notes by holders who are
entitled to participate in this exchange offer. The holders of outstanding
notes, other than any holder that is our affiliate within the meaning of Rule
405 under the Securities Act, who are not eligible to participate in the
exchange offer are entitled to certain registration rights, and we are required
to file a shelf registration statement with respect to the outstanding notes.
The exchange notes will constitute a new issue of securities with no established
trading market. We do not intend to list the exchange notes on any national
securities exchange or to seek the admission thereof to trading in the Nasdaq
national market. In addition, such market making activity will be subject to the
limits imposed by the Securities Act and the Exchange Act and may be limited
during the exchange offer and the pendency of the shelf registration statements.
Accordingly, no assurance can be given that an active public or other market
will develop for the exchange notes or as to the liquidity of the trading market
for the exchange notes. If a trading market does not develop or is not
maintained, holders of the exchange notes may experience difficulty in reselling
the exchange notes or may be unable to sell them at all. If a market for the
exchange notes develops, any such market may be discontinued at any time.
WHERE YOU CAN FIND MORE INFORMATION
We are required to file reports and other information with the SEC pursuant
to the information requirements of the Securities and Exchange Act of 1934, as
amended.
115
Our filings with the SEC may be inspected and copied at the public
reference facilities maintained by the SEC at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330 for further information relating to the public reference rooms.
Copies of our filings may be obtained at the prescribed rates from the Public
Reference Section of the SEC, 450 Fifth Street, N.W., Washington, D.C. 20549. In
addition, the SEC maintains an Internet site (http://www.sec.gov) that contains
certain reports, proxy statements and other information regarding us. Our common
stock is traded under the symbol "JOYG" on the Nasdaq national market, through
which information also is available.
INCORPORATION BY REFERENCE
The SEC permits us to "incorporate by reference" the information in
documents we file with them, which means that we can disclose important
information to you by referring you to those documents. The information
incorporated by reference is considered to be part of this prospectus, and
information that we file with the SEC after the initial filing date of the
registration statement of which this prospectus is a part, and prior to the
effectiveness of that registration statement, will automatically update and
supersede this information. We have filed the following documents with the SEC
and hereby incorporate them in this prospectus by reference:
- our Annual Report on Form 10-K for the year ended October 31, 2001;
- our Proxy Statement, dated January 25, 2002, for our 2002 annual meeting;
- our Quarterly Report on Form 10-Q for the quarter ended February 2, 2002;
and
- our Reports on Form 8-K filed on January 25, 2002, March 1, 2002 and
April 15, 2002.
We also incorporate by reference any future filings made with the SEC under
Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act. Statements
contained in documents incorporated or deemed to be incorporated by reference
after the initial filing date of the registration statement of which this
prospectus is a part will modify statements in any other subsequently filed
documents to the extent the new information differs from the old information.
Any statements modified or superseded will no longer constitute a part of this
prospectus in their original form.
If you request a copy of any or all of the documents incorporated by
reference, then we will send to you the copies you requested at no charge.
However, we will not send exhibits to such documents, unless such exhibits are
specifically incorporated by reference in such documents. You should direct
requests for such copies to Investor Relations at Joy Global Inc., 100 East
Wisconsin Avenue, Suite 2780, Milwaukee, Wisconsin 53202, telephone: (414)
319-8500.
We have filed with the SEC a registration statement on Form S-4 under the
Securities Act, covering the securities described in this prospectus. This
prospectus does not contain all of the information included in the registration
statement, some of which is contained in exhibits to the registration statement.
The registration statement, including the exhibits, can be read at the SEC web
site or at the SEC offices referred to above. Any statement made in this
prospectus concerning the contents of any contract, agreement or other document
is only a summary of the actual contract, agreement or other document. If we
have filed any contract, agreement or other document as an exhibit to the
registration statement, you should read the exhibit for a more complete
understanding of the document or matter involved.
116
LEGAL MATTERS
The validity of the exchange notes and the guarantees and other legal
matters, including the tax-free nature of the exchange, will be passed upon on
our behalf by Kirkland & Ellis, Chicago, Illinois, a partnership including
professional corporations.
INDEPENDENT ACCOUNTANTS
The financial statements incorporated in this prospectus by reference to
the Annual Report on Form 10-K as of October 31, 2001 and the period from June
24, 2001 to October 31, 2001 (the Successor Company) and the period from
November 1, 2000 to June 23, 2001 and as of October 31, 2000 and each of the two
years then ended (Predecessor Company), have been so incorporated in reliance on
the report of PricewaterhouseCoopers LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
117
UNAUDITED PRO FORMA
CONSOLIDATED STATEMENT OF OPERATIONS
The following unaudited pro forma consolidated statements of operations are
based on our historical financial statements and should be read in conjunction
with the historical financial statements included elsewhere in, or incorporated
by reference into, this prospectus.
The unaudited pro forma financial statements reflect the following:
- The elimination of our Predecessor Company's amortization of patents and
goodwill and the increase in the amortization of our Successor Company's
intangible assets;
- The interest expense and financing fee amortization related to the
issuance of the notes; and
- The reduction of interest expense and financing fee amortization related
to the repayment of outstanding borrowings under our existing credit
facility and our $108.8 million 10.75% Senior Notes.
The pro forma statements give effect to the transactions described above as
if they had been consummated on the first day of the applicable period. The pro
forma adjustments to the historical consolidated statements of operations are
those that we deem appropriate, reflecting items of recurring significance and
which are factually supportable based on currently available information. The
pro forma financial statements do not purport to be indicative of what actual
results would have been, nor do the pro forma financial statements purport to
present our consolidated financial results for future periods.
P-1
<Table>
<Caption>
(IN MILLIONS)
PERIOD ENDED OCTOBER 31, 2001
------------------------------------------------------------------
PREDECESSOR SUCCESSOR
COMPANY COMPANY
EIGHT FOUR REORGANIZATION REFINANCING
MONTHS MONTHS ADJUSTMENTS ADJUSTMENTS PRO FORMA
----------- --------- -------------- ----------- ---------
Net sales............................... $740.5 $407.7 -- -- $ 1,148.2
Cost of sales........................... 556.0 307.1 8.9(1) -- 872.0
Fresh start inventory charges........... -- 74.6 -- -- 74.6
Product development, selling and
administrative expenses............... 141.8 70.2 (2.7)(2) -- 209.3
Amortization of backlog intangible
assets................................ -- 9.8 -- -- 9.8
Other income............................ (1.2) (1.7) -- -- (2.9)
Restructuring and other special
(credits) charges..................... (0.1) -- -- (0.1)
------ ------ ----- ---- ---------
Operating income (loss)................. 44.0 (52.3) (6.2) -- (14.5)
Interest income......................... 1.6 1.2 -- -- 2.8
Interest expense........................ (29.3) (11.0) 10.7(3) 0.0(4) (29.6)
------ ------ ----- ---- ---------
Income (loss) before reorganization
items and fresh start accounting
adjustments........................... 16.3 (62.1) 4.5 0.0 (41.3)
Reorganization items.................... (36.4) -- -- -- (36.4)
Fresh start accounting adjustments...... 45.1 -- -- -- 45.1
------ ------ ----- ---- ---------
Income (loss) before income taxes and
minority interest..................... 25.0 (62.1) 4.5 0.0 (32.6)
(Provision) benefit for income taxes.... 26.8 (13.2) (0.6)(5) -- 13.0
Minority interest....................... (1.2) (1.2) -- -- (2.4)
------ ------ ----- ---- ---------
Income (loss) from continuing
operations, before discontinued
operations, and extraordinary items... $ 50.6 $(76.5) $ 3.9 $0.0 $ (22.0)
====== ====== ===== ==== =========
<Caption>
(IN MILLIONS)
THREE MONTHS ENDED FEBRUARY 2, 2002
-------------------------------------------------
REORGANIZATION REFINANCING
ACTUAL ADJUSTMENTS ADJUSTMENTS PRO FORMA
------ -------------- ----------- ---------
Net sales............................... $286.4 -- -- $286.4
Cost of sales........................... 223.9 -- -- 223.9
Fresh start inventory charges........... 46.4 -- -- 46.4
Product development, selling and
administrative expenses............... 53.7 -- -- 53.7
Amortization of backlog intangible
assets................................ 7.3 -- -- 7.3
Other income............................ (0.2) -- -- (0.2)
Restructuring and other special
(credits) charges..................... (5.0) -- -- (5.0)
------ -- ----- ------
Operating income (loss)................. (39.7) -- -- (39.7)
Interest income......................... 0.5 -- -- 0.5
Interest expense........................ (8.0) -- 0.3 (6) (7.7)
------ -- ----- ------
Income (loss) before reorganization
items and fresh start accounting
adjustments........................... (47.2) -- 0.3 (46.9)
Reorganization items.................... -- -- -- --
Fresh start accounting adjustments...... -- -- -- --
------ -- ----- ------
Income (loss) before income taxes and
minority interest..................... (47.2) -- 0.3 (46.9)
(Provision) benefit for income taxes.... 18.5 -- (0.1)(7) 18.4
Minority interest....................... (0.4) -- -- (0.4)
------ -- ----- ------
Income (loss) from continuing
operations, before discontinued
operations, and extraordinary items... $(29.1) -- $ 0.2 $(28.9)
====== == ===== ======
</Table>
P-2
The following adjustments have been made to our historical consolidated
statement of operations to compute the unaudited pro forma amounts.
(1) This adjustment reflects an increase of depreciation of property, plant
and equipment to reflect a full year of expense based upon the fair
value of such assets of the Successor Company.
(2) The adjustment reflects the net effects of the elimination of $7.1
million of amortization related to the Predecessor Company's patents
and goodwill and a $4.4 million increase of amortization to reflect a
full year of amortization of the Successor Company's intangible assets.
(3) This adjustment reflects the decrease in interest expense as a result
of the replacement of our debtor-in-possession financing facility with
our current credit facility and 10.75% Senior Notes which we put in
place upon our emergence from bankruptcy. Approximately $15.1 million
of Predecessor Company interest expense is related to the interest
accrued for the period June 1999 through July 2001 on the Joy and P&H
prepetition claims.
(4) This adjustment reflects the increase in interest expense as a result
of the issuance of the Senior Subordinated Notes and the repayment of
our existing debt. Had the issuance of the Senior Subordinated Notes
and application of the net proceeds occurred on November 1, 2000,
interest expense for fiscal 2001 would have been as follows:
<Table>
<Caption>
PRO FORMA
INTEREST INTEREST
INSTRUMENT AMOUNT RATE EXPENSE
- ---------- ------ -------- ---------
Revolving credit facility............................... $ 83.9 6.82% $ 5.7
Industrial revenue bond................................. 12.6 8.59% 1.1
Senior subordinated notes............................... 200.0 8.75% 17.5
Other miscellaneous..................................... 4.6 Various 0.4
Amortization of financing costs......................... -- -- 2.9
Letter of credit fees................................... -- -- 2.0
------ -----
$301.1 $29.6
====== =====
</Table>
(5) This adjustment reflects an increase in our provision for income taxes
to an effective income tax rate of 40%.
(6) This adjustment reflects the decrease in interest expense as a result
of the issuance of the Senior Subordinated Notes and the repayment of
our existing debt. Had the issuance of the Senior Subordinated Notes
and application of the net proceeds occurred on November 1, 2001,
interest expense for the 2002 First Quarter would have been as follows:
<Table>
<Caption>
PRO FORMA
INTEREST INTEREST
INSTRUMENT AMOUNT RATE EXPENSE
- ---------- ------ -------- ---------
Revolving credit........................................ $102.0 5.17% $1.3
Industrial revenue bonds................................ 12.6 8.59% 0.3
Senior subordinated notes............................... 200.0 8.75% 4.4
Other miscellaneous..................................... 4.4 Various 0.4
Amortization of finance fees............................ -- -- 0.7
Letter of credit fees................................... -- -- 0.6
------ ----
$319.0 $7.7
====== ====
</Table>
(7) This adjustment reflects the income tax effect with a 40% effective
income tax rate.
P-3
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$200,000,000
JOY GLOBAL INC.
Offer to Exchange $200,000,000
8 3/4% Senior Subordinated Notes Due 2012, Series B
for any and all outstanding
8 3/4% Senior Subordinated Notes due 2012
---------------------
PROSPECTUS
May , 2002
---------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20: INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The following is a summary of the statutes, charter and bylaw provisions or
other arrangements under which the Registrants' directors and officers are
insured or indemnified against liability in their capacities as such.
REGISTRANTS INCORPORATED UNDER DELAWARE LAW
Joy Global Inc. and several of its domestic subsidiary guarantors,
including Benefit, Inc., Dobson Park Industries, Inc., Harnischfeger
Corporation, Harnischfeger Technologies, Inc., Harnischfeger World Services
Corporation, HCHC, Inc., HCHC UK Holdings, Inc., HIHC, Inc., Joy MM Delaware,
Inc., Joy Technologies Inc., JTI UK Holdings, Inc., and RCHH, Inc. (the
"Delaware Subsidiary Guarantors"), are incorporated under the laws of the State
of Delaware. Section 145 of the Delaware General Corporation Law (the "DGCL")
provides that a Delaware corporation may indemnify any persons who are, or are
threatened to be made, parties to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of such corporation), by reason of the
fact that such person is or was an officer, director, employee or agent of such
corporation, or is or was serving at the request of such corporation as a
director, officer, employee or agent of another corporation or enterprise. The
indemnity may include expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding, provided such person acted in
good faith and in a manner he or she reasonably believed to be in, or not
opposed to, the corporation's best interests and, with respect to any criminal
action or proceedings, had no reasonable cause to believe that his or her
conduct was illegal. Similar provisions apply to actions brought by or in the
right of the corporation, except that no indemnification shall be made without
judicial approval if the officer or director is adjudged to be liable to the
corporation. Where an officer or director is successful on the merits or
otherwise in the defense of any action referred to above, the corporation must
indemnify him or her against the expenses which such officer or director has
actually and reasonably incurred. Section 145 of the DGCL further authorizes a
corporation to purchase and maintain insurance on behalf of any indemnified
person against any liability asserted against him or her and incurred by him or
her in any indemnified capacity, or arising out of his or her status as such,
regardless of whether the corporation would otherwise have the power to
indemnify him or her under the DGCL.
In addition, Section 102 of the DGCL allows a corporation to eliminate the
personal liability of a director of a corporation to the corporation or to any
of its stockholders for monetary damages for a breach of fiduciary duty as a
director, except in the case where the director (i) breaches his duty of
loyalty, (ii) fails to act in good faith, engages in intentional misconduct or
knowingly violates a law, (iii) authorizes the payment of a dividend or approves
a stock repurchase in violation of the DGCL or (iv) obtains an improper personal
benefit.
Article 6 of the Amended and Restated Certificate of Incorporation of Joy
Global Inc. provides that, to the fullest extent permitted by the DGCL, as
presently existing or as amended, no director of Joy Global Inc. shall be liable
to the corporation or its stockholders for monetary damages arising from a
breach of fiduciary duty owed to the corporation or its stockholders.
Article III, Section 15 of the Amended and Restated Bylaws of Joy Global
Inc. provides that each person who was or is made a party, or is threatened to
be made a party to, or is involved in any action, suit, arbitration, mediation
or proceeding, whether civil, criminal, administrative or investigative, whether
domestic or foreign, by reason of the fact that he or she, or a person of whom
he or she is the legal representative, is or was a director or officer of the
corporation or is or was serving at the request of the corporation as a
director, officer, fiduciary, employee or agent of another corporation or of a
partnership, joint venture, trust or other enterprise, shall be indemnified and
held harmless by Joy Global Inc. to the
II-1
fullest extent not prohibited by the DGCL, against all expense, liability and
loss reasonably incurred or suffered by such person in connection therewith. The
right to indemnification conferred in the bylaws is a contract right and is not
exclusive of any other right which any person may have or acquire. Joy Global
Inc. may maintain insurance, at its expense, to protect itself and any
applicable person against any such expense, liability or loss, whether or not
the corporation would have the power to indemnify such person against such
expense, liability or loss under the DGCL.
The charter of each Delaware Subsidiary Guarantor provides that a director
of such corporation shall not be personally liable to such corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except to the extent such exemption from liability or limitation thereof is not
permitted by the DGCL. Furthermore, the charter and bylaws of each Delaware
Subsidiary Guarantor provide that each person who was or is made a party, or is
threatened to be made a party to, or is involved in any action, suit,
arbitration, mediation or proceeding, whether civil, criminal, administrative or
investigative, whether domestic or foreign, by reason of the fact that he or
she, or a person of whom he or she is the legal representative, is or was a
director or officer of the Delaware Subsidiary Guarantor or is or was serving at
the request of the Delaware Subsidiary Guarantor as a director, officer,
fiduciary, employee or agent of another corporation or of a partnership, joint
venture, trust or other enterprise, shall be indemnified and held harmless by
the Delaware Subsidiary Guarantor to the fullest extent not prohibited by the
DGCL, against all expense, liability and loss reasonably incurred or suffered by
such person in connection therewith. The right to indemnification conferred in
the bylaws is a contract right and is not exclusive of any other right which any
person may have or acquire. Each Delaware Subsidiary Guarantor may maintain
insurance, at its expense, to protect itself and any applicable person against
any such expense, liability or loss, whether or not the Delaware Subsidiary
Guarantor would have the power to indemnify such person against such expense,
liability or loss under the DGCL.
REGISTRANT FORMED UNDER THE DELAWARE LIMITED LIABILITY COMPANY ACT
South Shore Development, LLC is a limited liability company formed under
the laws of the State of Delaware. Section 18-808 of the Delaware Limited
Liability Company Act provides that, subject to any standards and restrictions,
if any, set forth in a limited liability company's operating agreement, a
limited liability company may indemnify and hold harmless any member or manager
or other person from and against any and all claims and demands whatsoever. The
Amended Operating Agreement of South Shore Development, LLC provides that a
manager shall not have any liability by reason of being or having been a
manager, provided that such manager performs his duties in good faith. To the
maximum extent provided under the Delaware Limited Liability Company Act, South
Shore Development, LLC will indemnify the manager, its employees and agents
against any and all claims which arise out of their duties in such capacities.
REGISTRANTS FORMED UNDER OHIO LAW
American Alloy Corporation and The Horsburgh & Scott Company (the "Ohio
Subsidiary Guarantors") are incorporated under the laws of the State of Ohio.
Section 1701.13(E) of the Ohio General Corporation Law (the "Ohio Statute")
permits indemnification by a corporation to any person made, or threatened to be
made, a party to any proceeding, other than a proceeding by or in the right of
the corporation, by reason of the fact that he or she is or was serving in an
indemnified capacity, against expenses, including judgment and fines, if he or
she acted in good faith and in a manner reasonably believed to be in or not
opposed to the best interests of the corporation and, with respect to criminal
actions, in which he or she had no reasonable cause to believe that his conduct
was unlawful. Similar provisions apply to actions brought by, or in the right
of, the corporation, except that no indemnification shall be made if the person
shall have been adjudged to be liable for negligence or misconduct to the
corporation unless a court determines that the person, in view of all of the
facts and circumstances of the case, is fairly and reasonably entitled to
indemnification. Where an officer or director or other indemnified person is
successful on the merits or otherwise in the defense of any action referred to
above, the
II-2
corporation must indemnify him or her against the expenses which such officer or
director has actually and reasonably incurred.
The Ohio Statute further authorizes a corporation to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of such corporation, or is or was serving at the request of such
corporation as a director, officer, employee or agent of another corporation or
enterprise against any liability asserted against him or her and incurred by him
or her in any such capacity, arising out of his or her status as such,
regardless of whether the corporation would otherwise have the power to
indemnify him or her under the Ohio Statute. The indemnification provided under
the Ohio Statute is not exclusive and is in addition to any indemnification
provided under a corporation's articles of incorporation, regulations or other
agreement.
The charter of each Ohio Subsidiary Guarantor provides that a director of
such corporation shall not be personally liable to such corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except to the extent such exemption from liability or limitation thereof is not
permitted by the Ohio Statute. Furthermore, the charter and bylaws of each Ohio
Subsidiary Guarantor provide that each person who was or is made a party or is
threatened to be made a party to or is involved in any action, suit,
arbitration, mediation or proceeding, whether civil, criminal, administrative or
investigative, whether domestic or foreign, by reason of the fact that he or
she, or a person of whom he or she is the legal representative, is or was a
director or officer of the Ohio Subsidiary Guarantor or is or was serving at the
request of the Ohio Subsidiary Guarantor as a director, officer, fiduciary,
employee or agent of another corporation or of a partnership, joint venture,
trust or other enterprise, shall be indemnified and held harmless by the Ohio
Subsidiary Guarantor to the fullest extent not prohibited by the Ohio Statute,
against all expense, liability and loss reasonably incurred or suffered by such
person in connection therewith. The right to indemnification conferred in the
charter and bylaws is a contract right and is not exclusive of any other right
which any person may have or acquire. Each Ohio Subsidiary Guarantor may
maintain insurance, at its expense, to protect itself and any applicable person
against any such expense, liability or loss, whether or not the Ohio Subsidiary
Guarantor would have the power to indemnify such person against such expense,
liability or loss under the Ohio Statute.
REGISTRANT FORMED UNDER WISCONSIN LAW
South Shore Corporation is incorporated under the laws of the State of
Wisconsin. Sections 180.0850 to 180.0859 of the Wisconsin Business Corporation
Laws (the "Wisconsin Statute") require a corporation to indemnify any director
or officer who is a party to any threatened, pending or completed proceeding, to
the extent the director or officer has been successful on the merits or
otherwise in the defense of the proceeding, for all reasonable expenses incurred
in the proceeding if the director or officer was a party thereto because he or
she is a director or officer of the corporation. If the director or officer is
not successful in defense of the proceeding, a corporation must indemnify the
director or officer, unless the liability was incurred as a result of the breach
or failure to perform a duty which the director or officer owes to the
corporation and the breach or failure to perform constitutes: (1) a willful
failure to deal fairly with the corporation or its shareholders in connection
with a matter in which the director or officer has a material conflict of
interest; (2) a violation of criminal law, unless the person has reasonable
cause to believe his conduct was lawful or had no reasonable cause to believe
his or her conduct was unlawful; (3) a transaction from which the person derived
an improper personal profit; or (4) willful misconduct. A corporation's articles
of incorporation may limit its obligation to indemnify under these statutory
provisions. The Wisconsin Statute also provides that a corporation may purchase
and maintain insurance for officers and directors against liabilities incurred
while acting in such capacities whether or not the corporation would be
empowered to indemnify such persons under the Wisconsin Statute.
The charter of South Shore Corporation provides that a director of the
corporation shall not be personally liable to the corporation or its
shareholders for monetary damages for breach of fiduciary duty as a director,
except to the extent such exemption from liability or limitation thereof is not
permitted by the Wisconsin Statute. Furthermore, the charter and bylaws of South
Shore Corporation provide that each person who was or is made a party, or is
threatened to be made a party to, or is involved in any action,
II-3
suit, arbitration, mediation or proceeding, whether civil, criminal,
administrative or investigative, whether domestic or foreign, by reason of the
fact that he or she, or a person of whom he or she is the legal representative,
is or was a director or officer of South Shore Corporation or is or was serving
at the request of South Shore Corporation as a director, officer, fiduciary,
employee or agent of another corporation or of a partnership, joint venture,
trust or other enterprise, shall be indemnified and held harmless by South Shore
Corporation to the fullest extent not prohibited by the Wisconsin Statute,
against all expense, liability and loss reasonably incurred or suffered by such
person in connection therewith. The right to indemnification conferred in the
charter and bylaws is a contract right and is not exclusive of any other right
which any person may have or acquire. South Shore Corporation may maintain
insurance, at its expense, to protect itself and any applicable person against
any such expense, liability or loss, whether or not South Shore Corporation
would have the power to indemnify such person against such expense, liability or
loss under the Wisconsin Statute.
ITEM 21. EXHIBITS.
(a) The following exhibits are filed as part of this Registration Statement or
incorporated by reference herein:
<Table>
<Caption>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
2.1 -- Third Amended Joint Plan of Reorganization, as modified, of
the Debtors under Chapter 11 of the Bankruptcy Code
(incorporated by reference to Exhibit 2.1 to Current Report
of Joy Global Inc. on Form 8-K dated July 12, 2001, File No.
01-9299).
3.1 -- Amended and Restated Certificate of Incorporation of Joy
Global Inc. (incorporated by reference to Exhibit 3.1 to
Current Report of Joy Global Inc. on Form 8-K dated July 12,
2001, File No. 01-9299).
3.2 -- By-Laws of Joy Global Inc., as amended January 15, 2002
(incorporated by reference to Exhibit 3(b) to Annual Report
of Joy Global Inc. on Form 10-K dated January 22, 2002 for
year-ended October 31, 2002, File No. 01-9299).
3.3 -- Restated Articles of Incorporation of American Alloy
Corporation (incorporated by reference to Exhibit T3A-2 to
Form T-3 dated July 12, 2001 for application for
qualification of indentures under the Trust Indenture Act of
1939, File No. 01-9299).
3.4 -- Bylaws of American Alloy Corporation (incorporated by
reference to Exhibit T3B-2 to Form T-3 dated July 12, 2001
for application for qualification of indentures under the
Trust Indenture Act of 1939, File No. 01-9299).
3.5 -- Restated Certificate of Incorporation of Benefit, Inc.
(incorporated by reference to Exhibit T3A-7 to Form T-3
dated July 12, 2001 for application for qualification of
indentures under the Trust Indenture Act of 1939, File No.
01-9299).
3.6 -- Bylaws of Benefit, Inc. (incorporated by reference to
Exhibit T3B-7 to Form T-3 dated July 12, 2001 for
application for qualification of indentures under the Trust
Indenture Act of 1939, File No. 01-9299).
3.7 -- Restated Certificate of Incorporation of Dobson Park
Industries Inc. (incorporated by reference to Exhibit T3A-8
to Form T-3 dated July 12, 2001 for application for
qualification of indentures under the Trust Indenture Act of
1939, File No. 01-9299).
3.8 -- Bylaws of Dobson Park Industries Inc. (incorporated by
reference to Exhibit T3B-8 to Form T-3 dated July 12, 2001
for application for qualification of indentures under the
Trust Indenture Act of 1939, File No. 01-9299).
3.9 -- Restated Certificate of Incorporation of Harnischfeger
Corporation (incorporated by reference to Exhibit T3A-10 to
Form T-3 dated July 12, 2001 for application for
qualification of indentures under the Trust Indenture Act of
1939, File No. 01-9299).
3.10 -- Bylaws of Harnischfeger Corporation (incorporated by
reference to Exhibit T3B-10 to Form T-3 dated July 12, 2001
for application for qualification of indentures under the
Trust Indenture Act of 1939, File No. 01-9299).
</Table>
II-4
<Table>
<Caption>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
3.11 -- Restated Certificate of Incorporation of Harnischfeger
Technologies, Inc. (incorporated by reference to Exhibit
T3A-11 to Form T-3 dated July 12, 2001 for application for
qualification of indentures under the Trust Indenture Act of
1939, File No. 01-9299).
3.12 -- Bylaws of Harnischfeger Technologies, Inc. (incorporated by
reference to Exhibit T3B-12 to Form T-3 dated July 12, 2001
for application for qualification of indentures under the
Trust Indenture Act of 1939, File No. 01-9299).
3.13 -- Restated Certificate of Incorporation of Harnischfeger World
Services Corporation (incorporated by reference to Exhibit
T3A-12 to Form T-3 dated July 12, 2001 for application for
qualification of indentures under the Trust Indenture Act of
1939, File No. 01-9299).
3.14 -- Bylaws of Harnischfeger World Services Corporation
(incorporated by reference to Exhibit T3B-13 to Form T-3
dated July 12, 2001 for application for qualification of
indentures under the Trust Indenture Act of 1939, File No.
01-9299).
3.15 -- Restated Certificate of Incorporation of HCHC, Inc.
(incorporated by reference to Exhibit T3A-13 to Form T-3
dated July 12, 2001 for application for qualification of
indentures under the Trust Indenture Act of 1939, File No.
01-9299).
3.16 -- Bylaws of HCHC, Inc. (incorporated by reference to Exhibit
T3B-14 to Form T-3 dated July 12, 2001 for application for
qualification of indentures under the Trust Indenture Act of
1939, File No. 01-9299).
3.17 -- Restated Certificate of Incorporation of HCHC UK Holdings,
Inc. (incorporated by reference to Exhibit T3A-14 to Form
T-3 dated July 12, 2001 for application for qualification of
indentures under the Trust Indenture Act of 1939, File No.
01-9299).
3.18 -- Bylaws of HCHC UK Holdings, Inc. (incorporated by reference
to Exhibit T3B-15 to Form T-3 dated July 12, 2001 for
application for qualification of indentures under the Trust
Indenture Act of 1939, File No. 01-9299).
3.19 -- Restated Certificate of Incorporation of HIHC, Inc.
(incorporated by reference to Exhibit T3A-15 to Form T-3
dated July 12, 2001 for application for qualification of
indentures under the Trust Indenture Act of 1939, File No.
01-9299).
3.20 -- Bylaws of HIHC, Inc. (incorporated by reference to Exhibit
T3B-16 to Form T-3 dated July 12, 2001 for application for
qualification of indentures under the Trust Indenture Act of
1939, File No. 01-9299).
3.21 -- Restated Certificate of Incorporation of Joy MM Delaware,
Inc. (incorporated by reference to Exhibit T3A-18 to Form
T-3 dated July 12, 2001 for application for qualification of
indentures under the Trust Indenture Act of 1939, File No.
01-9299).
3.22 -- Bylaws of Joy MM Delaware, Inc. (incorporated by reference
to Exhibit T3B-19 to Form T-3 dated July 12, 2001 for
application for qualification of indentures under the Trust
Indenture Act of 1939, File No. 01-9299).
3.23 -- Restated Certificate of Incorporation of Joy Technologies
Inc. (incorporated by reference to Exhibit T3A-20 to Form
T-3 dated July 12, 2001 for application for qualification of
indentures under the Trust Indenture Act of 1939, File No.
01-9299).
3.24 -- Bylaws of Joy Technologies Inc. (incorporated by reference
to Exhibit T3B-21 to Form T-3 dated July 12, 2001 for
application for qualification of indentures under the Trust
Indenture Act of 1939, File No. 01-9299).
3.25 -- Restated Certificate of Incorporation of JTI UK Holdings,
Inc. (incorporated by reference to Exhibit T3A-22 to Form
T-3 dated July 12, 2001 for application for qualification of
indentures under the Trust Indenture Act of 1939, File No.
01-9299).
3.26 -- Bylaws of JT UK Holdings, Inc. (incorporated by reference to
Exhibit T3B-23 to Form T-3 dated July 12, 2001 for
application for qualification of indentures under the Trust
Indenture Act of 1939, File No. 01-9299).
3.27 -- Restated Certificate of Incorporation of RCHH, Inc.
(incorporated by reference to Exhibit T3A-25 to Form T-3
dated July 12, 2001 for application for qualification of
indentures under the Trust Indenture Act of 1939, File No.
01-9299).
</Table>
II-5
<Table>
<Caption>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
3.28 -- Bylaws of RCHH, Inc. (incorporated by reference to Exhibit
T3B-26 to Form T-3 dated July 12, 2001 for application for
qualification of indentures under the Trust Indenture Act of
1939, File No. 01-9299).
3.29 -- Restated Articles of Incorporation of South Shore
Corporation (incorporated by reference to Exhibit T3A-26 to
Form T-3 dated July 12, 2001 for application for
qualification of indentures under the Trust Indenture Act of
1939, File No. 01-9299).
3.30 -- Bylaws of South Shore Corporation (incorporated by reference
to Exhibit T3B-27 to Form T-3 dated July 12, 2001 for
application for qualification of indentures under the Trust
Indenture Act of 1939, File No. 01-9299).
3.31 -- Operating Agreement of South Shore Development, LLC
(incorporated by reference to Exhibit T3B-28 to Form T-3
dated July 12, 2001 for application for qualification of
indentures under the Trust Indenture Act of 1939, File No.
01-9299).
3.32 -- Restated Articles of Incorporation of The Horsburgh & Scott
Company (incorporated by reference to Exhibit T3A-27 to Form
T-3 dated July 12, 2001 for application for qualification of
indentures under the Trust Indenture Act of 1939, File No.
01-9299).
3.33 -- Bylaws of The Horsburgh & Scott Company (incorporated by
reference to Exhibit T3B-29 to Form T-3 dated July 12, 2001
for application for qualification of indentures under the
Trust Indenture Act of 1939, File No. 01-9299).
4.1 -- Purchase Agreement, dated March 13, 2001, among Joy Global
Inc., the Subsidiary Guarantors named therein, Credit Suisse
First Boston Corporation ("CSFBC") and Deutsche Banc Alex.
Brown, Inc. (together with CSFBC, the "Initial Purchasers")
with respect to 8.75% Senior Subordinated Notes Due 2012
(incorporated by reference to Exhibit 4.3 to Current Report
of Joy Global Inc. on Form 8-K dated April 15, 2002, File
No. 01-9299)
4.2 -- Indenture, dated March 18, 2001, among Joy Global Inc., the
Guarantors named therein, and Wells Fargo Bank Minnesota,
N.A., as trustee. with respect to 8.75% Senior Subordinated
Notes Due 2012 (incorporated by reference to Exhibit 4.1 to
Current Report of Joy Global Inc. on Form 8-K dated April
15, 2002, File No. 01-9299).
4.3 -- Specimen 8 3/4% Senior Subordinated Notes due 2012
(incorporated by reference to Exhibit 4.4 to Current Report
of Joy Global Inc. on Form 8-K dated April 15, 2002, File
No. 01-9299)
4.4 -- Registration Rights Agreement, dated March 13, 2001, among
Joy Global Inc., the Subsidiary Guarantors named therein and
the Initial Purchasers (incorporated by reference to Exhibit
4.2 to Current Report of Joy Global Inc. on Form 8-K dated
April 15, 2002, File No. 01-9299)
4.5 -- Specimen common stock certificate of Joy Global Inc.
(incorporated by reference to Exhibit 4.3 to Current Report
of Joy Global Inc. on Form 8-K dated July 12, 2001, File No.
01-9299).
5.1* -- Opinion of Kirkland & Ellis regarding the securities offered
hereby.
8.1 -- Opinion of Kirkland & Ellis regarding federal income tax
considerations.
10.1 -- Credit Agreement, dated June 29, 2001, among Harnischfeger
Industries, Inc., as Borrower, the lenders named therein,
Bankers' Trust Company, as Agent, Heller Financial, Inc. and
Fleet Capital Corporation, as Co-Syndication Agents, CIT
Group/Business Credit, as Documentation Agent and Deutsche
Banc Alex. Brown Inc., as Lead Arranger and Sole Book
Running Manager (incorporated by reference to Exhibit 10.1
to Current Report of Joy Global Inc. on Form 8-K dated July
12, 2001, File No. 01-9299).
10.2 -- First Amendment to Credit Agreement, dated December 26, 2001
and entered into by and among Joy Global Inc., as Borrower,
the lenders named herein, as lenders, Bankers' Trust
Company, as Agent, Heller Financial, Inc. and Fleet Capital
Corporation, as Co-Syndication Agents, CIT Group/Business
Credit, as Documentation Agent, and Deutsche Banc Alex.
Brown Inc., as Lead Arranger and Sole Book Running Manager
(incorporated by reference to Exhibit 10(b) to Annual Report
of Joy Global Inc. on Form 10-K dated January 22, 2002 for
year ended October 31, 2001, File No. 01-9299).
</Table>
II-6
<Table>
<Caption>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
10.3 -- Joy Global Inc. 2001 Stock Incentive Plan, as amended
October 16, 2001(incorporated by reference to Exhibit 10(c)
to Annual Report of Joy Global Inc. on Form 10-K dated
January 22, 2002, File No. 01-9299).
10.4 -- Harnischfeger Industries, Inc. Supplemental Retirement Plan,
as amended and restated as of June 3, 1999 (incorporated by
reference to Exhibit 10(e) to Annual Report of Harnischfeger
Industries, Inc. on Form 10-K for the year ended October 31,
1999, File No. 01-9299).
10.5 -- Form of Change in Control Agreement made and entered into as
of September 30, 1999, between Harnischfeger Industries,
Inc. and James A. Chokey, Robert W. Hale, John Nils Hanson
and Wayne F. Hunnell and made and entered into as of May 22,
2000 and June 11, 2001, with Dennis R. Winkleman and Donald
C. Roof, respectively (incorporated by reference to Exhibit
10(e) to Annual Report of Joy Global Inc. on Form 10-K dated
January 22, 2002 for year ended October 31, 2001, File No.
01-9299).
10.6 -- Change in Control Agreement made and entered into as of
November 17, 2000, by and between Harnischfeger Industries,
Inc. and Michael S. Olsen (incorporated by reference to
Exhibit 10(f) to Annual Report of Joy Global Inc. on Form
10-K dated January 22, 2002 for year ended October 31, 2001,
File No. 01-9299).
10.7 -- Form of Stock Option Agreement, dated July 16, 2001
(incorporated by reference to Exhibit 10(g) to Annual Report
of Joy Global Inc. on Form 10-K dated January 22, 2002 for
year ended October 31, 2001, File No. 01-9299).
10.8 -- Form of Performance Unit Agreement entered into as of August
27, 2001, between Joy Global Inc. and James A. Chokey,
Robert W. Hale, John Nils Hanson, Wayne F. Hunnell, Michael
S. Olsen, Donald C. Roof and Dennis R. Winkleman
(incorporated by reference to Exhibit 10(h) to Annual Report
of Joy Global Inc. on Form 10-K dated January 22, 2002 for
year ended October 31, 2001, File No. 01-9299).
10.9 -- Form of Stock Option Agreement, dated November 1, 2001
(incorporated by reference to Exhibit 10(i) to Annual Report
of Joy Global Inc. on Form 10-K dated January 22, 2002 for
year ended October 31, 2001, File No. 01-9299).
10.10 -- Joy Global Inc. Annual Bonus Compensation (incorporated by
reference to Exhibit 10(j) to Annual Report of Joy Global
Inc. on Form 10-K dated January 22, 2002 for year ended
October 31, 2001, File No. 01-9299).
10.11 -- Form of Stock Option Agreement, dated February 1, 2002
(incorporated by reference to Quarterly Report of Joy Global
Inc. on Form 10-Q dated March 15, 2002, File No. 01-9299).
12.1 -- Statement regarding computation of ratio of earnings to
fixed charges.
21.1 -- Subsidiaries of Joy Global Inc. (incorporated by reference
to Exhibit 21 to Report of Joy Global Inc. on Form 10-K
dated January 22, 2002 for year ended October 31, 2001, File
No. 01-9299).
23.1* -- Consent of PricewaterhouseCoopers LLP.
23.2* -- Consent of Kirkland & Ellis (included in Exhibits 5.1 and
8.1).
24.1 -- Power of Attorney (included on the signature pages of the
Registration Statement filed on April 22, 2002).
25.1 -- Statement of Eligibility of Trustee on Form T-1 under the
Trustee Indenture Act of 1939 of Wells Fargo Bank Minnesota.
99.1 -- Form of Letter of Transmittal.
99.2 -- Form of Notice of Guaranteed Delivery.
99.3 -- Form of Tender Instructions.
</Table>
- ---------------
*Filed herewith. All other exhibits have been previously filed.
(b) No financial statement schedules are required to be filed herewith pursuant
to this Item.
II-7
ITEM 22. UNDERTAKINGS.
(a) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described in Item 20, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In +the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a directors, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
(b) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as a part of this
Registration Statement in reliance on Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be a part of this registration
statement as of the time it was declared effective.
(c) For purposes of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(d) The undersigned hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the date of the registration statement through the date of
responding to the request.
(e) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(f) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Securities and
Exchange Commission pursuant to Rule 424(b) under the Securities Act of
1933 if, in the aggregate, the changes in volume and price represent no
more than a 20% change in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in the effective registration
statement; and
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the registration statement of any
material change to such information in the registration statement;
provided, however, the paragraphs (f)(i) and (f)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the
II-8
registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange
Act of 1934 that are incorporated by reference in the registration statement.
(g) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
II-9
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement on Form S-4
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Milwaukee, State of Wisconsin on the 14th day of May, 2002.
JOY GLOBAL INC.
By: /s/ ERIC FONSTAD
------------------------------------
Name: Eric Fonstad
Title: Secretary
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities indicated on the 14th day of May, 2002.
<Table>
<Caption>
SIGNATURE TITLE
--------- -----
* Chief Executive Officer
- ------------------------------------------------ (Principal Executive Officer)
John Nils Hanson
/s/ DONALD C. ROOF Executive Vice President, Treasurer and
- ------------------------------------------------ Chief Financial Officer
Donald C. Roof (Principal Financial Officer)
* Vice President, Controller and
- ------------------------------------------------ Chief Accounting Officer
Michael S. Olsen (Principal Accounting Officer)
* Director
- ------------------------------------------------
John Nils Hanson
* Director
- ------------------------------------------------
Steven L. Gerard
* Director
- ------------------------------------------------
Ken C. Johnsen
* Director
- ------------------------------------------------
James R. Klauser
* Director
- ------------------------------------------------
Richard B. Loynd
</Table>
II-10
<Table>
<Caption>
SIGNATURE TITLE
--------- -----
* Director
- ------------------------------------------------
P. Eric Siegert
* Director
- ------------------------------------------------
James H. Tate
* By: /s/ DONALD C. ROOF
------------------------------------------
Donald C. Roof
Attorney in Fact
</Table>
II-11
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement on Form S-4
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Milwaukee, State of Wisconsin on the 14th day of May, 2002.
JOY TECHNOLOGIES INC.
By: /s/ ERIC FONSTAD
------------------------------------
Name: Eric Fonstad
Title: Vice President and
Secretary
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities indicated on the 14th day of May, 2002.
<Table>
<Caption>
SIGNATURE TITLE
--------- -----
* Chief Executive Officer
- ------------------------------------------------ (Principal Executive Officer)
John Nils Hanson
* Vice President and Chief Financial Officer
- ------------------------------------------------ (Principal Financial Officer)
Michael S. Olsen
* Vice President and Chief Financial Officer
- ------------------------------------------------ (Principal Accounting Officer)
Michael S. Olsen
* Director
- ------------------------------------------------
John Nils Hanson
* Director
- ------------------------------------------------
Wayne F. Hunnell
* Director
- ------------------------------------------------
Michael S. Olsen
*By: /s/ DONALD C. ROOF
------------------------------------------
Donald C. Roof
Attorney in Fact
</Table>
II-12
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement on Form S-4
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Milwaukee, State of Wisconsin on the 14th day of May, 2002.
HARNISCHFEGER CORPORATION
By: /s/ ERIC FONSTAD
------------------------------------
Name: Eric Fonstad
Title: Vice President and
Secretary
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities indicated on the 14th day of May, 2002.
<Table>
<Caption>
SIGNATURE TITLE
--------- -----
* President and Chief Executive Officer
- ------------------------------------------------ (Principal Executive Officer)
Robert W. Hale
* Vice President and Chief Financial Officer
- ------------------------------------------------ (Principal Financial Officer)
Michael S. Olsen
* Vice President and Controller
- ------------------------------------------------ (Principal Accounting Officer)
Eugene Fuhrmann
* Director
- ------------------------------------------------
John Nils Hanson
* Director
- ------------------------------------------------
Robert W. Hale
* Director
- ------------------------------------------------
Michael S. Olsen
* By: /s/ DONALD C. ROOF
------------------------------------------
Donald C. Roof
Attorney in Fact
</Table>
II-13
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement on Form S-4
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Wilmington, State of Delaware on the 14th day of May, 2002.
DOBSON PARK INDUSTRIES INC.
By: /s/ DONALD J. BROMLEY
------------------------------------
Name: Donald J. Bromley
Title: Vice President, Secretary
and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities indicated on the 14th day of May, 2002.
<Table>
<Caption>
SIGNATURE TITLE
--------- -----
* President (Principal Executive Officer)
- ------------------------------------------------
John P. Garniewski, Jr.
/s/ DONALD J. BROMLEY Vice President, Secretary and Treasurer
- ------------------------------------------------ (Principal Financial Officer)
Donald J. Bromley
/s/ DONALD J. BROMLEY Vice President, Secretary and Treasurer
- ------------------------------------------------ (Principal Accounting Officer)
Donald J. Bromley
* Director
- ------------------------------------------------
John P. Garniewski, Jr.
* Director
- ------------------------------------------------
John DiClemente
* Director
- ------------------------------------------------
Patrick M. Pennefeather
*By: /s/ DONALD C. ROOF
------------------------------------------
Donald C. Roof
Attorney in Fact
</Table>
II-14
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement on Form S-4
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Wilmington, State of Delaware on the 14th day of May, 2002.
HARNISCHFEGER TECHNOLOGIES, INC.
By: /s/ DONALD J. BROMLEY
------------------------------------
Name: Donald J. Bromley
Title: Vice President, Secretary
and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities indicated on the 14th day of May, 2002.
<Table>
<Caption>
SIGNATURE TITLE
--------- -----
* President
- ------------------------------------------------ (Principal Executive Officer)
John P. Garniewski, Jr.
/s/ DONALD J. BROMLEY Vice President, Secretary and Treasurer
- ------------------------------------------------ (Principal Financial Officer)
Donald J. Bromley
/s/ DONALD J. BROMLEY Vice President, Secretary and Treasurer
- ------------------------------------------------ (Principal Accounting Officer)
Donald J. Bromley
* Director
- ------------------------------------------------
John P. Garniewski, Jr.
* Director
- ------------------------------------------------
John DiClemente
* Director
- ------------------------------------------------
Patrick M. Pennefeather
* By: /s/ DONALD C. ROOF
------------------------------------------
Donald C. Roof
Attorney in Fact
</Table>
II-15
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement on Form S-4
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Wilmington, State of Delaware on the 14th day of May, 2002.
HCHC, INC.
By: /s/ DONALD J. BROMLEY
------------------------------------
Name: Donald J. Bromley
Title: Vice President, Secretary
and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities indicated on the 14th day of May, 2002.
<Table>
<Caption>
SIGNATURE TITLE
--------- -----
* President
- ------------------------------------------------ (Principal Executive Officer)
John P. Garniewski, Jr.
/s/ DONALD J. BROMLEY Vice President, Secretary and Treasurer
- ------------------------------------------------ (Principal Financial Officer)
Donald J. Bromley
/s/ DONALD J. BROMLEY Vice President, Secretary and Treasurer
- ------------------------------------------------ (Principal Accounting Officer)
Donald J. Bromley
* Director
- ------------------------------------------------
John P. Garniewski, Jr.
* Director
- ------------------------------------------------
John DiClemente
* Director
- ------------------------------------------------
Patrick M. Pennefeather
*By: /s/ DONALD C. ROOF
------------------------------------------
Donald C. Roof
Attorney in Fact
</Table>
II-16
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement on Form S-4
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Wilmington, State of Delaware on the 14th day of May, 2002.
HCHC UK HOLDINGS, INC.
By: /s/ DONALD J. BROMLEY
------------------------------------
Name: Donald J. Bromley
Title: Vice President, Secretary
and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities indicated on the 14th day of May, 2002.
<Table>
<Caption>
SIGNATURE TITLE
--------- -----
* President
- ------------------------------------------------ (Principal Executive Officer)
John P. Garniewski, Jr.
/s/ DONALD J. BROMLEY Vice President, Secretary and Treasurer
- ------------------------------------------------ (Principal Financial Officer)
Donald J. Bromley
/s/ DONALD J. BROMLEY Vice President, Secretary and Treasurer
- ------------------------------------------------ (Principal Accounting Officer)
Donald J. Bromley
* Director
- ------------------------------------------------
John P. Garniewski, Jr.
* Director
- ------------------------------------------------
John DiClemente
* Director
- ------------------------------------------------
Patrick M. Pennefeather
* By: /s/ DONALD C. ROOF
------------------------------------------
Donald C. Roof
Attorney in Fact
</Table>
II-17
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement on Form S-4
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Wilmington, State of Delaware on the 14th day of May, 2002.
HIHC, INC.
By: /s/ DONALD J. BROMLEY
------------------------------------
Name: Donald J. Bromley
Title: Vice President, Secretary
and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities indicated on the 14th day of May, 2002.
<Table>
<Caption>
SIGNATURE TITLE
--------- -----
* President
- ------------------------------------------------ (Principal Executive Officer)
John P. Garniewski, Jr.
/s/ DONALD J. BROMLEY Vice President, Secretary and Treasurer
- ------------------------------------------------ (Principal Financial Officer)
Donald J. Bromley
/s/ DONALD J. BROMLEY Vice President, Secretary and Treasurer
- ------------------------------------------------ (Principal Accounting Officer)
Donald J. Bromley
* Director
- ------------------------------------------------
John P. Garniewski, Jr.
* Director
- ------------------------------------------------
John DiClemente
* Director
- ------------------------------------------------
Patrick M. Pennefeather
*By: /s/ DONALD C. ROOF
------------------------------------------
Donald C. Roof
Attorney in Fact
</Table>
II-18
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement on Form S-4
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Wilmington, State of Delaware on the 14th day of May, 2002.
JOY MM DELAWARE, INC.
By: /s/ DONALD J. BROMLEY
------------------------------------
Name: Donald J. Bromley
Title: Vice President, Secretary
and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities indicated on the 14th day of May, 2002.
<Table>
<Caption>
SIGNATURE TITLE
--------- -----
* President
- ------------------------------------------------ (Principal Executive Officer)
John P. Garniewski, Jr.
/s/ DONALD J. BROMLEY Vice President, Secretary and Treasurer
- ------------------------------------------------ (Principal Financial Officer)
Donald J. Bromley
/s/ DONALD J. BROMLEY Vice President, Secretary and Treasurer
- ------------------------------------------------ (Principal Accounting Officer)
Donald J. Bromley
* Director
- ------------------------------------------------
John P. Garniewski, Jr.
* Director
- ------------------------------------------------
John DiClemente
* Director
- ------------------------------------------------
Patrick M. Pennefeather
* By: /s/ DONALD C. ROOF
------------------------------------------
Donald C. Roof
Attorney in Fact
</Table>
II-19
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement on Form S-4
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Wilmington, State of Delaware on the 14th day of May, 2002.
JTI UK HOLDINGS, INC.
By: /s/ DONALD J. BROMLEY
------------------------------------
Name: Donald J. Bromley
Title: Vice President, Secretary
and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities indicated on the 14th day of May, 2002.
<Table>
<Caption>
SIGNATURE TITLE
--------- -----
* President
- ------------------------------------------------ (Principal Executive Officer)
John P. Garniewski, Jr.
/s/ DONALD J. BROMLEY Vice President, Secretary and Treasurer
- ------------------------------------------------ (Principal Financial Officer)
Donald J. Bromley
/s/ DONALD J. BROMLEY Vice President, Secretary and Treasurer
- ------------------------------------------------ (Principal Accounting Officer)
Donald J. Bromley
* Director
- ------------------------------------------------
John P. Garniewski, Jr.
* Director
- ------------------------------------------------
John DiClemente
* Director
- ------------------------------------------------
Patrick M. Pennefeather
*By: /s/ DONALD C. ROOF
------------------------------------------
Donald C. Roof
Attorney in Fact
</Table>
II-20
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement on Form S-4
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Milwaukee, State of Wisconsin on the 14th day of May, 2002.
AMERICAN ALLOY CORPORATION
By: /s/ ERIC FONSTAD
------------------------------------
Name: Eric Fonstad
Title: Secretary
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities indicated on the 14th day of May, 2002.
<Table>
<Caption>
SIGNATURE TITLE
--------- -----
* President
- ------------------------------------------------ (Principal Executive Officer)
Robert W. Hale
* Vice President
- ------------------------------------------------ (Principal Financial Officer)
Michael S. Olsen
* Vice President
- ------------------------------------------------ (Principal Accounting Officer)
Michael S. Olsen
* Director
- ------------------------------------------------
John Nils Hanson
* Director
- ------------------------------------------------
Robert W. Hale
* Director
- ------------------------------------------------
Michael S. Olsen
* By: /s/ DONALD C. ROOF
------------------------------------------
Donald C. Roof
Attorney in Fact
</Table>
II-21
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement on Form S-4
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Milwaukee, State of Wisconsin on the 14th day of May, 2002.
HARNISCHFEGER WORLD SERVICES
CORPORATION
By: /s/ ERIC FONSTAD
------------------------------------
Name: Eric Fonstad
Title: Secretary
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities indicated on the 14th day of May, 2002.
<Table>
<Caption>
SIGNATURE TITLE
--------- -----
* President
- ------------------------------------------------ (Principal Executive Officer)
Robert W. Hale
* Vice President
- ------------------------------------------------ (Principal Financial Officer)
Michael S. Olsen
* Vice President
- ------------------------------------------------ (Principal Accounting Officer)
Michael S. Olsen
* Director
- ------------------------------------------------
John Nils Hanson
* Director
- ------------------------------------------------
Robert W. Hale
* Director
- ------------------------------------------------
Michael S. Olsen
*By: /s/ DONALD C. ROOF
------------------------------------------
Donald C. Roof
Attorney in Fact
</Table>
II-22
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement on Form S-4
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Milwaukee, State of Wisconsin on the 14th day of May, 2002.
RCHH, INC.
By: /s/ ERIC FONSTAD
------------------------------------
Name: Eric Fonstad
Title: Secretary
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities indicated on the 14th day of May, 2002.
<Table>
<Caption>
SIGNATURE TITLE
--------- -----
* President
- ------------------------------------------------ (Principal Executive Officer)
Robert W. Hale
* Vice President
- ------------------------------------------------ (Principal Financial Officer)
Michael S. Olsen
* Vice President
- ------------------------------------------------ (Principal Accounting Officer)
Michael S. Olsen
* Director
- ------------------------------------------------
John Nils Hanson
* Director
- ------------------------------------------------
Robert W. Hale
* Director
- ------------------------------------------------
Michael S. Olsen
*By: /s/ DONALD C. ROOF
------------------------------------------
Donald C. Roof
Attorney in Fact
</Table>
II-23
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement on Form S-4
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Milwaukee, State of Wisconsin on the 14th day of May, 2002.
THE HORSBURGH & SCOTT COMPANY
By: /s/ ERIC FONSTAD
------------------------------------
Name: Eric Fonstad
Title: Secretary
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities indicated on the 14th day of May, 2002.
<Table>
<Caption>
SIGNATURE TITLE
--------- -----
* President
- ------------------------------------------------ (Principal Executive Officer)
Robert W. Hale
* Vice President
- ------------------------------------------------ (Principal Financial Officer)
Michael S. Olsen
* Vice President
- ------------------------------------------------ (Principal Accounting Officer)
Michael S. Olsen
* Director
- ------------------------------------------------
John Nils Hanson
* Director
- ------------------------------------------------
Robert W. Hale
* Director
- ------------------------------------------------
Michael S. Olsen
* By: /s/ DONALD C. ROOF
------------------------------------------
Donald C. Roof
Attorney in Fact
</Table>
II-24
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement on Form S-4
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Milwaukee, State of Wisconsin on the 14th day of May, 2002.
BENEFIT, INC.
By: /s/ ERIC FONSTAD
------------------------------------
Name: Eric Fonstad
Title: Secretary
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities indicated on the 14th day of May, 2002.
<Table>
<Caption>
SIGNATURE TITLE
--------- -----
* President
- ------------------------------------------------ (Principal Executive Officer)
John Nils Hanson
* Vice President
- ------------------------------------------------ (Principal Financial Officer)
Michael S. Olsen
* Vice President
- ------------------------------------------------ (Principal Accounting Officer)
Michael S. Olsen
* Director
- ------------------------------------------------
John Nils Hanson
* Director
- ------------------------------------------------
Dennis R. Winkleman
* Director
- ------------------------------------------------
Michael S. Olsen
* By: /s/ DONALD C. ROOF
------------------------------------------
Donald C. Roof
Attorney in Fact
</Table>
II-25
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement on Form S-4
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Milwaukee, State of Wisconsin on the 14th day of May, 2002.
SOUTH SHORE CORPORATION
By: /s/ ERIC FONSTAD
------------------------------------
Name: Eric Fonstad
Title: Secretary
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities indicated on the 14th day of May, 2002.
<Table>
<Caption>
SIGNATURE TITLE
--------- -----
* President
- ------------------------------------------------ (Principal Executive Officer)
John Nils Hanson
* Vice President
- ------------------------------------------------ (Principal Financial Officer)
Michael S. Olsen
* Vice President
- ------------------------------------------------ (Principal Accounting Officer)
Michael S. Olsen
* Director
- ------------------------------------------------
John Nils Hanson
* Director
- ------------------------------------------------
Dennis R. Winkleman
* Director
- ------------------------------------------------
Michael S. Olsen
*By: /s/ DONALD C. ROOF
------------------------------------------
Donald C. Roof
Attorney in Fact
</Table>
II-26
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement on Form S-4
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Milwaukee, State of Wisconsin on the 14th day of May, 2002.
SOUTH SHORE DEVELOPMENT, LLC
By: /s/ ERIC FONSTAD
------------------------------------
Name: Eric Fonstad
Title: Secretary
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities indicated on the 14th day of May, 2002.
<Table>
<Caption>
SIGNATURE TITLE
--------- -----
* President
- ------------------------------------------------ (Principal Executive Officer)
John Nils Hanson
* Vice President
- ------------------------------------------------ (Principal Financial Officer)
Michael S. Olsen
* Vice President
- ------------------------------------------------ (Principal Accounting Officer)
Michael S. Olsen
* Chief Executive Officer,
- ------------------------------------------------ Joy Global Inc.
John Nils Hanson (Manager of Registrant)
* By: /s/ DONALD C. ROOF
------------------------------------------
Donald C. Roof
Attorney in Fact
</Table>
II-27
EXHIBIT INDEX
<Table>
<Caption>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
2.1 Third Amended Joint Plan of Reorganization, as modified, of
the Debtors under Chapter 11 of the Bankruptcy Code
(incorporated by reference to Exhibit 2.1 to Current Report
of Joy Global Inc. on Form 8-K dated July 12, 2001, File No.
01-9299).
3.1 Amended and Restated Certificate of Incorporation of Joy
Global Inc. (incorporated by reference to Exhibit 3.1 to
Current Report of Joy Global Inc. on Form 8-K dated July 12,
2001, File No. 01-9299).
3.2 By-Laws of Joy Global Inc., as amended January 15, 2002
(incorporated by reference to Exhibit 3(b) to Annual Report
of Joy Global Inc. on Form 10-K dated January 22, 2002 for
year-ended October 31, 2002, File No. 01-9299).
3.3 Restated Articles of Incorporation of American Alloy
Corporation (incorporated by reference to Exhibit T3A-2 to
Form T-3 dated July 12, 2001 for application for
qualification of indentures under the Trust Indenture Act of
1939, File No. 01-9299).
3.4 Bylaws of American Alloy Corporation (incorporated by
reference to Exhibit T3B-2 to Form T-3 dated July 12, 2001
for application for qualification of indentures under the
Trust Indenture Act of 1939, File No. 01-9299).
3.5 Restated Certificate of Incorporation of Benefit, Inc.
(incorporated by reference to Exhibit T3A-7 to Form T-3
dated July 12, 2001 for application for qualification of
indentures under the Trust Indenture Act of 1939, File No.
01-9299).
3.6 Bylaws of Benefit, Inc. (incorporated by reference to
Exhibit T3B-7 to Form T-3 dated July 12, 2001 for
application for qualification of indentures under the Trust
Indenture Act of 1939, File No. 01-9299).
3.7 Restated Certificate of Incorporation of Dobson Park
Industries Inc. (incorporated by reference to Exhibit T3A-8
to Form T-3 dated July 12, 2001 for application for
qualification of indentures under the Trust Indenture Act of
1939, File No. 01-9299).
3.8 Bylaws of Dobson Park Industries Inc. (incorporated by
reference to Exhibit T3B-8 to Form T-3 dated July 12, 2001
for application for qualification of indentures under the
Trust Indenture Act of 1939, File No. 01-9299).
3.9 Restated Certificate of Incorporation of Harnischfeger
Corporation (incorporated by reference to Exhibit T3A-10 to
Form T-3 dated July 12, 2001 for application for
qualification of indentures under the Trust Indenture Act of
1939, File No. 01-9299).
3.10 Bylaws of Harnischfeger Corporation (incorporated by
reference to Exhibit T3B-10 to Form T-3 dated July 12, 2001
for application for qualification of indentures under the
Trust Indenture Act of 1939, File No. 01-9299).
3.11 Restated Certificate of Incorporation of Harnischfeger
Technologies, Inc. (incorporated by reference to Exhibit
T3A-11 to Form T-3 dated July 12, 2001 for application for
qualification of indentures under the Trust Indenture Act of
1939, File No. 01-9299).
3.12 Bylaws of Harnischfeger Technologies, Inc. (incorporated by
reference to Exhibit T3B-12 to Form T-3 dated July 12, 2001
for application for qualification of indentures under the
Trust Indenture Act of 1939, File No. 01-9299).
3.13 Restated Certificate of Incorporation of Harnischfeger World
Services Corporation (incorporated by reference to Exhibit
T3A-12 to Form T-3 dated July 12, 2001 for application for
qualification of indentures under the Trust Indenture Act of
1939, File No. 01-9299).
3.14 Bylaws of HarnischfegerWorld Services Corporation
(incorporated by reference to Exhibit T3B-13 to Form T-3
dated July 12, 2001 for application for qualification of
indentures under the Trust Indenture Act of 1939, File No.
01-9299).
3.15 Restated Certificate of Incorporation of HCHC, Inc.
(incorporated by reference to Exhibit T3A-13 to Form T-3
dated July 12, 2001 for application for qualification of
indentures under the Trust Indenture Act of 1939, File No.
01-9299).
</Table>
EX-1
<Table>
<Caption>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
3.16 Bylaws of HCHC, Inc. (incorporated by reference to Exhibit
T3B-14 to Form T-3 dated July 12, 2001 for application for
qualification of indentures under the Trust Indenture Act of
1939, File No. 01-9299).
3.17 Restated Certificate of Incorporation of HCHC UK Holdings,
Inc. (incorporated by reference to Exhibit T3A-14 to Form
T-3 dated July 12, 2001 for application for qualification of
indentures under the Trust Indenture Act of 1939, File No.
01-9299).
3.18 Bylaws of HCHC UK Holdings, Inc. (incorporated by reference
to Exhibit T3B-15 to Form T-3 dated July 12, 2001 for
application for qualification of indentures under the Trust
Indenture Act of 1939, File No. 01-9299).
3.19 Restated Certificate of Incorporation of HIHC, Inc.
(incorporated by reference to Exhibit T3A-15 to Form T-3
dated July 12, 2001 for application for qualification of
indentures under the Trust Indenture Act of 1939, File No.
01-9299).
3.20 Bylaws of HIHC, Inc. (incorporated by reference to Exhibit
T3B-16 to Form T-3 dated July 12, 2001 for application for
qualification of indentures under the Trust Indenture Act of
1939, File No. 01-9299).
3.21 Restated Certificate of Incorporation of Joy MM Delaware,
Inc. (incorporated by reference to Exhibit T3A-18 to Form
T-3 dated July 12, 2001 for application for qualification of
indentures under the Trust Indenture Act of 1939, File No.
01-9299).
3.22 Bylaws of Joy MM Delaware, Inc. (incorporated by reference
to Exhibit T3B-19 to Form T-3 dated July 12, 2001 for
application for qualification of indentures under the Trust
Indenture Act of 1939, File No. 01-9299).
3.23 Restated Certificate of Incorporation of Joy Technologies
Inc. (incorporated by reference to Exhibit T3A-20 to Form
T-3 dated July 12, 2001 for application for qualification of
indentures under the Trust Indenture Act of 1939, File No.
01-9299).
3.24 Bylaws of Joy Technologies Inc. (incorporated by reference
to Exhibit T3B-21 to Form T-3 dated July 12, 2001 for
application for qualification of indentures under the Trust
Indenture Act of 1939, File No. 01-9299).
3.25 Restated Certificate of Incorporation of JTI UK Holdings,
Inc. (incorporated by reference to Exhibit T3A-22 to Form
T-3 dated July 12, 2001 for application for qualification of
indentures under the Trust Indenture Act of 1939, File No.
01-9299).
3.26 Bylaws of JT UK Holdings, Inc. (incorporated by reference to
Exhibit T3B-23 to Form T-3 dated July 12, 2001 for
application for qualification of indentures under the Trust
Indenture Act of 1939, File No. 01-9299).
3.27 Restated Certificate of Incorporation of RCHH, Inc.
(incorporated by reference to Exhibit T3A-25 to Form T-3
dated July 12, 2001 for application for qualification of
indentures under the Trust Indenture Act of 1939, File No.
01-9299).
3.28 Bylaws of RCHH, Inc. (incorporated by reference to Exhibit
T3B-26 to Form T-3 dated July 12, 2001 for application for
qualification of indentures under the Trust Indenture Act of
1939, File No. 01-9299).
3.29 Restated Articles of Incorporation of South Shore
Corporation (incorporated by reference to Exhibit T3A-26 to
Form T-3 dated July 12, 2001 for application for
qualification of indentures under the Trust Indenture Act of
1939, File No. 01-9299).
3.30 Bylaws of South Shore Corporation (incorporated by reference
to Exhibit T3B-27 to Form T-3 dated July 12, 2001 for
application for qualification of indentures under the Trust
Indenture Act of 1939, File No. 01-9299).
3.31 Operating Agreement of South Shore Development, LLC
(incorporated by reference to Exhibit T3B-28 to Form T-3
dated July 12, 2001 for application for qualification of
indentures under the Trust Indenture Act of 1939, File No.
01-9299).
3.32 Restated Articles of Incorporation of The Horsburgh & Scott
Company (incorporated by reference to Exhibit T3A-27 to Form
T-3 dated July 12, 2001 for application for qualification of
indentures under the Trust Indenture Act of 1939, File No.
01-9299).
</Table>
EX-2
<Table>
<Caption>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
3.33 Bylaws of The Horsburgh & Scott Company (incorporated by
reference to Exhibit T3B-29 to Form T-3 dated July 12, 2001
for application for qualification of indentures under the
Trust Indenture Act of 1939, File No. 01-9299).
4.1 Purchase Agreement, dated March 13, 2001, among Joy Global
Inc., the Subsidiary Guarantors named therein, Credit Suisse
First Boston Corporation ("CSFBC") and Deutsche Banc Alex.
Brown, Inc. (together with CSFBC, the "Initial Purchasers")
with respect to 8.75% Senior Subordinated Notes Due 2012
(incorporated by reference to Exhibit 4.3 to Current Report
of Joy Global Inc. on Form 8-K dated April 15, 2002, File
No. 01-9299)
4.2 Indenture, dated March 18, 2001, among Joy Global Inc., the
Guarantors named therein, and Wells Fargo Bank Minnesota,
N.A., as trustee. with respect to 8.75% Senior Subordinated
Notes Due 2012 (incorporated by reference to Exhibit 4.1 to
Current Report of Joy Global Inc. on Form 8-K dated April
15, 2002, File No. 01-9299).
4.3 Specimen 8 3/4% Senior Subordinated Notes due 2012
(incorporated by reference to Exhibit 4.4 to Current Report
of Joy Global Inc. on Form 8-K dated April 15, 2002, File
No. 01-9299)
4.4 Registration Rights Agreement, dated March 13, 2001, among
Joy Global Inc., the Subsidiary Guarantors named therein and
the Initial Purchasers (incorporated by reference to Exhibit
4.2 to Current Report of Joy Global Inc. on Form 8-K dated
April 15, 2002, File No. 01-9299)
4.5 Specimen common stock certificate of Joy Global Inc.
(incorporated by reference to Exhibit 4.3 to Current Report
of Joy Global Inc. on Form 8-K dated July 12, 2001, File No.
01-9299).
5.1* Opinion of Kirkland & Ellis regarding the securities offered
hereby.
8.1 Opinion of Kirkland & Ellis regarding federal income tax
considerations.
10.1 Credit Agreement, dated June 29, 2001, among Harnischfeger
Industries, Inc., as Borrower, the lenders named therein,
Bankers' Trust Company, as Agent, Heller Financial, Inc. and
Fleet Capital Corporation, as Co-Syndication Agents, CIT
Group/Business Credit, as Documentation Agent and Deutsche
Banc Alex. Brown Inc., as Lead Arranger and Sole Book
Running Manager (incorporated by reference to Exhibit 10.1
to Current Report of Joy Global Inc. on Form 8-K dated July
12, 2001, File No. 01-9299).
10.2 First Amendment to Credit Agreement, dated December 26, 2001
and entered into by and among Joy Global Inc., as Borrower,
the lenders named herein, as lenders, Bankers' Trust
Company, as Agent, Heller Financial, Inc. and Fleet Capital
Corporation, as Co-Syndication Agents, CIT Group/Business
Credit, as Documentation Agent, and Deutsche Banc Alex.
Brown Inc., as Lead Arranger and Sole Book Running Manager
(incorporated by reference to Exhibit 10(b) to Annual Report
of Joy Global Inc. on Form 10-K dated January 22, 2002 for
year ended October 31, 2001, File No. 01-9299).
10.3 Joy Global Inc. 2001 Stock Incentive Plan, as amended
October 16, 2001(incorporated by reference to Exhibit 10(c)
to Annual Report of Joy Global Inc. on Form 10-K dated
January 22, 2002, File No. 01-9299).
10.4 Harnischfeger Industries, Inc. Supplemental Retirement Plan,
as amended and restated as of June 3, 1999 (incorporated by
reference to Exhibit 10(e) to Annual Report of Harnischfeger
Industries, Inc. on Form 10-K for the year ended October 31,
1999, File No. 01-9299).
10.5 Form of Change in Control Agreement made and entered into as
of September 30, 1999, between Harnischfeger Industries,
Inc. and James A. Chokey, Robert W. Hale, John Nils Hanson
and Wayne F. Hunnell and made and entered into as of May 22,
2000 and June 11, 2001, with Dennis R. Winkleman and Donald
C. Roof, respectively (incorporated by reference to Exhibit
10(e) to Annual Report of Joy Global Inc. on Form 10-K dated
January 22, 2002 for year ended October 31, 2001, File No.
01-9299).
10.6 Change in Control Agreement made and entered into as of
November 17, 2000, by and between Harnischfeger Industries,
Inc. and Michael S. Olsen (incorporated by reference to
Exhibit 10(f) to Annual Report of Joy Global Inc. on Form
10-K dated January 22, 2002 for year ended October 31, 2001,
File No. 01-9299).
</Table>
EX-3
<Table>
<Caption>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
10.7 Form of Stock Option Agreement, dated July 16, 2001
(incorporated by reference to Exhibit 10(g) to Annual Report
of Joy Global Inc. on Form 10-K dated January 22, 2002 for
year ended October 31, 2001, File No. 01-9299).
10.8 Form of Performance Unit Agreement entered into as of August
27, 2001, between Joy Global Inc. and James A. Chokey,
Robert W. Hale, John Nils Hanson, Wayne F. Hunnell, Michael
S. Olsen, Donald C. Roof and Dennis R. Winkleman
(incorporated by reference to Exhibit 10(h) to Annual Report
of Joy Global Inc. on Form 10-K dated January 22, 2002 for
year ended October 31, 2001, File No. 01-9299).
10.9 Form of Stock Option Agreement, dated November 1, 2001
(incorporated by reference to Exhibit 10(i) to Annual Report
of Joy Global Inc. on Form 10-K dated January 22, 2002 for
year ended October 31, 2001, File No. 01-9299).
10.10 Joy Global Inc. Annual Bonus Compensation (incorporated by
reference to Exhibit 10(j) to Annual Report of Joy Global
Inc. on Form 10-K dated January 22, 2002 for year ended
October 31, 2001, File No. 01-9299).
10.11 Form of Stock Option Agreement, dated February 1, 2002
(incorporated by reference to Quarterly Report of Joy Global
Inc. on Form 10-Q dated March 15, 2002, File No. 01-9299).
12.1 Statement regarding computation of ratio of earnings to
fixed charges.
21.1 Subsidiaries of Joy Global Inc. (incorporated by reference
to Exhibit 21 to Report of Joy Global Inc. on Form 10-K
dated January 22, 2002 for year ended October 31, 2001, File
No. 01-9299).
23.1* Consent of PricewaterhouseCoopers LLP.
23.2* Consent of Kirkland & Ellis (included in Exhibits 5.1 and
8.1).
24.1 Power of Attorney (included on the signature pages of the
Registration Statement filed on April 22, 2002).
25.1 Statement of Eligibility of Trustee on Form T-1 under the
Trustee Indenture Act of 1939 of Wells Fargo Bank Minnesota.
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
99.3 Form of Tender Instructions.
</Table>
- ---------------
* Filed herewith. All other exhibits have been previously filed.
EX-4