EXHIBIT 4
JOINT PROSECUTION AGREEMENT
This Agreement is dated as of the 21st day of August, 1997 by
and among BUCYRUS INTERNATIONAL, INC. ("BI"), and XXXXXXX NATIONAL LIFE
INSURANCE COMPANY ("JNL"), both for itself and in its capacity as a
representative of the estate of Bucyrus Erie Company ("Bucyrus") pursuant to
Section 1123(b)(3)(b) of the Bankruptcy Code.
WHEREAS, BI is the successor in interest to Bucyrus-Erie
Company ("Bucyrus") and B-E Holdings, Inc. ("Holdings" and, collectively with
Bucyrus, the "Debtors") under the Debtors' Second Amended Plan of Reorganization
(the "Plan") which was consummated on December 14, 1994 in proceedings (the
"Bankruptcy Proceedings") captioned In re B-E Holdings, Inc. and Bucyrus-Erie
Company, Case Nos. 94-20786, 94-20787 (Bankr.E.D.Wis.) (RAE) in the United
States Bankruptcy Court for the Eastern District of Wisconsin (the "Bankruptcy
Court");
WHEREAS, JNL objected in February, 1995 to the application for
compensation of fees and expenses of Milbank, Tweed, Xxxxxx & XxXxxx ("Milbank")
for its representation of Bucyrus in the Bankruptcy Proceedings, JNL appealed
the Bankruptcy Court's partial award of fees and expenses to from Bucyrus to
Milbank in April 1996, Bucyrus subsequently joined in that objection in January,
1997 and JNL and Bucyrus are now prosecuting that objection and seeking
disgorgement to Bucyrus of up to approximately $1.8 million of fees and expenses
previously paid to Milbank (the "Disgorgement Claim"), as well as sanctions and
other relief;
WHEREAS, the Disgorgement Claims would have been lost but for
the efforts of JNL to preserve Bucyrus' rights in them by objecting to Milbank's
fee application, appealing the Bankruptcy Court's allowance of Milbank's fees
and thereafter discovering Milbank's fraud on the Bankruptcy Court, Bucyrus and
JNL in the course of monitoring the trial between Xxxxxx Xxxxxxxxx and Xxxxxx X.
Xxxxxx, all at great effort and expense to JNL at a time when Milbank still
represented Bucyrus;
WHEREAS, BI and JNL each have additional claims against
Milbank and each of them had contemplated commencing separate additional actions
against Milbank, its partners and others for malpractice, fraud and other claims
related to and in connection with Milbank's representation of the Debtors and BI
and other matters before, during and after the Bankruptcy Proceedings;
WHEREAS, Milbank has asserted that it will pursue
counterclaims and other legal remedies against both BI and JNL if they in fact
pursue any of their claims against Milbank;
WHEREAS, Milbank has also alleged that BI owes payment to
Milbank for billed and unbilled fees, expenses and other charges arising after
December 14, 1994 in an alleged amount of approximately $1,000,000
(collectively, the "Milbank Fees");
WHEREAS, BI and JNL both believe that their respective Milbank
Claims may in some instances overlap, be duplicative of or conflict with each
other and JNL and BI also disagree as to the extent to which each of them has
the right to prosecute and retain the proceeds of certain of such claims;
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WHEREAS, BI wishes to avoid the cost and expenditure of time
and effort involved in prosecuting claims against Milbank and defending any
counterclaims and other proceedings brought by Milbank in response to such
claims and Xxxxxxx has agreed to advance such costs and expenses on behalf of BI
and to indemnify BI for them;
WHEREAS, BI and JNL both wish to avoid the potential for
confusion and conflict which may ensue if they separately prosecute their
respective claims against Milbank;
WHEREAS, JNL made an application for reimbursement of its
professional fees and expenses incurred in the Bankruptcy Proceedings pursuant
to Section 503(b) of the Bankruptcy Code (the "503(b) Claim"), the Bankruptcy
Court allowed that application to the extent of $500, JNL appealed the
Bankruptcy Court's ruling to the United States District Court for the Eastern
District of Wisconsin, that court has now referred the 503(b) Claim back to the
Bankruptcy Court and BI continues to oppose the 503(b) Claim; and
WHEREAS, BI and JNL believe that continuing the dispute
between them over the 503(b) Claim may impede their ability to prosecute the
Milbank Claims and they accordingly both wish to compromise and settle their
disagreements over the 503(b) Claim and the prosection of claims against
Milbank;
NOW, THEREFORE, the parties have agreed as follows:
1. Effective September 1, 1997, JNL and BI shall jointly
prosecute all of their respective claims against Milbank (collectively, the
"Milbank Claims") in their respective names
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subject to the terms and conditions of this Agreement. All proceeds of the
Milbank Claims will be allocated as follows: (i) first, to pay, or to reimburse
the prior payment of, all bona fide third party costs, expenses and liabilities
incurred on or after September 1, 1997 in connection with the Milbank Claims
including, without limitation, the reasonable fees and disbursements of counsel
and other professional advisors and all other amounts contemplated by the first
sentence of Paragraph 2 below; (ii) the next $8,675,000 of proceeds from the
Milbank Claims, if any, will be paid to JNL, provided that Bucyrus will retain
ten percent of the proceeds of the Disgorgement Claim, if any, and direct
payment to JNL of the balance of such proceeds; and (iii) all additional
proceeds of the Milbank Claims will be divided equally between JNL and BI.
Notwithstanding the foregoing, BI shall also receive the benefit of any
reduction of any obligation it may have to pay the Milbank Fees. JNL and BI will
each provide the other with all such documentation available to it which
evidences expenses contemplated by this Paragraph 1 as the other party shall
reasonably request. JNL may, in its discretion after consultation with the
designated representative of BI, direct prosecution of the Milbank Claims in a
manner and to the extent which JNL reasonably deems necessary to minimize the
cost and expense of doing so, provided, however, that BI and JNL shall at all
times vigorously prosecute the defense of Milbank's claims or counterclaims for
the Milbank Fees.
2. JNL shall advance all of the costs and expenses of
prosecuting the Milbank Claims incurred on or after September 1,
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1997 and shall indemnify and hold BI and the Debtors harmless in connection with
all of the Milbank Claims on the same terms and conditions as those which were
provided for in the Indemnification Agreement dated as of November 30, 1994
between the Debtors and JNL as if the Milbank Claims were "Claims" thereunder.
Notwithstanding the foregoing, BI shall bear the cost of: (i) its own reasonable
general and administrative expenses for work done and time spent by employees
who are not officers; (ii) the first fifteen days of interview, preparation,
deposition, witness or related time spent by officers of BI other than Xxxxxxx
X. Xxxxxxxxxx; (iii) incidental time spent by officers of BI; (iv) BI's own
gross negligence, willful misconduct and its actions or omissions taken or made
in contravention of the terms and conditions of this Agreement; and (v) payment
(as distinguished from netting), if any, of the Milbank Fees. JNL may direct and
implement the manner of prosecution and terms of settlement or other resolution
of the Milbank Claims in its discretion, provided that if JNL for any reason
elects to resolve, settle or cease prosecution of any or all of the Milbank
Claims, JNL shall give BI notice of its decision to do so. BI thereupon may, but
shall not be obligated to, elect within ten business days to prosecute such
Milbank Claims upon payment to JNL of all amounts JNL would have received under
this Agreement, if any, after giving effect to the terms of such proposed
resolution, settlement or cessation of prosecution as to which JNL has given BI
notice, whereupon BI may thereafter prosecute such Milbank Claims, and retain
all recoveries
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therefrom, at its own cost and expense. In that event, BI thereafter shall
indemnify and hold JNL harmless on the terms and conditions of the first two
sentences of this Paragraph 2 as if BI were the indemnifying party and JNL the
indemnified party thereunder and this Paragraph 2 shall otherwise thereafter be
of no further force and effect as to the Milbank Claims in question.
3. JNL and BI agree to settle and resolve the 503(b) Claim on
the terms and conditions set forth in, and as evidenced by, a Settlement
Agreement in the form of Exhibit A attached.
4. BI, the Debtors and JNL have shared and will continue to
share legal advice, work product, attorney-client privileged communications and
other confidential information received from their respective counsel which
pertains to the Claims (collectively, together with the terms and conditions of
this Agreement, the "Confidential Information"), and they agree that when any
Confidential Information has been or is shared, their respective counsel have
been and will be acting as consultants to one another in conjunction with the
Claims. BI and JNL each waive all conflicts of interest, if any, which their
respective counsel have or might have had with respect to the Milbank Claims of
the other.
5. JNL and BI each covenant and agree with the other that they
each will provide the other with all information and all other cooperation which
they reasonably can provide in order to effectuate the proposes of this
Agreement, to promote the parties' ability to prosecute the Milbank Claims on
the terms and conditions of this Agreement, as well as any other claims which
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JNL may in its discretion pursue against Non-Released Persons under the Plan and
any other party connected with the Bankruptcy Proceedings (collectively, the
"Claims"), and otherwise to comply with the terms and conditions of this
Agreement. Without limitation of the foregoing, JNL, BI and the Debtors will at
all times: (i) to the extent they have any right to do so, make all of their
present and former officers and employees available to cooperate in prosecuting
the Claims and cause them to do so; (ii) share and make available, and allow the
review and copying of all documents and other information which may be relevant
to the Claims; and (iii) execute and deliver any and all agreements, documents
and instruments, in their own name or otherwise, to the full extent of their
legal power and authority, which either JNL or BI may reasonably request in
order to prosecute and pursue the Claims pursuant to and in accordance with the
terms of this Agreement. JNL and BI shall each be entitled to injunctive relief
to enforce the terms and conditions of this Paragraph 5.
6. Nothing in this Agreement shall constitute or is intended
to be a waiver of any attorney-client, work product or any other privilege or
immunity, including protections or requirements imposed by or available under
any applicable law. All documents and other information contemplated hereby
shall remain jointly subject to the attorney-client privilege and the work
product privilege, and will be kept confidential by JNL and BI, except as
reasonably needed to review, pursue and litigate the Claims. Each of the parties
to this Agreement agrees that it will not disclose any Confidential Information,
except to the
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extent reasonably necessary to implement the terms and conditions of this
Agreement, to prosecute the Claims and as otherwise required by applicable law
or a court or government agency of competent jurisdiction, in each case to the
extent that the same: (i) is not publicly available; or (ii) was not or could
not be obtained from another source not bound by any obligation of
confidentiality to either party hereto. Without limitation of the foregoing, if
either party receives any subpoena or other request for disclosure of
Confidential Information, the party receiving the same shall so notify the other
party as promptly as practicable and both parties shall cooperate with each
other in any efforts which either of them reasonably elects to pursue at their
own expense in order to preserve the confidentiality of the information in
question.
7. Nothing in this Agreement shall constitute an agreement by
BI or JNL to limit its freedom or ability to make its own independent,
unilateral decisions about the conduct of its business or any other matter,
except to the extent expressly set forth in this Agreement. This Agreement is
intended to facilitate cooperation between BI and JNL in reviewing, pursuing and
litigating the Claims. BI and JNL hereby covenant that they will act in good
faith toward one another in their use of the Confidential Information and will
make all reasonable efforts to protect each other's interest when using any
Confidential Information received from one another in reviewing, pursuing and
litigating the Claims.
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8. Nothing in this Agreement shall be construed as limiting or
waiving the right of Xxxxxxx to pursue or realize all of the proceeds of any
Claim which is not a Milbank Claim. Nothing in this Agreement shall be construed
as an admission by any person that any claim, defense or objection of any other
person has merit. Nothing in this Agreement shall constitute or evidence an
assignment by either party hereto of any of its rights in its own respective
Milbank Claims to the other.
9. BI and JNL each represent and warrant to the other that it
has the requisite power and authority under its respective organizational
documents and otherwise (if applicable) to execute and deliver this Agreement,
that this Agreement has been duly authorized, executed and delivered by it and
constitutes its legal, valid and binding obligation, and is enforceable against
it in accordance with its terms. No other representations or warranties of any
kind have been made to induce any party to enter into this Agreement. This
Agreement represents the entire agreement between the parties and supersedes all
prior negotiations, representations or agreements between the parties, either
written or oral, on the subject hereof including, without limitation, the Joint
Privilege and Confidentiality Agreement between the parties hereto dated April
9, 1997, which shall be of no further force and effect as to future events. No
amendment, change or modification of any provision of this Agreement, or any
waiver thereof, shall be effective unless in writing signed by the party to be
charged. BI and JNL shall each bear their own costs and expenses incurred
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prior to September 1, 1997 and otherwise in connection with the negotiation,
execution and delivery of this Agreement. This Agreement shall bind and inure to
the benefit of the principals, agents, representatives, successors, heirs and
assigns of the parties hereto.
10. The parties agree to resolve any controversy or dispute
arising under or relating to this Agreement (except to the extent otherwise
provided in Paragraph 5) in binding arbitration before a panel of the American
Arbitration Association, or another alternative dispute resolution forum
mutually acceptable to the parties, and pursuant to the rules and procedures of
that organization. Any such arbitration will take place in New York City. The
terms and language of this Agreement are the result of negotiations between the
parties hereto and there shall be no presumption that any ambiguities in this
Agreement should be resolved against either party hereto. Any controversy
concerning the construction of this Agreement shall be decided without regard to
authorship.
11. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original. This Agreement
shall in all respects be interpreted, enforced, governed and construed by and
under the laws of the State of New York without reference to principles of
conflicts of law or choice of law.
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IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed as of the date first written above.
By: /s/ Xxxxxxx X. Xxxxxxxxxx
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for Bucyrus International, Inc.,
Bucyrus-Erie Company and B-E
Holdings, Inc.
By: /s/ F. Xxxx Xxxxx, III
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PPM America, Inc., as attorney-in-
fact for Xxxxxxx National Life
Insurance Company
