UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended March 31, 1999
OR
______ TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) of the
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
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Commission file number 0-27618
COLUMBUS McKINNON CORPORATION
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(Exact name of registrant as specified in its charter)
New York 16-0547600
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
140 John James Audubon Parkway, Amherst, N.Y. 14228-1197
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (716) 689-5400
Securities registered pursuant to Section 12(b) of the Act:
Name of exchange on
Title of Class which registered
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Common Stock, $0.01 Par Value NASDAQ National Market
Securities pursuant to section 12(g) of the Act: NONE
Indicate by checkmark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No .
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (Sec. 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K [ ].
The aggregate market value of the voting stock held by non-affiliates
of the registrant as of May 31, 1999 was $274,298,068.
The number of shares of common stock outstanding as of May 31, 1999
was: 14,663,697 shares.
Documents Incorporated By Reference
-----------------------------------
Portions of the proxy statement for the annual shareholders meeting to
be held August 16, 1999 are incorporated by reference into Part III of this
report .
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COLUMBUS McKINNON CORPORATION
1999 Annual Report on Form 10-K
PART I.
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This annual report may include "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. Such statements
involve known and unknown risks, uncertainties and other factors that could
cause the actual results of the Company to differ materially from the results
expressed or implied by such statements, including general economic and business
conditions, conditions affecting the industries served by the Company and its
subsidiaries, conditions affecting the Company's customers and suppliers,
competitor responses to the Company's products and services, the overall market
acceptance of such products and services, the integration of acquisitions and
other factors disclosed in the Company's periodic reports filed with the
Commission. Consequently such forward looking statements should be regarded as
the Company's current plans, estimates and beliefs. The Company does not
undertake and specifically declines any obligation to publicly release the
results of any revisions to these forward-looking statements that may be made to
reflect any future events or circumstances after the date of such statements or
to reflect the occurrence of anticipated or unanticipated events.
Item 1. Business.
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Overview
Columbus McKinnon ("Columbus McKinnon" or the "Company"), established in
1875, is a broad-line designer, manufacturer and supplier of sophisticated
material handling products and integrated material handling solutions that are
widely distributed to industrial and consumer markets worldwide. The Company's
material handling products are sold, domestically and internationally,
principally to third party distributors in commercial and consumer distribution
channels and, to a lesser extent, directly to manufacturers and other end-users.
The Company's integrated material handling solutions businesses primarily deal
with end-users. For the year ended March 31, 1999, the Company generated net
sales and income from operations of approximately $735.4 million and
approximately $85.1 million, respectively.
The Company's Products segment includes a wide variety of electric, lever,
hand and air-powered hoists; hoist trolleys; industrial crane systems, such as
bridge, gantry and jib cranes; alloy, carbon steel and kiln chain; closed-die
forged attachments, such as hooks, shackles, logging tools and loadbinders;
industrial components, such as mechanical and electromechanical actuators,
mechanical jacks and rotary unions; and below-the-hook lifters. Through
innovative design and manufacturing expertise developed by the Company and
through selective acquisitions, the Company has established a leading market
share in many of its product lines. Columbus McKinnon believes it has more
overhead hoists in use in North America than all of its competitors combined.
The Company's products and customer base are highly diversified; no single
product accounted for more than 1% and no individual customer accounted for more
than 5% of net Products segment sales for the year ended March 31, 1999. For the
year ended March 31, 1999, the Company's Products segment generated net sales
and income from operations before amortization of approximately $515.7 million
and approximately $80.0 million, respectively.
As a result of its fiscal 1998 acquisitions of Univeyor A/S ("Univeyor")
and LICO, Inc. ("LICO"), the Company has also positioned itself as a leader in
the project design, management and implementation of integrated material
handling systems that are designed to meet specific applications of end-users to
increase productivity. These businesses have formed the foundation for the
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Company's two Solutions segments, Solutions - Industrial and Solutions -
Automotive. The delivered products of these segments include various types of
conveyor systems as well as operator-controlled manipulators and scissor lifts.
For the year ended March 31, 1999, the Company's Solutions - Industrial segment
generated net sales and income from operations before amortization of
approximately $58.3 million and approximately $5.6 million, respectively, and
the Company's Solutions - Automotive segment generated net sales and income from
operations before amortization of approximately $161.4 million and approximately
$14.9 million, respectively.
The Company believes that the demand for its products has increased in
recent years and will continue to increase in the future as a result of several
favorable trends impacting a broad array of industries that have enabled the
Company to expand into new product areas and markets. These trends include:
Productivity Enhancement. In recent years employers have responded to
competitive pressures by seeking to maximize productivity and efficiency. The
Company's hoists and other lifting and positioning products allow loads to be
lifted and placed quickly, precisely, with little effort, and with fewer people.
In addition, the Company's conveyor systems enhance productivity within
automotive assembly, general warehousing and industrial operations.
Safety Regulations and Concerns. Driven by federal and state workplace
safety regulations such as the Occupational Safety and Health Act ("OSHA") and
the Americans with Disabilities Act, and by the general competitive need to
reduce costs such as health insurance premiums and workers' compensation
expenses, employers seek safer ways to lift, position and move loads. The
Company's material handling products and solutions enable these tasks to be
performed with reduced risk of personal injury.
Workforce Diversity. The percentages of women, disabled and older persons
in the work force and the tasks they perform are continuing to increase. The
Company's products enable many workplace tasks to be performed safely,
efficiently and with less physical stress. The Company believes that increasing
diversity in the workforce will continue to increase demand for its products and
solutions.
Outsourcing of Material Handling Project Design and Management. More of
the Company's customers and end-users are outsourcing non-core business
functions to improve productivity and cost efficiency. This has created
opportunities for the Company to assume the project design, management and
implementation responsibilities for both workstation and facility-wide material
handling systems. The Company's opportunity to capitalize on this trend has been
enhanced by the recent acquisitions of Univeyor and LICO. Through the
combination of the Company's expertise and technological know-how with that of
Univeyor and LICO, the Company believes that it will be able to position itself
as a leader in the project design, management and implementation of automated
material handling systems. As a result, many of the Company's existing products
may be utilized in these systems.
The Company has extended its product lines and penetrated new markets in
recent years through several acquisitions which have been successfully
integrated into the Company. Over the past five years, the Company has made
thirteen acquisitions which have (i) enhanced the Company's position as the
largest North American manufacturer of overhead hoists, operator-controlled
manipulators and alloy chain, (ii) enabled the Company to broaden its product
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and service offerings and (iii) provided the Company with cross-selling
opportunities into other segments of the material handling and lifting industry.
As a result of internal growth and acquisitions, the Company's net sales and
income from operations have increased to approximately $735.4 million and $85.1
million, respectively, for the year ended March 31, 1999 from approximately
$142.3 million and $12.4 million, respectively, in fiscal 1994, representing
compound annual growth rates of approximately 39% and 47%, respectively.
Key Strengths
The Company attributes its strong competitive position to the following
key strengths:
Leading Market Position. Columbus McKinnon is the largest manufacturer of
hoists, alloy and high strength carbon steel chain and operator-controlled
manipulators in North America. The Company has developed its leading market
position over its nearly 125-year history by emphasizing technological
innovation, manufacturing excellence and superior after-sale service.
Preferred Provider to Major Distributors and End-Users. The Company enjoys
long-standing relationships with and is a preferred provider to many of its
largest distributors. Since 1990, during a period of significant consolidation
among distributors of material handling equipment, the Company has benefited
from this consolidation as it has maintained and enhanced its relationships with
the leading distributors. For example, the Company maintains close contact with
its customers and provides prompt aftermarket service to end-users of its
products through a network of independent distributors staffed with
Company-trained professionals at over 450 hoist parts, product, service and
repair centers, and 12 chain service centers. Additionally, to ensure continuing
product development and market awareness, the Company sponsors advisory boards
composed of representatives of its largest distributors and aftermarket sales
and service network. The Company's Automatic Systems, Inc. ("ASI") subsidiary
was awarded the General Motors Corporation ("GM") 1998 Supplier of the Year
award, recognition which GM made to only 184 out of its approximately 30,000
suppliers worldwide. This marked the second consecutive year that ASI was
awarded this distinction. The Company believes that its ability to retain
existing customers and attract new customers is attributable to its ongoing
commitment to customer service and satisfaction.
Diversified Products, Markets, and Customer Base. The Company believes
that it offers the most extensive line of material handling products and
solutions in the markets which it serves. No single product accounted for more
than 1% of net Products segment sales for the year ended March 31, 1999. The
Company's products are sold to over 10,000 general, specialty and
service-after-sale distributors and original equipment manufacturers ("OEMs")
for various applications in the general manufacturing, crane building, mining,
construction, transportation, entertainment, power generation, agricultural,
marine, automotive and logging markets. Additionally, the Company sells its
products for consumer use to over 100 hardware, trucking and transportation,
farm hardware and rental outlets. No single customer accounted for more than 5%
of net Products segment sales for the year ended March 31, 1999. GM, which deals
principally with the Company's Solutions - Automotive segment, accounted for
approximately 13% of the Company's net sales for the year ended March 31, 1999.
The Company believes that the breadth of its products, the diversity of its
markets and the strength of its distribution relationships minimize its
dependence on any particular product, market or customer.
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Large Installed Product Base; Strong Brand Names. Columbus McKinnon
believes it has more overhead hoists in use in North America than all of its
competitors combined. In addition, the Company's brand names, including
Abell-Howe, Big Orange, Budgit, Chester, CM, Coffing, Duff-Norton, Gaffey,
Hammerlok, Herc-Alloy, Larco, Shaw-Box and Yale, are among the most recognized
and respected in the industry. The Company believes that its strong brand name
recognition, together with the Company's large installed base of products,
provide it with a significant competitive advantage in selling its full product
line to existing and new customers as well as providing repair and replacement
parts.
Experienced Management Team with Significant Ownership Interest. The
Company's management team provides a depth and continuity of experience. The
Company's directors and executive officers own an aggregate of approximately 22%
of the Company's outstanding common stock. In addition, in April 1997 Columbus
McKinnon implemented economic value added ("EVA@") as a performance measure and
is using EVA@ goals to, among other things, determine incentive-based
compensation for all of its employees.
Business Strategy
The Company's strategic objective is to further enhance its position as a
leading designer, manufacturer and distributor of material handling, lifting and
positioning products both domestically and internationally. The Company plans to
achieve this objective through the continued implementation of the following
three-pronged strategy:
Enhance Existing Business. The Company continually strives to enhance its
existing business through the following:
o Leverage Strong Competitive Position. The Company's position as a
leading provider of material handling equipment has resulted in a
substantial installed base of its products. The Company's close
relationships with its distributors permit it to obtain customer
information and product requirements in order to respond to and
anticipate future needs of end-users of the Company's products, which
the Company believes allows it to maintain its market leadership
position. The repair and replacement of parts and complementary
products for the Company's large installed base of products represents
additional revenue growth potential. The Company believes that it can
expand the market and customer base for new and acquired products by
introducing these products through its existing distribution channels.
In addition, the Company believes it can achieve product and marketing
synergies by selling its products into the markets of acquired
businesses.
In fiscal 1999, the Company initiated its CraneMart@ strategy to build
an integrated North American network of full-service crane builders.
The acquisition of Abell-Howe Crane, Inc., a regional manufacturer of
jib and other overhead cranes ("Abell-Howe"), in August 1998 and
merger with GL International, Inc., a full-service designer and
builder of industrial overhead bridge, gantry and jib cranes ("GL"),
in March 1999 were the Company's first significant steps in the
implementation of CraneMart@. In furtherance of this strategy, the
Company expects to form additional strategic alliances, either through
full or partial equity ownership or joint ventures with independent
participants, in major North American Industrial markets. The Company
believes that CraneMart@ will enhance its position as a full-service
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supplier of hoists, cranes and components and will enable it to expand
its product and service offerings to meet the increasing demands of
its end-user customers.
o Increase Productivity and Realize Cost Savings. In addition to
developing and introducing new products, the Company focuses on
improving the quality and reliability of its products and increasing
manufacturing efficiency. Twenty of the Company's existing
manufacturing facilities and six of its distribution facilities have
achieved ISO 9000 certification, and substantially all of the
Company's remaining manufacturing and distribution facilities are in
the process of obtaining such certification. The Company improves
productivity by reducing cycle times, increasing employee involvement
in production and investing in new, more efficient manufacturing
processes, including computer-aided design capabilities. The Company
has implemented EVA@ to analyze the utilization of its assets and
productivity in order to improve all aspects of the Company's
operations, and to determine incentive-based compensation for its
employees. Further, the Company believes additional cost savings can
be realized through the continued integration of the operations of
recent acquisitions with those of the Company. For example, through
its increased critical mass, the Company has been able to achieve raw
material purchasing efficiencies.
Increase Penetration of International Markets. The Company maintains a
distributor network in approximately 50 countries and has manufacturing
facilities in Canada, Mexico, Germany, Denmark, France and China. The Company
intends to increase its international presence, with a primary focus on
enhancing its existing presence in Europe and expanding its operations into the
Pacific Rim, South America and Africa. The Company intends to accomplish this
growth by strengthening its international distribution network and by making
additional strategic acquisitions and alliances. The recent acquisitions of
Camlok Lifting Clamps ("Camlok"), the Tigrip product line ("Tigrip"), Societe
D'Exploitation des Raccords Gautier ("SERG" or "Gautier") and GL with its
Canadian operation have provided the Company with additional international
operating locations, and will enable the Company to market their products to the
Company's customer base. The Company has increased its international net sales
from approximately 14% ($20.3 million) of net sales in fiscal 1994 to
approximately 26% ($191.6 million) of net sales for fiscal 1999.
Pursue Selective Acquisitions. The Company intends to selectively pursue
strategic acquisitions, joint ventures and alliances. Potential strategic
combinations will be evaluated based on their ability to, among other things:
(i) complement existing businesses and further expand product lines; (ii)
strengthen the Company's leadership position in the material handling and
lifting industry; (iii) provide synergistic opportunities; (iv) enhance and
broaden distribution channels; (v) increase the Company's international
presence; and (vi) enhance shareholder value and be EVA@ positive.
Segment Information
During fiscal 1999 the Company classified its operations into the
following three business segments:
(i) Products, which includes the design, manufacture and supply
of a wide variety of electric, lever, hand and air-powered
hoists; hoist trolleys; industrial crane systems; alloy, carbon
steel and kiln chain; closed-die forged attachments, such as
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hooks, shackles, logging tools and loadbinders; industrial
components, such as mechanical and electromechanical actuators,
mechanical jacks and rotary unions; and below-the-hook lifters
for commercial and consumer markets.
(ii) Solutions - Industrial, which includes the project design,
fabrication and installation of integrated material handling
systems for consumer products manufacturing, warehousing and,
to a lesser extent, the steel, construction and other
industrial markets. Products sold by this segment include
powered roller conveyors, operator-controlled manipulators and
scissor lifts.
(iii) Solutions - Automotive, which includes the project design,
fabrication and installation of integrated material handling
systems for the automotive industry. Products sold by this
segment consist primarily of overhead power-and-free conveyors
and electrified monorail conveyors.
Financial information regarding the business segments is presented in Note
18 to the Company's audited consolidated financial statements included elsewhere
herein.
Products and Services
Products Segment
The Company's Products segment primarily designs, manufactures and
distributes a broad range of material handling, lifting and positioning products
for various applications in industry and for consumer use. These products are
typically manufactured for stock and are sold through a variety of distributors.
In fiscal 1999, net sales of the Products segment were approximately $515.7
million or approximately 70% of the Company's net sales, of which approximately
$389.7 million (76%) were domestic and $126.0 million (24%) were international.
The following table sets forth certain sales data for the products of the
Products segment, expressed as a percentage of net sales of this segment for
fiscal 1999:
Hoists............................................ 56%
Chain and forged attachments...................... 22
Industrial overhead cranes........................ 15
Industrial components............................. 7
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100%
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Hoists. The Company manufactures a variety of hand-operated hoists and
lever tools, air-powered hoists, electric chain hoists, and electric wire rope
hoists. Load capacities for the Company's hoist product lines range from less
than one ton to 100 tons. These products are sold under its Budgit, Chester, CM,
Coffing, Shaw-Box, Yale and other recognized trademarks. The Company's hoists
are sold for use in a variety of general industrial applications, as well as for
use in the entertainment, consumer, rental, health care and other emerging
product markets. The Company also supplies hoist trolleys, driven manually or by
electric motors, for the industrial, consumer and OEM markets.
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The Company also offers a line of custom-designed, below-the-hook tooling
and clamps. Below-the-hook tooling and clamps are specialized lifting apparatus
used in a variety of lifting activities performed in conjunction with hoist and
chain applications.
Chain and Forged Attachments. The Company manufactures alloy chain for
various industrial applications. Federal regulations in the United States
require the use of alloy chain, which the Company first developed, for overhead
lifting applications because of its strength and wear characteristics. A line of
the Company's alloy chain is sold under the Herc-Alloy brand name for use in
overhead lifting, pulling and restraining applications. The Company also sells
specialized load chain for use in hoists. Three grades and multiple sizes of
carbon steel welded-link chain are sold by the Company in the industrial and
consumer markets for various load securement and other non-overhead lifting
applications. As a result of the acquisition of Lister Bolt & Chain, Ltd. and
Lister Chain & Forge Inc. (collectively, "Lister"), the Company now also
manufactures kiln chain sold primarily to the cement and lime kiln manufacturing
market and anchor and buoy chain sold primarily to the United States and
Canadian governments.
The Company manufactures a complete line of alloy and carbon steel forged
attachments, including hooks, shackles, hitch pins, master links and
loadbinders. These forged attachments are used in virtually all types of chain
and wire rope rigging applications in a variety of industries, including
transportation, mining, railroad, construction, marine, logging, petrochemical
and agriculture.
The Company also manufactures carbon steel forged and stamped products,
such as loadbinders, hooks, shackles and other securement devices, for sale to
the industrial, consumer and logging markets through industrial distributors,
hardware distributors, mass merchandiser outlets and OEMs.
Industrial Overhead Cranes. The Company entered the crane manufacturing
market through the August 1998 acquisition of Abell-Howe, a Chicago-based
regional manufacturer of jib and overhead bridge cranes. The Company's merger
with GL in March 1999 established the Company as a significant participant in
the strategically important crane building and servicing markets, which are
strong complements to its hoist business.
Industrial Components. The Company, through the Duff-Norton division of
its Yale Industrial Products, Inc. ("Yale") subsidiary, designs and manufactures
industrial components such as mechanical and electromechanical actuators,
mechanical jacks and rotary unions for sale domestically and abroad. Actuators
are linear motion devices used in a variety of industries, including the paper,
steel and aerospace industries. Mechanical jacks are heavy duty lifting devices
whose uses include the repair and maintenance of railroad tracks, locomotives
and industrial machinery. Rotary unions are piping devices which introduce
heating or cooling liquids into the interiors of rotating drums in industrial
processes in the paper, textiles, rubber, plastics, printing and machine tool
industries. The December 1998 acquisition of Gautier, a French rotary union and
swivel joint manufacturer, complemented Duff-Norton's product line while
expanding its global reach.
Solutions Segments
The Solutions segments are engaged primarily in the design, fabrication
and installation of integrated work station and facility-wide material handling
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systems and in the manufacture and distribution of operator-controlled
manipulators and scissor lifts. The products and services of these two segments
are highly engineered and are generally built to order and sold directly to
end-users for specific applications. Net sales of the Solutions - Industrial
segment in fiscal 1999 were approximately $58.3 million or approximately 8% of
the Company's total net sales, of which approximately $30.1 million (52%) were
domestic and approximately $28.2 million (48%) were international. Net sales of
the Solutions - Automotive segment in fiscal 1999 were approximately $161.4
million or approximately 22% of the Company's total net sales, of which
approximately $124.0 million (77%) were domestic and approximately $37.4 million
(23%) were international. The following table sets forth certain sales data for
the products and services of the Solutions segments, expressed as a percentage
of net sales of these segments for fiscal 1999:
Integrated material handling conveyor systems..... 86%
Scissor lifts..................................... 6
Manipulators...................................... 4
Other............................................. 4
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100%
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Integrated Material Handling Conveyor Systems. Conveyors are the most
important component of a material handling system, reflecting their high
functionality for transporting material throughout manufacturing and warehouse
facilities. ASI, which is the sole business of the Solutions - Automotive
segment, specializes in overhead conveyors, electrified monorail systems,
robotic indexing systems and automatic body transfer systems. Univeyor, a
component of the Solutions - Industrial segment, specializes in
computer-controlled and automated powered roller conveyors for use in warehouse
operations and distribution systems.
Scissor Lifts. The American Lifts division of Yale manufactures hydraulic
scissor lift tables and other engineered lifting products. These products
enhance workplace ergonomics and are sold primarily to customers in the
manufacturing, construction, general industrial and air cargo industries.
Manipulators. The Company manufactures a line of sophisticated
operator-controlled manipulators. These products are articulated mechanical arms
with specialized end tooling designed to perform lifting, rotating, turning,
tilting, reaching and positioning tasks in a manufacturing process. Utilizing
various models and size configurations, the Company can offer custom-designed
hydraulic, pneumatic, and electric manipulators for a wide variety of
applications where the user requires multi-axial movement in a harsh or
repetitive environment.
Sales and Marketing
The Company supports its Products segment sales through its sales forces
and through independent manufacturing agents worldwide, including approximately
150 dedicated salespersons who sell hoists, chain, forged attachments, cranes,
rotary unions, actuators, jacks, and related material handling accessories.
Sales are further supported by over 130 Company-trained customer service
correspondents and sales application engineers.
The Company promotes its products by advertising in trade journals and by
participating in more than 60 trade shows each year throughout the United States
and abroad. Trade shows are central to promotion of the Company's products and,
in certain cases, for actual sale of the Company's products, particularly to
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hardware retailers. Shows in which the Company participates range from global
events held in Hanover, Germany, Cologne, Germany and Chicago, Illinois to local
"markets" and "open houses" put on by individual hardware and industrial
distributors. The Company also attends specialty shows for the entertainment,
rental, safety and environmental recycling markets, as well as general purpose
industrial and consumer hardware shows. In fiscal 1999, the Company participated
in trade shows in Canada, France, Mexico, Germany, England, Singapore, South
Africa, China, Australia and Brazil, as well as in the United States.
The Company's communication program encompasses advertisements in leading
trade journals as well as producing and distributing high quality information
catalogs. On-site distributors and end-user training programs are held worldwide
to promote and reinforce the attributes of the Company's products. The Company
also has a Web site on the Internet (http://www.cmworks.com).
The Company supports its product distribution by running cooperative
"pull-through" advertising in over 50 vertical trade magazines and directories
targeted to the theatrical, international, consumer, tire shredder and crane
builder markets. The Company has separate ads for chain, hoists, forged
attachments, lifters, actuators, hydraulic jacks, tire shredders, hardware
programs, cranes and light rail systems.
Distribution and Markets
Products Segment.
The distribution channels for the Products segment include a variety of
commercial distributors, including general distributors, specialty distributors,
service-after-sale distributors and other distributors.
General Distribution Channels:
o Industrial distributors sell a variety of products for maintenance,
repair, operation and production ("MROP") applications through their
own direct sales force.
o Rigging shops are distributors who are experts in the rigging,
lifting, positioning and load securement areas of material handling.
Most rigging shops manufacture and distribute chain, wire rope and
synthetic slings and distribute off-the-shelf hoists and attachments,
chain slings and other off-the-shelf products.
o Crane builders design, build and install overhead crane and light-rail
systems for general industry and sell a wide variety of hoists and
lifting attachments. Cranes and crane components are also sold by the
Company's wholly owned crane builders, Abell-Howe and GL, directly to
end-users in a variety of industrial markets.
Specialty Distribution Channels:
o Catalog houses market a variety of MROP supplies and material handling
products either exclusively through large, nationally distributed
catalogs, or through a combination of catalog sales and a field sales
force. The customer base of catalog houses, which traditionally
included smaller industrial companies and consumers, has expanded to
include large industrial accounts and integrated suppliers.
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o Material handling specialists design and assemble systems incorporat-
ing hoists, overhead rail systems, trolleys, lift tables,
manipulators, air balancers, jib arms and other products.
o Entertainment equipment distributors design, supply and install a
variety of material handling equipment for concerts, theaters, ice
shows, sports arenas, convention centers and discos.
Service-After-Sale Distribution Channel:
o Service-after-sale distributors include over 12 chain repair service
stations and over 450 hoist parts, product, service and repair
stations. This service network is designed for easy parts and service
access for the Company's large installed base of hoists and related
equipment in North America.
Other Sales Channels:
o Original equipment manufacturers supply various component parts to
other industrial manufacturers as well as private branding and
packaging of traditional Company products for material handling,
lifting and positioning applications.
o Government sales are sold directly by the Company and have expanded
with the acquisition of Lister, which manufactures anchor, buoy and
mooring chain for the United States and Canadian Navies and Coast
Guards.
Solutions Segments
The products and services of the Solutions segment are sold primarily to
end-users. In the sale of its integrated material handling conveyor systems, the
Company generally acts as a prime contractor with turnkey responsibility for its
systems, or a supplier working closely with the customer's general contractor.
Sales are generated by in-house personnel, generally through
engineer-to-engineer interactions. Products, such as scissor lifts and
manipulators are sold by Company sales employees and specialized independent
distributors.
Customer Service and Training
The Company maintains well-trained customer service departments for all of
its Products segment sales divisions, and regularly schedules product and
service training schools for all customer service representatives and field
sales forces. In addition, training schools for distribution, service stations,
and end-users are held on a regular basis at most of the Company's facilities,
as well as in the field. The Company has more than 450 service stations
worldwide that provide local and regional repair, warranty and general service
work for distributors and end-users. End-user trainees attending various
training schools maintained by the Company include representatives of General
Motors, DuPont, 3M, GTE, Cummins Engine, General Electric and many other large
industrial manufacturers.
The Company also provides a variety of collateral material in video,
cassette, CD-ROM, slide and literature format addressing such relevant material
handling topics as the care, use and inspection of chains and hoists, and
overhead lifting and positioning safety.
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The Company also sponsors nine separate advisory boards made up of
representatives of its primary distributors and service-after-sale network
members who are invited to participate in discussions focused on improving
products and service. These boards enable the Company and its primary
distributors to exchange product and market information relevant to industry
trends.
Recent Acquisitions
Since February 1994, the Company has acquired thirteen operations:
o In March 1999, the Company merged with GL, a full-service designer and
builder of industrial overhead bridge, gantry and jib cranes and
related components, in exchange for shares of, and options to
purchase, the Company's common stock valued at approximately $20.6.
This acquisition was the Company's first major step in the
implementation of its CraneMart@ strategy.
o In January 1999, the Company acquired Camlok and the Tigrip product
line for aggregate consideration of approximately $10.6 million.
Camlok, located in the United Kingdom, manufactures plate clamps,
crane weighers and related products. The German-based Tigrip produces
standard and specialized plate clamps. These acquisitions positioned
the Company as a market leader for lifting clamps in Europe.
o In December 1998, the Company acquired SERG, a manufacturer of rotary
unions and swivel joints, for approximately $2.9 million. SERG's
product lines are complementary to those of the Company's Duff-Norton
division and provide the Company with additional cross-selling and
cross-branding opportunities.
o In August 1998, the Company acquired Abell-Howe, a regional
manufacturer of jib and other overhead cranes for approximately $7.0
million. This acquisition marked the Company's entry into the
complementary crane building product line, creating significant
cross-selling opportunities for its existing hoist products.
o In March 1998, the Company acquired LICO, a designer, manufacturer and
installer of custom conveyors and material handling systems primarily
for the automotive industry, for approximately $155.0 million,
adjusted for outstanding borrowings. This acquisition strengthened the
Company's position as a leader in the project design, fabrication and
installation of automated material handling systems and provided the
Company with an established platform for increasing its sales to the
automotive and industrial manufacturing markets.
o In January 1998, the Company acquired Univeyor, which is engaged in
the design and manufacture of automated material handling systems, for
approximately $15.0 million plus assumed liabilities. This transaction
enabled the Company, which previously had designed solutions only for
individual workstations, to offer automated material handling systems,
predominantly using powered roller conveyors, for the entire
workplace.
o In December 1996, the Company acquired Lister, a manufacturer of
cement kiln, anchor and buoy chain and mining bolts, for approximately
$7.0 million. This transaction complemented the Company's line of
chain products and provided the Company with access to new markets,
11
<PAGE>
particularly in the international marketplace.
o In October 1996, the Company acquired the majority of the outstanding
common equity of Yale Industrial Products, Inc., a manufacturer of a
variety of lifting and positioning products, including hoists and
scissor lifts and industrial components such as actuators, jacks and
rotary unions, for approximately $270.0 million through a cash tender
offer. In January 1997, the Company acquired the remaining common
equity of Yale and effected a merger. This acquisition further
complemented the Company's product line and also provided the Company
with international operations and distribution facilities in Europe,
South Africa and China.
o In November 1995, the Company acquired Lift-Tech International, Inc.
("Lift-Tech"), a manufacturer and distributor of hoists and crane
components, including wire rope and air-powered hoists, for
approximately $63.0 million. Lift-Tech's products complemented the
Company's existing hoist product lines, thereby enabling the Company
to offer a broader product line to the marketplace.
Between February 1994 and October 1995 the Company also acquired (i) the
remaining 51% equity interest in Endor, a Mexican manufacturer of hoists, for
approximately $2.0 million, (ii) certain assets of Cady Lifters, Inc., a
manufacturer of "below the hook" lifters, for approximately $0.8 million, (iii)
the assets of the Conco Division of McGill Industries, Inc., a manufacturer of
manipulators, for approximately $0.8 million and (iv) the assets of
Durbin-Durco, Inc., a manufacturer of load securement equipment and attachments,
for approximately $2.4 million.
Competition
The markets in which the Company operates are highly competitive and the
Company faces competition from a number of different manufacturers in each of
its product areas and geographic markets, domestic and foreign. The Company
competes in the sale of hoists with Demag, Kito-Harrington, Ingersoll-Rand and
Morris Material Handling; in chain with Campbell, Peerless Chain Company and
American Chain and Cable Company; in forged attachments with the Crosby Group,
Chicago Hardware and Cooper; in actuators and rotary unions with Deublin and
Joyce-Dayton; and in integrated material handling systems with Jervis B. Webb,
Dearborn Mid-West, Allied UniKing and FATA. The principal competitive factors
affecting the market for the Company's products include performance,
functionality, price, brand recognition, customer service and support and
product availability. Some of the Company's competitors have greater financial
and other resources than the Company.
Employees
At March 31, 1999, the Company had approximately 4,350 employees, 3,480 in
the United States, 375 in Canada, 120 in Mexico and 375 in Europe. Approximately
1,580 of the Company's employees are represented under 12 separate collective
bargaining agreements which terminate at various times between September 1999
and April 2003.
During the past five years, the only interruptions or curtailments of the
Company's business due to labor disputes was a five-day work stoppage at a Yale
plant in Charlotte, North Carolina in fiscal 1997. The Company believes that its
relationship with its employees is good. In support of this relationship, the
12
<PAGE>
Company has maintained an Employee Stock Ownership Plan since 1988 and also uses
incentive-based compensation programs that are linked to the Company's
profitability and increase in shareholder value.
Backlog
The Company's backlog of orders at March 31, 1999 was approximately $166.1
million compared to approximately $214.6 million at March 31, 1998. The
Company's orders for standard products are generally shipped within one week.
Orders for products that are manufactured to customers' specifications are
generally shipped within four to twelve weeks. Revenues from the Company's
contracts for automated systems are generally recognized within 12 to 18 months.
The Company does not believe that the amount of its backlog orders is a reliable
indication of its future sales.
Raw Materials and Components
The principal raw materials used by the Company are structural steel and
processed steel bar, forging bar steel, steel rod and wire, steel pipe and
tubing and tool steel which are available from multiple sources. The Company
purchases these various forms of steel from a number of suppliers under
long-term agreements which are negotiated on a company-wide basis to take
advantage of volume discounts. Although the steel industry is cyclical and steel
prices can be volatile, the Company has not been significantly impacted in
recent years by increases in steel prices.
The Company also purchases components such as motors, bearings and gear
housings and castings. These components are generally available from several
suppliers.
The Company estimates that its total materials cost, including steel
products and components, represented approximately 31% of net sales in fiscal
1999. The Company generally seeks to pass on materials price increases to its
customers, although a lag period often exists. The Company's ability to pass on
these increases is determined by competitive conditions.
Environmental and Other Governmental Regulation
Like many manufacturing companies, the Company is subject to various
federal, state and local laws relating to the protection of the environment. To
address the requirements of such laws, the Company has adopted a corporate
environmental protection policy which provides that all facilities owned or
leased by the Company shall, and all employees of the Company have the duty to,
comply with all applicable environmental regulatory standards, and the Company
has initiated an environmental auditing program for its facilities to ensure
compliance with such regulatory standards. The Company has also established
managerial responsibilities and internal communication channels for dealing with
environmental compliance issues that may arise in the course of its business.
Because of the complexity and changing nature of environmental regulatory
standards, it is possible that situations will arise from time to time requiring
the Company to incur expenditures in order to ensure environmental regulatory
compliance. However, the Company is not aware of any environmental condition or
any operation at any of its facilities, either individually or in the aggregate,
which would cause expenditures that would result in a material adverse effect on
the Company's results of operations, financial condition or cash flows and,
accordingly, has not budgeted any material capital expenditures for
environmental compliance for fiscal 2000.
13
<PAGE>
Certain federal and state laws, sometimes referred to as Superfund laws,
require certain companies to remediate sites that are contaminated by hazardous
substances. These laws apply to sites owned or operated by a company, as well as
certain off-site areas for which a company may be jointly and severally liable
with other companies or persons. The required remedial activities are usually
performed in the context of administrative or judicial enforcement proceedings
brought by regulatory authorities. The Company has been involved recently in six
administrative enforcement proceedings in connection with the remediation of
certain facilities, one of which it owns and operates, one of which was formerly
owned and operated by a subsidiary of one of the Company's subsidiaries, and
four of which neither the Company nor any subsidiary of the Company has ever
owned or operated but with regard to which the Company or a subsidiary of the
Company has been identified as one of several potentially responsible parties
("PRPs"). The Company has cooperated with the regulatory authorities in
connection with these environmental proceedings. From the perspective of the
Company, with the exception of the two environmental administrative proceedings
discussed below, these matters have been, and are expected to continue to be,
minor matters not requiring substantial effort or expenditure on the part of the
Company.
The first environmental administrative proceeding is one in which the
Company has been identified by the New York State Department of Environmental
Conservation ("NYSDEC"), along with other companies, as a PRP at the Frontier
Chemical Site in Pendleton, New York ("Pendleton Site"), a site listed on
NYSDEC's Registry. From 1958 to 1977, the Pendleton Site had been operated as a
commercial waste treatment and disposal facility. The Company sent waste
pickling liquor generated at its facility in Tonawanda, New York to the
Pendleton Site during the period from approximately 1969 to 1977, and the
Company is participating with other PRPs in conducting the remediation of the
Pendleton Site under a consent order with NYSDEC. As a result of a negotiated
cost allocation among the participating PRPs, the Company has paid its pro rata
share of the remediation costs and accrued its share of the ongoing operations
and maintenance costs. As of March 31, 1999, the Company has paid approximately
$1.0 million in remediation and ongoing operations and maintenance costs
associated with the Pendleton Site. The participating PRPs have identified and
commenced a cost recovery action against a number of other parties who sent
hazardous substances to the Pendleton Site. If any of the currently
nonparticipating parties identified by the participating PRPs pay their pro rata
shares of the remediation costs, then the Company's share of total site
remediation costs will decrease. Settlements have been reached with 45 of the
113 defendants in the cost recovery action, and additional settlements are
expected in the future. However, the Company has not yet received payment in
connection with such settlements. The Company also has entered into a settlement
agreement with one of its insurance carriers in the amount of approximately
$734,130 in connection with the Pendleton Site and has received payment in full
of the settlement amount.
The second environmental administrative proceeding involved Mechanical
Products, Inc., a former subsidiary of Yale ("MPI"). In 1987, MPI discovered
that groundwater and certain soils at and near its Jackson, Michigan plant
contained certain organic chemical compounds in concentrations above those
permitted by applicable law. MPI conducted an extensive investigation of the
site and entered into an Administrative Order by Consent with the State of
Michigan Department of Natural Resources which provides for further
investigation and the development and implementation of a plan for remedial
action. Since 1991, MPI has been engaged in efforts to investigate and remediate
the impacted areas. On or about August 10, 1998, Yale sold MPI in a stock
transaction, and the purchaser assumed the environmental liabilities associated
with the administrative proceeding described in this paragraph. As of August 10,
1998, the Company had paid a total of approximately $3.4 million in remediation
14
<PAGE>
and operations and maintenance costs required by this administrative proceeding,
and since that date, as a result of the sale of MPI, the Company has not had,
and does not expect to have, further expenditures in connection with same.
For all of the currently known and unpaid environmental matters, the
Company has accrued a total of approximately $930,000 as of March 31, 1999,
which, in the opinion of the Company's management, is sufficient to deal with
such matters. Further, the Company's management believes that the environmental
matters known to, or anticipated by, the Company should not, individually or in
the aggregate, have a material adverse effect on the Company's cash flow,
results of operations or financial condition. However, there can be no assurance
that potential liabilities and expenditures associated with unknown
environmental matters, unanticipated events, or future compliance with
environmental laws and regulations will not have a material adverse effect on
the Company.
The Company's operations are also governed by many other laws and
regulations, including those relating to workplace safety and worker health,
principally OSHA and regulations thereunder. The Company believes that it is in
material compliance with these laws and regulations and does not believe that
future compliance with such laws and regulations will have a material adverse
effect on its cash flow, results of operations or financial condition.
Item 2. Properties.
- ------- -----------
The Company maintains its corporate headquarters in Amherst, New York. The
principal properties utilized by the Company for its continuous operations
consist of 56 manufacturing and distribution facilities, of which 40 are located
in the United States, 5 are located in Canada, 1 is located in Mexico, 8 are
located in Europe, and 2 are located in Asia. The Company also leases a number
of sales offices and minor warehouses throughout North America, Europe, Asia and
South AFrica. The following table summarizes the Company's headquarters and
principal manufacturing and distribution facilities by business segment:
<TABLE>
<CAPTION>
Approximate Floor Space
(in square feet)
Owned Leased Total
<S> <C> <C> <C>
Corporate Headquarters --- 52,000(1) 52,000
Products (42 facilities):
United States 1,740,000 623,000 2,363,000
International 394,000 187,000 581,000
Solutions - Industrial (7 facilities):
United States 323,000 - 323,000
International 85,000 20,000 105,000
Solutions - Automotive (7 facilities):
United States 81,000 65,000 146,000
International - - -
_______________________
(1) Approximately 26,000 square feet is sublet to an unaffiliated party through June 30, 2003. Title to the property is vested in
the Town of Amherst Industrial Development Agency pursuant to an industrial revenue bond transaction. The Company has the right and
obligation to purchase the property upon the expiration of the lease term for $1.00.
</TABLE>
15
<PAGE>
The Company believes that its properties have been adequately maintained,
are in generally good condition and are suitable for the Company's business as
presently conducted. The Company believes its existing facilities provide
sufficient production capacity for its present needs and for its anticipated
needs in the foreseeable future. The Company also believes that upon the
expiration of its current leases, it either will be able to secure renewal terms
or enter into leases for alternative locations at market terms.
Item 3. Legal Proceedings.
- ------- ------------------
From time to time, the Company is named a defendant in legal actions
arising out of the normal course of business. The Company is not a party to any
pending legal proceeding the resolution of which the management of the Company
believes will have a material adverse effect on the Company's cash flow, results
of operations or financial condition or to any other pending legal proceedings
other than ordinary, routine litigation incidental to its business. The Company
maintains liability insurance against risks arising out of the normal course of
business.
On November 18, 1996, an action entitled Milliken & Company vs.
Duff-Norton Company, Inc. and Industrial Distribution Group, Inc. d/b/a Dixie
Industrial Supply Company was commenced in the Superior Court of Troup County,
Georgia. In its complaint in this action, the plaintiff alleges that a rotary
union coupler manufactured by a subsidiary of Yale failed, causing a fire
resulting in alleged damages to the plaintiff's carpet manufacturing facility
and equipment in excess of $500 million. This action was settled in fiscal 1999
within the limits of the Company's insurance coverage.
Item 4. Submission of Matters to a Vote of Security Holders.
- ------- ----------------------------------------------------
Not applicable.
16
<PAGE>
PART II
Item 5. Market for the Company's Common Stock and Related Security
- ------- --------------------------------------------------------------
Holder Matters.
---------------
The Company's Common Stock is listed on the National Association of
Securities Dealers Automated Quotation System - National Market System
("NASDAQ") under the trading symbol "CMCO". The following table sets forth, for
the fiscal periods indicated, the high and low closing sale prices per share of
the Company's Common Stock as reported by NASDAQ.
Fiscal 1999 Fiscal 1998
----------- -----------
High Low High Low
---- --- ---- ---
1st Quarter 30 1/2 26 1/4 19 17
2nd Quarter 28 7/16 15 1/8 26 1/4 18 5/8
3rd Quarter 19 1/4 14 3/8 26 1/2 22 1/2
4th Quarter 22 3/4 17 7/16 27 7/8 22 3/16
As of March 31, 1999, there were 162 holders of record of the Company's
Common Stock. Approximately 2,000 additional shareholders hold shares of the
Company's Common Stock in "street name".
The Company declared total cash dividends of $.28 per share in fiscal 1999
and $.28 per share in fiscal 1998.
On March 1, 1999, the Company issued 897,114 shares of its common stock
(the "Merger Shares") to six investors in a private placement. The Merger Shares
were issued pursuant to a pooling transaction in which a subsidiary of the
Company and GL merged. As a result of such merger, all of the outstanding shares
of GL were converted into the Merger Shares. The value of the Merger Shares,
based upon the last reported sale price of the Company's common stock on March
1, 1999, was $17.8 million. The Merger Shares were issued in reliance on an
exemption provided under Section 4(2) of the Securities Act of 1933, as amended.
17
<PAGE>
Item 6. Selected Financial Data.
- ------- ------------------------
SELECTED FINANCIAL INFORMATION
The following table sets forth selected consolidated financial information
of the Company for each of the five fiscal years in the period ended March 31,
1999. This information includes (i) the results of operations of Lift-Tech since
its acquisition on November 1, 1995, (ii) the results of operations of Yale
since its acquisition on October 17, 1996, (iii) the results of operations of
Lister since its acquisition on December 19, 1996, (iv) the results of
operations of Univeyor since its acquisition on January 8, 1998, (v) the results
of operations of LICO since its acquisition on March 31, 1998, (vi) the results
of operations of Mechanical Products through its divestiture on August 7, 1998,
(vii) the results of operations of Abell-Howe since its acquisition on August
21, 1998, (viii) the results of operations of Gautier since its acquisition on
December 4, 1998, (ix) the results of operations of Camlok and Tigrip since
their acquisition on January 29, 1999, and (x) the results of operations of GL
since its formation on April 1, 1997, including the restatement of Company data
reported prior to GL's merger with the Company on March 1, 1999. This table
should be read in conjunction with the "Management's Discussion and Analysis of
Results of Operations and Financial Condition" and the Consolidated Financial
Statements of the Company, including the notes thereto, included elsewhere
herein. Refer to the "Description of Business and Business Acquisitions" note to
the Consolidated Financial Statements regarding the unaudited pro forma
information presented, which reflects the fiscal 1999 and 1998 business
acquisitions and divestiture, and related capital impact, as if they occurred on
April 1, 1997, which is the beginning of fiscal 1998.
<TABLE>
<CAPTION>
Fiscal Years Ended March 31,
----------------------------
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
(Dollars in thousands, except per share data)
Statement of Income Data:
<S> <C> <C> <C> <C> <C>
Net sales.................................................... $172,330 $209,837 $359,424 $561,823 $735,445
Cost of products sold........................................ 124,492 149,511 251,987 401,669 542,975
Gross profit................................................. 47,838 60,326 107,437 160,154 192,470
Selling expenses............................................. 15,915 19,120 32,550 46,578 52,059
General and administrative expenses.......................... 11,449 13,941 24,636 33,361 39,850
Amortization of intangibles.................................. 600 791 5,197 10,297 15,479
Other charges................................................ 1,598 672 - --- ---
Income from operations....................................... 18,276 25,802 45,054 69,918 85,082
Interest and debt expense.................................... 2,352 5,292 11,930 25,104 35,923
Interest and other income.................................... 472 1,134 1,168 1,940 1,565
Income before income taxes, minority interest and
extraordinary charge.......................................
16,396 21,644 34,292 46,754 50,724
Income tax expense........................................... 5,892 8,657 15,617 22,776 23,288
Minority interest............................................ - - (323) --- ---
Extraordinary charge for early debt extinguishment........... - - (3,198) (4,520) ---
Net income................................................... $ 10,504 $ 12,987 $ 15,154 $ 19,458 $ 27,436
Net income per common share-diluted(a)....................... $ 1.48 $ 1.69 $ 1.15 $ 1.35 $ 1.92
Cash dividend per common share (a)........................... 0.21 0.24 0.27 0.28 0.28
Pro Forma Statement of Income Data:
Net sales.................................................... $735,525 $732,143
Income from operations....................................... 81,963 84,702
Income before extraordinary charge........................... 24,354 27,355
Net income................................................... 19,834 27,355
Earnings per share -- diluted:
Income before extraordinary charge........................ 1.69 1.91
Net income................................................ 1.37 1.91
18
<PAGE>
Balance Sheet Data (at end of period):
Total assets................................................. $ 97,822 $ 188,734 $ 548,245 $ 788,862 $ 766,911
Total long-term debt (including current maturities).......... 22,587 9,744 286,288 458,577 423,612
Total liabilities............................................ 56,972 51,112 398,089 617,916 578,237
Total shareholders' equity................................... 40,850 137,622 150,156 170,946 188,674
(a) Reflects a 17 to 1 stock split of the common stock effected on February 15, 1996; fiscal 1995 and 1996
per share data also impacted by the Company's initial public offering effected on February 22, 1996.
</TABLE>
19
<PAGE>
Item 7. Management's Discussion and Analysis of Results of Operations
- ------- --------------------------------------------------------------
and Financial Condition.
------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Overview
The Company is a broad-line designer, manufacturer, and supplier of
sophisticated material handling products and integrated material handling
solutions that are widely distributed to industrial, automotive and consumer
markets worldwide. The Company's material handling products are sold,
domestically and internationally, principally to third party distributors in
commercial and consumer distribution channels, and to a lesser extent directly
to manufacturers and other end-users. Commercial distribution channels include
general distributors, specialty distributors, service-after-sale distributors,
original equipment manufacturers ("OEMs"), and the U.S. and Canadian
governments. The general distributors are comprised of industrial distributors,
rigging shops and crane builders. Specialty distributors include catalog houses,
material handling specialists and entertainment equipment riggers. The
service-after-sale network includes repair parts distribution centers, chain
service centers, and hoist repair centers. Company products are also sold to
OEMs, and to the U.S. and Canadian governments. Consumer distribution channels
include mass merchandisers, hardware distributors, trucking and transportation
distributors, farm hardware distributors and rental outlets. The Company's
integrated material handling solutions businesses primarily deal with end-users.
Material handling solution sales are concentrated, domestically and
internationally (primarily Europe), in the automotive industry, and consumer
products manufacturing, warehousing and, to a lesser extent, the steel,
construction and other industrial markets.
On March 1, 1999, GL International, Inc. ("GL") was merged with and into
the Company through the issuance of new Company stock and options to purchase
Company stock for all issued and outstanding stock and options of GL. The merger
was accounted for as a pooling of interests and, accordingly, the 1999 and 1998
consolidated financial statements have been restated to include the accounts of
GL from the date of GL's formation, April 1, 1997.
This section should be read in conjunction with the consolidated financial
statements of the Company included elsewhere herein.
Results of Operations
The following table sets forth certain income statement data for the
Company, expressed as a percentage of net sales, for each of the periods
presented:
20
<PAGE>
<TABLE>
<CAPTION>
Fiscal Years Ended March 31,
----------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Products Segment sales............................................................... 71.9% 93.4% 88.6%
Solutions - Industrial Segment sales................................................. 7.9 7.1 7.9
Solutions - Automotive Segment sales................................................. 22.0 - -
Intercompany eliminations/Other sales................................................ (1.8) (0.5) 3.5
---- ---- ---
Net sales............................................................................ 100.0 100.0 100.0
Cost of products sold................................................................ 73.8 71.5 70.1
---- ---- ----
Gross profit......................................................................... 26.2 28.5 29.9
Selling expenses..................................................................... 7.1 8.3 9.1
General and administrative expenses.................................................. 5.4 5.9 6.9
Amortization of intangibles.......................................................... 2.1 1.9 1.4
--- --- ---
Income from operations............................................................... 11.6 12.4 12.5
Interest and debt expense............................................................ 4.9 4.4 3.3
Interest and other income............................................................ 0.2 0.3 0.3
--- --- ---
Income before income taxes, minority interest and extraordinary charge............... 6.9 8.3 9.5
Income tax expense................................................................... 3.2 4.0 4.3
--- --- ---
Income before minority interest and extraordinary charge............................. 3.7% 4.3% 5.2%
==== ==== ====
</TABLE>
Fiscal Years Ended March 31, 1999, 1998, and 1997
Sales growth during the periods was primarily due to the March 1999 GL
merger, the March 1998 LICO acquisition, the January 1998 Univeyor acquisition,
the December 1996 Lister acquisition and the October 1996 Yale acquisition,
offset by the August 1998 Mechanical Products divestiture. Sales in 1999 of
$735,445,000 increased $173,622,000 or 30.9% over 1998, and sales in 1998 of
$561,823,000 increased $202,399,000 or 56.3% over 1997. On a pro forma basis,
considering the effects of fiscal 1999 and 1998 acquisitions and divestiture,
the Company experienced a 0.5% decrease in sales in fiscal 1999 compared to
1998. This comparison is impacted by the following economic factors: 1) a
relatively soft industrial market, 2) the effect of the mid-1998 General Motors
strike, 3) the impact of the Asian and South American economic situations, and
4) a shift in demand from small retail hardware stores to larger do-it-yourself
superstores, to which the Company supplies only a small share. On a pro forma
basis, considering the effects of fiscal 1998 and 1997 acquisitions, the Company
experienced a 10.6% increase in sales in fiscal 1998 compared to 1997. This
growth was due to strong Solutions-Automotive segment demand as well as solid
demand by nearly all Products segment market channels. In addition, during these
periods the Company introduced list price increases of approximately 4% in both
December 1998 and 1997 affecting certain of the Company's hoist, chain and
forged products sold in its domestic commercial markets. Sales in the Products,
Solutions-Industrial and Solutions-Automotive segments were as follows, in
thousands of dollars and with percentage changes for each segment:
<TABLE>
<CAPTION>
Change Change
Fiscal Years Ended March 31, 1999 vs 1998 1998 vs 1997
---------------------------- ------------ ------------
1999 1998 1997 Amount % Amount %
---- ---- ---- ------ - ------ -
(In thousands, except percentages)
<S> <C> <C> <C> <C> <C> <C> <C>
Products................... $528,974 $524,949 $318,544 $ 4,025 0.8 $206,405 64.8
Solutions-Industrial....... 58,301 39,845 28,308 18,456 46.3 11,537 40.8
Solutions-Automotive....... 161,443 - - 161,443 - - -
Eliminations/Other......... (13,273) (2,971) 12,572 (10,302) - (15,543) -
Consolidated net sales........ $735,445 $561,823 $359,424 $173,622 30.9 $202,399 56.3
</TABLE>
21
<PAGE>
The addition of the Solutions-Automotive segment in fiscal 1999 is due to
the March 1998 LICO acquisition. The 46.3% and 40.8% growth in the
Solutions-Industrial segment in fiscal 1999 and 1998, respectively, is due to
the January 1998 Univeyor acquisition and also a small portion of the October
1996 Yale acquisition. The 64.8% growth in the Products segment in fiscal 1998
is due to the formation of GL in April 1997, the December 1996 Lister
acquisition, the October 1996 Yale acquisition and solid sales growth in nearly
all market channels within this segment. The fluctuation in Eliminations/Other
in each of the periods is due to the addition of intercompany sales between GL
and the other businesses within the Company in fiscal 1999 and 1998, offset by
the August 1998 Mechanical Products divestiture. Sales per employee increased to
$169,500 in fiscal 1999 from $134,400 in fiscal 1997.
The Company's gross profit margins were approximately 26.2%, 28.5% and
29.9% for 1999, 1998 and 1997, respectively. The decrease in gross profit margin
in fiscal 1999 is primarily due to the LICO acquisition which formed the
Solutions-Automotive segment and generally produces lower gross profit margins
than the other segments. The lower profitability of this segment is offset by a
lower operating capital base required to design and manufacture its products.
After isolating the effect of the LICO acquisition, the 1999 gross profit margin
increased by approximately 90 basis points. The decrease in gross profit margin
in fiscal 1998 resulted primarily from a change in the classification of
approximately $7.6 million of costs into cost of products sold which previously
had been classified as general and administrative expenses. This change was made
for intracorporate consistency and had a minimal effect on income from
operations. In addition, the fiscal 1998 gross profit margin was also impact by
the addition of GL, which also generates lower gross profit margins on a lower
capital base as compared to the pre-existing Products segment businesses. After
isolating the effect of the classification change and the GL merger, the 1998
gross profit margin increased by approximately 50 basis points compared to 1997.
Excluding the effects of those specific items noted above, the resulting
increase in gross profit margin in each of the periods resulted from the effects
of the Company's cost control efforts and integration of acquisitions.
Selling expenses were $52,059,000, $46,578,000 and $32,550,000 in fiscal
1999, 1998, and 1997, respectively. The 1999 expenses include the full year of
LICO activity; 1998 expenses include the full year of Yale and GL activity as
compared to fiscal 1997. As a percentage of consolidated net sales, selling
expenses were 7.1%, 8.3% and 9.1% in fiscal 1999, 1998 and 1997, respectively.
The 1999 and 1998 improvements reflect a lower level of selling expenses
incurred on behalf of the LICO and GL businesses, relative to sales.
General and administrative expenses were $39,850,000, $33,361,000 and
$24,636,000 in fiscal 1999, 1998 and 1997, respectively. The 1999 expenses
include the full year of LICO activity; 1998 expenses include the full year of
Yale and GL activity as compared to fiscal 1997. As a percentage of consolidated
net sales, general and administrative expenses were 5.4%, 5.9% and 6.9% in
fiscal 1999, 1998 and 1997, respectively. The 1999 improvement reflects a lower
level of general and administrative expenses incurred on behalf of the LICO
business, relative to sales. As noted above, the improved percentage in fiscal
1998 was primarily due to a change that reclassified approximately $7.6 million
of expenses previously classified as general and administrative into costs of
products sold for intracorporate consistency. This 1998 improvement was offset
somewhat by a higher level of general and administrative expenses incurred on
behalf of the GL business, relative to sales.
22
<PAGE>
Amortization of intangibles was $15,479,000, $10,297,000 and $5,197,000 in
fiscal 1999, 1998 and 1997, respectively. Fiscal 1999 includes a full year of
goodwill amortization resulting from the LICO acquisition; 1998 includes a full
year of goodwill amortization resulting from the Yale acquisition; 1997 includes
a partial year of Yale and a full year of goodwill amortization resulting from
the Lift-Tech acquisition.
Interest and debt expense was $35,923,000, $25,104,000 and $11,930,000 in
fiscal 1999, 1998 and 1997, respectively. The fiscal 1999 and 1998 increases
were primarily due to the financing required to complete the LICO and Yale
acquisitions. As a percentage of consolidated net sales, interest and debt
expense was 4.9%, 4.4% and 3.3% in fiscal 1999, 1998 and 1997, respectively.
Interest and other income was $1,565,000, $1,940,000 and $1,168,000 in
fiscal 1999, 1998 and 1997, respectively. The fluctuations reflect changes in
the investment return on marketable securities held for settlement of a portion
of the Company's general and products liability claims.
Income taxes as a percentage of pre-tax accounting income were 45.9%,
48.7% and 45.5% in fiscal 1999, 1998 and 1997, respectively. The percentages
reflect the effect of non-deductible goodwill amortization resulting from the
business acquisitions.
In fiscal 1997, the minority interest share of Yale earnings of $323,000
resulted from the fact that the Company acquired 72% of the outstanding Yale
shares on a fully diluted basis in October 1996 and the remainder in January
1997.
As a result of the above, income before extraordinary charges increased
$3,458,000 or 14.4% in 1999 and $5,626,000 or 30.7% in 1998. This is based on
income before extraordinary charges of $27,436,000, $23,978,000 and $18,352,000
or 3.7%, 4.3% and 5.2% as a percentage of consolidated net sales in fiscal 1999,
1998 and 1997, respectively.
In fiscal 1998, the extraordinary charge for early debt extinguishment of
$4,520,000 resulted from the non-cash write-off of unamortized deferred
financing costs upon refinancing of the Company's bank debt effective March 31,
1998. The charge is net of $3,012,000 of tax benefit. In 1997, the extraordinary
charge for early debt extinguishment of $3,198,000 resulted from the tender in
December 1996 for 11.5% acquired Yale notes. The charge consisted of redemption
premiums, costs to exercise the tender offer, and write-off of previously
incurred deferred financing costs, and was net of $2,133,000 of tax benefit.
Net income, therefore, increased $7,978,000 or 41.0% in 1999 and
$4,304,000 or 28.4% in 1998. This is based on net income of $27,436,000,
$19,458,000 and $15,154,000 in fiscal 1999, 1998 and 1997, respectively.
Liquidity and Capital Resources
On March 1, 1999, GL was merged with and into the Company through the
issuance of 897,114 shares of newly issued Company stock and options to purchase
154,848 shares of Company stock for all issued and outstanding stock and options
of GL. The fair market value of the stock and options exchanged was
approximately $20.6 million.
On January 29, 1999, the Company acquired all of the outstanding stock of
Camlok and the net assets of the Tigrip product line for $10.6 million in cash,
23
<PAGE>
financed by a German subsidiary revolving credit facility and term note.
On December 4, 1998, the Company acquired all of the outstanding stock of
Gautier for $3 million in cash, financed by the Company's revolving credit
facility.
During October 1998, the Company's ESOP borrowed $7,682,000 from the
Company and purchased 479,900 shares of Company common stock on the open market
at an average cost of $16 per share.
On August 21, 1998, the Company acquired the net assets of Abell-Howe for
$7 million in cash, financed by the Company's revolving credit facility.
On August 7, 1998, the Company sold its Mechanical Products division for
$11.5 million, consisting of $9.1 million in cash and a $2.4 million note
receivable.
On March 31, 1998, the Company acquired all of the outstanding stock of
LICO for approximately $155 million of cash, which was financed by proceeds from
the Company's revolving credit facility and a private placement of senior
subordinated notes, both of which also closed effective March 31, 1998. The
Company's previously existing Term Loan A, Term Loan B and revolving credit
facility were repaid and retired on March 31, 1998.
On January 7, 1998, the Company acquired all of the outstanding stock of
Univeyor for approximately $15 million of cash plus the assumption of certain
debt, financed by the Company's revolving credit facility.
The 1998 Revolving Credit Facility provides availability up to $300
million, due March 31, 2003, against which $212.4 million was outstanding at
March 31, 1999. Interest is payable at varying Eurodollar rates based on LIBOR
plus a spread determined by the Company's leverage ratio, amounting to 112.5
basis points at March 31, 1999. The 1998 Revolving Credit Facility is secured by
all equipment, inventory, receivables, subsidiary stock (limited to 65% for
foreign subsidiaries) and intellectual property. To manage its exposure to
interest rate fluctuations, the Company has an interest rate swap and cap.
The senior subordinated 8 1/2% Notes issued on March 31, 1998 amounted to
$199,468,000, net of original issue discount of $532,000 and are due March 31,
2008. Interest is payable semi-annually based on an effective rate of 8.45%,
considering $1,902,000 of proceeds from rate hedging in advance of the
placement. Provisions of the 8 1/2% Notes include, without limitation,
restrictions of liens, indebtedness, asset sales, and dividends and other
restricted payments. Prior to April 1, 2003, the 8 1/2% Notes are redeemable at
the option of the Company, in whole or in part, at the Make-Whole Price (as
defined). On or after April 1, 2003, they are redeemable at prices declining
annually from 108.5% to 100% on and after April 1, 2006. In addition, on or
prior to April 1, 2001, the Company may redeem up to 35% of the outstanding
notes with the proceeds of equity offerings at a redemption price of 108.5%,
subject to certain restrictions. In the event of a Change of Control (as
defined), each holder of the 8 1/2% Notes may require the Company to repurchase
all or a portion of such holder's 8 1/2% Notes at a purchase price equal to 101%
of the principal amount thereof. The 8 1/2% Notes are not subject to any sinking
fund requirements.
The Company believes that its cash on hand, cash flows, and borrowing
capacity under its revolving credit facility will be sufficient to fund its
24
<PAGE>
ongoing operations, budgeted capital expenditures, and business acquisitions for
the next twelve months.
Net cash provided by operating activities increased to $57,493,000 in
fiscal 1999 from $38,420,000 in 1998 and $28,886,000 in 1997. The $19,073,000
increase in net cash provided by operating activities in fiscal 1999 compared to
1998 results from increased net income of $7,978,000, increased depreciation and
amortization of $7,360,000, and a decrease of changes in net working capital
components, offset by the extraordinary charge for early debt extinguishment of
$4,520,000 in 1998. The $9,534,000 increase in net cash provided by operating
activities in fiscal 1998 compared to 1997 results from increased net income of
$4,304,000, and increased depreciation and amortization of $8,611,000, offset by
decreased deferred income tax expense by $4,761,000. Operating assets net of
liabilities decreased by $4,412,000 in fiscal 1999 and increased by $5,509,000
and $5,905,000 in fiscal 1998 and 1997, respectively.
Net cash used in investing activities was $23,943,000 in fiscal 1999
compared to $185,034,000 in 1998 and $215,851,000 in 1997. The 1999 amount
includes the acquisitions of Camlok/Tigrip, Gautier, and Abell-Howe for
$19,958,000, net of cash acquired; it is reduced by $8,801,000 of net proceeds
from the Mechanical Products divestiture and $2,182,000 of proceeds from the
sale of a portion of non-operating assets acquired with Yale in fiscal 1997. The
1998 amount includes the acquisitions of LICO, Univeyor and a GL business
acquisition for $175,686,000, net of cash acquired; it is reduced by $4,575,000
of proceeds from the sale of a portion of the non-operating Yale assets. The net
cash used in investing activities in fiscal 1997 includes $203,577,000 for the
Yale and Lister acquisitions, net of cash acquired.
Capital Expenditures
In addition to keeping its current equipment and plants properly
maintained, the Company is committed to replacing, enhancing, and upgrading its
property, plant, and equipment to reduce production costs, increase flexibility
to respond effectively to market fluctuations and changes, meet environmental
requirements, enhance safety, and promote ergonomically correct work stations.
Consolidated capital expenditures for fiscal 1999, 1998 and 1997 were
$12,992,000, $11,406,000 and $9,392,000, respectively, excluding those capital
assets acquired in conjunction with business acquisitions.
Inflation and Other Market Conditions
The Company's costs are affected by inflation in the U.S. economy, and to
a lesser extent, in foreign economies including those of Europe, Canada, Mexico,
and the Pacific Rim. The Company does not believe that inflation has had a
material effect on results of operations over the periods presented because of
low inflation levels over the periods and because the Company has generally been
able to pass on rising costs through price increases. However, in the future
there can be no assurance that the Company's business will not be affected by
inflation or that it will be able to pass on cost increases.
Seasonality and Quarterly Results
Lower than average orders and shipments during the December holiday period
have a slight effect on the Company. In addition, quarterly results may be
materially affected by the timing of large customer orders, by periods of high
vacation concentrations, and by acquisitions and the magnitude of acquisition
costs. Therefore, the operating results for any particular fiscal quarter are
not necessarily indicative of results for any subsequent fiscal quarter or for
the full fiscal year.
25
<PAGE>
Year 2000 Conversions
The Company's corporate-wide Year 2000 initiative is being managed by a
team of internal staff and administered by the Director of Information Services.
The Company has completed the assessment phase of its Year 2000 compliance
project and is currently working on remediation of affected components.
The Company has determined that it needs to modify certain portions of its
corporate business information software so that its computer system will
function properly with respect to dates in the year 2000 and beyond. Both
internal and external resources have been dedicated to identifying,
implementing, and testing corrective action in order to make such programs Year
2000 compliant; all such work is planned to be completed by July 1999 and is
currently on schedule. To date the corporate business information software has
been 100% assessed, approximately 95% has been remedially reprogrammed, and
approximately 72% is now certified to be Year 2000 compliant. The Company
believes that, with modifications to existing software, the Year 2000 issue will
not pose significant operational problems for its computer systems.
The Company has completed a corporate-wide assessment of the Year 2000
readiness of microprocessor controlled equipment such as robotics, CNC machines,
and security and environmental systems. This assessment has revealed that at
least 98% of all microprocessor-controlled equipment, including over 98% of all
security and environmental systems, is currently compliant. Any necessary
upgrades to ensure Year 2000 readiness are expected to be in place by the end of
June 1999. In addition, the Company has determined that all of its manufactured
products are 100% Year 2000 compliant.
The Company has initiated communications with its suppliers and customers
to determine the extent to which systems, products or services are vulnerable to
failure should those third parties fail to remediate their own Year 2000 issues.
To date the Company has received responses to over 80% of its inquiries and no
Year 2000 compliance problem has been identified from these responses. While we
believe that our Year 2000 compliance plan adequately addresses potential Year
2000 concerns and to date no significant Year 2000 issues have been identified
with our suppliers and customers, there can be no guarantee that the systems of
other companies on which our operations rely will be compliant on a timely basis
and will not have an effect on our operations.
The Company has conducted preliminary contingency planning and identified
the critical need areas. A high level approach incorporating manual workarounds,
increasing critical inventories, identifying alternate suppliers, and adjusting
staffing levels has been discussed and forms the basis for the initial
contingency planning. The Company believes this level of planning is appropriate
at the current time, however, the planning will be further expanded if warranted
by future events.
The cost of the Year 2000 initiatives is not expected to be material to
the Company's results of operations or financial position.
The forward looking statements contained in the Year 2000 Conversions
should be read in conjunction with the Company's disclosures under the heading
"Safe Harbor Statement under the Private Securities Litigation Reform Act of
1995".
26
<PAGE>
Effects of New Accounting Pronouncements
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 133 "Accounting for Derivative Instruments and Hedging
Activities," in June of 1998 which is effective for fiscal 2001. Statement No.
133 establishes accounting and reporting standards for hedging activities. It
requires that entities recognize all derivatives as either assets or liabilities
in the statement of financial position and measure those instruments at fair
value. The intended use of the derivative and its designation as either (1) a
hedge of the exposure to changes in the fair value of a recognized asset or
liability or a firm commitment (a fair value hedge) (2) a hedge of the exposure
to variable cash flows of a forecasted transaction (a cash flow hedge), or (3) a
hedge of the foreign currency exposure of a net investment in a foreign
operation (a foreign currency hedge), will determine when the gains and losses
on the derivatives are reported in earnings and when they are to be reported as
a component of other comprehensive income. The impact of compliance with this
Statement has not yet been determined by the Company.
In March of 1998, the American Institute of Certified Public Accountants
(AICPA) issued Statement of Position (SOP) 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use." The Company adopted
the provisions of the SOP in its financial statements for the year ended March
31, 1999. The SOP requires the capitalization of certain costs incurred in
connection with developing or obtaining software for internal use. The impact of
the SOP was not material to the Company.
In April of 1998, the AICPA issued SOP 98-5, "Reporting the Costs of
Start-Up Activities," which requires costs related to start-up activities be
expensed as incurred. The Company adopted the provisions of the SOP in its
financial statements for the year ended March 31, 1999. The adoption of SOP 98-5
had no effect on the Company's reported earnings.
27
<PAGE>
Item 7A. Quantitive and Qualitative Disclosures About Market Risk
- -------- --------------------------------------------------------
Market risk is the potential loss arising from adverse changes in market
rates and prices, such as interest rates. The Company is exposed to various
market risks, including commodity prices for raw materials, foreign currency
exchange rates, and primarily changes in interest rates. The Company has entered
into financial instrument transactions which attempt to manage and reduce the
impact of changes in interest rates. The Company does not enter into derivatives
or other financial instruments for trading or speculative purposes.
The Company's primary commodity risk is related to changes in the price of
steel. The Company controls this risk through negotiating purchase contracts on
a consolidated basis and by attempting to build changes in raw material costs
into the selling prices of its products. The Company does not enter into
financial instrument transactions related to raw material costs.
Approximately 17% of the Company's operations consist of manufacturing
plants and sales offices in foreign jurisdictions. The Company manufactures its
products in the United States, Canada, Germany, Denmark, the United Kingdom,
Mexico, France and China and sells its products and solutions in over 50
countries annually. The Company's results of operations could be affected by
such factors as changes in foreign currency rates or weak economic conditions in
foreign markets. The Company's operating results are exposed to fluctuations
between the US dollar and the Canadian dollar, European currencies, the Mexican
peso and the Chinese renminbi. For example, when the US dollar strengthens
against the Canadian dollar, the value of sales and net income denominated in
Canadian dollars decreases when translated into US dollars for inclusion in the
Company's consolidated results. The Company also is exposed to foreign currency
fluctuations in relation to purchases denominated in foreign currencies. The
Company's foreign currency risk is mitigated since the majority of foreign
operations' sales and the related expense transactions are denominated in the
same currency. In addition, the majority of export sale transactions are
denominated in US dollars. Accordingly, the Company currently does not invest in
derivative instruments such as foreign exchange contracts to hedge foreign
currency transactions.
The Company controls risk related to changes in interest rates through
structuring its debt instruments with a combination of fixed and variable
interest rates and by periodically entering into financial instrument
transactions. At March 31, 1999, approximately 49% of the Company's outstanding
debt has fixed interest rates. At that date, the Company has approximately
$217.2 million of variable rate non-current debt and has an interest rate swap
with a notional amount of $3.5 million maturing in July 2000 based on LIBOR at
5.9025%, plus the applicable margin based on the Company's leverage ratio. Under
this agreement, the Company makes or receives payments equal to the difference
between fixed and variable interest rate payments on the notional amount. In
addition, the Company also has a LIBOR-based interest rate cap on $49.5 million
of debt, maturing in December 1999 at 10%. A 1% fluctuation in interest rates
would change future interest expense on the $213.7 million of debt that is not
covered by the swap agreement by approximately $2.1 million.
28
<PAGE>
Item 8. Financial Statements and Supplementary Data.
- ------- --------------------------------------------
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Columbus McKinnon Corporation
Audited Consolidated Financial Statements as of March 31, 1999:
Report of Independent Auditors................................. F-2
Consolidated Balance Sheets.................................... F-4
Consolidated Statements of Income.............................. F-5
Consolidated Statements of Shareholders' Equity................ F-6
Consolidated Statements of Cash Flows.......................... F-7
Notes to Consolidated Financial Statements..................... F-8
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Columbus McKinnon Corporation
We have audited the accompanying consolidated balance sheets of Columbus
McKinnon Corporation as of March 31, 1999 and 1998, and the related consolidated
statements of income, shareholders' equity, and cash flows for each of the three
years in the period ended March 31, 1999. Our audits also include the financial
statement schedule listed in the Index at Item 14(a). These financial statements
and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits. The consolidated financial statements give
retroactive effect to the merger of Columbus McKinnon Corporation and GL
International, Inc., which has been accounted for as a pooling of interests as
described in Note 1 to the consolidated financial statements. We did not audit
the balance sheet of GL International, Inc. as of March 31, 1998, or the related
statements of income and cash flows for the year then ended, which statements
reflect total assets of $27,921,000 as of March 31, 1998, and total revenues of
$59,860,000 for the year ended March 31, 1998. Those statements were audited by
other auditors whose report has been furnished to us, and our opinion, insofar
as it relates to the amounts included for GL International, Inc. for 1998, is
solely based on the report of such other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the report of other auditors provide a reasonable
basis for our opinion.
In our opinion, based on our audits and the report of other auditors, the
financial statements referred to above present fairly, in all material respects,
the consolidated financial position of Columbus McKinnon Corporation at March
31, 1999 and 1998, and the consolidated results of its operations and its cash
flows for each of the three years in the period ended March 31, 1999, in
conformity with generally accepted accounting principles. Also, in our opinion,
the financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.
/s/ Ernst & Young LLP
Buffalo, New York
May 17, 1999
F-2
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
GL International, Inc.:
We have audited the consolidated balance sheet of GL International, Inc.
and subsidiaries as of March 31, 1998, and the related consolidated statements
of income and cash flows for the year then ended (none of which are presented
herein). These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of GL
International, Inc. and subsidiaries at March 31, 1998, and the results of their
operations and their cash flows for the year then ended, in conformity with
generally accepted accounting principles.
/s/ DELOITTE & TOUCHE LLP
Tulsa, Oklahoma
August 24, 1998
F-3
<PAGE>
<TABLE>
<CAPTION>
COLUMBUS McKINNON CORPORATION
CONSOLIDATED BALANCE SHEETS
March 31,
---------
1999 1998
---- ----
(In thousands)
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents ............................................. $ 6,867 $ 22,861
Trade accounts receivable, less allowance for doubtful accounts ($2,271
and $2,511 respectively) ............................................ 136,988 124,637
Unbilled revenues ..................................................... 9,821 19,634
Inventories ........................................................... 115,979 115,126
Net assets held for sale .............................................. 8,214 10,396
Prepaid expenses ...................................................... 8,160 10,407
----- ------
Total current assets ....................................................... 286,029 303,061
Net property, plant, and equipment ......................................... 90,004 87,662
Goodwill and other intangibles, net ........................................ 357,727 368,946
Marketable securities ...................................................... 19,355 16,665
Deferred taxes on income ................................................... 5,627 7,045
Other assets ............................................................... 8,169 5,483
----- -----
Total assets ............................................................... $ 766,911 $ 788,862
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable to banks ................................................ $ 4,590 $ 5,184
Trade accounts payable ................................................ 54,651 58,639
Excess billings ....................................................... 5,058 4,653
Accrued liabilities ................................................... 54,331 44,405
Current portion of long-term debt ..................................... 1,926 2,180
----- -----
Total current liabilities .................................................. 120,556 115,061
Senior debt, less current portion .......................................... 222,165 256,929
Subordinated debt .......................................................... 199,521 199,468
Other non-current liabilities .............................................. 35,995 46,458
------ ------
Total liabilities .......................................................... 578,237 617,916
======= =======
Shareholders' equity:
Class A voting common stock; 50,000,000 shares authorized; 14,663,697 .
and 14,652,972 shares issued ........................................ 146 146
Additional paid-in capital ............................................ 102,313 100,425
Retained earnings ..................................................... 100,455 76,744
ESOP debt guarantee; 708,382 and 325,092 shares ....................... (9,865) (3,203)
Unearned restricted stock; 152,775 and 134,550 shares ................. (1,009) (538)
Accumulated other comprehensive loss .................................. (3,366) (2,628)
Total shareholders' equity ................................................. 188,674 170,946
------- -------
Total liabilities and shareholders' equity ................................. $ 766,911 $ 788,862
========= =========
</TABLE>
See accompanying notes.
F-4
<PAGE>
<TABLE>
<CAPTION>
COLUMBUS McKINNON CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
Year Ended March 31,
--------------------
1999 1998 1997
---- ---- ----
(In thousands,
except per share data)
<S> <C> <C> <C>
Net sales .............................................. $ 735,445 $ 561,823 $ 359,424
Cost of products sold .................................. 542,975 401,669 251,987
------- ------- -------
Gross profit ........................................... 192,470 160,154 107,437
Selling expenses ....................................... 52,059 46,578 32,550
General and administrative expenses .................... 39,850 33,361 24,636
Amortization of intangibles ............................ 15,479 10,297 5,197
------ ------ -----
107,388 90,236 62,383
------- ------ ------
Income from operations ................................. 85,082 69,918 45,054
Interest and debt expense .............................. 35,923 25,104 11,930
Interest and other income .............................. 1,565 1,940 1,168
----- ----- -----
Income before income taxes, minority interest and
extraordinary charge ................................ 50,724 46,754 34,292
Income tax expense ..................................... 23,288 22,776 15,617
------ ------ ------
Income before minority interest and extraordinary charge
27,436 23,978 18,675
Minority interest ...................................... - - (323)
------ ------ ------
Income before extraordinary charge ..................... 27,436 23,978 18,352
Extraordinary charge for early debt extinguishment ..... - (4,520) (3,198)
------ ------ ------
Net income ............................................. $ 27,436 $ 19,458 $ 15,154
========= ========= =========
Earnings per share data, basic:
Income before extraordinary charge for
debt extinguishment .......................... $ 1.94 $ 1.69 $ 1.39
Extraordinary charge for debt extinguishment ...... - (0.32) (0.24)
-------- -------- --------
Net income ........................................ $ 1.94 $ 1.37 $ 1.15
======== ======== ========
Earnings per share data, diluted:
Income before extraordinary charge for
debt extinguishment .......................... $ 1.92 $ 1.66 $ 1.39
Extraordinary charge for debt extinguishment ...... - (0.31) (0.24)
-------- -------- --------
Net income ........................................ $ 1.92 $ 1.35 $ 1.15
======== ======== ========
</TABLE>
See accompanying notes.
F-5
<PAGE>
<TABLE>
<CAPTION>
COLUMBUS McKINNON CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands, except share and per share data)
Common Addi- Accumulated
Stock tional ESOP Unearned Other Total
($.01 Paid-in Retained Debt Restricted Comprehensive Shareholders'
par value) Capital Earnings Guarantee Stock Income (Loss) Equity
---------- ------- -------- --------- ----- ------------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at March 31, 1996.......... $ 137 $ 94,283 $ 49,386 $ (5,238) $ (836) $ (110) $ 137,622
Comprehensive income:
Net income 1997.................... - - 15,154 - - - 15,154
Change in foreign currency
translation adjustment........... - - - - - (1,309) (1,309)
Net unrealized gain on investments. - - - - - 318 318
Change in minimum pension
liability adjustment............. - - - - - (111) (111)
-----
Total comprehensive income......... - - - - - - 14,052
Earned 105,601 ESOP shares......... - 665 - 1,037 - - 1,702
Restricted common stock granted,
19,800 shares; net of 3,111 - 289 - - (280) - 9
shares canceled....................
Earned portion of restricted stock. - 17 - - 295 - 312
Common dividends declared
$0.27 per share.................. - - (3,541) - - - (3,541)
--- ------ ------ ----- --- ----- -------
Balance at March 31, 1997.......... 137 95,254 60,999 (4,201) (821) (1,212) 150,156
Issued 897,114 common shares....... 9 3,881 - - - 3,890
Comprehensive income:
Net income 1998.................... - - 19,458 - - - 19,458
Change in foreign currency
translation adjustment........... - - - - - (1,527) (1,527)
Net unrealized gain on investments. - - - - - 558 558
Change in minimum pension
liability adjustment............. - - - - - (447) (447)
-----
Total comprehensive income......... - - - - - - 18,042
Earned 101,416 ESOP shares......... - 1,270 - 998 - - 2,268
Earned portion of restricted stock. - 20 - - 283 - 303
Common dividends declared
$0.28 per share.................. - - (3,713) - - - (3,713)
--- ------- ------ ----- --- ----- -------
Balance at March 31, 1998.......... $ 146 $ 100,425 $ 76,744 $ (3,203) $ (538) $ (2,628) $ 170,946
Comprehensive income:
Net income 1999.................... - - 27,436 - - - 27,436
Change in foreign currency
translation adjustment........... - - - - - (1,399) (1,399)
Net unrealized gain on investments. - - - - - 714 714
Change in minimum pension
liability adjustment............. - - - - - (53) (53)
----
Total comprehensive income........ - - - - - - 26,698
Earned 96,610 ESOP shares.......... - 1,108 - 1,020 - - 2,128
Repurchase of 479,900 common shares
by ESOP.......................... - - - (7,682) - - (7,682)
Restricted common stock granted,
19,500 - 780 - - (759) - 21
shares; net of 1,275 shares
canceled...........................
Earned portion of restricted stock. - - - - 288 - 288
Common dividends declared
$0.28 per share.................. - - (3,725) - - - (3,725)
--- ------- ------- ----- ----- ----- -------
Balance at March 31, 1999.......... $ 146 $ 102,313 $ 100,455 $ (9,865) $ (1,009) $ (3,366) $ 188,674
===== ========= ========= ======== ======== ======== =========
</TABLE>
See accompanying notes.
F-6
<PAGE>
<TABLE>
<CAPTION>
COLUMBUS McKINNON CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended March 31,
--------------------
1999 1998 1997
---- ---- ----
(In thousands)
Operating activities:
<S> <C> <C> <C>
Net income........................................................................ $27,436 $ 19,458 $15,154
Adjustments to reconcile net income to net cash provided by
operating activities:
Extraordinary charge for early debt extinguishment........................... - 4,520 3,198
Minority interest............................................................ - - 323
Depreciation and amortization................................................ 27,256 19,896 11,285
Deferred income taxes........................................................ (2,235) 55 4,816
Other........................................................................ 624 - 15
Changes in operating assets and liabilities net of effects from
businesses purchased:
Trade accounts receivable and unbilled revenues......................... 37 (8,224) (3,320)
Inventories............................................................. (865) (5,454) (2,177)
Prepaid expenses........................................................ 1,952 4,008 (1,721)
Other assets............................................................ (96) 2,135 (949)
Trade accounts payable and excess billings.............................. (5,940) (646) (586)
Accrued and non-current liabilities..................................... 9,324 2,672 2,848
Net cash provided by operating activities......................................... 57,493 38,420 28,886
Investing activities:
Purchase of marketable securities, net............................................ (1,976) (2,517) (2,098)
Capital expenditures.............................................................. (12,992) (11,406) (9,392)
Proceeds from sale of business.................................................... 8,801 - -
Purchase of businesses, net of cash acquired...................................... (19,958) (175,686) (203,577)
Net assets held for sale.......................................................... 2,182 4,575 (784)
Net cash used in investing activities............................................. (23,943) (185,034) (215,851)
Financing activities:
Proceeds from issuance of common stock, net....................................... - 1,914 -
Net (payments) borrowings under revolving line-of-credit agreements............... (28,194) 159,101 75,293
Repayment of debt................................................................. (8,179) (198,251) (78,528)
Proceeds from issuance of long-term debt, net..................................... - 203,357 206,000
Deferred financing costs incurred................................................. (1,272) (1,313) (10,000)
Dividends paid ................................................................... (3,725) (3,713) (4,390)
Repurchase of stock by ESOP....................................................... (7,682) - -
Change in ESOP debt guarantee..................................................... 1,020 998 (1,596)
Net cash (used in) provided by financing activities............................... (48,032) 162,093 186,779
Effect of exchange rate changes on cash........................................... (1,512) (1,525) (1,078)
Net change in cash and cash equivalents........................................... (15,994) 13,954 (1,264)
Cash and cash equivalents at beginning of year.................................... 22,861 8,907 10,171
Cash and cash equivalents at end of year.......................................... $6,867 $ 22,861 $ 8,907
Supplementary cash flows data:
Interest paid................................................................ $27,595 $ 26,553 $ 8,683
Income taxes paid............................................................ $22,829 $ 15,040 $ 14,993
</TABLE>
See accompanying notes.
F-7
<PAGE>
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Description of Business and Business Acquisitions
Columbus McKinnon Corporation (the Company) is a leading broad-line
designer, manufacturer and supplier of sophisticated material handling products
and integrated material handling solutions that are widely distributed to
industrial, automotive, and consumer markets worldwide. The Company's material
handling products are sold, domestically and internationally, principally to
third party distributors in commercial and consumer distribution channels. The
Company's integrated material handling solutions businesses primarily deal with
end users, both domestically and internationally (primarily Europe) in the
automotive and industrial markets. During fiscal 1999, approximately 74% of
sales were to customers in the United States.
On March 1, 1999, GL International, Inc. ("GL"), was merged with and into
the Company through the issuance of 897,114 shares of newly issued Company stock
and options to purchase 154,848 shares of Company stock for all issued and
outstanding stock and options of GL. GL is a full-service designer and builder
of industrial overhead bridge and jib cranes and related components. The merger
was accounted for as a pooling of interests and, accordingly, the 1999 and 1998
consolidated financial statements have been restated to include the accounts of
GL from the date of GL's formation, April 1, 1997. The fair market value of the
stock and options exchanged was approximately $20.6 million. In connection with
the merger, the Company incurred $560,000 of merger related costs which were
charged to operations during the year ended March 31, 1999. Net sales and net
income of the separate companies for the periods preceding the merger were as
follows:
<TABLE>
<CAPTION>
Nine Months Ended Year Ended
December 27,1998 March 31, 1998
----------------- --------------
(In thousands)
Net sales:
<S> <C> <C>
Columbus McKinnon, as reported............. $ 510,865 $ 510,731
GL International, Inc...................... 51,558 59,860
Intercompany eliminations.................. (5,455) (8,768)
------- -------
Combined................................... $ 556,968 $ 561,823
======= =======
Net income:
Columbus McKinnon, as reported............. $ 16,865 $ 18,901
GL International, Inc...................... 1,736 1,140
Intercompany eliminations.................. 142 (583)
------ ------
Combined................................... $ 18,743 $ 19,458
====== ======
</TABLE>
On January 29, 1999, the Company acquired all of the outstanding stock of
Camlok Lifting Clamps Limited ("Camlok") and the net assets of the Tigrip
product line ("Tigrip") from Schmidt-Krantz & Co. GmbH for $10.6 million in
cash. The acquisition was accounted for as a purchase and was financed through
cash, a revolving credit facility, and a $4 million term note. Camlok
manufactures plate clamps, crane weighers and related products and is based in
Chester, England, while the Tigrip line of standard and specialized plate clamps
is produced in Germany. The consolidated statement of income and the
consolidated statement of cash flows for the year ended March 31, 1999 include
Camlok and Tigrip activity since their January 29, 1999 acquisition by the
Company.
F-8
<PAGE>
1. Description of Business and Business Acquisitions (continued)
On December 4, 1998, the Company acquired all of the outstanding stock of
Societe D'Exploitation des Raccords Gautier ("Gautier"), a French-based
manufacturer of industrial components. The total cost of the acquisition, which
was accounted for as a purchase, was approximately $3 million in cash,
consisting of $2.4 million financed by proceeds from the Company's revolving
debt facility and the assumption of certain debt. The consolidated statement of
income and the consolidated statement of cash flows for the year ended March 31,
1999 include Gautier activity since its December 4, 1998 acquisition by the
Company.
On August 21, 1998 the Company acquired the net assets of Abell-Howe Crane
division ("Abell-Howe") of Abell-Howe Company, a regional manufacturer of jib,
gantry, and bridge cranes. The total cost of the acquisition, which was
accounted for as a purchase, was approximately $7 million of cash, which was
financed by proceeds from the Company's revolving debt facility. The
consolidated statement of income and the consolidated statement of cash flows
for the year ended March 31, 1999 include Abell-Howe activity since its August
21, 1998 acquisition by the Company.
On August 7, 1998 the Company sold its Mechanical Products division, a
producer of circuit controls and protection devices, for $11.5 million,
consisting of $9.1 million in cash and a $2.4 million note receivable, to
Mechanical Products' senior management team. The selling price approximated the
net book value of the division. The consolidated statement of income and the
consolidated statement of cash flows for the year ended March 31, 1999 include
Mechanical Products activity through its August 7, 1998 sale by the Company.
On March 31, 1998, the Company acquired all of the outstanding stock of
LICO, Inc. ("LICO"), a leading designer, manufacturer and installer of custom
conveyor and automated material handling systems primarily for the automotive
industry. The total cost of the acquisition, which was accounted for as a
purchase, was approximately $155 million of cash, which was financed by proceeds
from the Company's revolving credit facility and a private placement of senior
subordinated notes, both of which also closed effective March 31, 1998. The
consolidated statement of income and the consolidated statement of cash flows
for the year ended March 31, 1998 do not include any LICO activity.
On January 7, 1998, the Company acquired all of the outstanding stock of
Univeyor A/S ("Univeyor"), a Denmark-based designer, manufacturer and
distributor of automated material handling systems for the industrial market,
and has accounted for the acquisition as a purchase. The cost of the acquisition
was approximately $15 million of cash plus certain debt, financed by the
Company's revolving debt facility. The consolidated statement of income and the
consolidated statement of cash flows for the year ended March 31, 1998 include
Univeyor activity since its January 7, 1998 acquisition by the Company.
On October 17, 1996, through a tender offer, the Company acquired
approximately 72% of the outstanding stock (on a diluted basis) of Spreckels
Industries, Inc., now known as Yale Industrial Products, Inc. ("Yale"), a
manufacturer of a wide range of industrial products, including hoists, scissor
lift tables, mechanical jacks, rotating joints, actuators and circuit protection
devices. On January 3, 1997 the Company acquired the remaining outstanding
shares, effected a merger, and accounted for the acquisition as a purchase.
F-9
<PAGE>
1. Description of Business and Business Acquisitions (continued)
The total cost of the acquisition was approximately $270 million, consisting of
$200 million of cash and $70 million of acquired Yale debt. The consolidated
statement of income and the consolidated statement of cash flows for the year
ended March 31, 1997 include Yale activity since its October 17, 1996
acquisition by the Company. The minority interest share of Yale's earnings since
acquisition through January 3, 1997 has been appropriately segregated from
consolidated net income for the year ended March 31, 1997.
Included with the Yale acquired assets were real estate properties and
equipment retained from Yale's April 19, 1996 sale of two of its subsidiaries in
unrelated businesses. Certain assets were sold during fiscal 1998 and 1999 and
the remaining assets held for sale are expected to be sold in fiscal 2000. They
have been recorded at their estimated realizable values net of disposal costs,
separately reflected on the consolidated balance sheet and amounting to
$8,214,000 and $10,396,000 as of March 31, 1999 and 1998, respectively.
On December 19, 1996, the Company acquired all of the outstanding stock of
Lister Bolt & Chain Ltd. and of Lister Chain & Forge, Inc. (together known as
"Lister"), a chain and forgings manufacturer, and has accounted for the
acquisition as a purchase. The total cost of the acquisition was approximately
$7 million of cash, which was financed by the Company's revolving debt facility.
The consolidated statement of income and the consolidated statement of cash
flows for the year ended March 31, 1997 include Lister activity since its
December 19, 1996 acquisition by the Company.
The following table presents pro forma summary information, which is not
covered by the report of independent auditors, for the years ended March 31,
1999 and 1998, as if the Abell-Howe, LICO, and Univeyor acquisitions and related
borrowings and also the private placement of senior subordinated notes and the
sale of Mechanical Products, had occurred as of April 1, 1997 which is the
beginning of fiscal 1998. The pro forma information is provided for
informational purposes only. It is based on historical information and does not
necessarily reflect the actual results that would have occurred nor is it
necessarily indicative of future results of operations of the combined
enterprise:
<TABLE>
<CAPTION>
Year Ended March 31,
--------------------
1999 1998
---- ----
(In thousands,
except per share data)
Pro forma:
<S> <C> <C>
Net sales..................................................................... $732,143 $735,525
Income from operations........................................................ 84,702 81,963
Income before extraordinary charge............................................ 27,355 24,354
Net income.................................................................... 27,355 19,834
Earnings per share, basic:
Income before extraordinary charge........................................ $ 1.93 $ 1.71
Extraordinary charge...................................................... - (0.32)
------ ------
Net income................................................................ $ 1.93 $ 1.39
====== ======
Earnings per share, diluted:
Income before extraordinary charge........................................ $ 1.91 $ 1.69
Extraordinary charge...................................................... - (0.32)
------ ------
Net income............................................................... $ 1.91 $ 1.37
====== ======
</TABLE>
F-10
<PAGE>
2. Accounting Principles and Practices
Consolidation
These consolidated financial statements include the accounts of the Company
and its domestic and foreign subsidiaries; all significant intercompany accounts
and transactions have been eliminated.
Foreign Currency Translations
The Company translates foreign currency financial statements as described
in Financial Accounting Standards (FAS) No. 52. Under this method, all items of
income and expense are translated at average exchange rates for the year. All
assets and liabilities are translated at the year-end exchange rate. Gains or
losses on translations are recorded in accumulated other comprehensive income
(loss) in the shareholders' equity section of the balance sheet.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements. Estimates also affect the reported amounts of revenue and expenses.
Actual results could differ from those estimates.
Revenue Recognition and Concentration of Credit Risk
Sales are recorded when products are shipped to a customer, except as
described below. The Company performs ongoing credit evaluations of its
customers' financial condition, but generally does not require collateral to
support customer receivables. The credit risk is controlled through credit
approvals, limits and monitoring procedures. The Company established an
allowance for doubtful accounts based upon factors surrounding the credit risk
of specific customers, historical trends and other factors.
LICO and Univeyor recognize contract revenues under the percentage of
completion method, measured by comparing direct costs incurred to total
estimated direct costs. Changes in job performance, job conditions and estimated
profitability, including those arising from final contract settlements, may
result in revisions to costs and income and are recognized in the period in
which the revisions are determined. In the event that a loss is anticipated on
an uncompleted contract, a provision for the estimated loss is made at the time
it is determined. Billings on contracts may precede or lag revenues earned, and
such differences are reported in the balance sheet as current liabilities
(excess billings) and current assets (unbilled revenues), respectively.
As of March 31, 1999, approximately $26 million ($26 million in 1998) of
trade accounts receivable was concentrated in the automotive industry, including
retainages amounting to $9,061,000 ($7,870,000 in 1998). The accounts receivable
included $22,007,000 ($13,840,000 in 1998) due from General Motors Corporation.
This one customer accounted for $96,663,000 or 13% of consolidated net sales and
is included within the Solutions - Automotive segment for the year ended March
31, 1999.
F-11
<PAGE>
2. Accounting Principles and Practices (continued)
Concentrations of Labor
Approximately 36% of the Company's employees are represented by twelve
separate domestic and Canadian collective bargaining agreements which terminate
at various times between September 26, 1999 and April 30, 2003. Approximately 3%
of the labor force is covered by collective bargaining agreements that will
expire within one year. In addition, the Company hires union production workers
for field installation under its material handling systems contracts.
Cash and Cash Equivalents
The Company considers as cash equivalents all highly liquid investments
with an original maturity of three months or less.
Inventories
Inventories are valued at the lower of cost or market. Costs of
approximately 49% of inventories at March 31, 1999 and 1998 have been determined
using the LIFO (last-in, first-out) method. Costs of other inventories have been
determined using the FIFO (first-in, first-out) or average cost method. FIFO
cost approximates replacement cost.
Property, Plant, and Equipment
Property, plant, and equipment are stated at cost and depreciated
principally using the straight-line method over their respective estimated
useful lives (buildings and building equipment-15 to 40 years; machinery and
equipment-3 to 18 years). When depreciable assets are retired, or otherwise
disposed of, the cost and related accumulated depreciation are removed from the
accounts and any resulting gain or loss is reflected in operating results.
Goodwill
It is the Company's policy to account for goodwill and other intangible
assets at the lower of amortized cost or fair value based on discounted cash
flows, if indicators of impairment exist. As a result of the Yale, Lister,
Univeyor, LICO, Abell-Howe, Gautier, Camlok and Tigrip acquisitions, the Company
recorded approximately $200 million, $2 million, $9 million, $123 million, $3
million, $1 million, and $6 million of goodwill, respectively, which is being
amortized on a straight-line basis over twenty five years. As a result of the
sale of Mechanical Products, the Company reduced goodwill by approximately $8
million. At March 31, 1999 and 1998 accumulated amortization was $29,864,000 and
$14,979,000, respectively.
F-12
<PAGE>
2. Accounting Principles and Practices (continued)
Marketable Securities
All of the Company's investments, which consist of equity securities and
corporate and governmental obligations, have been classified as
available-for-sale securities and are therefore recorded at their fair values
with the unrealized gains and losses, net of tax, reported in accumulated other
comprehensive income (loss) within shareholders' equity. Estimated fair value is
based on published trading values at the balance sheet dates. The amortized cost
of debt securities is adjusted for amortization of premiums and accretion of
discounts to maturity. The cost of securities sold is based on the specific
identification method. Interest and dividend income are included in interest and
other income on the consolidated statements of income.
The marketable securities are carried as long-term assets since they are
retained for the settlement of a portion of the Company's general liability and
products liability insurance claims filed through CM Insurance Company, Inc., a
wholly owned captive insurance subsidiary.
Fair Value of Financial Instruments
The fair value of interest rate swap and cap agreements is the amount that
the Company would receive or pay to terminate the agreements, based on quoted
market prices and considering current interest rates and remaining maturities.
Research and Development
Research and development costs as defined in FAS No. 2, for the years ended
March 31, 1999, 1998 and 1997 were $1,663,000, $1,497,000 and $1,283,000,
respectively.
3. Unbilled Revenues and Excess Billings
<TABLE>
<CAPTION>
March 31,
---------
1999 1998
---- ----
(In thousands)
<S> <C> <C>
Costs incurred on uncompleted contracts............................................ $ 255,706 $ 194,359
Estimated earnings................................................................. 54,013 38,255
------- -------
Revenues earned to date............................................................ 309,719 232,614
Less billings to date.............................................................. 304,956 217,633
------- -------
$ 4,763 $ 14,981
======= ========
The net amounts above are included in the consolidated balance sheets under the following captions:
March 31,
---------
1999 1998
---- ----
(In thousands)
Unbilled revenues.................................................................. $9,821 $ 19,634
Excess billings.................................................................... (5,058) (4,653)
------- ---------
$4,763 $ 14,981
======= =========
F-13
<PAGE>
4. Inventories
Inventories consisted of the following:
March 31,
---------
1999 1998
---- ----
(In thousands)
At cost-FIFO basis:
Raw materials................................................................... $ 54,648 $57,103
Work-in-process................................................................. 21,663 24,696
Finished goods.................................................................. 45,042 37,089
------ ------
121,353 118,888
LIFO cost less than FIFO cost........................................................ (5,374) (3,762)
------- -------
Net inventories...................................................................... $115,979 $115,126
======== ========
</TABLE>
5. Marketable Securities
Marketable securities are retained for the settlement of a portion of the
Company's general liability and products liability insurance claims filed
through CM Insurance Company, Inc. (see Notes 2 and 13). The following is a
summary of available-for-sale securities at March 31, 1999:
<TABLE>
<CAPTION>
Gross Gross Estimated
Unrealized Unrealized Fair
Cost Gains Losses Value
(In thousands)
<S> <C> <C> <C> <C>
Government securities................................. $ 7,668 $ 203 $ 1 $ 7,870
U. S. corporate securities............................ 700 31 - 731
----- ----- --- -----
Total debt securities............................ 8,368 234 1 8,601
Equity securities..................................... 7,134 3,710 90 10,754
----- ----- --- ------
$15,502 $ 3,944 $ 91 $19,355
======= ======= ==== =======
The following is a summary of available-for-sale securities at March 31, 1998:
Gross Gross Estimated
Unrealized Unrealized Fair
Cost Gains Losses Value
(In thousands)
Government securities................................. $ 10,180 $ 285 $ 13 $ 10,452
U. S. corporate securities............................ 1,107 36 1 1,142
------ ----- --- ------
Total debt securities............................ 11,287 321 14 11,594
Equity securities..................................... 2,847 2,247 23 5,071
------ ----- --- ------
$14,134 $ 2,568 $ 37 $16,665
======= ======= ==== =======
</TABLE>
F-14
<PAGE>
5. Marketable Securities (continued)
The amortized cost and estimated fair value of debt and equity securities
at March 31, 1999, by contractual maturity, are shown below:
<TABLE>
<CAPTION>
Estimated
Fair
Cost Value
---- -----
(In thousands)
<S> <C> <C>
Due in one year or less.................................................... $ 4,688 $ 4,688
Due after one year through three years..................................... 100 107
Due after three years...................................................... 3,580 3,806
----- -----
8,368 8,601
Equity securities.......................................................... 7,134 10,754
----- ------
$15,502 $19,355
======= =======
Net unrealized gains included in the balance sheet amounted to $3,853,000
and $2,531,000 at March 31, 1999 and 1998, respectively. The amounts, net of
related income taxes of $1,541,000 and $933,000 at March 31, 1999 and 1998,
respectively, are reflected as a component of accumulated other comprehensive
income (loss) within shareholders' equity.
6. Property, Plant, and Equipment
Consolidated property, plant, and equipment of the Company consisted of the
following:
March 31,
---------
1999 1998
---- ----
(In thousands)
Land and land improvements......................................................... $ 4,592 $ 4,980
Buildings.......................................................................... 31,880 29,570
Machinery, equipment, and leasehold improvements................................... 92,991 81,418
Construction in progress........................................................... 2,589 3,162
------ ------
132,052 119,130
Less accumulated depreciation...................................................... 42,048 31,468
----- ------
Net property, plant, and equipment................................................. $ 90,004 $87,662
======== =======
7. Accrued Liabilities and Other Non-current Liabilities
Consolidated accrued liabilities of the Company included the following:
March 31,
---------
1999 1998
---- ----
(In thousands)
Accrued payroll..................................................................... $12,233 $17,228
Accrued pension cost................................................................ 4,508 5,195
Interest payable.................................................................... 10,394 499
Income taxes payable................................................................ 10,133 5,546
Other accrued liabilities........................................................... 17,063 15,937
------ ------
$54,331 $44,405
======= =======
F-15
<PAGE>
7. Accrued Liabilities and Other Non-current Liabilities (continued)
Consolidated other non-current liabilities of the Company included the following:
March 31,
---------
1999 1998
---- ----
(In thousands)
Accumulated postretirement benefit obligation....................................... $15,379 $17,154
Accrued general and product liability costs......................................... 11,416 11,688
Other non-current liabilities....................................................... 9,200 17,616
----- ------
$35,995 $46,458
======= =======
</TABLE>
8. Long-Term Debt
Consolidated long-term debt payable to banks (except as noted) of the
Company consisted of the following:
<TABLE>
<CAPTION>
March 31,
---------
1999 1998
---- ----
(In thousands)
<S> <C>
Revolving Credit Facility with availability up to $300 million,due
March 31, 2003 with interest payable at varying Eurodollar rates
based on LIBOR plus a spread determined by the Company's
leverage ratio, amounting to 112.5 basis points at March
31, 1999 (6.09% and 6.85% at March 31, 1999 and 1998)............................. $212,400 $ 240,000
Revolving credit facilities, term note, subordinated term loan, and
mortgage note payable repaid and retired March 1999............................... - 10,265
Industrial Development Revenue Bonds payable annually at $625,000
through 1999, $620,000 thereafter through 2001, $315,000 in 2002,
and $52,000 in 2003 in quarterly sinking fund installments plus
interest payable at varying effective rates (3.58% and 3.98% at
March 31, 1999 and 1998).......................................................... 1,608 2,232
Term loan of foreign subsidiary payable in two installments of
$1,639,000 and $2,186,000, due on December 30, 2000 and
December 30, 2001, respectively; interest payable monthly at
4.255%............................................................................ 3,825 -
Employee Stock Ownership Plan term loans payable in quarterly
installments of $148,000 through January 2002 and $1,099,000
in April 2002 plus interest payable at a Eurodollar rate based on
LIBOR plus a spread determined by the Company's leverage ratio
(6.62% and 7.34% at March 31, 1999 and 1998)................................. 3,173 3,765
Other senior debt................................................................... 3,085 2,847
----- -----
Total senior debt................................................................... 224,091 259,109
8 1/2% Senior Subordinated Notes due March 31, 2008 with interest
payable in semi-annual installments at 8.45% effective rate, recorded
net of unamortized discount of $479,000 ($532,000 at March 31,
1998).............................................................................
199,521 199,468
------- -------
Total............................................................................... 423,612 458,577
Less current portion................................................................ 1,926 2,180
----- -----
$421,686 $456,397
======== ========
</TABLE>
F-16
<PAGE>
8. Long-Term Debt (continued)
On March 31, 1998, the Company entered into a new revolving credit facility
("1998 Revolving Credit Facility") with a group of financial institutions.
Concurrently, the Company issued $200 million of 8 1/2% Senior Subordinated
Notes ("the 1/2% Notes") due March 31, 2008. Proceeds from both the bank
refinancing and the note offering were used to finance the acquisition of LICO,
and to repay the outstanding balances and retire the Company's then existing
Term Loan A, Term Loan B and revolving credit facility.
The 1998 Revolving Credit Facility is secured by all equipment, inventory,
receivables, subsidiary stock (limited to 65% for foreign subsidiaries) and
intellectual property. The corresponding credit agreement places certain debt
covenant restrictions on the Company including, but not limited to, maximum
annual cash dividends of $10 million. Upon refinancing its bank debt in 1998,
the Company wrote off unamortized financing costs of $7,532,000 and recorded an
extraordinary charge of $4,520,000, which is net of $3,012,000 of tax.
To manage its exposure to interest rate fluctuations, the Company has an
interest rate swap with a notional amount of $3.5 million from January 2, 1999
through July 2, 2000, based on LIBOR at 5.9025%. In order to comply with its
credit agreements, the Company also has a LIBOR-based interest rate cap on $49.5
million of debt through December 16, 1999 at 10%. Net payments or receipts under
the swap and cap agreements are recorded as adjustments to interest expense. The
carrying amount of the Company's debt instruments approximates the fair values.
The Industrial Development Revenue Bonds are held by institutional
investors and are guaranteed by a bank letter of credit (IDRB letter of credit),
which is collateralized by the assets also securing the 1998 Revolving Credit
Facility. The Employee Stock Ownership Plan term loans (ESOP loans) are
guaranteed by the Company and are collateralized by an equivalent number of
shares of Company common stock. The ESOP loans are not further collateralized.
Provisions of the 8 1/2% Notes include, without limitation, restrictions of
liens, indebtedness, asset sales, and dividends and other restricted payments.
Prior to April 1, 2003, the 8 1/2% Notes are redeemable at the option of the
Company, in whole or in part, at the Make-Whole Price (as defined in the 8 1/2%
Notes agreement). On or after April 1, 2003, they are redeemable at prices
declining annually to 100% on and after April 1, 2006. In addition, on or prior
to April 1, 2001, the Company may redeem up to 35% of the outstanding notes with
the proceeds of equity offerings at a redemption price of 108.5%, subject to
certain restrictions. In the event of a Change of Control (as defined in the
indenture for such notes), each holder of the 8 1/2% Notes may require the
Company to repurchase all or a portion of such holder's 8 1/2% Notes at a
purchase price equal to 101% of the principal amount thereof. The 8 1/2% Notes
are guaranteed by certain existing and future domestic subsidiaries and are not
subject to any sinking fund requirements.
The principal payments scheduled to be made as of March 31, 1999 on the
above debt, for the next five annual periods subsequent thereto, are as follows
(in thousands):
2000................................... $ 1,926
2001................................... 3,213
2002................................... 3,422
2003................................... 213,870
2004................................... 295
F-17
<PAGE>
8. Long-Term Debt (continued)
In December 1996, the Company tendered to purchase the outstanding Yale
Senior Secured Notes at a premium and redeemed $69,480,000 of the $70,000,000
face value which was outstanding. The Company recorded an extraordinary charge
of $5,331,000 ($3,198,000 net of taxes), consisting of redemption premiums,
costs to exercise the tender offer, and write-off of deferred financing costs
related to early retirement of debt. The debt extinguishment was funded by the
Company's revolving credit facility. The remaining $520,000 was redeemed during
fiscal 1999.
As of March 31, 1999, the Company had letters of credit outstanding of $3.6
million, including those issued as security for the IDRBs as referred to above.
9. Retirement Plans
The Company provides defined benefit pension plans to certain employees.
The following provides a reconciliation of benefit obligations, plan assets, and
funded status of plans:
<TABLE>
<CAPTION>
March 31,
---------
1999 1998
---- ----
(In thousands)
Change in benefit obligation:
<S> <C> <C>
Benefit obligation at beginning of year........................................ $ 69,680 $62,093
Benefit obligation of sold businesses.......................................... (9,590) -
Service cost................................................................... 3,151 3,244
Interest cost.................................................................. 4,489 4,787
Effect of amendments........................................................... - (522)
Actuarial loss................................................................. 5,866 3,476
Benefits paid.................................................................. (2,975) (3,398)
------ ------
Benefit obligation at end of year............................................. $ 70,621 $ 69,680
======== ========
Change in plan assets:
Fair value of plan assets at beginning of year................................. 69,203 54,844
Assets of sold plans........................................................... (10,348) -
Actual return on plan assets................................................... 7,015 13,706
Employer contribution.......................................................... 3,381 4,051
Benefits paid.................................................................. (2,975) (3,398)
------ ------
Fair value of plan assets at end of year....................................... $66,276 $69,203
======= =======
Funded Status ................................................................. $ (4,345) $ (477)
Unrecognized transition obligation............................................. (85) (113)
Unrecognized actuarial loss (gain)............................................. 1,661 (3,037)
Unrecognized prior service cost................................................ 1,610 855
----- ---
Net amount recognized.......................................................... $ (1,159) $ (2,772)
========= =========
F-18
<PAGE>
9. Retirement Plans (continued)
Amounts recognized in the consolidated balance sheets are as follows:
Intangible asset............................................................... $ 1,172 $ 776
Accrued liabilities............................................................ (4,066) (5,195)
Deferred tax effect of equity charge........................................... 694 659
Accumulated other comprehensive income......................................... 1,041 988
Net amount recognized.......................................................... $(1,159) $(2,772)
</TABLE>
Net periodic pension cost included the following components:
<TABLE>
<CAPTION>
Year Ended March 31,
--------------------
1999 1998 1997
---- ---- ----
(In thousands)
<S> <C> <C> <C>
Service costs-benefits earned during the period............................ $3,151 $3,244 $2,354
Interest cost on projected benefit obligation.............................. 4,489 4,787 2,744
Expected return on plan assets............................................. (5,124) (6,670) (2,966)
Net amortization........................................................... 167 1,951 475
--- ----- ---
Net periodic pension cost.................................................. $2,683 $3,312 $2,607
====== ====== ======
</TABLE>
The aggregate accumulated benefit obligation and aggregate fair value of
plan assets for the pension plans with accumulated benefit obligations in excess
of plan assets were $9,932,000 and $7,293,000, respectively as of March 31, 1999
and $11,311,000 and $9,090,000, respectively as of March 31, 1998.
The unrecognized transition obligation is being amortized on a
straight-line basis over 20 years. Unrecognized gains and losses are amortized
on a straight-line basis over the average remaining service period of active
participants.
The weighted-average discount rate used in determining the actuarial
present value of the projected benefit obligation of all of the defined benefit
plans was 7% and 7 1/2% as of March 31, 1999 and 1998, respectively. Future
average compensation increases are assumed to be 4.0% and 4.3% per year as of
March 31, 1999 and 1998, respectively. The weighted-average expected long-term
rate of return on plan assets used in determining the expected return on plan
assets included in net periodic pension cost was 8 7/8% for the each of the
years ended March 31, 1999, 1998 and 1997. Plan assets consist of equities,
corporate and government securities, and fixed income annuity contracts.
The Company's funding policy with respect to the defined benefit pension
plans is to contribute annually at least the minimum amount required by the
Employee Retirement Income Security Act of 1974 (ERISA).
The Company also sponsors defined contribution plans covering substantially
all domestic employees. Participants may elect to contribute basic
contributions. Effective April 1, 1998, these plans provide for employer
contributions based primarily on employee participation. The Company recorded a
charge for such contributions of approximately $1,410,000 during 1999.
F-19
<PAGE>
10. Employee Stock Ownership Plan (ESOP)
The AICPA Statement of Position 93-6, "Employers' Accounting for Employee
Stock Ownership Plans" requires that compensation expense for ESOP shares be
measured based on the fair value of those shares when committed to be released
to employees, rather than based on their original cost. Also, dividends on those
ESOP shares that have not been allocated or committed to be released to ESOP
participants are not reflected as a reduction of retained earnings. Rather,
since those dividends are used for debt service, a charge to compensation
expense is recorded. Furthermore, ESOP shares that have not been allocated or
committed to be released are not considered outstanding for purposes of
calculating earnings per share.
The obligation of the ESOP to repay borrowings incurred previously to
purchase shares of the Company's common stock is guaranteed by the Company; the
unpaid balance of such borrowings, therefore, has been reflected in the
accompanying consolidated balance sheet as a liability. An amount equivalent to
the cost of the collateralized common stock and representing deferred employee
benefits has been recorded as a deduction from shareholders' equity.
Substantially all of the Company's domestic non-union employees, excluding
LICO, Abell-Howe and GL employees, are participants in the ESOP. Contributions
to the plan result from the release of collateralized shares as debt service
payments are made. Compensation expense amounting to $2,128,000, $2,268,000 and
$1,704,000 in fiscal 1999, 1998 and 1997, respectively, is recorded based on the
guarantee release of the ESOP shares at their fair market value. Dividends on
allocated ESOP shares are recorded as a reduction of retained earnings and are
applied toward debt service.
During fiscal 1999, the ESOP borrowed $7,682,000 from the Company and
purchased 479,900 shares on the open market at an average cost of $16 per share.
At March 31, 1999 and 1998, 886,684 and 855,337 of ESOP shares,
respectively, were allocated or available to be allocated to participants'
accounts. At March 31, 1999 and 1998, 708,382 and 325,092 of ESOP shares were
pledged as collateral to guarantee the ESOP term loans.
The fair market value of unearned ESOP shares at March 31, 1999 amounted to
$14,256,000.
11. Postretirement Benefit Obligation
The Company sponsors defined benefit postretirement health care plans that
provide medical and life insurance coverage to Yale domestic retirees and their
dependents. Prior to the acquisition of Yale, the Company did not sponsor any
postretirement benefit plans. The Company pays the majority of the medical costs
for Yale retirees and their spouses who are under age 65. For retirees and
dependents of retirees who retired prior to January 1, 1989, and are age 65 or
over, the Company contributes 100% toward the American Association of Retired
Persons ("AARP") premium frozen at the 1992 level. For retirees and dependents
of retirees who retired after January 1, 1989, the Company contributes $35 per
month toward the AARP premium. The life insurance plan is noncontributory.
F-20
<PAGE>
11. Postretirement Benefit Obligation (continued)
The Company's postretirement health benefit plans are not funded. In
accordance with FAS No. 132 "Employers' Disclosures about Pensions and Other
Postretirement Benefits," the following sets forth a reconciliation of benefit
obligations and the funded status
of the plan:
<TABLE>
<CAPTION>
March 31,
---------
1999 1998
---- ----
(In thousands)
Change in benefit obligation:
<S> <C> <C>
Benefit obligation at beginning of year....................................... $ 16,509 $17,057
Service cost.................................................................. 257 348
Interest cost................................................................. 1,061 1,203
Effect of amendments.......................................................... (4,035) -
Actuarial loss (gain)......................................................... 1,713 (645)
Benefits paid................................................................. (1,475) (1,454)
Curtailment effect............................................................ (1,618) -
----- --
Benefit obligation at end of year............................................ $ 12,412 $16,509
======== =======
Funded Status ................................................................ $(12,412) $(16,509)
Unrecognized actuarial loss (gain)............................................ 1,068 (645)
Unrecognized prior service gain............................................... (4,035) -
----- --
Net amount recognized in other non-current liabilities........................ $(15,379) $(17,154)
======== ========
</TABLE>
Net periodic postretirement benefit cost included the following components
since the October 17, 1996 Yale acquisition:
<TABLE>
<CAPTION>
Year Ended March 31,
--------------------
1999 1998 1997
---- ---- ----
(In thousands)
<S> <C> <C> <C>
Service cost-benefits attributed to service during the period........... $ 257 $ 348 $187
Interest cost........................................................... 1,061 1,203 609
----- ----- ---
Net periodic postretirement benefit cost........................... $1,318 $1,551 $796
====== ====== ====
</TABLE>
For measurement purposes, a 6.5% annual rate of increase in the per capita
cost of postretirement medical benefits was assumed at the beginning of the
period; the rate was assumed to decrease 0.5% per year to 5.5% by 2001. The
discount rate used in determining the accumulated postretirement benefit
obligation was 7% and 7 1/2% as of March 31, 1999 and 1998, respectively.
Assumed medical claims cost trend rates have an effect on the amounts
reported for the health care plans. A one-percentage point change in assumed
health care cost trend rates would have the following effects:
<TABLE>
<CAPTION>
One Percentage One Percentage
Point Increase Point Decrease
(In thousands)
<S> <C> <C>
Effect on total of service and interest cost components......... $ 86 $ (79)
Effect on postretirement obligation............................. 600 (541)
</TABLE>
F-21
<PAGE>
12. Earnings per Share and Stock Plans
Earnings per Share
In 1997 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings per Share" (FAS No. 128). FAS
No. 128 replaced the previously reported primary and fully diluted earnings per
share with basic and diluted earnings per share. Unlike primary earnings per
share, basic earnings per share excludes any dilutive effects of options,
warrants, and convertible securities. Diluted earnings per share is very similar
to the previously reported fully diluted earnings per share. All earnings per
share amounts for all periods have been presented, and where necessary, restated
to conform to the FAS No. 128 requirements. The following table sets forth the
computation of basic and diluted earnings per share before extraordinary charge
for debt extinguishment:
<TABLE>
<CAPTION>
Year Ended March 31,
--------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
(In thousands)
Numerator for basic and diluted earnings per share:
Income before extraordinary charge..................................... $27,436 $23,978 $18,352
======= ======= =======
Denominators:
Weighted-average common stock outstanding-denominator
for basic EPS........................................................ 14,137 14,221 13,210
Effect of dilutive employee stock options.............................. 157 206 5
--- --- --
Adjusted weighted-average common stock outstanding and
assumed conversions-denominator for diluted EPS...................... 14,294 14,427 13,215
====== ====== ======
</TABLE>
The weighted-average common stock outstanding shown above is net of
unallocated ESOP shares (see Note 10).
Stock Plans
The Company maintains two stock option plans, a Non-Qualified Stock Option
Plan ("Non-Qualified Plan") and an Incentive Stock Option Plan ("Incentive
Plan"). Under the Non-Qualified Plan, options may be granted to officers and
other key employees of the Company as well as to non-employee directors and
advisors. The Company has not granted any options under the Non-Qualified Plan
and accordingly, at March 31, 1999, 250,000 shares were reserved for grant under
that plan. Options granted under the Incentive Plan become exercisable over a
four-year period at the rate of 25% per year commencing one year from the date
of grant at an exercise price of not less than 100% of the fair market value of
the common stock on the date of grant. Any option granted under this plan may be
exercised not earlier than one year and not later than ten years from the date
such option is granted.
F-22
<PAGE>
12. Earnings per Share and Stock Plans (continued)
A summary of Incentive Plan option transactions during each of the three
fiscal years in the period ended March 31, 1999 is as follows:
<TABLE>
<CAPTION>
Year Ended March 31,
--------------------
Number of Shares 1999 1998 1997
---------------- ---------------------------------
<S> <C> <C> <C>
Outstanding at beginning of year 200,000 200,000 -
Granted 31,000 - 200,000
Canceled (32,500) - -
Exercised - - -
----------------------------------
Outstanding at end of year 198,500 200,000 200,000
==================================
Exercisable at end of year 92,500 50,000 -
Available for grant at end of year 1,051,500 1,050,000 1,050,000
Price range of options outstanding $15.50-$29.00 $15.50 $15.50
</TABLE>
In conjunction with the March 1, 1999 merger of GL International, Inc. (see
Note 1), outstanding GL options which were originally issued in fiscal years
1999 and 1998 became fully vested and were converted into options to acquire
154,848 Company shares at prices of $4.34 to $17.36. Those options expire
approximately three years after the date of their original issuance, ranging
from September 30, 1999 through June 5, 2001.
The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" (APB 25) in accounting for its
employee stock options because, as discussed below, the alternative fair value
accounting provided for under FAS No. 123, "Accounting for Stock-Based
Compensation," requires use of option valuation models that were not developed
for use in valuing employee stock options. Under APB 25, because the exercise
price of the Company's employee stock options equals the market price of the
underlying stock on the grant date, no compensation expense is recognized.
Pro forma information regarding net income and earnings per share is
required by FAS No. 123, and has been determined as if the Company had accounted
for its employee stock options under the fair value method of that Statement.
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
F-23
<PAGE>
12. Earnings per Share and Stock Plans (continued)
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The fair value
for issued options was estimated at the date of grant using a Black-Scholes
option pricing model with the following weighted-average assumptions and
yielding the following pro forma results:
<TABLE>
<CAPTION>
Year Ended March 31,
--------------------
1999 1998 1997
---------------------------------------
(In thousands, except for assumptions
and earnings per share data)
Assumptions:
<S> <C> <C> <C>
Risk-free interest rate 5.5% 5.5% 5.5%
Dividend yield - Incentive Plan 0.97% - 1.80%
Dividend yield - GL conversions 1.33% 1.33% -
Volatility factor 0.200 0.245 0.245
Expected life - Incentive Plan 4 years - 4 years
Expected life - GL conversions 1 year 3 years ---
Pro forma results:
Net income $ 26,314 $ 18,946 $ 15,127
Earnings per share, basic 1.86 1.33 1.15
Earnings per share, diluted 1.84 1.31 1.14
</TABLE>
The Company maintains a Restricted Stock Plan, under which the Company has
reserved 60,700 shares at March 31, 1999. The Company charges unearned
compensation, a component of shareholders' equity, for the market value of
shares, as they're issued. It is then ratably amortized over the restricted
period. Grantees who remain continuously employed with the Company become vested
in their shares five years after the date of the grant.
13. Loss Contingencies
General and Product Liability - $10,392,000 of the accrued general and
product liability costs which are included in other non-current liabilities at
March 31, 1999 ($9,688,000 at March 31, 1998) are the actuarial present value of
estimated reserves based on an amount determined from loss reports and
individual cases filed with the Company and an amount, based on past experience,
for losses incurred but not reported. The accrual in these consolidated
financial statements was determined by applying a discount factor based on
interest rates customarily used in the insurance industry, between 6.76% and
8.12%, to the undiscounted reserves of $13,897,000 and $12,685,000 at March 31,
1999 and 1998, respectively. This liability is funded by investments in
marketable securities (see Notes 2 and 5).
Prior to its acquisition by the Company, Yale was self-insured for product
liability claims up to a maximum of $500,000 per occurrence and maintained
product liability insurance with a $100 million cap per occurrence. The Company
was advised that a customer alleged that one of Yale's products was the cause of
a fire which occurred in January 1995 at a manufacturing facility, resulting in
losses in excess of Yale's policy limits. A formal complaint was filed seeking
damages in excess of $500 million. This claim was settled during fiscal 1999
within the Company's policy limits.
F-24
<PAGE>
14. Income Taxes
The following is a reconciliation of the difference between the effective
tax rate and the statutory federal tax rate:
<TABLE>
<CAPTION>
Year Ended March 31,
--------------------
1999 1998 1997
---- ---- ----
(In thousands)
<S> <C> <C> <C>
Computed statutory provision.............................................. $17,753 $16,363 $12,002
State income taxes net of federal benefit................................. 1,767 1,945 1,700
Nondeductible goodwill amortization....................................... 4,540 2,870 1,961
Foreign taxes greater than statutory provision............................ 790 949 301
Other..................................................................... (1,562) 649 (347)
----- --- ---
Actual tax provision...................................................... $23,288 $22,776 $15,617
======= ======= =======
The provision for income tax expense consisted of the following:
Year Ended March 31,
--------------------
1999 1998 1997
---- ---- ----
(In thousands)
Current income tax expense:
Federal taxes........................................................ $18,775 $15,800 $8,399
State taxes.......................................................... 2,770 3,081 1,124
Foreign.............................................................. 3,978 3,840 1,278
Deferred income tax (benefit) expense:
Domestic............................................................. (2,298) (238) 4,736
Foreign.............................................................. 63 293 80
-- --- --
$23,288 $22,776 $15,617
======= ======= =======
</TABLE>
The Company applies the liability method of accounting for income taxes as
required by FAS Statement No. 109, "Accounting for Income Taxes."
The gross composition of the net current deferred tax asset, included in
prepaid expenses within the consolidated balance sheet, is as follows:
<TABLE>
<CAPTION>
March 31,
---------
1999 1998
---- ----
(In thousands)
<S> <C> <C>
Inventory........................................................................... $ (5,366) $ (5,357)
Accrued vacation and incentive costs................................................ 1,596 1,724
Other............................................................................... 5,945 4,463
----- -----
Net current deferred tax asset................................................. $ 2,175 $ 830
======= =====
The gross composition of the net non-current deferred tax asset is as follows:
March 31,
---------
1999 1998
---- ----
(In thousands)
Insurance reserves.................................................................. $10,718 $11,087
Property, plant, and equipment...................................................... (7,438) (8,109)
Other............................................................................... 2,347 4,067
----- -----
Net non-current deferred tax asset............................................. $ 5,627 $ 7,045
======= =======
</TABLE>
F-25
<PAGE>
14. Income Taxes (continued)
Income before income taxes, minority interest and extraordinary charge
includes foreign subsidiary income of $9,288,000, $9,097,000, and $3,650,000 for
the years ended March 31, 1999, 1998, and 1997 respectively. United States
income taxes have not been provided on unremitted earnings of the Company's
foreign subsidiaries as such earnings are considered to be permanently
reinvested.
15. Rental Expense and Lease Commitments
Rental expense for the years ended March 31, 1999, 1998 and 1997 was
$6,672,000, $4,478,000 and $2,805,000, respectively. The following amounts
represent future minimum payment commitments as of March 31, 1999 under
non-cancelable operating leases extending beyond one year (in thousands):
<TABLE>
<CAPTION>
Vehicles and
Year Ended March 31, Real Property Equipment Total
-------------------- ------------- --------- -----
<S> <C> <C> <C>
2000........................................................... $ 1,984 $ 1,940 $3,924
2001........................................................... 1,705 1,476 3,181
2002........................................................... 1,538 752 2,290
2003........................................................... 1,478 252 1,730
2004........................................................... 1,466 118 1,584
</TABLE>
F-26
<PAGE>
16. Summary Financial Information
The summary financial information of the parent, domestic subsidiaries
(guarantors) and foreign subsidiaries (nonguarantors) of the 8 1/2% senior
subordinated notes follows:
As of and for the year ended March 31, 1999:
<TABLE>
<CAPTION>
Domestic Foreign
-------- -------
Parent Subsidiaries Subsidiaries Eliminations Consolidated
------ ------------ ------------ ------------ ------------
(In thousands)
As of March 31, 1999:
Current assets:
<S> <C> <C> <C> <C> <C>
Cash..................................... $ 3,109 $ 408 $ 3,350 $ - $ 6,867
Trade accounts receivable and unbilled
revenues............................... 55,479 66,556 24,774 - 146,809
Inventories.............................. 47,792 41,707 27,488 (1,008) 115,979
Other current assets..................... 3,168 10,645 2,561 --- 16,374
----- ------ ----- ----- ------
Total current assets.................. 109,548 119,316 58,173 (1,008) 286,029
Net property, plant, and equipment............ 36,649 33,058 20,297 - 90,004
Goodwill and other intangibles, net........... 42,993 260,406 54,328 - 357,727
Intercompany balances......................... 205,830 (368,479) (66,710) 229,359 -
Other non-current assets...................... 220,453 162,153 (833) (348,622) 33,151
------- ------- ------ ------- ------
Total assets.......................... $615,473 $ 206,454 $ 65,255 $(120,271) $ 766,911
======== ========= ======== ========= =========
Current liabilities........................... $ 41,010 $ 54,336 $ 25,846 $ (636) $ 120,556
Long-term debt, less current portion.......... 415,096 --- 6,590 - 421,686
Other non-current liabilities................. 11,311 21,849 2,835 - 35,995
------ ------ ----- --- ------
Total liabilities..................... 467,417 76,185 35,271 (636) 578,237
Shareholders' equity.......................... 148,056 130,269 29,984 (119,635) 188,674
------- ------- ------ ------- -------
Total liabilities and shareholders'
equity........................... $615,473 $ 206,454 $ 65,255 $(120,271) $ 766,911
======== ========= ======== ========= =========
For the Year Ended March 31, 1999:
Net sales..................................... $265,284 $ 368,716 $ 122,300 $ (20,855) $ 735,445
Cost of products sold......................... 184,781 291,446 87,744 (20,996) 542,975
------- ------- ------ ------ -------
Gross profit.................................. 80,503 77,270 34,556 141 192,470
Selling, general and administrative expenses. 35,147 34,436 22,326 - 91,909
Amortization of intangibles................... 1,961 11,349 2,169 - 15,479
----- ------ ----- --- ------
37,108 45,785 24,495 - 107,388
------ ------ ------ --- -------
Income from operations........................ 43,395 31,485 10,061 141 85,082
Interest and debt expense..................... 34,349 947 627 - 35,923
Interest and other income..................... 1,531 249 (215) - 1,565
----- --- --- --- -----
Income before income taxes and
extraordinary charge..................... 10,577 30,787 9,219 141 50,724
Income tax expense............................ 4,521 14,709 4,006 52 23,288
----- ------ ----- -- ------
Income before extraordinary charge............ 6,056 16,078 5,213 89 27,436
Extraordinary charge for early debt
extinguishment.......................... - - - - -
--- --- --- -- ---
Net income.................................... $ 6,056 $ 16,078 $ 5,213 $ 89 $ 27,436
======= ======== ======= ==== ========
F-27
<PAGE>
16. Summary Financial Information (continued)
Domestic Foreign
-------- -------
Parent Subsidiaries Subsidiaries Eliminations Consolidated
------ ------------ ------------ ------------ ------------
(In thousands)
For the Year Ended March 31, 1999:
Operating activities:
Cash provided by (used in) operating
activities................................. $ 36,147 $ 10,776 $ 9,878 $ 692 $ 57,493
Investing activities:
Purchase of marketable securities, net........ (1,976) - - - (1,976)
Capital expenditures.......................... (8,414) (2,809) (1,769) - (12,992)
Proceeds from sale of business................ 9,390 (589) - - 8,801
Purchase of businesses, net of cash acquired. (9,597) (1,313) (8,861) (187) (19,958)
Net assets held for sale...................... - 2,182 - - 2,182
--- ----- --- --- -----
Net cash (used in) provided by investing
activities................................. (10,597) (2,529) (10,630) (187) (23,943)
Financing activities:
Proceeds from issuance of common stock........ - - 1,449 (1,449) -
Net (payments) borrowings under revolving
line-of-credit agreements.................. (27,600) (1,340) 746 - (28,194)
Repayment of debt............................. (1,216) (8,365) 1,402 - (8,179)
Dividends paid................................ (3,725) 1,078 (2,071) 993 (3,725)
Other......................................... (7,934) - - - (7,934)
----- --- --- --- -----
Net cash provided by (used in) financing
activities................................. (40,475) (8,627) 1,526 (456) (48,032)
Effect of exchange rate changes on cash....... (1) - (1,462) (49) (1,512)
- --- ----- -- -----
Net change in cash and cash equivalents....... (14,926) (380) (688) - (15,994)
Cash and cash equivalents at beginning of
year....................................... 18,035 788 4,038 - 22,861
------ --- ----- --- ------
Cash and cash equivalents at end of year...... $ 3,109 $ 408 $ 3,350 $ - $ 6,867
======= ===== ======= === =======
As of and for the year ended March 31, 1998:
Domestic Foreign
-------- -------
Parent Subsidiaries Subsidiaries Eliminations Consolidated
------ ------------ ------------ ------------ ------------
(In thousands)
As of March 31, 1998:
Current assets:
Cash..................................... $ 18,035 $ 788 $ 4,038 $ --- $ 22,861
Trade accounts receivable and unbilled
revenues............................... 41,651 79,245 24,744 (1,369) 144,271
Inventories.............................. 47,201 44,314 24,712 (1,101) 115,126
Other current assets..................... 5,050 12,919 2,834 --- 20,803
----- ------ ----- ----- ------
Total current assets.................. 111,937 137,266 56,328 (2,470) 303,061
Net property, plant, and equipment............ 32,159 35,517 19,986 --- 87,662
Goodwill and other intangibles, net........... 43,404 276,210 49,332 --- 368,946
Intercompany balances......................... 237,011 (400,737) (65,997) 229,723 -
Other non-current assets...................... 214,997 165,698 494 (351,996) 29,193
------- ------ --- ------- ------
Total assets.......................... $639,508 $ 213,954 $ 60,143 $(124,743) $ 788,862
======== ========= ======== ========= =========
Current liabilities........................... $ 35,854 $ 54,748 $ 25,933 $(1,474) $ 115,061
Long-term debt, less current portion.......... 444,225 9,098 3,074 --- 456,397
Other non-current liabilities................. 10,576 31,065 4,817 --- 46,458
------ ------ ----- ----- ------
Total liabilities..................... 490,655 94,911 33,824 (1,474) 617,916
Shareholders' equity.......................... 148,853 119,043 26,319 (123,269) 170,946
------- ------- ------ ------- -------
Total liabilities and shareholders'
equity........................... $639,508 $ 213,954 $ 60,143 $(124,743) $ 788,862
======== ========= ======== ========= =========
F-28
<PAGE>
16. Summary Financial Information (continued)
Domestic Foreign
-------- -------
Parent Subsidiaries Subsidiaries Eliminations Consolidated
------ ------------ ------------ ------------ ------------
(In thousands)
For the Year Ended March 31, 1998:
Net sales .................................... $269,675 $ 212,269 $ 101,279 $ (21,400) $ 561,823
Cost of products sold......................... 192,684 156,749 72,688 (20,452) 401,669
------- ------- ------ ------ -------
Gross profit.................................. 76,991 55,520 28,591 (948) 160,154
Selling, general and administrative expenses. 36,804 26,122 17,013 --- 79,939
Amortization of intangibles................... 1,892 6,475 1,930 --- 10,297
----- ----- ----- ----- ------
38,696 32,597 18,943 - 90,236
------ ------ ------ --- ------
Income from operations........................ 38,295 22,923 9,648 (948) 69,918
Interest and debt expense..................... 24,125 594 385 --- 25,104
Interest and other income..................... 1,764 7 169 --- 1,940
----- - --- ----- -----
Income before income taxes
and extraordinary charge................... 15,934 22,336 9,432 (948) 46,754
Income tax expense............................ 7,326 11,529 4,286 365 22,776
----- ------ ----- --- ------
Income before extraordinary charge............ 8,608 10,807 5,146 (583) 23,978
Extraordinary charge for early debt
extinguishment............................. (4,520) - - --- (4,520)
----- --- --- ----- -----
Net income.................................... $ 4,088 $ 10,807 $ 5,146 $ (583) $ 19,458
======= ======== ======= ====== ========
For the Year Ended March 31, 1998:
Operating activities:
Cash provided by (used in) operating
activities................................. $ 40,272 $ (5,864) $ 3,361 $ 651 $ 38,420
Investing activities:
Purchase of marketable securities, net........ (2,517) - - - (2,517)
Capital expenditures.......................... (6,518) (3,044) (1,844) - (11,406)
Purchase of businesses, net of cash acquired. (170,277) (5,918) 509 --- (175,686)
Net assets held for sale...................... - 4,575 - --- 4,575
------- ----- --- ----- -----
Net cash (used in) provided by investing
activities................................. (179,312) (4,387) (1,335) - (185,034)
Financing activities:
Proceeds from issuance of stock............... - 1,914 - - 1,914
Net (payments) borrowings under revolving
line-of-credit agreements.................. 157,058 2,551 (508) - 159,101
Repayment of debt............................. (196,353) (955) (943) - (198,251)
Proceeds from issuance of long-term debt, -
net........................................ 196,120 7,237 - --- 203,357
Dividends paid................................ (3,713) - - --- (3,713)
Other......................................... (275) (219) 740 (561) (315)
--- --- --- --- ---
Net cash provided by (used in) financing
activities................................. 152,837 10,528 (711) (561) 162,093
Effect of exchange rate changes on cash....... - - (1,435) (90) (1,525)
--- --- ----- -- -----
Net change in cash and cash equivalents....... 13,797 277 (120) - 13,954
Cash and cash equivalents at beginning of
year....................................... 4,238 511 4,158 --- 8,907
----- --- ----- ----- -----
Cash and cash equivalents at end of year...... $ 18,035 $ 788 $ 4,038 $ - $ 22,861
======== ===== ======= === ========
</TABLE>
F-29
<PAGE>
17. Effects of New Accounting Pronouncements
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 133 "Accounting for Derivative Instruments and Hedging
Activities," in June of 1998 which is effective for fiscal 2001. Statement No.
133 establishes accounting and reporting standards for hedging activities. It
requires that entities recognize all derivatives as either assets or liabilities
in the statement of financial position and measure those instruments at fair
value. The intended use of the derivative and its designation as either (1) a
hedge of the exposure to changes in the fair value of a recognized asset or
liability or a firm commitment (a fair value hedge) (2) a hedge of the exposure
to variable cash flows of a forecasted transaction (a cash flow hedge), or (3) a
hedge of the foreign currency exposure of a net investment in a foreign
operation (a foreign currency hedge), will determine when the gains and losses
on the derivatives are reported in earnings and when they are to be reported as
a component of other comprehensive income. The impact of compliance with this
Statement has not yet been determined by the Company.
In March of 1998, the American Institute of Certified Public Accountants
(AICPA) issued Statement of Position (SOP) 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use." The Company adopted
the provisions of the SOP in its financial statements for the year ended March
31, 1999. The SOP requires the capitalization of certain costs incurred in
connection with developing or obtaining software for internal use. The impact of
the SOP was not material to the Company.
In April of 1998, the AICPA issued SOP 98-5, "Reporting the Costs of
Start-Up Activities," which requires costs related to start-up activities be
expensed as incurred. The Company adopted the provisions of the SOP in its
financial statements for the year ended March 31, 1999. The adoption of SOP 98-5
had no effect on the Company's reported earnings.
18. Business Segment Information
In June of 1997, SFAS No. 131, "Disclosures about Segments of an Enterprise
and Related Information" was issued effective for fiscal years ending after
December 15, 1998. The Company has adopted the statement for the year ended
March 31, 1999.
As a result of how the Company manages the business, its reportable
segments are strategic business units that offer products with different
characteristics. The most defining characteristic is the extent of customized
engineering required on a per-order basis. In addition, the segments serve
different customer bases through differing methods of distribution. The Company
has three reportable segments: material handling products, integrated material
handling solutions - industrial, and integrated material handling solutions -
automotive. The Company's material handling products segment sells hoists,
chains, attachments, and other material handling products principally to third
party distributors in commercial and consumer distribution channels. The
material handling solutions segments sell engineered material handling systems
such as conveyors, manipulators, and lift tables primarily to end-users in the
consumer products manufacturing, warehousing, and general manufacturing
industries or the automotive segment. The accounting policies of the segments
are the same as those described in the summary of significant accounting
policies. Intersegment sales are not significant. The Company evaluates
performance based on operating earnings of the respective business units prior
to the effects of amortization.
F-30
<PAGE>
18. Business Segment Information (continued)
<TABLE>
<CAPTION>
Segment information as of and for the years ended March 31, 1999, 1998, and 1997, is as follows:
Year Ended March 31, 1999
-------------------------
Solutions - Solutions - Eliminations/
Products Industrial Automotive Other Total
-------- ---------- ---------- ----- -----
(In thousands)
<S> <C> <C> <C> <C> <C>
Sales to external customers.............. $528,974 $ 58,301 $ 161,443 $ (13,273) $735,445
Operating income before amortization. 81,165 5,592 14,925 (1,121) 100,561
Depreciation and amortization............ 18,237 3,045 5,652 322 27,256
Total assets............................. 517,774 68,520 180,617 --- 766,911
Capital expenditures..................... 11,201 1,468 321 2 12,992
Year Ended March 31, 1998
-------------------------
Solutions - Solutions - Eliminations/
Products Industrial Automotive Other Total
-------- ---------- ---------- ----- -----
(In thousands)
Sales to external customers.............. $524,949 $ 39,845 $ --- $(2,971) $561,823
Operating income before amortization. 76,188 3,992 --- 35 80,215
Depreciation and amortization............ 17,094 1,957 --- 845 19,896
Total assets............................. 515,772 71,499 183,609 17,982 788,862
Capital expenditures..................... 10,580 712 --- 114 11,406
Year Ended March 31, 1997
-------------------------
Solutions - Solutions - Eliminations/
Products Industrial Automotive Other Total
-------- ---------- ---------- ----- -----
(In thousands)
Sales to external customers.............. $318,544 $ 28,308 $ --- $12,572 $359,424
Operating income before amortization. 45,169 3,513 --- 1,569 50,251
Depreciation and amortization............ 10,571 506 --- 208 11,285
Total assets............................. 485,350 43,744 --- 19,151 548,245
Capital expenditures..................... 8,851 541 --- --- 9,392
</TABLE>
<TABLE>
<CAPTION>
The following provides a reconciliation of operating income before amortization to consolidated income
before income tax, minority interest, and extraordinary charge:
Year Ended March 31,
--------------------
1999 1998 1997
---- ---- ----
(In thousands)
<S> <C> <C> <C>
Operating income before amortization............................... $100,561 $80,215 $50,251
Amortization of intangibles........................................ 15,479 10,297 5,197
Interest and debt expense.......................................... 35,923 25,104 11,930
Interest and other income.......................................... (1,565) (1,940) (1,168)
----- ----- -----
Income before income taxes, minority interest and
extraordinary charge.......................................... $50,724 $46,754 $34,292
======= ======= =======
</TABLE>
F-31
<PAGE>
18. Business Segment Information (continued)
<TABLE>
<CAPTION>
Financial information relating to the Company's operations by geographic area is as follows:
Year Ended March 31,
--------------------
1999 1998 1997
---- ---- ----
(In thousands)
Net sales:
<S> <C> <C> <C>
United States...................................................... $613,179 $462,120 $313,705
Europe............................................................. 65,000 39,208 14,146
Canada............................................................. 51,653 55,367 27,951
Other.............................................................. 5,613 5,128 3,622
----- ----- -----
Total.............................................................. $735,445 $561,823 $359,424
======== ======== ========
Year Ended March 31,
--------------------
1999 1998 1997
---- ---- ----
(In thousands)
Identifiable and total assets:
United States...................................................... $634,720 $662,371 $457,501
Europe............................................................. 100,317 90,036 61,696
Canada............................................................. 28,265 32,258 26,191
Other.............................................................. 3,609 4,197 2,857
----- ----- -----
Total.............................................................. $766,911 $788,862 $548,245
======== ======== ========
</TABLE>
19. Selected Quarterly Financial Data (Unaudited)
<TABLE>
<CAPTION>
In accordance with the pooling of interests method of accounting, the following selected quarterly financial
data has been restated to include the accounts of GL from the date of GL's formation, April 1, 1997.
(In thousands, except per share data)
Three Months Ended Year Ended
------------------ ----------
June 28, September 27, December 27, March 31, March 31,
1998 1998 1998 1999 1999
---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net sales................................ $184,616 $ 185,357 $ 186,995 $178,477 $735,445
Gross profit............................. 47,313 47,042 47,396 50,719 192,470
Income from operations................... 21,223 20,578 21,402 21,879 85,082
Income before extraordinary charge....... 6,375 5,923 6,445 8,693 27,436
Net income............................... 6,375 5,923 6,445 8,693 27,436
Income per share before extraordinary
charge................................ 0.44 0.41 0.46 0.62 1.92
Net income per share..................... 0.44 0.41 0.46 0.62 1.92
Three Months Ended Year Ended
------------------ ----------
June 29, September 28, December 28, March 31, March 31,
1997 1997 1997 1998 1998
---- ---- ---- ---- ----
Net sales................................ $136,858 $ 136,060 $ 137,329 $151,576 $561,823
Gross profit............................. 38,273 39,008 38,634 44,239 160,154
Income from operations................... 15,663 17,312 16,112 20,831 69,918
Income before extraordinary charge 4,579 5,850 5,619 7,930 23,978
Net income............................... 4,579 5,850 5,619 3,410(a) 19,458(a)
Income per share before extraordinary
charge................................ 0.32 0.41 0.39 0.55 1.66
Net income per share..................... 0.32 0.41 0.39 0.24(a) 1.35(a)
F-32
<PAGE>
19. Selected Quarterly Financial Data (Unaudited) (continued)
Three Months Ended Year Ended
------------------ ----------
June 30, September 29, December 29, March 31, March 31,
1996 1996 1996 1997 1997
---- ---- ---- ---- ----
Net sales................................ $ 65,735 $ 64,426 $ 103,393 $125,870 $359,424
Gross profit............................. 20,017 19,184 30,104 38,132 107,437
Income from operations................... 8,681 8,910 11,240 16,223 45,054
Income before extraordinary charge 5,032 5,211 3,219 4,890 18,352
Net income............................... 5,032 5,211 118(b) 4,793(b) 15,154(b)
Income per share before extraordinary
charge................................ 0.38 0.39 0.24 0.37 1.39
Net income per share..................... 0.38 0.39 0.01(b) 0.36(b) 1.15(b)
________
(a) Includes extraordinary charges for early debt extinguishment amounting to $4,520,000 in the quarter ended
March 31, 1998, net of the tax effect.
(b) Includes extraordinary charges for early debt extinguishment amounting to $3,101,000 and $97,000 in the
quarters ended December 29, 1996 and March 31, 1997, respectively, net of the tax effect.
</TABLE>
20. Accumulated Other Comprehensive Income (Loss)
<TABLE>
<CAPTION>
The components of accumulated other comprehensive income (loss) are as follows:
March 31,
---------
1999 1998
---- ----
(In thousands)
<S> <C> <C>
Net unrealized investment gains - net of tax....................................... $ 2,312 $ 1,598
Minimum pension liability adjustment - net of tax.................................. (1,041) (988)
Foreign currency translation adjustment............................................ (4,637) (3,238)
----- -----
Accumulated other comprehensive loss............................................... $ (3,366) $ (2,628)
======== ========
</TABLE>
The net tax liability associated with items included in comprehensive
income (loss) was $847,000 and $406,000 for 1999 and 1998, respectively.
F-33
<PAGE>
<TABLE>
<CAPTION>
COLUMBUS McKINNON CORPORATION
SCHEDULE II-Valuation and qualifying accounts
March 31, 1999, 1998 and 1997
Dollars in thousands
Additions
---------
Balance at Charged to Charged Balance at
Beginning Costs and to Other End of
Description of Period Expenses Accounts Deductions Period
----------- --------- -------- -------- ---------- ------
Year ended March 31, 1999
Deducted from asset accounts:
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts $ 2,511 $ 743 $ (27)(5) $ 956(1) $ 2,271
Slow-moving and obsolete inventory 4,684 1,884 (592)(5) 1,681(2) 4,295
Reserve against non-current receivable 600 - - 600(6) -
--- --- --- --- ---
Total $ 7,795 $2,627 $ (619) $ 3,237 $ 6,566
======= ====== ====== ======= =======
Reserves on balance sheet:
Accrued general and product liability costs $ 11,688 $3,265 $- $3,537(3) $11,416
======== ====== === ====== =======
Year ended March 31, 1998:
Deducted from asset accounts:
Allowance for doubtful accounts $ 1,884 $1,677 $ 470(4) $1,520(1) $ 2,511
Slow-moving and obsolete inventory 3,356 1,115 854(4) 641(2) 4,684
Reserve against non-current receivable 600 - - - 600
--- --- --- --- ---
Total $ 5,840 $2,792 $ 1,324 $ 2,161 $ 7,795
======= ====== ======= ======= =======
Reserves on balance sheet:
Accrued general and product liability costs $ 11,973 $1,522 $- $1,807(3) $11,688
======== ====== === ====== =======
Year ended March 31, 1997:
Deducted from asset accounts:
Allowance for doubtful accounts $ 917 $ 905 $ 1,189(4) $ 1,127(1) $ 1,884
Slow-moving and obsolete inventory 2,467 325 1,770(4) 1,206(2) 3,356
Reserve against non-current receivable 600 - - - 600
--- --- --- --- ---
Total $ 3,984 $1,230 $ 2,959 $2,333 $ 5,840
======= ====== ======= ====== =======
Reserves on balance sheet:
Accrued general and product liability costs $ 7,110 $1,775 $ 3,806(4) $ 718(3) $11,973
======= ====== ======= ===== =======
________
(1) Uncollectible accounts written off, net of recoveries
(2) Obsolete inventory disposals
(3) Insurance claims and expenses paid
(4) Reserves at date of acquisition of subsidiaries
(5) Reserves at date of disposal of subsidiary
(6) Receivable deemed to be collectible in its entirety
</TABLE>
F-34
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting
- ------- --------------------------------------------------------------
and Financial Disclosures
-------------------------
None.
PART III
Item 10. Directors and Executive Officers of the Registrant.
- -------- ---------------------------------------------------
The information regarding Directors and Executive Officers of the
Registrant will be included in a Proxy Statement to be filed with the Commission
prior to July 29, 1999.
Item 11. Executive Compensation
- -------- ----------------------
The information regarding Executive Compensation will be included in a
Proxy Statement to be filed with the Commission prior to July 29, 1999.
Item 12. Security Ownership of Certain Beneficial Owners and Management
- -------- --------------------------------------------------------------
The information regarding Security Ownership of Certain Beneficial Owners
and Management will be included in a Proxy Statement to be filed with the
Commission prior to July 29, 1999.
Item 13. Certain Relationships and Related Transactions
- -------- ----------------------------------------------
The information regarding Certain Relationships and Related Transactions
will be included in a Proxy Statement to be filed with the Commission prior to
July 29, 1999.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form
- -------- ------------------------------------------------------------
8-K.
----
(a)(1) Financial Statements:
---------------------
The following consolidated financial statements of Columbus McKinnon
Corporation are included in Item 8:
Reference Page No.
--------- --------
Report of Independent Auditors - Ernst & Young LLP F-2
Report of Independent Auditors - Deloitte & Touche LLP F-3
Consolidated balance sheets - March 31, 1999 and 1998 F-4
29
<PAGE>
Consolidated statements of income - Years ended
March 31, 1999, 1998 and 1997 F-5
Consolidated statements of shareholders' equity - Years ended
March 31, 1999, 1998 and 1997 F-6
Consolidated statements of cash flows - Years ended
March 31, 1999, 1998 and 1997 F-7
Notes to consolidated financial statements F-8 - F-33
(a)(2) Financial Statement Schedule: Page No.
----------------------------- --------
Report of Independent Auditors F-2
Schedule II - Valuation and qualifying accounts F-34
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission
are not required under the related instructions or are
inapplicable and therefore have been omitted.
(a)(3) Exhibits:
---------
Exhibit
Number
- ------
2.1 Agreement and Plan of Merger dated August 24, 1996 among Columbus
McKinnon Corporation, L Acquisition Corporation and Spreckels
Industries, Inc. (known as Yale International, Inc.) (incorporated by
reference to Exhibit (c)(1) to the Company's Tender Offer Statement on
Schedule 14D-1 dated August 30, 1996).
2.2 Offer to Purchase by L Acquisition Corporation dated August 30,
1997, as revised (incorporated by reference to Exhibit (a)(1) to the
Company's Tender Offer Statement on Schedule 14D-1 dated August 30,
1997, as amended by Amendment No. 1 dated September 18, 1996, Amendment
No. 2 dated September 27, 1996, Amendment No. 3 dated October 4, 1996,
Amendment No. 4 dated October 9, 1996 Amendment No. 5 dated October 13,
1996 and Amendment No. 6 dated October 17, 1996).
3.1 Restated Certificate of Incorporation of the Registrant (incorporat-
ed by reference to Exhibit 3.1 to the Company's Registration Statement
No. 33-80687 on Form S-1 dated December 21, 1995).
3.2 Amended By-Laws of the Registrant (incorporated by reference to
Exhibit 3 the Company's Current Report on Form 8-K dated May 17, 1999).
4.1 Specimen Common Share Certificate (incorporated by reference to
Exhibit 4.1 to the Company's Registration Statement No. 33-80687 on
Form S-1 dated December 21, 1995).
30
<PAGE>
4.2 First Amendment and Restatement of Rights Agreement, dated as of
October 1, 1998, between Columbus McKinnon Corporation and American
Stock Transfer & Trust Company, as Rights Agent (incorporated by
reference to Exhibit 4 to the Company's Current Report on Form 8-K
dated October 29, 1998).
4.3 Indenture among Columbus McKinnon Corporation, the guarantors named
on the signature pages thereto and State Street Bank and Trust Company,
N.A., as trustee (incorporated by reference to Exhibit 4.1 to the
Company's Current Report on Form 8-K dated April 9, 1998).
4.4 Supplemental Indenture among LICO, Inc., Automatic Systems, Inc.,
LICO Steel, Inc., Columbus McKinnon Corporation, Yale Industrial
Products, Inc., Mechanical Products, Inc., Minitec Corporation and
State Street Bank and Trust Company, N.A., as trustee, dated March 31,
1998 (incorporated by reference to Exhibit 4.3 to the Company's Current
Report on form 8-K dated April 9, 1998).
4.5 A/B Registration Rights Agreement among Columbus McKinnon
Corporation, the guarantors named on the signature pages thereto and
Bear, Stearns & Co., Inc. and Goldman, Sachs & Co., as initial
purchasers (incorporated by reference to Exhibit 4.2 to the Company's
Current Report on Form 8-K dated April 9, 1998).
#4.6 Second Supplemental Indenture among Abell-Howe Crane, Inc., LICO,
Inc., Automatic Systems, Inc. LICO Steel, Inc., Columbus McKinnon
Corporation, Yale Industrial Products Inc. and State Street Bank and
Trust Company, N.A., as trustee, dated as of February 12, 1999.
#4.7 Third Supplemental Indenture among G.L. International, Inc., Gaffey,
Inc., Handling Systems and Conveyors, Inc., Larco Material Handling
Inc., Abell-Howe Crane, Inc., LICO, Inc., Automatic Systems, Inc., LICO
Steel, Inc., Columbus McKinnon Corporation, Yale Industrial Products,
Inc. and State Street Bank and Trust Company, N.A., as trustee, dated
as of March 1, 1999.
10.1 Amended and Restated Term Loan Agreement by and among Fleet Bank of
New York, Columbus McKinnon Corporation and Kenneth G. McCreadie, Peter
A. Grant and Robert L. Montgomery, Jr., as Trustees under the Columbus
McKinnon Corporation Employee Stock Ownership Trust Agreement, dated
March 31, 1993 (incorporated by reference to Exhibit 10.2 to the
Company's Registration Statement No. 33-80687 on Form S-1 dated
December 21, 1995).
10.2 Amendment No. 1 to Amended and Restated Term Loan Agreement, dated
March 31, 1993, by and among Fleet Bank of New York, Columbus McKinnon
Corporation and Kenneth G. McCreadie, Peter A. Grant and Robert L.
Montgomery, Jr. as trustees under the Columbus McKinnon Corporation
Employee Stock Ownership Trust Agreement, dated October 27, 1994
(incorporated by reference to Exhibit 10.3 to the Company's
Registration Statement No. 33-80687 on Form S-1 dated December 21,
1995).
31
<PAGE>
10.3 Amendment No. 2 to Amended and Restated Term Loan Agreement by and
among Fleet Bank, Columbus McKinnon Corporation and Kenneth G.
McCreadie, Peter A. Grant and Robert L. Montgomery, Jr. under the
Columbus McKinnon Corporation Employee Stock Ownership Trust Agreement,
dated November 2, 1995 (incorporated by reference to Exhibit 10.4 to
the Company's Registration Statement No. 33-80687 on Form S-1 dated
December 21, 1995).
#10.4 Amendment No. 3 to Amended and Restated Term Loan Agreement by and
among Fleet Bank, Columbus McKinnon Corporation and Karen L. Howard,
Timothy R. Harvey, and Robert L. Montgomery, Jr. as trustees under the
Columbus McKinnon Corporation Employee Stock Ownership Trust Agreement.
10.5 Loan Agreement by and among Columbus McKinnon Corporation Employee
Stock Ownership Trust, Columbus McKinnon Corporation and Marine Midland
Bank, dated October 27, 1994 (incorporated by reference to Exhibit 10.5
to the Company's Registration Statement No. 33-80687 on Form S-1 dated
December 21, 1995).
#10.6 Amended and Restated Term Loan Agreement by and among Columbus
McKinnon Corporation Employee Stock Ownership Trust, Columbus McKinnon
Corporation and Marine Midland Bank, dated August 5, 1996.
#10.7 First Amendment to Amended and Restated Term Loan Agreement by
and among Columbus McKinnon Corporation Employee Stock Ownership Trust,
Columbus McKinnon Corporation and Marine Midland Bank, dated October
16, 1996.
#10.8 Second Amendment to Amended and Restated Term Loan Agreement by
and among Columbus McKinnon Corporation Employee Stock Ownership Trust,
Columbus McKinnon Corporation and Marine Midland Bank, dated March 31,
1998.
#10.9 Third Amendment to Amended and Restated Term Loan Agreement by and
among Columbus McKinnon Corporation Employee Stock Ownership Trust,
Columbus McKinnon Corporation and Marine Midland Bank, dated November
30, 1998.
10.10 Agreement by and among Columbus McKinnon Corporation Employee Stock
Ownerhsip Trust, Columbus McKinnon Corporation and Marine Midland Bank,
dated November 2, 1995 (incorporated by reference to Exhibit 10.6 to
the Company's Registration Statement No. 33-80687 on Form S-1 dated
December 21, 1995).
10.11 Credit Agreement, dated as of March 31, 1998, among Columbus
McKinnon Corporation, as Borrower, the banks, financial institutions
and other institutional lenders named therein, as Initial Lenders,
Fleet National Bank, as the Initial Issuing Bank, Fleet National Bank,
as the Swing Line Bank, and Fleet National Bank, as the Administrative
Agent (incorporated by reference to Exhibit 10.2 to the Company's
Current Report on Form 8-K dated April 9, 1998).
10.12 First Amendment, dated as of September 23, 1998, to the Credit
Agreement, dated as of March 31, 1998, among Columbus McKinnon
Corporation, as Borrower, the banks, financial institutions and other
institutional lenders named therein, as Initial Lenders, Fleet National
Bank, as the Initial Issuing Bank, Fleet National Bank, as the Swing
Line Bank and Fleet National Bank, as the Administrative Agent
(incorporated by reference to Exhibit 10.1 to the Company's Quarterly
Report on Form 10-Q for the quarterly period ended September 27, 1998).
32
<PAGE>
#10.13 Second Amendment, dated as of February 12, 1999, to the Credit
Agreement, dated as of March 31, 1998, among Columbus McKinnon
Corporation, as Borrower, the banks, financial institutions and other
institutional leaders named therein, as Initial Lenders, Fleet National
Bank, as the Initial Issuing Bank, Fleet National Bank, as the Swing
Line Bank and Fleet National Bank, as the Administrative Agent.
10.14 Series Lease, dated as of November 1, 1993, between Town of Amherst
Industrial Development Agency as Lessor and Columbus McKinnon
Corporation as Lessee (incorporated by reference to Exhibit 10.13 to
the Company's Registration Statement No. 33-80687 on Form S-1 dated
December 21, 1995).
*10.15 Columbus McKinnon Corporation Employee Stock Ownership Plan
Restatement Effective April 1, 1989 (incorporated by reference to
Exhibit 10.23 to the Company's Registration Statement No. 33-80687 on
Form S-1 dated December 21, 1995).
*10.16 Amendment No. 1 to the Columbus McKinnon Corporation Employee Stock
Ownership Plan as Amended and Restated as of April 1, 1989, dated March
2, 1995 (incorporated by reference to Exhibit 10.24 to the Company's
Registration Statement No. 33-80687 on Form S-1 dated December 21,
1995).
*10.17 Amendment No. 2 to the Columbus McKinnon Corporation Employee Stock
Ownership Plan, dated October 17, 1995 (incorporated by reference to
Exhibit 10.38 to the Company's Annual Report on Form 10-K for the
fiscal year ended March 31, 1997).
*10.18 Amendment No. 3 to the Columbus McKinnon Corporation Employee Stock
Ownership Plan, dated March 27, 1996 (incorporated by reference to
Exhibit 10.39 to the Company's Annual Report on Form 10-K for the
fiscal year ended March 31, 1997).
*10.19 Amendment No. 4 of the Columbus McKinnon Corporation Employee Stock
Ownership Plan as Amended and Restated as of April 1, 1989, dated
September 30, 1996 (incorporated by reference to Exhibit 10.1 to the
Company's Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 1996).
*10.20 Amendment No. 5 to the Columbus McKinnon Corporation Employee Stock
Ownership Plan as Amended and Restated as of April 1, 1989, dated
August 28, 1997 (incorporated by reference to Exhibit 10.37 to the
Company's Annual Report on Form 10-K for the fiscal year ended March
31, 1998).
*10.21 Amendment No. 6 to the Columbus McKinnon Corporation Employee Stock
Ownership Plan as Amended and Restated as of April 1, 1989, dated June
24, 1998 (incorporated by reference to Exhibit 10.38 to the Company's
Annual Report on Form 10-K for the fiscal year ended March 31, 1998).
*10.22 Columbus McKinnon Corporation Personal Retirement Account Plan
Trust Agreement, dated April 1, 1987 (incorporated by reference to
Exhibit 10.25 to the Company's Registration Statement No. 33-80687 on
Form S-1 dated December 21, 1995).
33
<PAGE>
*10.23 Amendment No. 1 to the Columbus McKinnon Corporation Employee Stock
Ownership Trust Agreement (formerly known as the Columbus McKinnon
Corporation Personal Retirement Account Plan Trust Agreement) effective
November 1, 1988 (incorporated by reference to Exhibit 10.26 to the
Company's Registration Statement No. 33-80687 on Form S-1 dated
December 21, 1995).
*10.24 Columbus McKinnon Corporation Management EVA@ Incentive Compensation
Plan (incorporated by reference to Exhibit 99.1 to the Company's
Quarterly Report on Form 10-Q for the quarterly period ended June 28,
1998).
#*10.25 Amendment and Restatement of Columbus McKinnon Corporation 1995
Incentive Stock Option Plan.
*10.26 Columbus McKinnon Corporation Restricted Stock Plan (incorporated
by reference to Exhibit 10.28 to the Company's Registration Statement
No. 33-80687 on Form S-1 dated December 21, 1995).
#*10.27 Amendment and Restatement of Columbus McKinnon Corporation Non-
Qualified Stock Option Plan.
*10.28 Columbus McKinnon Corporation Thrift [401(k) Plan] 1989 Restatement
Effective January 1, 1998 (incorporated by reference to Exhibit 10.2 to
the Company's Quarterly Report on Form 10-Q for the quarterly period
ended December 27, 1998).
#*10.29 Amendment No.1 to the 1998 Plan Restatement of the Columbus McKinnon
Corporation Thrift 401(K) Plan, dated December 10, 1998.
*10.30 Columbus McKinnon Corporation Thrift [401(k)] Plan Trust Agreement
Restatement Effective August 9, 1994 (incorporated by reference to
Exhibit 10.32 to the Company's Registration Statement No. 33-80687 on
Form S-1 dated December 21, 1995).
*10.31 Columbus McKinnon Corporation Monthly Retirement Benefit Plan
Restatement Effective April 1, 1998 (incorporated by reference to
Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the
quarterly period ended December 27, 1998).
#*10.32 Amendment No.1 to the 1998 Plan Restatement of the Columbus McKinnon
Corporation Monthly Retirement Benefit Plan, dated December 10, 1998.
#*10.33 Amendment No.2 to the 1998 Plan Restatement of the Columbus McKinnon
Corporation Monthly Retirement Benefit Plan, dated May 26, 1999.
*10.34 Columbus McKinnon Corporation Monthly Retirement Benefit Plan Trust
Agreement effective as of April 1, 1987 (incorporated by reference to
Exhibit 10.34 to the Company's Registration Statement No. 33-80687 on
Form S-1 dated December 21, 1995).
34
<PAGE>
#*10.35 Form of change in Control Agreement as entered into between Columbus
McKinnon Corporation and each of Timothy T. Tevens, Robert L.
Montgomery, Jr., Ned T. Librock, Karen L. Howard, Lois H. Demler,
Timothy R. Harvey, John Hansen, Neal Wixson and Joe Owen.
10.36 Stock Purchase Agreement, dated as of March 11, 1998, among Columbus
McKinnon Corporation and the shareholders of LICO, Inc. identified on
the signature pages thereto (incorporated by reference to Exhibit 10.1
to the Company's Current Report on Form 8-K dated April 9, 1998).
#10.37 Agreement and Plan of Merger, dated as of February 16, 1999, by and
among Columbus McKinnon Corporation, GL Delaware, Inc. and Larco
Industrial Services, Ltd.
#10.38 Columbus McKinnon Corporation - GL International Inc. 1997 Stock
Option Plan.
#10.39 Columbus McKinnon Corporation - Larco Industrial Services, Ltd. 1997
Stock Option Plan.
#21.1 Subsidiaries of the Registrant.
#23.1 Consent of Ernst & Young LLP.
#23.2 Consent of Deloitte & Touche LLP.
#27.1 Financial Data Schedule.
#99.1 Form 11-K Columbus McKinnon Corporation Employee Stock Ownership
Plan Annual Report for the year ended March 31, 1999.
* Indicates a management contract or compensation plan or arrangement.
# Filed herewith
(b) Reports on Form 8-K:
During the fourth quarter of fiscal 1999, the Company did not file any
Current Reports on Form 8-K.
35
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Buffalo,
State of New York on June 29, 1999.
COLUMBUS McKINNON CORPORATION
By: /s/ Timothy T. Tevens
----------------------
Timothy T. Tevens
President and Chief Executive Officer
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Signature Title Date
--------- ----- ----
/s/ Timothy T. Tevens President, Chief Executive Officer June 29, 1999
- ---------------------
Timothy T. Tevens and Director
(Principal Executive Officer)
/s/ Robert L. Montgomery, Jr. Executive Vice President, Chief June 29, 1999
- -----------------------------
Robert L. Montgomery, Jr. Financial Officer and Director
(Principal Financial Officer
and Principal Accounting Officer)
/s/ Herbert P. Ladds, Jr. Chairman of the Board of Directors June 29, 1999
- -------------------------
Herbert P. Ladds, Jr.
/s/ Edward W. Duffy Director June 29, 1999
- -------------------
Edward W. Duffy
/s/ Randolph A. Marks Director June 29, 1999
- ---------------------
Randolph A. Marks
/s/ L. David Black Director June 29, 1999
- ------------------
L. David Black
/s/ Carlos Pascual Director June 29, 1999
- ------------------
Carlos Pascual
/s/ Richard H. Fleming Director June 29, 1999
- ----------------------
Richard H. Fleming
36
SECOND SUPPLEMENTAL INDENTURE
SECOND SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"),
dated as of February 12, 1999, among ABELL-HOWE CRANE, INC., a Delaware
corporation (a "Guaranteeing Subsidiary""), subsidiaries of Columbus McKinnon
Corporation (or its permitted successor), a New York corporation (the
"Company"), the Company, the other Guarantors (as defined in the Indenture
referred to herein) and State Street Bank and Trust Company, N.A., as trustee
under the indenture referred to below (the "Trustee").
W I T N E S S E T H
WHEREAS, the Company has heretofore executed and delivered to
the Trustee an indenture (the "Indenture"), dated as of March 31, 1998 providing
for the issuance of an aggregate principal amount of up to $300.0 million of 8
1/2% Senior Subordinated Notes due 2008 (the "Notes");
WHEREAS, the Indenture provides that under certain
circumstances the Guaranteeing Subsidiary shall execute and deliver to the
Trustee a supplemental indenture pursuant to which the Guaranteeing Subsidiary
shall unconditionally guarantee all of the Company's Obligations under the Notes
and the Indenture on the terms and conditions set forth herein ( a "Subsidiary
Guarantee"); and
WHEREAS, pursuant to Section 9.01 of the Indenture, the
Trustee is authorized to execute and deliver this Supplemental Indenture.
NOW THEREFORE, in consideration of the foregoing and for other
good and valuable consideration, the receipt of which is hereby acknowledged,
the Guaranteeing Subsidiary and the Trustee mutually covenant and agree for the
equal and ratable benefit of the Holders of the Notes as follows:
1. CAPITALIZED TERMS. Capitalized terms used herein without
definition shall have the meanings assigned to them in the Indenture.
2. AGREEMENT TO GUARANTEE. The Guaranteeing Subsidiary hereby
agrees as follows:
(a) Along with all Guarantors named in the Indenture, to
jointly and severally Guarantee to each Holder of a
Note authenticated and delivered by the Trustee and
to the Trustee and its successors and assigns,
irrespective of the validity and enforceability of
the Indenture, the Notes or the obligations of the
Company hereunder or thereunder, that:
(i) the principal of and interest on the Notes
will be promptly paid in full when due,
whether at maturity, by acceleration,
redemption or otherwise, and interest on the
overdue principal of and interest on the
Notes, if any, if lawful, and all other
obligations of the Company to the Holders or
the Trustee hereunder or thereunder will be
promptly paid in full or performed, all in
accordance with the terms hereof and
thereof; and
<PAGE>
(ii) in case of any extension of time of payment
or renewal of any Notes or any of such other
obligations, that same will be promptly paid
in full when due or performed in accordance
with the terms of the extension or renewal,
whether at stated maturity, by acceleration
or otherwise. Failing payment when due of
any amount so guaranteed or any performance
so guaranteed for whatever reason, the
Guarantors shall be jointly and severally
obligated to pay the same immediately.
(b) The obligations hereunder shall be unconditional,
irrespective of the validity, regularity or
enforceability of the Notes or the Indenture, the
absence of any action to enforce the same, any waiver
or consent by any Holder of the Notes with respect to
any provisions hereof or thereof, the recovery of any
judgment against the Company, any action to enforce
the same or any other circumstance which might
otherwise constitute a legal or equitable discharge
or defense of a guarantor.
(c) The following is hereby waived: diligence
presentment, demand of payment, filing of claims with
a court in the event of insolvency or bankruptcy of
the Company, any right to require a proceeding first
against the Company, protest, notice and all demands
whatsoever.
(d) The Subsidiary Guarantee shall not be discharged
except by complete performance of the obligations
contained in the Notes and the Indenture.
(e) If any Holder or the Trustee is required by any court
or otherwise to return to the Company, the
Guarantors, or any Custodian, Trustee, liquidator or
other similar official acting in relation to either
the Company or the Guarantors, any amount paid by
either to the Trustee or such Holder, the Subsidiary
Guarantee, to the extent theretofore discharged,
shall be reinstated in full force and effect.
(f) The Guaranteeing Subsidiary shall not be entitled to
any right of subrogation in relation to the Holders
in respect of any obligations guaranteed hereby until
payment in full of all obligations guaranteed hereby.
<PAGE>
(g) As between the Guarantors, on the one hand, and the
Holders and the Trustee, on the other hand, (x) the
maturity of the obligations guaranteed hereby may be
accelerated as provided in Article 6 of the Indenture
for the purposes of the Subsidiary Guarantee
notwithstanding any stay, injunction or other
prohibition preventing such acceleration in respect
of the obligations guaranteed hereby, and (y) in the
event of any declaration of acceleration of such
obligations as provided in Article 6 of the
Indenture, such obligations (whether or not due and
payable) shall forthwith become due and payable by
the Guarantors for the purpose of these Subsidiary
Guarantee.
(h) The Guarantors shall have the right to seek
contribution from any non-paying Guarantor so long as
the exercise of such right does not impair the rights
of the Holders under the Subsidiary Guarantee.
(i) Notwithstanding the foregoing, in the event that the
Subsidiary Guarantee would constitute or result in a
violation of any applicable fraudulent conveyance or
similar law of any relevant jurisdiction, the
liability of the Guaranteeing Subsidiary under this
Second Supplemental Indenture and its Subsidiary
Guarantee shall be reduced to the maximum amount
permissible under such fraudulent conveyance or
similar law.
3. SUBORDINATION. Payment of principal, premium, if any, and
interest and Liquidated Damages, if any, on the Subsidiary Guarantee is
subordinated to the prior payment in full of Senior Debt on the terms provided
in the Indenture.
4. EXECUTION AND DELIVERY. The Guaranteeing Subsidiary agrees
that the Subsidiary Guarantee shall remain in full force and effect
notwithstanding any failure to endorse on each Note a notation of such
Subsidiary Guarantee.
5. GUARANTEEING SUBSIDIARY MAY CONSOLIDATE, ETC. ON CERTAIN
TERMS.
(a) The Guaranteeing Subsidiary may not consolidate with
or merge with or into (whether or not such Guarantor
is the surviving Person) another corporation, Person
or entity whether or not affiliated with such
Guarantor unless:
<PAGE>
(i) subject to Section 11.05 of the Indenture,
the Person formed by or surviving any such
consolidation or merger (if other than a
Guarantor or the Company) unconditionally
assumes all the obligations of such
Guarantor, pursuant to a supplemental
indenture in form and substance reasonably
satisfactory to the Trustee, under the
Notes, the Indenture and the Subsidiary
Guarantee on the terms set forth herein or
therein; and
(ii) immediately after giving effect to such
transaction, no Default or Event of Default
exists.
(b) In case of any such consolidation, merger, sale or
conveyance and upon the assumption by the successor
corporation, by supplemental indenture, executed and
delivered to the Trustee and satisfactory in form to
the Trustee, of the Subsidiary Guarantee endorsed
upon the Notes and the due and punctual performance
of all of the covenants and conditions of the
Indenture to be performed by the Guarantor, such
successor corporation shall succeed to and be
substituted for the Guarantor with the same effect as
if it had been named herein as a Guarantor. Such
successor corporation thereupon may cause to be
signed any or all of the Subsidiary Guarantees to be
endorsed upon all of the Notes issuable hereunder
which theretofore shall not have been signed by the
Company and delivered to the Trustee. All the
Subsidiary Guarantees so issued shall in all respects
have the same legal rank and benefit under the
Indenture as the Subsidiary Guarantees theretofore
and thereafter issued in accordance with the terms of
the Indenture as though all of such Subsidiary
Guarantees had been issued at the date of the
execution hereof.
(c) Except as set forth in Articles 4 and 5 of the
Indenture, and notwithstanding clauses (a) and (b)
above, nothing contained in the Indenture or in any
of the Notes shall prevent any consolidation or
merger of a Guarantor with or into the Company or
another Guarantor, or shall prevent any sale or
conveyance of the property of a Guarantor as an
entirety or substantially as an entirety to the
Company or another Guarantor.
<PAGE>
6. RELEASES.
(a) In the event of a sale or other disposition of all of
the assets of any Guarantor, by way of merger,
consolidation or otherwise, or a sale or other
disposition of all of the capital stock of any
Guarantor, then such Guarantor (in the event of a
sale or other disposition, by way of merger,
consolidation or otherwise, of all of the capital
stock of such Guarantor) or the corporation acquiring
the property (in the event of a sale or other
disposition of all or substantially all of the assets
of such Guarantor) will be released and relieved of
any obligations under its Subsidiary Guarantee;
provided that the Net Proceeds of such sale or other
disposition are applied in accordance with the
applicable provisions of the Indenture, including
without limitation, Section 4.10 of the Indenture.
Upon delivery by the Company to the Trustee of an
Officers' Certificate and an Opinion of Counsel to
the effect that such sale or other disposition was
made by the Company in accordance with the provisions
of the Indenture, including without limitation
Section 4.10 of the Indenture, the Trustee shall
execute any documents reasonably required in order to
evidence the release of any Guarantor from its
obligations under its Subsidiary Guarantee.
(b) Any Guarantor not released from its obligations under
its Subsidiary Guarantee shall remain liable for the
full amount of principal of and interest on the Notes
and for the other obligations of any Guarantor under
the Indenture as provided in Article 11 of the
Indenture.
7. NO RECOURSE AGAINST OTHERS. No past, present or future
director, officer, employee, incorporator, stockholder or agent of the
Guaranteeing Subsidiary, as such, shall have any liability for any obligations
of the Company or any Guaranteeing Subsidiary under the Notes, any Subsidiary
Guarantees, the Indenture or this Supplemental 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 may not be effective to waive liabilities under the federal
securities laws and it is the view of the SEC that such a waiver is against
public policy.
8. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF
NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE BUT
WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT
THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED
THEREBY.
<PAGE>
9. COUNTERPARTS. The parties may sign any number of copies of
this Supplemental Indenture. Each signed copy shall be an original, but all of
them together represent the same agreement.
10. EFFECT OF HEADINGS. The Section headings herein are for
convenience only and shall not affect the construction hereof.
11. THE TRUSTEE. The Trustee shall not be responsible in any
manner whatsoever for or in respect of the validity or sufficiency of this
Supplemental Indenture or for or in respect of the recitals contained herein,
all of which recitals are made solely by the Guaranteeing Subsidiary and the
Company.
IN WITNESS WHEREOF, the parties hereto have
caused this Second Supplemental Indenture to be duly executed and attested, all
as of the date first above written.
Dated: February 12, 1999
ABELL-HOWE CRANE, INC..
By: /s/ Robert L. Montgomery, Jr.
-----------------------------
Name: Robert L. Montgomery, Jr.
-----------------------------
Title: Treasurer
-----------------------------
LICO, INC.
By: /s/ Robert L. Montgomery, Jr.
-----------------------------
Name: Robert L. Montgomery, Jr.
-----------------------------
Title: Treasurer
-----------------------------
<PAGE>
AUTOMATIC SYSTEMS, INC.
By: /s/ Robert L. Montgomery, Jr.
-----------------------------
Name: Robert L. Montgomery, Jr.
-----------------------------
Title: Treasurer
-----------------------------
LICO STEEL, INC.
By: /s/ Robert L. Montgomery, Jr.
-----------------------------
Name: Robert L. Montgomery, Jr.
-----------------------------
Title: Treasurer
-----------------------------
COLUMBUS McKINNON CORPORATION
By: /s/ Robert L. Montgomery, Jr.
-----------------------------
Name: Robert L. Montgomery, Jr.
-----------------------------
Title: Executive Vice President
-----------------------------
YALE INDUSTRIAL PRODUCTS, INC.
By: /s/ Robert L. Montgomery, Jr.
-----------------------------
Name: Robert L. Montgomery, Jr.
-----------------------------
Title: Treasurer
-----------------------------
STATE STREET BANK AND TRUST COMPANY, N.A.
as Trustee
By: /s/ James E. Murphy
-----------------------------
Name: James E. Murphy
-----------------------------
Title: Vice President
-----------------------------
THIRD SUPPLEMENTAL INDENTURE
THIRD SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"),
dated as of March 1, 1999, among G.L. INTERNATIONAL INC., a Delaware
corporation, GAFFEY, INC., an Oklahoma corporation, HANDLING SYSTEMS AND
CONVEYORS, INC., a Delaware corporation and LARCO MATERIAL HANDLING INC., an
Ohio corporation (each a "Guaranteeing Subsidiary" and together the
"Guaranteeing Subsidiaries"), subsidiaries of Columbus McKinnon Corporation (or
its permitted successor), a New York corporation (the "Company"), the Company,
the other Guarantors (as defined in the Indenture referred to herein) and State
Street Bank and Trust Company, N.A., as trustee under the indenture referred to
below (the "Trustee").
W I T N E S S E T H
WHEREAS, the Company has heretofore executed and delivered to
the Trustee an indenture (the "Indenture"), dated as of March 31, 1998 providing
for the issuance of an aggregate principal amount of up to $300.0 million of 8
1/2% Senior Subordinated Notes due 2008 (the "Notes");
WHEREAS, the Indenture provides that under certain
circumstances the Guaranteeing Subsidiaries shall execute and deliver to the
Trustee a supplemental indenture pursuant to which the Guaranteeing Subsidiaries
shall unconditionally guarantee all of the Company's Obligations under the Notes
and the Indenture on the terms and conditions set forth herein (each a
"Subsidiary Guarantee" and together the "Subsidiary Guarantees"); and
WHEREAS, pursuant to Section 9.01 of the Indenture, the
Trustee is authorized to execute and deliver this Supplemental Indenture.
NOW THEREFORE, in consideration of the foregoing and for other
good and valuable consideration, the receipt of which is hereby acknowledged,
the Guaranteeing Subsidiaries and the Trustee mutually covenant and agree for
the equal and ratable benefit of the Holders of the Notes as follows:
1. CAPITALIZED TERMS. Capitalized terms used herein without
definition shall have the meanings assigned to them in the Indenture.
2. AGREEMENT TO GUARANTEE. The Guaranteeing Subsidiaries
hereby agree as follows:
(a) Along with all Guarantors named in the Indenture, to
jointly and severally Guarantee to each Holder of a
Note authenticated and delivered by the Trustee and
to the Trustee and its successors and assigns,
irrespective of the validity and enforceability of
the Indenture, the Notes or the obligations of the
Company hereunder or thereunder, that:
<PAGE>
(i) the principal of and interest on the Notes
will be promptly paid in full when due,
whether at maturity, by acceleration,
redemption or otherwise, and interest on the
overdue principal of and interest on the
Notes, if any, if lawful, and all other
obligations of the Company to the Holders or
the Trustee hereunder or thereunder will be
promptly paid in full or performed, all in
accordance with the terms hereof and
thereof; and
(ii) in case of any extension of time of payment
or renewal of any Notes or any of such other
obligations, that same will be promptly paid
in full when due or performed in accordance
with the terms of the extension or renewal,
whether at stated maturity, by acceleration
or otherwise. Failing payment when due of
any amount so guaranteed or any performance
so guaranteed for whatever reason, the
Guarantors shall be jointly and severally
obligated to pay the same immediately.
(b) The obligations hereunder shall be unconditional,
irrespective of the validity, regularity or
enforceability of the Notes or the Indenture, the
absence of any action to enforce the same, any waiver
or consent by any Holder of the Notes with respect to
any provisions hereof or thereof, the recovery of any
judgment against the Company, any action to enforce
the same or any other circumstance which might
otherwise constitute a legal or equitable discharge
or defense of a guarantor.
(c) The following is hereby waived: diligence
presentment, demand of payment, filing of claims with
a court in the event of insolvency or bankruptcy of
the Company, any right to require a proceeding first
against the Company, protest, notice and all demands
whatsoever.
(d) These Subsidiary Guarantees shall not be discharged
except by complete performance of the obligations
contained in the Notes and the Indenture.
<PAGE>
(e) If any Holder or the Trustee is required by any court
or otherwise to return to the Company, the
Guarantors, or any Custodian, Trustee, liquidator or
other similar official acting in relation to either
the Company or the Guarantors, any amount paid by
either to the Trustee or such Holder, these
Subsidiary Guarantees, to the extent theretofore
discharged, shall be reinstated in full force and
effect.
(f) The Guaranteeing Subsidiaries shall not be entitled
to any right of subrogation in relation to the
Holders in respect of any obligations guaranteed
hereby until payment in full of all obligations
guaranteed hereby.
(g) As between the Guarantors, on the one hand, and the
Holders and the Trustee, on the other hand, (x) the
maturity of the obligations guaranteed hereby may be
accelerated as provided in Article 6 of the Indenture
for the purposes of these Subsidiary Guarantees,
notwithstanding any stay, injunction or other
prohibition preventing such acceleration in respect
of the obligations guaranteed hereby, and (y) in the
event of any declaration of acceleration of such
obligations as provided in Article 6 of the
Indenture, such obligations (whether or not due and
payable) shall forthwith become due and payable by
the Guarantors for the purpose of these Subsidiary
Guarantees.
(h) The Guarantors shall have the right to seek
contribution from any non-paying Guarantor so long as
the exercise of such right does not impair the rights
of the Holders under the Subsidiary Guarantees.
(i) Notwithstanding the foregoing, in the event that
these Subsidiary Guarantees would constitute or
result in a violation of any applicable fraudulent
conveyance or similar law of any relevant
jurisdiction, the liability of the Guaranteeing
Subsidiaries under this Third Supplemental Indenture
and their Subsidiary Guarantees shall be reduced to
the maximum amount permissible under such fraudulent
conveyance or similar law.
3. SUBORDINATION. Payment of principal, premium, if any, and
interest and Liquidated Damages, if any, on the Subsidiary Guarantees is
subordinated to the prior payment in full of Senior Debt on the terms provided
in the Indenture.
4. EXECUTION AND DELIVERY. Each Guaranteeing Subsidiary agrees
that the Subsidiary Guarantees shall remain in full force and effect
notwithstanding any failure to endorse on each Note a notation of such
Subsidiary Guarantee.
<PAGE>
5. GUARANTEEING SUBSIDIARIES MAY CONSOLIDATE, ETC. ON CERTAIN
TERMS.
(a) The Guaranteeing Subsidiaries, and each of them, may
not consolidate with or merge with or into (whether
or not such Guarantor is the surviving Person)
another corporation, Person or entity whether or not
affiliated with such Guarantor unless:
(i) subject to Section 11.05 of the Indenture,
the Person formed by or surviving any such
consolidation or merger (if other than a
Guarantor or the Company) unconditionally
assumes all the obligations of such
Guarantor, pursuant to a supplemental
indenture in form and substance reasonably
satisfactory to the Trustee, under the
Notes, the Indenture and the Subsidiary
Guarantee on the terms set forth herein or
therein; and
(ii) immediately after giving effect to such
transaction, no Default or Event of Default
exists.
(b) In case of any such consolidation, merger, sale or
conveyance and upon the assumption by the successor
corporation, by supplemental indenture, executed and
delivered to the Trustee and satisfactory in form to
the Trustee, of the Subsidiary Guarantee endorsed
upon the Notes and the due and punctual performance
of all of the covenants and conditions of the
Indenture to be performed by the Guarantor, such
successor corporation shall succeed to and be
substituted for the Guarantor with the same effect as
if it had been named herein as a Guarantor. Such
successor corporation thereupon may cause to be
signed any or all of the Subsidiary Guarantees to be
endorsed upon all of the Notes issuable hereunder
which theretofore shall not have been signed by the
Company and delivered to the Trustee. All the
Subsidiary Guarantees so issued shall in all respects
have the same legal rank and benefit under the
Indenture as the Subsidiary Guarantees theretofore
and thereafter issued in accordance with the terms of
the Indenture as though all of such Subsidiary
Guarantees had been issued at the date of the
execution hereof.
(c) Except as set forth in Articles 4 and 5 of the
Indenture, and notwithstanding clauses (a) and (b)
above, nothing contained in the Indenture or in any
of the Notes shall prevent any consolidation or
merger of a Guarantor with or into the Company or
another Guarantor, or shall prevent any sale or
conveyance of the property of a Guarantor as an
entirety or substantially as an entirety to the
Company or another Guarantor.
<PAGE>
6. RELEASES.
(a) In the event of a sale or other disposition of all of
the assets of any Guarantor, by way of merger,
consolidation or otherwise, or a sale or other
disposition of all of the capital stock of any
Guarantor, then such Guarantor (in the event of a
sale or other disposition, by way of merger,
consolidation or otherwise, of all of the capital
stock of such Guarantor) or the corporation acquiring
the property (in the event of a sale or other
disposition of all or substantially all of the assets
of such Guarantor) will be released and relieved of
any obligations under its Subsidiary Guarantee;
provided that the Net Proceeds of such sale or other
disposition are applied in accordance with the
applicable provisions of the Indenture, including
without limitation, Section 4.10 of the Indenture.
Upon delivery by the Company to the Trustee of an
Officers' Certificate and an Opinion of Counsel to
the effect that such sale or other disposition was
made by the Company in accordance with the provisions
of the Indenture, including without limitation
Section 4.10 of the Indenture, the Trustee shall
execute any documents reasonably required in order to
evidence the release of any Guarantor from its
obligations under its Subsidiary Guarantee.
(b) Any Guarantor not released from its obligations under
its Subsidiary Guarantee shall remain liable for the
full amount of principal of and interest on the Notes
and for the other obligations of any Guarantor under
the Indenture as provided in Article 11 of the
Indenture.
7. NO RECOURSE AGAINST OTHERS. No past, present or future
director, officer, employee, incorporator, stockholder or agent of each of the
Guaranteeing Subsidiaries, as such, shall have any liability for any obligations
of the Company or any Guaranteeing Subsidiary under the Notes, any Subsidiary
Guarantees, the Indenture or this Supplemental 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 may not be effective to waive liabilities under the federal
securities laws and it is the view of the SEC that such a waiver is against
public policy.
8. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF
NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE BUT
WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT
THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED
THEREBY.
9. COUNTERPARTS. The parties may sign any number of copies of
this Supplemental Indenture. Each signed copy shall be an original, but all of
them together represent the same agreement.
<PAGE>
10. EFFECT OF HEADINGS. The Section headings herein are for
convenience only and shall not affect the construction hereof.
11. THE TRUSTEE. The Trustee shall not be responsible in any
manner whatsoever for or in respect of the validity or sufficiency of this
Supplemental Indenture or for or in respect of the recitals contained herein,
all of which recitals are made solely by the Guaranteeing Subsidiaries and the
Company.
IN WITNESS WHEREOF, the parties hereto have
caused this Third Supplemental Indenture to be duly executed and attested, all
as of the date first above written.
Dated: March 1, 1999
G.L. INTERNATIONAL INC.
By: /s/ R. L. Montgomery
------------------------------
Name: R. L. Montgomery
Title: Vice President and Treasurer
GAFFEY, INC.
By: /s/ R. L. Montgomery
------------------------------
Name: R. L. Montgomery
Title: Vice President and Treasurer
HANDLING SYSTEMS AND CONVEYORS, INC.
By: /s/ R. L. Montgomery
------------------------------
Name: R. L. Montgomery
Title: Vice President and Treasurer
LARCO MATERIAL HANDLING INC.
By: /s/ R. L. Montgomery
------------------------------
Name: R. L. Montgomery
Title: Vice President and Treasurer
ABELL-HOWE CRANE, INC..
By: /s/ R. L. Montgomery
------------------------------
Name: R. L. Montgomery
Title: Vice President and Treasurer
<PAGE>
LICO, INC.
By: /s/ R. L. Montgomery
------------------------------
Name: R. L. Montgomery
Title: Treasurer
AUTOMATIC SYSTEMS, INC.
By: /s/ R. L. Montgomery
------------------------------
Name: R. L. Montgomery
Title: Treasurer
LICO STEEL, INC.
By: /s/ R. L. Montgomery
------------------------------
Name: R. L. Montgomery
Title: Treasurer
COLUMBUS McKINNON CORPORATION
By: /s/ R. L. Montgomery
------------------------------
Name: R. L. Montgomery
Title: Executive Vice President
YALE INDUSTRIAL PRODUCTS, INC.
By: /s/ R. L. Montgomery
------------------------------
Name: R. L. Montgomery
Title: Vice President and Treasurer
STATE STREET BANK AND TRUST COMPANY, N.A.
as Trustee
By: /s/ James E. Murphy
------------------------------
Name: James E. Murphy
------------------------------
Title: Vice President
------------------------------
THIRD AMENDMENT TO AMENDED AND RESTATED
TERM LOAN AGREEMENT AMONG
FLEET NATIONAL BANK
(AS SUCCESSOR BY MERGER TO FLEET BANK),
COLUMBUS MCKINNON CORPORATION, AS GUARANTOR, AND
KAREN L. HOWARD, TIMOTHY R. HARVEY AND ROBERT L. MONTGOMERY,
AS TRUSTEES UNDER THE COLUMBUS MCKINNON CORPORATION
EMPLOYEE STOCK OWNERSHIP TRUST AGREEMENT
This Third Amendment to Amended and Restated Term Loan
Agreement, dated as of November __, 1998 (this "Third Amendment"), is entered
into by and among FLEET NATIONAL BANK (AS SUCCESSOR BY MERGER TO FLEET BANK), a
bank having its principal office at 10 Fountain Plaza, Buffalo, New York 14202
("Bank"), COLUMBUS MCKINNON CORPORATION, a New York corporation having its
principal office at 140 Audubon Parkway, Amherst, New York 14228 ("Guarantor"),
and Karen L. Howard, Timothy R. Harvey and Robert L. Montgomery, as Trustees
under the Columbus McKinnon Corporation Employee Stock Ownership Trust Agreement
(the "Trust Agreement"), effective on April 1, 1987 and amended as of November
1, 1988 (collectively, "Trustees").
W I T N E S S E T H:
WHEREAS:
A. Bank, Guarantor and Trustees are parties to that certain
Amended and Restated Term Loan Agreement dated August 5, 1996, as amended by the
First Amendment thereto, dated as of October 16, 1996, and the Second Amendment
thereto, dated as of March 31, 1998 (as so amended and as hereafter amended,
restated or otherwise modified, the "Restated Agreement");
B. Bank, Guarantor and Trustees wish to amend the Restated
Agreement to extend the maturity of the ESOP Loan and make certain other
changes, as and to the extent set forth in this Third Amendment and subject to
the terms and conditions stated herein; it being understood that no additional
money is being advanced in connection with this Third Amendment and that the
note which evidences the ESOP Loan is being replaced by the ESOP Note (as
hereinafter defined).
NOW THEREFORE, in consideration of the premises and the
agreements, provisions and covenants herein contained, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. DEFINITIONS. Except to the extent otherwise specified
herein, capitalized terms used in this Third Amendment shall have the same
meanings ascribed to them in the Restated Agreement.
<PAGE>
2. AMENDMENTS. This Third Amendment shall be deemed to be an
amendment to the Restated Agreement and shall not be construed in any way as a
replacement or substitution therefor. All of the terms and conditions of, and
terms defined in, this Third Amendment are hereby incorporated by reference into
the Restated Agreement as if such terms and provisions were set forth in full
therein.
2.1 Section 1.1 of the Restated Agreement is hereby amended by
deleting the existing definition of "ESOP Note" in its entirety and replacing it
with the following, in the appropriate alphabetical order:
"`ESOP NOTE' means the Replacement ESOP Term Note, dated of
even date herewith, by Trustees to Bank (a copy of which is attached to this
Third Amendment as Exhibit A) and all replacements, substitutions,
modifications, extensions, renewals, consolidations and refinancings thereof.";
2.2 Section 1.1 of the Restated Agreement is further amended
by deleting from the definition of the term "Trustees" the words "Ivan E.
Shawvan,";
2.3 Section 5.1 of the Restated Agreement is hereby amended by
deleting the text of existing Section 5.1 in its entirety and replacing it with
the following:
"ENCUMBRANCES. Except for (i) the pledge of shares in favor of
Bank pursuant to the Stock Pledge Security Agreement, (ii) the pledge of shares
in favor of Marine pursuant to that certain pledge agreement dated October 27,
1994, executed and delivered by Guarantor to Marine, as amended through the date
hereof and (iii) the pledge of shares in favor of Guarantor to secure loans made
by Guarantor to the Trustees for the purpose of enabling the Trustees, on behalf
of the Plan, to purchase such pledged shares (to the extent and only to the
extent that such loans by Guarantor to the Trustees, on behalf of the Plan, and
such pledge of shares are permitted under Section 5.02(f) and Section 5.02(r) of
the Credit Agreement), the Trustees shall not mortgage, pledge or otherwise
encumber or suffer to be encumbered any of their assets."
3. REPRESENTATIONS AND WARRANTIES OF TRUSTEES AND GUARANTOR.
3.1 Trustees and Guarantor have full power, authority and
legal right to enter into this Third Amendment, and to take all action required
of them under this Third Amendment. Trustees hereby represent and warrant that
the execution, delivery and performance by Trustees of this Third Amendment has
been duly authorized by all necessary action, if any, and that this Third
Amendment is a legal, valid and binding obligation of Trustees enforceable
against Trustees in accordance with its terms, except as the enforcement hereof
may be subject to the effect of any applicable bankruptcy, insolvency,
reorganization, moratorium or similar law affecting creditors' rights generally
or to general principles of equity.
<PAGE>
3.2 Trustees and Guarantor each hereby represent and warrant
that the execution, delivery and performance of this Third Amendment by Trustees
and Guarantor, respectively, does not, and will not, contravene or conflict with
any provision of (i) law or (ii) any judgment, decree or order, and does not,
and will not, contravene or conflict with, or cause any lien to arise under, any
provision of the Trust Agreement or any other agreement, instrument or other
document binding upon or otherwise affecting Trustees, Guarantor, any property
subject to the Trust Agreement or Plan, or any property of Guarantor.
3.3 All of the representations and warranties contained in the
Restated Agreement, including, without limitation, those contained in Section 3
thereof, and each other agreement and document executed in connection therewith
are true and correct on and as of the date hereof as though made on the date
hereof, and no Event of Default exists under the Restated Agreement or will
exist after or be triggered by the execution and delivery of this Third
Amendment or any of the other agreements and documents contemplated hereby. In
addition, Trustees hereby represent, warrant and affirm that the Financing
Documents and each of the other agreements and documents executed in connection
with or relating to the Restated Agreement remain in full force and effect.
4. CONDITIONS PRECEDENT TO AMENDMENTS. The effectiveness of
this Third Amendment shall be subject to the fulfillment (to the satisfaction of
Bank) of the following conditions precedent:
4.1 AMENDMENT DOCUMENTATION. Trustees shall have delivered to
Bank all of the following, each duly executed, if required, and dated the date
hereof, and each in form and substance satisfactory to Bank:
(a) AMENDMENT. Trustees, Bank and Guarantor shall have
executed and delivered this Third Amendment.
(b) ESOP NOTE. Bank shall have received the ESOP Note, duly
executed and delivered by Trustees and payable to the order of Bank.
(c) OTHER. Such other documents and such other actions as Bank
may reasonably request.
4.2 NO DEFAULT. As of the closing date of this Third
Amendment, no Event of Default shall have occurred or be continuing under the
Restated Agreement.
4.3 REPRESENTATIONS AND WARRANTIES. The representations and
warranties set forth in Section 3 hereof shall be true and correct on the
closing date of this Third Amendment.
4.4 LEGAL MATTERS. All legal matters incident hereto shall be
satisfactory to counsel to Bank.
<PAGE>
5. MISCELLANEOUS
5.1 Except as specifically amended by this Third Amendment,
the Restated Agreement and each other agreement and document executed in
connection therewith shall remain in full force and effect and is hereby
ratified and confirmed.
5.2 The execution, delivery and effect of this Third Amendment
shall be limited precisely as written and shall not be deemed to (i) be a
consent to any waiver of any term or condition or to any amendment or
modification of any term or condition of the Restated Agreement or any other
agreement or document executed in connection therewith, except, upon the
effectiveness of this Third Amendment, as specifically amended hereby, or (ii)
prejudice any right, power or remedy which Bank now has or may have in the
future under or in connection with the Restated Agreement or any other agreement
or document executed in connection therewith. Upon the effectiveness of this
Third Amendment, each reference in the Restated Agreement to "this Agreement",
"hereunder", "hereof", "herein" or any other word or words of similar import
shall mean and be a reference to the Restated Agreement as amended hereby, and
each reference in any other agreement or document executed in connection with
the Restated Agreement to the Restated Agreement or any word or words of similar
import shall be and mean a reference to the Restated Agreement as amended
hereby.
5.3 COUNTERPARTS. This Third Amendment may be executed in any
number of counterparts, each of which when so executed shall be deemed an
original but all such counterparts shall constitute one and the same instrument.
5.4 COSTS AND EXPENSES. Guarantor and Trustees jointly and
severally shall reimburse Bank promptly for all reasonable costs and expenses,
including reasonable counsel fees, incurred by Bank in connection with this
Third Amendment, any indebtedness created or evidenced hereunder and, in the
case of Guarantor, any other Obligations; and for costs and expenses, including
reasonable counsel fees, of Bank incident to the enforcement of any provision of
this Third Amendment, the ESOP Note, any other Financing Documents and, in the
case of Guarantor, any other Obligations.
5.5 GOVERNING LAW. THIS THIRD AMENDMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO CONFLICTS OF
LAW PROVISIONS) OF THE STATE OF NEW YORK.
5.6 HEADINGS. Section headings in this Third Amendment are
included herein for convenience of reference only and shall not constitute a
part of this Third Amendment for any other purpose.
<PAGE>
IN WITNESS WHEREOF, this Third Amendment to Amended and
Restated Term Loan Agreement has been duly executed as of the date first written
above.
FLEET NATIONAL BANK (AS
SUCCESSOR BY MERGER TO FLEET
BANK)
By: /s/ John G. Tierney
---------------------------
Title: Vice President
------------------------
COLUMBUS MCKINNON CORPORATION
By: /s/ R. L. Montgomery
---------------------------
Title: Executive Vice President
------------------------
/s/ Karen L. Howard
--------------------------
KAREN L. HOWARD, as
Trustee under the Columbus
McKinnon Corporation Employee
Stock Ownership Trust Agreement
/s/ Timothy R. Harvey
--------------------------
TIMOTHY R. HARVEY, as
Trustee under the Columbus
McKinnon Corporation Employee
Stock Ownership Trust Agreement
/s/ Robert L. Montgomery
--------------------------
ROBERT L. MONTGOMERY, as
Trustee under the Columbus
McKinnon Corporation Employee
Stock Ownership Trust Agreement
AMENDED AND RESTATED
LOAN AGREEMENT
- Among -
COLUMBUS MCKINNON CORPORATION
EMPLOYEE STOCK OWNERSHIP TRUST
COLUMBUS MCKINNON CORPORATION
- and -
MARINE MIDLAND BANK
DATED: August 5, 1996
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE I Definitions.......................................... 1
---------
1.1 Definitions....................................... 1
1.2 Accounting Terms.................................. 3
ARTICLE II The Credit........................................... 3
----------
2.1 The Credit. . . . . . . . . . . . . . . . . . . . 3
2.2 The Note. . . . . . . . . . . . . . . . . . . . . 3
2.3 Interest. . . . . . . . . . . . . . . . . . . . . 4
2.4 Prepayment. . . . . . . . . . . . . . . . . . . . 5
2.5 Use of Proceeds . . . . . . . . . . . . . . . . . 6
2.6 Special Provisions Governing LIBOR Loans. . . . . 6
2.7 Taxes.............................................. 6
ARTICLE III Representations and Warranties...................... 7
-----------
3.1 Authority.......................................... 7
3.2 Valid and Binding Obligation....................... 7
3.3 No Pending Litigation.............................. 7
3.4 No Consent or Filing............................... 7
3.5 Compliance With Laws and Regulations............... 7
3.6 Guarantor's Obligations. . . . . . . . . . . ...... 8
3.7 Federal Regulations................................ 8
3.8 Credit Agreement . . . . . . . . . . . . . . . . .. 8
ARTICLE IV Affirmative Covenants................................ 8
----------
4.1 Payments........................................... 8
4.2 Future Financial Statements........................ 8
4.3 Books and Records.................................. 8
4.4 Compliance with Law................................ 9
4.5 Use of Proceeds.................................... 9
4.6 Taxes.............................................. 9
4.7 ESOP............................................... 9
4.8 Reports and Notices................................ 9
4.9 Information........................................ 9
4.10 Amendments......................................... 9
4.11 Notice............................................ 10
4.12 Other Acts........................................ 10
4.13 Credit Agreement Affirmative Covenants . . . . . . 10
- i -
<PAGE>
ARTICLE V Negative Covenants................................... 10
---------
5.1 Borrowed Money.................................... 10
5.2 Encumbrances...................................... 10
5.3 Maintain Existence................................ 11
5.4 Credit Agreement Negative Covenants. . . . . . . . 11
ARTICLE VI Default............................................. 11
----------
6.1 Events of Default................................. 11
6.2 Effects of an Event of Default.................... 12
ARTICLE VII Expenses........................................... 13
-----------
ARTICLE VIII Miscellaneous..................................... 13
------------
8.1 Amendments and Waivers............................ 13
8.2 Delays and Omissions.............................. 13
8.3 Successors and Assigns............................ 13
8.4 Notices........................................... 14
8.5 Governing Law..................................... 14
8.6 Counterparts...................................... 14
8.7 Titles............................................ 15
8.8 Inconsistent Provisions........................... 15
8.9 Course of Dealing................................. 15
8.10 Collateral Release................................ 15
8.11 The Trustee....................................... 15
8.12 Non-Recourse...................................... 16
8.13 JURY TRIAL WAIVER................................. 16
8.14 CONSENT TO JURISDICTION........................... 16
- ii -
<PAGE>
AMENDED AND RESTATED LOAN AGREEMENT dated August 5, 1996 made
by and between COLUMBUS MCKINNON CORPORATION EMPLOYEE STOCK OWNERSHIP TRUST, a
trust which was created under the laws of the State of New York ("Borrower"),
COLUMBUS MCKINNON CORPORATION, a corporation organized under the laws of the
State of New York ("Guarantor") and MARINE MIDLAND BANK, a banking corporation
organized under the laws of the State of New York ("Bank").
WITNESSETH
WHEREAS, Bank, Guarantor and Borrower are parties
to a Loan Agreement dated October 27, 1994 ("Original Agreement"); and
WHEREAS, Fleet Bank, Bank, Fleet Bank as Administra-
tive Agent and Guarantor have entered into a Credit Agreement dated of even date
herewith ("Credit Agreement"); and
WHEREAS, Bank, Guarantor and Borrower wish to amend
and restate the Original Agreement in its entirety to incorporate certain
covenants and pricing provisions of the Credit Agreement; it being understood
that the no additional money is being advanced in connection with this Agreement
and that the Note (as defined hereinafter) is not being replaced and remains an
obligation of the Borrower.
NOW THEREFORE the parties agree as follows:
ARTICLE I. DEFINITIONS
1.1 DEFINITIONS. As used in this Agreement, unless otherwise
specified, the following terms shall have the following respective meanings:
"Business Day" - shall have the meaning set forth in the
Credit Agreement.
"Credit" - collectively, "Credit" as defined in Section 2.1 of
this Agreement.
"Credit Agreement" - the Credit Agreement between Fleet Bank,
Bank, Fleet Bank as Administrative Agent and Guarantor dated August 5, 1996, as
amended from time to time.
"Domestic Subsidiary" - any Subsidiary organized under the
laws of the United States or any state or territory thereof.
"ESOP" - the Columbus McKinnon Corporation Employee Stock
Ownership Plan dated April 1, 1987, as amended and restated as of November 1,
1988, as amended and restated as of October 27, 1994.
<PAGE>
- 2 -
"Eurodollar Loan" - "LIBOR Loan" as defined hereinafter.
"Guaranty" - Guaranty by Guarantor to Bank dated October 27,
1994 guaranteeing the payment of any and all indebtedness and liabilities,
whether now existing or hereafter incurred of the Borrower to the Bank, as the
same may be amended or supplemented from time to time.
"Interest Period" - with respect to any LIBOR Loan, the period
commencing on the date such loan is made and ending, as the Borrower may select,
pursuant to Section 2.3(a) and (b) hereof, or the numerically corresponding day
in the first, second, third or sixth calendar month thereafter, except that each
such Interest Period that commences on the last Business Day of a calendar month
(or on any day for which there is no numerically corresponding day in the
appropriate subsequent calendar month) shall end on the last Business Day of the
appropriate subsequent calendar month; provided that all of the foregoing
provisions relating to Interest Periods are subject to the following:
(a) no Interest Period may extend beyond matur-
ity; and
(b) if an Interest Period would end on a day
that is not a Business Day, such Interest
Period shall be extended to the next
Business Day, unless such Business Day would
fall in the next calendar month in which
event such Interest Period shall end on the
immediately preceding Business Day.
"Leverage Ratio" - shall have the meaning set forth in the
Credit Agreement.
"LIBOR Interest Rate" - shall have the meaning set forth in
the Credit Agreement.
"LIBOR Loan" - a portion of the Credit for which the interest
rate is calculated based on the LIBOR Interest Rate.
"London Interbank Offered Rate" - shall have the meaning set
forth in the Credit Agreement.
"Note" - as used in all Articles of this Agreement, except
Article II, collectively, all notes evidencing any indebtedness created under
this Agreement.
"Plan Year" - Plan Year, as defined in Section 8.10 of this
Agreement.
<PAGE>
- 3 -
"Pledge Agreement" - Pledge Agreement dated October 27, 1994
executed and delivered by Borrower to Bank, pursuant to which Borrower pledged
to the Bank all shares of stock of the Guarantor owned or controlled directly or
indirectly by the Borrower and acquired with the proceeds of the Credit by
delivering the certificates of stock and endorsing such certificates or
appropriate stock powers to the Bank, as the same may be amended or supplemented
from time to time.
"Prime Rate" - the rate of interest publicly announced by the
Bank from time to time as its prime rate and is a base rate for calculating
interest on certain loans. The Prime Rate may or may not be the most favorable
rate charged by the Bank to its customers.
"Prime Rate Loan" - a portion of the Credit for which the
interest rate is calculated based on the Prime Rate.
"Subsidiary" - shall have the meaning set forth in the Credit
Agreement.
"Tangible Net Worth" - shall have the meaning set forth in the
Credit Agreement.
"Trust Agreement" - the Columbus McKinnon Corporation
Leveraged Employee Stock Ownership Trust Agreement effective as of April 1, 1987
(formerly known as the Columbus McKinnon Corporation Personal Retirement Account
Trust Agreement), by and between the Guarantor and the persons named as trustees
therein, as amended from time to time
"Trustees" - each or all of Kenneth G. McCreadie, Peter A.
Grant and Robert L. Montgomery, Jr. in their capacity as trustees for the
Borrower.
1.2 ACCOUNTING TERMS. All accounting terms not otherwise
defined herein have the meaning assigned to them in accordance with generally
accepted accounting principles.
ARTICLE II. THE CREDIT
2.1 THE CREDIT. The Bank agreed to lend to the Borrower and
the Borrower agreed to borrow from the Bank the sum of TWO MILLION DOLLARS
($2,000,000.00) ("Credit").
2.2 THE NOTE. The Credit is evidenced by a term note made by
Borrower to Bank dated October 27, 1994 ("Note"), payable in accordance with the
terms and conditions set forth therein. The Note is also subject to mandatory
prepayment as set forth in Section 2.4(c) of this Agreement.
<PAGE>
- 4 -
2.3 INTEREST.
(a) NOTICE. The Credit shall bear interest on the date hereof
at the Prime Rate unless the Borrower has given the Bank notice at least three
(3) Business Days prior to the date it desires all or any portion of the Credit
to be a LIBOR Loan. Subject to Section 2.3(b) hereof, Borrower may elect to
convert any portion of the Credit that is a Prime Rate Loan to a LIBOR Loan or
to continue any LIBOR Loan as a new LIBOR Loan by giving notice. All notices
given under this Section 2.3(a) shall be irrevocable and shall be given not
later than 11:00 a.m. on the day which is not less than the number of Business
Days specified above for such notice.
(b) CONVERSION AND RENEWALS. The Borrower may elect from
time to time to convert all or part of a Prime Rate Loan into a LIBOR Loan or a
LIBOR Loan into a Prime Rate Loan or to renew all or part of a LIBOR Loan by
giving Bank notice at least one (1) Business Day before conversion into a Prime
Rate Loan and at least three (3) Business Days before conversion into or renewal
of a LIBOR Loan specifying: (a) the renewal or conversion date; (b) the amount
of the Prime Rate Loan or LIBOR Loan to be converted or renewed; (c) in the case
of conversion, whether the conversion is into a Prime Rate Loan or a LIBOR Loan;
and (d) in the case of a renewal of, or a conversion into, a LIBOR Loan, the
duration of the Interest Period applicable thereto; provided that (i) the
minimum principal amount of each Prime Rate Loan outstanding after a renewal or
conversion shall be $250,000.00 and the minimum principal amount of each LIBOR
Loan after a renewal or conversion shall be $250,000; and (ii) a LIBOR Loan can
be converted only on the last day of the Interest Period for such LIBOR Loan.
All notices given under this Section 2.3(b) shall be irrevocable and shall be
given not later than 11:00 a.m. on the day which is not less than the number of
Business Days specified above for such notice. If the Borrower shall fail to
give Bank the notices specified above for the renewal or conversion of a LIBOR
Loan prior to the end of the Interest Period with respect thereto, such LIBOR
Loan shall by automatically converted into a Prime Rate Loan on the last day of
the Interest Period for such LIBOR Loan.
(c) PAYMENTS OF INTEREST. The Credit shall bear interest at
the rates of interest set forth in Section 2.06 of the Credit Agreement.
Interest on the Credit shall be paid in immediately avail-
able funds to the Bank at One Marine Midland Center, Buffalo, New York as
follows:
(i) Except to the extent that the Credit is a LIBOR Loan,
<PAGE>
- 5 -
on the first day of each month commencing after the
date of this Agreement and at maturity of the Credit;
and
(ii) For each LIBOR Loan, on the last day of the Interest
Period with respect thereto and in the case of any
Interest Period greater than three months, at three
month intervals after the first day of such Interest
Period.
(d) DEFAULT RATE. Any principal amount not paid when due (at
maturity, by acceleration or otherwise) shall bear interest thereafter until
paid in full, payable on demand, at a rate per annum equal to the rate of
interest otherwise payable on such amount plus four percent (4%) until paid in
full.
2.4 PREPAYMENT.
(a) OPTIONAL PREPAYMENT - PRIME RATE LOANS. The Borrower may
prepay, without premium, all or part of the indebtedness consisting of Prime
Rate Loans, together with interest on the principal so prepaid to the date of
prepayment. Subject to Subsection 2.4 (c) below, any partial prepayment shall be
applied to payments of the Note in inverse order of maturity.
(b) OPTIONAL PREPAYMENT - LIBOR LOANS. The Borrower shall have
the right to prepay without premium all or any portion of the indebtedness
consisting of LIBOR Loans on the expiration day of the applicable Interest
Period. If any LIBOR Loan is prepaid at any other time the Borrower shall pay to
the Bank such amount or amounts as the Bank deems necessary to compensate it for
any loss or expense sustained or incurred by the Bank with respect to such
repayment or prepayment. Subject to subsection 2.4(c) below, any partial
prepayment shall be applied to payments of the Note in inverse order of
maturity.
(c) MANDATORY PREPAYMENT. In addition to the installments
otherwise specified in the Note, the Borrower shall prepay $100,000 of principal
of the Note in five (5) annual installments. The Borrower has prepaid one (1)
installment on April 1, 1995 in the amount of $8333.00 and one (1) installment
in the amount of $22,619.75 on or before April 1, 1996, and the Borrower shall
prepay three (3) installments in the amounts of $22,916.75 each, payable on or
before the first day of each April of each year beginning April 1, 1997
("Mandatory Prepayment") which Mandatory Prepayment shall be applied to
installments of principal of the Note in inverse order of maturity. Any
prepayment in any Plan Year exceeding the amount of the required Mandatory
Prepayment shall be applied to the Mandatory Prepayment due in the immediately
succeeding year or years, until the
<PAGE>
- 6 -
Borrower has prepaid the full $100,000 which must be paid pursuant to this
Section 2.4(c).
2.5 USE OF PROCEEDS. The Borrower covenants to the Bank that
the proceeds advanced under this Agreement have and will be used exclusively to
acquire employer securities within the meaning of Section 409(1) of the Internal
Revenue Code and Borrower directed the Bank to advance such proceeds directly to
the Guarantor for such purpose. The Guarantor covenants to the Bank that it has
used such proceeds, and the proceeds of the funds it received from the Borrower
which the Borrower received from its $4,000,000 loan from Fleet Bank, to reduce
the Guarantor's working capital lines, to pay for certain environmental
remediation work (estimated to cost approximately $2,766,000) and to fund the
stock redemption to the Estates of Neville Proctor and Walter Ersing.
2.6 SPECIAL PROVISIONS GOVERNING LIBOR LOANS
The provisions set forth in the following sections
of the Credit Agreement: Section 2.10 (Illegality), Section 2.11 (Disaster),
Section 2.12 (Increased Cost), and Section 2.13 (Funding Loss Indemnification)
are incorporated herein by reference as if fully set forth. The provisions as
incorporated herein shall survive the termination of the Credit Agreement.
2.7 TAXES. If any taxes (other than taxes with respect to the
income of the Bank), or duties of any kind shall be payable, or ruled to be
payable, by or to any taxing authority of or in the United States, or any
foreign country, or any political subdivision of any thereof, in respect of any
of the transactions contemplated by this Agreement (including, but not limited
to, execution, delivery, performance, enforcement, or payment of principal or
interest of or under the Note or this Agreement, or the making of a LIBOR Loan),
by reason of any now existing or hereafter enacted statute, rule, regulation or
other determination (excluding any taxes imposed on or measured by the net
income of the Bank), the Company will:
(1) pay on written request therefor all such taxes or
duties, including interest and penalty, if any,
(2) promptly furnish the Bank with evidence of any such
payment, and
(3) indemnify and hold the Bank and any holder or holders of
the Note harmless and indemnified against any liability or liabilities with
respect to or in connection with any such taxes or the payment thereof or
resulting from any delay or omission to pay such taxes.
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ARTICLE III. REPRESENTATIONS AND WARRANTIES
The Borrower makes the following representations and
warranties, which shall be deemed to be continuing representations and
warranties so long as any indebtedness of the Borrower to the Bank, including
indebtedness for fees and expenses, remains unpaid:
3.1 AUTHORITY. The Borrower is a trust established under the
laws of New York and has all necessary power and authority to enter into this
Agreement and to execute, deliver and perform this Agreement, the Note, the
Pledge Agreement and any other document executed in connection with this
Agreement, all of which have been duly authorized by the Trust Agreement.
3.2 VALID AND BINDING OBLIGATION. This Agreement, the Pledge
Agreement and any other document executed in connection herewith, and the Note
constitute the legal, valid and binding obligations of the Borrower, enforceable
in accordance with their respective terms.
3.3 NO PENDING LITIGATION. There are not any actions, suits,
proceedings (whether or not purportedly on behalf of the Borrower) or
investigations pending or, to the knowledge of the Borrower, threatened against
the Borrower or any basis therefor, which, if adversely determined, would, in
any case or in the aggregate, materially adversely affect the financial
condition of the Borrower or which question the validity of this Agreement, the
Note, the Guaranty, the Pledge Agreement or other documents required by this
Agreement, or any action taken or to be taken pursuant to any of the foregoing.
3.4 NO CONSENT OR FILING. Other than the filings and
approvals contemplated by Section 3.5, no consent, license, approval or
authorization of, or registration, declaration or filing with, any court,
governmental body or authority or other person or entity is required in
connection with the valid execution, delivery or performance of this Agreement,
the Note, the Pledge Agreement or other documents required by this Agreement or
in connection with any of the transactions contemplated thereby.
3.5 COMPLIANCE WITH LAWS AND REGULATIONS. All necessary
action has been taken to adopt the ESOP and appoint the Trustees, and the Board
of Directors of the Guarantor has directed the officers of the Guarantor to have
the ESOP approved by the United States Department of the Treasury as qualified
under Section 401(a) and 4975(e)(7) of the Internal Revenue Code as amended.
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3.6 GUARANTOR'S OBLIGATIONS. The Guarantor has full power
and authority to guarantee, to execute and deliver this Agreement, the Guaranty
and to take all other action called for by the Guaranty. The Guaranty and this
Agreement constitute the legal, valid and binding obligations of the Guarantor
enforceable in accordance with the terms contained therein, subject to
applicable bankruptcy, insolvency and similar laws affecting creditors' rights
generally and to general principles of equity.
3.7 FEDERAL REGULATIONS. The Borrower is not engaged
principally, or as one of its important activities, in the business of extending
or arranging for the extension of credit for the purpose of purchasing or
carrying "margin security" or "margin stock" (as defined in Regulations G and U
issued by the Board of Governors of the Federal Reserve System). Likewise, the
Borrower does not own or intend to carry or purchase any such "margin security"
or "margin stock," and the Borrower will not use the proceeds advanced pursuant
to this Agreement to purchase or carry (or refinance any borrowing the proceeds
of which were used to purchase or carry) any such "margin security" or "margin
stock."
3.8 CREDIT AGREEMENT. The representations and warranties
made by the Guarantor, set forth in Article VI of the Credit Agreement are true
and corrent, and are incorporated herein by reference as if fully set forth. The
representations and warranties as incorporated herein shall survive the
termination of the Credit Agreement.
ARTICLE IV. AFFIRMATIVE COVENANTS
During the term of this Agreement, and so long thereafter as
any indebtedness of the Borrower to the Bank shall remain unpaid, including any
indebtedness for fees and expenses, the Borrower will:
4.1 PAYMENTS. Duly and punctually pay the principal of and
interest on all indebtedness incurred by it pursuant to this Agreement in the
manner set forth in this Agreement.
4.2 FUTURE FINANCIAL STATEMENTS. Furnish to the Bank the
financial statements and other certificates and information described in Section
7.02 of the Credit Agreement.
4.3 BOOKS AND RECORDS. Keep proper books and records in
accordance with generally accepted accounting principles consistently applied
and notify the Bank promptly in writing of any proposed change in the location
at which such books and records are maintained.
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4.4 COMPLIANCE WITH LAW. Comply in all material respects with
all applicable laws and governmental rules and regulations.
4.5 USE OF PROCEEDS. Use the proceeds of the loan solely and
exclusively for the purpose of acquiring employer securities within the meaning
of Internal Revenue Code Section 409(1).
4.6 TAXES. Pay all taxes, assessments and other charges of
every nature which may be imposed, levied or assessed against the Borrower or
the ESOP (and provide to the Bank receipted bills therefor if requested by the
Bank), prior to the date of attachment of any penalties or liens with respect
thereto (other than liens attaching prior to payment becoming due if payment is
made when due); provided, however, this Agreement shall not be deemed to require
such payment so long as the validity of such tax, assessment or other charge is
being contested in good faith by appropriate proceedings diligently conducted
and so long as the enforcement of any such lien is appropriately stayed.
4.7 ESOP. Promptly file, or cause the Guarantor to file, with
the appropriate District Director or other official of the Internal Revenue
Service for a determination letter that the ESOP is a qualified plan under
Internal Revenue Code Section 401(a) and take all necessary and appropriate
action to maintain the ESOP in full force and effect and to keep it fully
qualified under the Internal Revenue Code and regulations thereunder, from time
to time in effect.
4.8 REPORTS AND NOTICES. Furnish promptly to the Bank such
information as the Bank may reasonably require concerning the Borrower or the
ESOP and assets held by the ESOP or the Borrower and such other information as
the Bank may reasonably require; to notify the Bank promptly of any litigation
instituted or threatened against Borrower or the ESOP, any deficiencies asserted
or liens filed by the Internal Revenue Service against the Borrower, the ESOP or
the Trustee, any audits of any Federal or State tax return of Borrower or the
ESOP, and the results of any such audit; and any other matters which could
reasonably be expected to adversely affect the Borrower's ability to perform its
obligations under this Agreement.
4.9 INFORMATION. Provide, or cause the Trustees to provide,
to the Bank copies of all information incident to the Borrower's ownership of
shares of the Guarantor.
4.10 AMENDMENTS. Refrain, and cause the Guarantor to refrain,
from amending or modifying, or agreeing to the amendment or modification of, the
ESOP, or other matters relating to the ESOP or its operation if the effect of
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any such amendment or modification, or of all such amendments and modifications
in the aggregate, would be to cause the ESOP to lose its qualification under
Internal Revenue Code Section 401(a) or the Trust's qualification under Section
501(a), or would jeopardize the tax effects of the ESOP or the deductibility of
contributions by the Guarantor to the ESOP, or would result in any violation of
the Employee Retirement Income Security Act of 1974, as amended.
4.11 NOTICE. Notify the Bank promptly in writing of the
Guarantor's failure to make any contribution to the ESOP or to the Borrower that
is required by the ESOP.
4.12 OTHER ACTS. Execute and deliver, or cause to be executed
and delivered, to the Bank all further documents and perform all other acts and
things which the Bank deems necessary or appropriate to protect or perfect any
security interests in any property directly or indirectly securing payment of
any indebtedness of the Borrower to the Bank.
4.13 CREDIT AGREEMENT AFFIRMATIVE COVENANTS. Guarantor shall
comply with all affirmative covenants set forth in Article VII of the Credit
Agreement which covenants as amended from time to time are incorporated herein
by reference as if fully set forth. The foregoing covenants as incorporated
herein shall survive the termination of the Credit Agreement.
ARTICLE V. NEGATIVE COVENANTS
During the term of this Agreement and so long thereafter as
any of the indebtedness of the Borrower to the Bank, including any indebtedness
for fees and expenses, shall remain unpaid, the Borrower, without the prior
written consent of the Bank, will not:
5.1 BORROWED MONEY. Create, incur, assume or suffer to exist
any liability for borrowed money except to the Bank, except for an existing loan
from Fleet Bank in the original amount of $4,000,000.00 which loan was used only
to purchase shares of stock of the Guarantor.
5.2 ENCUMBRANCES. Create, incur, assume or suffer to exist any
mortgage, lien, security interest, pledge or other encumbrance on any of its
property or assets, whether now owned or hereafter owned or acquired, other than
encumbrances in favor of the Bank and other than a pledge of shares in favor of
Fleet Bank of New York to secure payment of the loans described in Section 5.1
above.
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5.3 MAINTAIN EXISTENCE. Take any action that would cause the
Borrower to not maintain itself as it is presently constituted or take any
action that would cause the ESOP and the Borrower not to be a qualified employee
stock ownership plan and trust under the Internal Revenue Code or the
regulations promulgated thereunder.
5.4 CREDIT AGREEMENT NEGATIVE COVENANTS. Guarantor shall not
breach the negative covenants set forth in Article VIII of the Credit Agreement
which covenants as amended from time to time are incorporated herein by
reference as if fully set forth. The foregoing covenants as incorporated herein
shall survive the termination of the Credit Agreement.
ARTICLE VI. DEFAULT
6.1 EVENTS OF DEFAULT. The occurrence of any one or more of
the following events shall constitute an event of default (individually, Event
of Default, or, collectively, Events of Default):
(a) NONPAYMENT. Nonpayment when due whether by acceleration or
otherwise of principal of or interest on the Note or of any fee or premium
provided for hereunder.
(b) NEGATIVE COVENANTS. Default in the observance of any
of the covenants or agreements of the Borrower contained in Article V of this
Agreement.
(c) OTHER COVENANTS. Default in the observance of any of the
covenants or agreements of the Borrower contained in this Agreement, other than
in Section 4.1 or Article V, or in any other agreement with the Bank, which is
not remedied within thirty (30) days after notice thereof by the Bank to the
Borrower.
(d) REPRESENTATIONS. If any certificate, statement,
representation, warranty or financial statement furnished by or on behalf of the
Borrower pursuant to or in connection with this Agreement (including, without
limitation, representations and warranties contained herein) or as an inducement
to the Bank to enter into this Agreement or any other lending agreement with the
Borrower shall prove to have been false in any material respect at the time as
of which the facts therein set forth were certified, or to have omitted any
substantial contingent or unliquidated liability or claim against the Borrower,
or if on the date of the execution of this Agreement there shall have been any
materially adverse change in any of the facts disclosed by any such statement or
certificate, which change shall not have been disclosed by the Borrower to the
Bank at or prior to the time of such execution.
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(e) OTHER INDEBTEDNESS AND AGREEMENTS. Nonpayment by the
Borrower of any indebtedness (other than as evidenced by the Note) owing by the
Borrower when due (or, if permitted by the terms of the applicable document,
within any applicable grace period), whether such indebtedness shall become due
by scheduled maturity, by required prepayment, by acceleration, by demand or
otherwise, or failure to perform any term, covenant or agreement on its part to
be performed under any agreement or instrument (other than this Agreement)
evidencing or securing or relating to any indebtedness owing by the Borrower
when required to be performed if the effect of such failure causes the holder to
accelerate the maturity of such indebtedness.
(f) JUDGMENTS. If any judgment or judgments in an amount
exceeding $1,000,000 in the singular or in the aggregate (other than any
judgment for which it is fully insured) against the Borrower remains unpaid,
unstayed on appeal, undischarged, unbonded or undismissed for a period of 45
days.
(g) TERMINATION OF ESOP. The termination for any cause
whatsoever of the ESOP without the prior written consent of the Bank.
(h) GUARANTOR'S DEFAULT. The occurrence of any Event of
Default applicable to Guarantor contained in this Article VI, or the breach by
Guarantor of any term, condition or covenant contained in the Guaranty.
(i) CREDIT AGREEMENT. The occurrence of any Event of Default
set forth in the Credit Agreement, whether or not the Credit Agreement remains
in effect.
6.2 EFFECTS OF AN EVENT OF DEFAULT.
(a) Upon the happening of one or more Events of Default
(except a default under either Section 6.1(d) or 6.1(e) hereof), the Bank may
declare any obligations it may have hereunder to be canceled and the principal
of the Note then outstanding to be immediately due and payable, together with
all interest thereon and fees and expenses accruing under this Agreement. Upon
such declaration, any obligations the Bank may have hereunder shall be
immediately canceled and the Note then outstanding shall become immediately due
and payable without presentation, demand or further notice of any kind to the
Borrower.
(b) Upon the happening of one or more Events of Default under
Section 6.1(d) or 6.1(e) hereof, the Bank's obligations hereunder shall be
canceled immediately, automatically and without notice, and the Note then
outstanding
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shall become immediately due and payable without presentation, demand or notice
of any kind to the Borrower.
ARTICLE VII. EXPENSES
The Guarantor shall reimburse the Bank promptly for all of its
expenses including, without limitation, reasonable counsel fees, filing fees and
recording fees incurred in connection with this Agreement and with any
indebtedness subject hereto, for any taxes which the Bank may be required to pay
in connection with the execution and delivery of this Agreement and the Note and
for any expenses, including actual counsel fees and expenses, incident to the
lawful enforcement of any provision of this Agreement, the Note, the Guaranty or
the Pledge Agreement.
ARTICLE VIII. MISCELLANEOUS
8.1 AMENDMENTS AND WAIVERS. This Agreement represents the
entire understanding and agreement between the parties hereto with respect to
the subject matter hereof; supersedes all prior negotiations between the parties
with respect to the subject matter hereof (and specifically supercedes the
Original Agreement); no modification, rescission, waiver, release or amendment
of any provision of this Agreement shall be made except by a written agreement
subscribed by the Trustee and duly authorized officers of the Bank and the
Guarantor.
8.2 DELAYS AND OMISSIONS. No course of dealing and no delay or
omission by the Bank in exercising any right or remedy hereunder or with respect
to any indebtedness of the Borrower to the Bank shall operate as a waiver
thereof or of any other right or remedy, and no single or partial exercise
thereof shall preclude any other or further exercise thereof or the exercise of
any other right or remedy. The Bank may remedy any default by the Borrower
hereunder or with respect to any other person, firm or corporation in any
reasonable manner without waiving the default remedied and without waiving any
other prior or subsequent default by the Borrower and shall be reimbursed for
its expenses in so remedying such default. All rights and remedies of the Bank
hereunder are cumulative.
8.3 SUCCESSORS AND ASSIGNS. The Borrower, the Guarantor and
the Bank as used herein shall include the legal representatives, successors and
assigns of those parties.
<PAGE>
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8.4 NOTICES. Any notice or demand to be given hereunder shall
be duly given if delivered, sent by facsimile transmission or mailed as follows:
To the Borrower - Columbus McKinnon Corporation
Employee Stock Ownership Trust
140 John James Audubon Parkway
Amherst, New York 14228-1197
Attn: Robert L. Montgomery,
Trustee
To the Bank - Marine Midland Bank
One Marine Midland Center
Buffalo, New York 14203
Attn: Regional Commercial
Banking Department
With a Copy to - Phillips, Lytle, Hitchcock,
Blaine & Huber
3400 Marine Midland Center
Buffalo, New York 14203
Attn: Raymond H. Seitz, Esq.
To the Guarantor - Columbus McKinnon Corporation
140 John James Audubon Parkway
Amherst, New York 14228-1197
Attn: Robert L. Montgomery
Executive Vice President
and shall be deemed effective if delivered upon delivery and if mailed upon
deposit in an official depository maintained by the United States Post Office
for the collection of mail.
8.5 GOVERNING LAW. This Agreement, the transaction described
herein and the obligations of the Bank, the Borrower and the Guarantor shall be
construed under, and governed by, the internal laws of the State of New York,
without regard to principles of conflicts of laws.
8.6 COUNTERPARTS. This Agreement may be executed in any number
of counterparts and by the Bank, the Borrower and the Guarantor on separate
counterparts, each of which when so executed and delivered shall be an original,
but all such counterparts shall together constitute one and the same Agreement.
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8.7 TITLES. Titles to the sections of this Agreement are
solely for the convenience of the Bank, the Borrower and the Guarantor and are
not an aid in the interpretation of this Agreement or any part thereof.
8.8 INCONSISTENT PROVISIONS. The terms of this Agreement and
any related agreements, instruments or other documents shall be cumulative
except to the extent that they are specifically inconsistent with each other, in
which case the terms of this Agreement shall prevail.
8.9 COURSE OF DEALING. Without limitation of the foregoing,
the Bank shall have the right at all times to enforce the provisions of this
Agreement and all other documents executed in connection herewith in strict
accordance with their terms, notwithstanding any course of dealing or
performance by the Bank in refraining from so doing at any time and
notwithstanding any custom in the banking trade. Any delay or failure by the
Bank at any time or times in enforcing its rights under such provisions in
strict accordance with their terms shall not be construed as having created a
course of dealing or performance modifying or waiving the specific provisions of
this Agreement.
8.10 COLLATERAL RELEASE. The Bank shall release to the
Borrower all Collateral remaining in its possession upon payment in full of all
indebtedness of the Borrower to the Bank. Prior to such payment in full, the
Bank shall release Collateral to the Borrower annually, the number of shares to
be released each Plan Year to be equal to the number of encumbered shares held
immediately before the release multiplied by a fraction, the numerator of which
is the amount of principal and interest paid on the Note during the Plan Year
and the denominator of which is the sum of the numerator plus the principal and
interest to be paid on the Note for all future Plan Years. For this purpose, the
interest to be paid in future years is to be computed by using the interest
rates in effect as of the last day of the Plan Year for which the calculation is
made. Each annual release of Collateral shall be calculated as of March 31 and
shall occur within ninety (90) days of the end of the Plan Year. In the event of
any change in the shares which occurs between March 31 and the date of the
release, by reason of a dividend payable in shares, recapitalization, merger,
consolidation, split-up, combination or exchange of shares, or the like,
appropriate adjustments shall be made to the number of shares to be released.
The "Plan Year" means the twelve-consecutive month period ending March 31.
8.11 THE TRUSTEE. The Bank acknowledges that the Trustee
is acting solely as Trustee of the Borrower and not in its individual capacity
in executing, delivering, and performing under this Agreement, the Note and the
Collateral Documents, and the Bank shall look solely to the Collateral of the
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Borrower and not to the individual assets of the Trustee for payment or
satisfaction of any and all obligations of the Borrower hereunder.
8.12 NON-RECOURSE. Notwithstanding any other provision of this
Agreement or the Note, no recourse shall be had against the Borrower for the
payment of the principal of or interest on the Note other than to the collateral
now or hereafter pledged pursuant to the Pledge Agreement.
8.13 JURY TRIAL WAIVER. THE BORROWER, THE BANK AND THE
GUARANTOR WAIVE ANY RIGHT TO TRIAL BY JURY WHICH THEY MAY HAVE IN ANY ACTION OR
PROCEEDING, IN LAW OR EQUITY, IN CONNECTION WITH THIS AGREEMENT OR THE
TRANSACTIONS RELATED THERETO.
8.14 CONSENT TO JURISDICTION. THE BORROWER, THE BANK AND THE
GUARANTOR AGREE THAT ANY ACTION OR PROCEEDING TO ENFORCE OR ARISING OUT OF THIS
AGREEMENT MAY BE COMMENCED IN THE SUPREME COURT OF NEW YORK IN ERIE COUNTY, OR
IN THE DISTRICT COURT OF THE UNITED STATES FOR THE WESTERN DISTRICT OF NEW YORK.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be signed by their duly authorized officers, all as of the 5th day
of August, 1996.
MARINE MIDLAND BANK
By /s/ Cary J. Haller
--------------------------
Cary J. Haller
Vice President
COLUMBUS MCKINNON COLUMBUS MCKINNON CORPORATION
CORPORATION EMPLOYEE STOCK OWNERSHIP TRUST
By: /s/ Robert L. Montgomery By /s/ Robert L. Montgomery
------------------------ --------------------------
Robert L. Montgomery Robert L. Montgomery, Trustee
Executive Vice President
By /s/ Peter A. Grant
--------------------------
Peter A. Grant, Trustee
By /s/ Kenneth A. McCreadie
--------------------------
Kenneth A. McCreadie, Trustee
FIRST AMENDMENT
TO AMENDED AND RESTATED
LOAN AGREEMENT AMONG
COLUMBUS MCKINNON CORPORATION
EMPLOYEE STOCK OWNERSHIP TRUST,
COLUMBUS MCKINNON CORPORATION,
AND MARINE MIDLAND BANK
This First Amendment to Amended and Restated Loan Agreement
("Amendment") is made as of the 16th day of October, 1996 by and among Columbus
McKinnon Corporation Employee Stock Ownership Trust, a trust which was created
under the laws of the State of New York ("Borrower"), Columbus McKinnon
Corporation, a corporation organized under the laws of the State of New York
("Guarantor"), and Marine Midland Bank, a banking corporation organized under
the laws of the State of New York ("Bank").
W I T N E S S E T H
WHEREAS, Bank, Guarantor and Borrower were parties to a Loan
Agreement dated October 27, 1994 ("Original Loan Agreement"); and
WHEREAS, Bank, Guarantor, Fleet Bank, and Fleet Bank, as
Administrative Agent, have previously entered into a Credit Agreement dated as
of August 5, 1996 ("Prior Credit Agreement"); and
WHEREAS, the Original Loan Agreement was amended and restated
on August 5, 1996 ("Restated Agreement") to incorporate certain covenants and
pricing provisions of the Prior Credit Agreement; and
WHEREAS, all obligations of the parties under and arising out
of the Prior Credit Agreement have been or will be paid in full on or prior to
the date hereof, and the Prior Credit Agreement has been or will be terminated,
and of no further force or effect, on or prior to the date hereof; and
WHEREAS, Guarantor, certain banks, financial institutions and
other institutional lenders party thereto, and Fleet Bank, as Administrative
Agent for the Lender Parties ("Administrative Agent") have entered or will enter
into a Credit Agreement, dated of even date herewith ("New Credit Agreement");
and
WHEREAS, Bank, Guarantor and Borrower wish to amend the
Restated Agreement to delete certain covenants and provisions of the Prior
Credit Agreement which were incorporated into the Restated Agreement,
incorporate certain covenants and provisions of the New Credit Agreement into
the Restated Agreement and make certain other changes, as and to the extent set
forth in this
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Amendment and subject to the terms and conditions stated herein; it being
understood that no additional money is being advanced in connection with this
Amendment and that the Note (as defined in the Restated Agreement) is not being
replaced and remains an obligation of the Borrower.
NOW, THEREFORE, it is agreed as follows:
A. DEFINITIONS. All capitalized terms used but not herein
defined shall have the meanings set forth in the Restated Agreement.
B. AMENDMENTS. The Restated Agreement is hereby amended as
follows:
1. The definitions of "Credit Agreement", "Leverage Ratio",
"LIBOR Interest Rate", "London Interbank Offered Rate", "Prime Rate" and
"Tangible Net Worth" set forth in Section 1.1 of the Restated Agreement are
hereby deleted in their entirety.
2. The Restated Agreement is hereby amended to add the
following definitions to Section 1.1 in the applicable alphabetical order:
"Credit Agreement" - the Credit Agreement among the
Guarantor, the banks, financial institutions and other institutional lenders
party thereto, and Fleet Bank, as Administrative Agent for the Lender Parties,
dated as of even date herewith as amended, restated or otherwise modified from
time to time.
"LIBOR Interest Rate" - shall have the meaning of
"Eurodollar Rate" as set forth in the Credit Agreement.
"Prime Rate" - shall have the meaning set forth in
the Credit Agreement.
3. The first sentence of Section 2.3(c) of the Restated
Agreement is hereby deleted and replaced in its entirety by the following:
PAYMENTS OF INTEREST. The Credit shall bear interest
at the rates of interest set forth in Section 2.07 of the Credit Agreement. For
purposes of this subsection 2.3(c) only, the term "Advances" as defined in the
Credit Agreement shall include the outstanding and unpaid principal amount of
the Credit owed to the Bank hereunder, the term "Prime Rate Advance" shall
include Prime Rate Loans, the term "Eurodollar Rate Advances" shall include
LIBOR Loans, and other defined terms used in Section 2.07 of the Credit
<PAGE>
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Agreement shall have the meanings ascribed thereto in the Credit Agreement.
4. The first sentence of Section 2.6 of the Restated Agreement
is hereby deleted and replaced in its entirety by the following:
2.6 SPECIAL PROVISIONS GOVERNING LIBOR LOANS
The provisions set forth in the following sections of
the Credit Agreement: Section 2.02(d), Section 2.10 (Increased
Costs, Etc.), and subsection 8.04(c) (Costs and Expenses) are
incorporated herein by reference as if fully set forth,
mutatis mutandis.
5. The first sentence of Section 3.8 of the Restated Agreement
is hereby deleted and replaced in its entirety by the following:
3.8 CREDIT AGREEMENT. The representations and
warranties made by the Guarantor, set forth in Article IV of
the Credit Agreement are true and correct, and are
incorporated herein by reference as if fully set forth.
6. Section 4.2 of the Restated Agreement is hereby deleted and
replaced in its entirety by the following:
4.2 FUTURE FINANCIAL STATEMENTS. Furnish to the Bank
the financial statements and other certificates and
information described in Section 5.03 of the Credit Agreement,
at the times specified in such Section 5.03.
7. Section 4.13 of the Restated Agreement is hereby deleted
and replaced in its entirety by the following:
4.13 CREDIT AGREEMENT AFFIRMATIVE COVENANTS.
Guarantor shall comply with all affirmative and financial
covenants and reporting requirements set forth in Sections
5.01, 5.03 and 5.04 of the Credit Agreement which covenants
and requirements as amended from time to time are incorporated
herein by reference as if fully set forth. The foregoing
covenants and requirements as incorporated herein shall
survive the termination of the Credit Agreement.
9. The first sentence of Section 5.4 of the Restated Agreement
is hereby deleted and replaced in its entirety by the following:
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5.4 CREDIT AGREEMENT NEGATIVE COVENANTS. Guarantor
shall not breach the negative covenants set forth in Section
5.02 of the Credit Agreement which covenants as amended from
time to time are incorporated herein by reference as if fully
set forth.
C. REPRESENTATIONS AND WARRANTIES.
1. The Borrower and the Guarantor have full
power, authority and legal right to enter into this Amendment, and to take all
action required of them under this Amendment. The Borrower hereby represents and
warrants that the execution, delivery and performance by the Borrower of this
Amendment has been duly authorized by all necessary action, if any, and that
this Amendment is a legal, valid and binding obligation of the Borrower
enforceable against the Borrower in accordance with its terms, except as the
enforcement hereof may be subject to the effect of any applicable bankruptcy,
insolvency, reorganization, moratorium or similar law affecting creditors'
rights generally or to general principles of equity.
2. The Borrower and the Guarantor each hereby
represents and warrants that the execution, delivery and performance of this
Amendment by the Borrower and the Guarantor, respectively does not, and will
not, contravene or conflict with any provision of (i) law or (ii) any judgment,
decree or order, and does not, and will not, contravene or conflict with, or
cause any lien to arise under, any provision of the Trust Agreement or any other
agreement, instrument or other document binding upon or otherwise affecting the
Borrower, the Guarantor, any property subject to the Trust Agreement or Plan, or
any property of the Guarantor.
3. All of the representations and warranties
contained in the Restated Agreement, after giving effect to this Amendment,
including, without limitation, those contained in Article 3 thereof, and each
other agreement and document executed in connection therewith are true and
correct on and as of the date hereof as though made on the date hereof, and no
Event of Default exists under the Restated Agreement or will exist after or be
triggered by the execution and delivery of this Amendment or any of the other
agreements and documents contemplated hereby. In addition, the Borrower hereby
represents, warrants and affirms that each of the other agreements and documents
executed in connection with or relating to the Restated Agreement remain in full
force and effect.
4. Guarantor hereby acknowledges that it has read the
Amendment and consents to the terms hereof and further confirmsand agrees that,
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notwithstanding the effectiveness of the Amendment, the obligations of the
Guarantor under the Guaranty shall not be impaired or affected and the Guaranty
is and shall continue to be in full force and effect and is hereby confirmed.
D. CONDITIONS PRECEDENT TO AMENDMENTS. The effectiveness
of this Amendment shall be subject to the fulfillment (to the satisfaction of
the Bank) of the following conditions precedent:
1. AMENDMENT DOCUMENTATION. The Borrower shall
have delivered to Bank all of the following, each duly executed if required, and
dated the date hereof, and each in form and substance satisfactory to Bank:
a. AMENDMENT. The Borrower, the Bank
and the Guarantor shall have executed and delivered this Amendment.
b. OPINION OF COUNSEL. Counsel to the
Borrower shall have delivered to Bank an opinion in form and substance
satisfactory to Bank and its counsel, which opinion shall include an express
statement to the effect that Bank is authorized to rely on such opinion.
c. OTHER. Such other documents and such
other actions as Bank may reasonably request.
2. NO DEFAULT. As of the closing date of this
Amendment, no Event of Default shall have occurred or be continuing under the
Restated Agreement after giving effect to this Amendment.
3. REPRESENTATIONS AND WARRANTIES. The repre-
sentations and Warranties set forth in Section C hereof shall be true and
correct on the closing date of this Amendment.
4. LEGAL MATTERS. All legal matters incident
hereto shall be satisfactory to counsel to the Bank.
E. MISCELLANEOUS.
1. Except as specifically amended by this Amend-
ment, the Restated Agreement and each other agreement and document executed in
connection therewith shall remain in full force and effect and are hereby
ratified and confirmed.
2. The execution, delivery and effect of this
Amendment shall be limited precisely as written and shall not be deemed to (i)
be a consent to any waiver of any term or condition or to any amendment or
modification of any term or condition of the Restated Agreement or any other
<PAGE>
- 6 -
agreement or document executed in connection therewith, except, upon the
effectiveness of this Amendment, as specifically amended hereby, or (ii)
prejudice any right, power or remedy which Bank now has or may have in the
future under or in connection with the Restated Agreement or any other agreement
or document executed in connection therewith. Upon the effectiveness of this
Amendment, each reference in the Restated Agreement to "this Agreement",
"hereunder", "hereof", "herein" or any other word or words of similar import
shall mean and be a reference to the Restated Agreement as amended hereby and
each reference in any other agreement or document executed in connection with
the Restated Agreement to the Restated Agreement or any word or words of similar
import shall be and mean a reference to the Restated Agreement as amended
hereby.
3. COUNTERPARTS. This Amendment may be executed
in any number of counterparts, each of which when so executed shall be deemed an
original but all such counterparts shall constitute one and the same instrument.
4. COSTS AND EXPENSES. The Guarantor and the
Borrower jointly and severally shall reimburse Bank promptly for all reasonable
costs and expenses, including reasonable counsel fees and expenses, incurred by
Bank in connection with this Amendment, any indebtedness created or evidenced
hereunder and, in the case of Guarantor, any other obligations; and for costs
and expenses, including reasonable counsel fees, of Bank incident to the
enforcement of any provision of this Amendment, the Note, any other documents
executed in connection with the Restated Agreement and, in the case of the
Guarantor, any other obligations.
5. GOVERNING LAW. THIS AMENDMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO
CONFLICTS OF LAW PROVISIONS) OF THE STATE OF NEW YORK.
6. HEADINGS. Section headings in this Amendment
are included herein for convenience of reference only and shall not constitute a
part of this Amendment for any other purpose.
[SIGNATURE PAGE FOLLOWS]
<PAGE>
- 7 -
IN WITNESS WHEREOF, Borrower, Guarantor and Bank have entered
into this First Amendment to Amended and Restated Loan Agreement on the date
first written above.
COLUMBUS McKINNON CORPORATION
STOCK OWNERSHIP TRUST
By: /s/ Kenneth G. McCreadie
-----------------------------
KENNETH G. McCREADIE, as
Trustee under the
Columbus McKinnon
Corporation Employee
Stock Ownership Trust
Agreement
By: /s/ Peter A. Grant
-----------------------------
PETER A. GRANT, as Trustee
under the Columbus McKinnon
Corporation Employee Stock
Ownership Trust Agreement
By: /s/ Robert L. Montgomery, Jr.
-----------------------------
ROBERT L. MONTGOMERY, JR.,
as Trustee under the Columbus
McKinnon Corporation Employee
Stock Ownership Trust
Agreement
COLUMBUS McKINNON CORPORATION
By: /s/ Robert L. Montgomery, Jr.
-----------------------------
Robert L. Montgomery, Jr.
Executive Vice President
MARINE MIDLAND BANK
By: /s/ Cary J. Haller
-----------------------------
Cary J. Haller
Vice President
SECOND AMENDMENT TO AMENDED AND RESTATED
LOAN AGREEMENT AMONG
COLUMBUS MCKINNON CORPORATION
EMPLOYEE STOCK OWNERSHIP TRUST,
COLUMBUS MCKINNON CORPORATION,
MARINE MIDLAND BANK
----------------------------------------
This Second Amendment to Amended and Restated Loan Agreement
is made as of March 31, 1998 (this "Second Amendment"), is entered into by and
among COLUMBUS MCKINNON CORPORATION EMPLOYEE STOCK OWNERSHIP TRUST, a trust
which was created under the laws of the State of New York ("Borrower"), COLUMBUS
MCKINNON CORPORATION, a corporation organized under the laws of the State of New
York ("Guarantor"), and MARINE MIDLAND BANK, a banking corporation organized
under the laws of the State of New York ("Bank").
W I T N E S S E T H:
WHEREAS, Bank, Guarantor and Borrower are parties to a Loan
Agreement dated October 27, 1994 (the "Original Loan Agreement"); and
WHEREAS, Guarantor, the banks, financial institutions and
other institutional lenders party thereto, and Fleet Bank, as Administrative
Agent, have previously entered into a Credit Agreement dated as of October 16,
1996, as amended (the "Prior Credit Agreement"); and
WHEREAS, the Original Loan Agreement was amended and restated
on August 5, 1996 and further amended by the First Amendment thereto, dated as
of October 16, 1996 (the "First Amendment" and the Original Loan Agreement as so
amended, restated and further amended, the "Restated Agreement"); and
WHEREAS, the obligations of the parties under and arising out
of the Prior Credit Agreement have been or will be paid in full on or prior to
the date hereof, and the Prior Credit Agreement has been or will be terminated
and of no further force and effect on or prior to the date hereof; and
WHEREAS, Guarantor, the banks, financial institutions and
other institutional lenders party thereto, and Fleet National Bank, as
Administrative Agent, have entered into a Credit Agreement, dated as of even
date herewith (the "New Credit Agreement"); and
WHEREAS, Bank, Guarantor and Borrower wish to amend the
Restated Agreement to delete certain provisions of the Prior Credit Agreement
which were incorporated into the Restated Agreement incorporate certain
provisions of the New Credit Agreement and make incorporate certain provisions
of the New Credit Agreement and make such other changes, as and to the extent
set forth in this Second amendment and subject to the terms and conditions
stated herein; it being understood that no additional money is being advanced in
connection with this Second amendment and that the Note (as defined in the
<PAGE>
restated Agreement) is not being replaced and remains an obligation of the
Borrower.
NOW THEREFORE, it is agreed as follows:
A. Definitions. All capitalized terms used but not herein
defined shall have the meanings set forth in the Restated Agreement.
B. Amendments. The Restated Agreement is hereby amended as
follows:
1. Section l.1 of the Restated Agreement is hereby amended by
deleting the existing definition of "Credit Agreement" in its entirety, and
replacing it with the following, in the appropriate alphabetical order:
"'Credit Agreement' - The Credit Agreement among Guarantor,
the banks, financial institutions and other institutional lenders party thereto,
and Fleet National Bank as Administrative Agent, dated as of March , 1998, as
amended, restated or otherwise modified from time to time."
2. Section 2.6 of the Restated Agreement (as amended by the
First Amendment) is hereby amended by deleting the first sentence of existing
Section 2.6 in its entirety and replacing it with the following:
"Special Provisions Governing LIBOR Loans. The provisions set
forth in the following sections of the Credit Agreement: Section 2.01(e),
Section 2.10 (Increased Costs, Etc.) and Section 8.04 (c) (Costs and Expenses)
are incorporated herein by reference as if fully set forth."
C. Representations and Warranties.
1. The Borrower and the Guarantor have full power, authority
and legal right to enter into this Second Amendment, and to take all action
required of them under this Amendment. The Borrower hereby represents and
warrants that the execution, delivery and performance by the Borrower of this
Second Amendment has been duly authorized by all necessary action, if any, and
that this Second Amendment is a legal, valid and binding obligation of the
Borrower enforceable against the Borrower in accordance with its terms, except
as the enforcement hereof may be subject to the effect of any applicable
bankruptcy, insolvency, reorganization, moratorium or similar law affecting
creditors' rights generally or to general principles of equity.
2. The Borrower and the Guarantor each hereby represents and
warrants that the execution, delivery and performance of this Second Amendment
<PAGE>
by the Borrower and the Guarantor, respectively, does not and will not,
contravene or conflict with any provision of (i) law or (ii) any judgment,
decree or order, and does not, and will not, contravene or conflict with, or
cause any lien to arise under, any provision of the Trust Agreement or any other
agreement, instrument or other document binding upon or otherwise affecting the
Borrower, the Guarantor, any property subject to the Trust Agreement or Plan, or
any property of the Guarantor.
3. All of the representations and warranties contained in the
Restated Agreement, after giving effect to this Second Amendment, including,
without limitation, those contained in Article 3 thereof, and each other
agreement and document executed in connection therewith are true and correct on
and as of the date hereof as though made on the date hereof, and no Event of
Default exists under the Restated Agreement or will exist after or be triggered
by the execution and delivery of this Second amendment or any of the other
agreements and documents contemplated hereby. In addition, the Borrower hereby
represents, warrants and affirms that each of the other agreements and documents
executed in connection with or relating to the Restated Agreement remain in full
force and effect.
4. Guarantor hereby acknowledges that it has read the Second
Amendment and consents to the terms hereof and further confirms and agrees that,
notwithstanding the effectiveness of the Second amendment, the obligations of
the Guarantor under the Guaranty shall not be impaired or affected and the
Guaranty is and shall continue to be in full force and effect and is hereby
confirmed.
D. Conditions Precedent to Amendments. The effectiveness of
this Second Amendment shall be subject to the fulfillment (to the satisfaction
of the Bank) of the following conditions precedent.
1. Amendment Documentation. The Borrower shall have delivered
to Bank all of the following, each duly executed, if required, and dated the
date hereof, and each in form and substance satisfactory to Bank:
a. Amendment. The Borrower, the Bank and the
Guarantor shall have executed and delivered this Second Amendment.
b. Opinion of Counsel. Counsel to the Borrower shall
have delivered to Bank an opinion in form and substance satisfactory to Bank and
its counsel and which opinion shall include an express statement to the effect
that Bank is authorized to rely on such opinion.
c. Other. Such other documents and such other actions
as Bank may reasonably request.
<PAGE>
2. No Default. As of the closing date of this Second
Amendment, no Default or Event of Default shall have occurred or be continuing
under the Restated Agreement.
3. Representations and Warranties. The representations and
warranties set forth in Section C hereof shall be true and correct on the
closing date of this Second Amendment.
4. Legal Matters. All legal matters incident hereto shall be
satisfactory to counsel to the Bank.
E. Miscellaneous
1. Except as specifically amended by this Second Amendment,
the Restated Agreement and each other agreement and document executed in
connection therewith shall remain in full force and effect and is hereby
ratified and confirmed.
2. The execution, delivery and effect of this Second Amendment
shall be limited precisely as written and shall not be deemed to (i) be a
consent to any waiver of any term or condition or to any amendment or
modification of any term of condition of the Restated Agreement of any other
agreement or document executed in connection therewith, except, upon the
effectiveness of this Second Amendment, as specifically amended hereby, or (ii)
prejudice any right, power or remedy which Bank now has or may have in the
future under or in connection with the Restated Agreement or any other agreement
or document executed in connection therewith. Upon the effectiveness of this
Second Amendment, each reference in the Restated Agreement to "this Agreement"
"hereunder", "hereof", "herein" or any other word or words of similar import
shall mean and be a reference in any other agreement or document executed in
connection with the Restated Agreement to the Restated Agreement or any word or
words of similar import shall be and mean a reference to the Restated Agreement
as amended thereby.
3. Counterparts. This Second Amendment may be executed in any
number of counterparts, each of which when so executed shall be deemed an
original but all such counterparts shall constitute one and the same instrument.
4. Costs and Expenses. The Guarantor and the Borrower jointly
and severally shall reimburse Bank promptly for all reasonable costs and
expenses, including reasonable counsel fees and expenses, incurred by Bank in
connection with this Second Amendment, any indebtedness created or evidenced
hereunder and, in the case of Guarantor, any other obligations; and for costs
and expenses, including reasonable counsel fees, of Bank incident to the
enforcement of any provision of this Second Amendment, the Note, any other
documents executed in connection with the Restated Agreement and, in the case of
the Guarantor, any other obligations.
<PAGE>
5. GOVERNING LAW. THIS SECOND AMENDMENT SHALL BE GOVERNED BY
AND CONTRUED IN CCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO CONFLICTS OF LAW
PROVISIONS) OF THE STATE OF NEW YORK.
6. Headings. Section headings in this Second Amendment are
included herein for convenience of reference only and shall not constitute a
part of this Second Amendment for any other purpose.
[Signature page follows]
<PAGE>
IN WITNESS WHEREOF, this Second Amendment to Amended and
Restated Loan Agreement has been duly executed as of the date first written
above.
MARINE MIDLAND BANK
By: /s/ Randolph M. Ross
----------------------------
Title: Authorized Aignatory #9107
--------------------------
COLUMBUS MC KINNON COLUMBUS MCKINNON CORPORATION
CORPORATION EMPLOYEE STOCK OWNERSHIP TRUST
By: /s/ R. L. Montogmery By: /s/ Ivan E. Shawvan
-------------------- -----------------------
Title: Executive Vice President Title: Trustee
------------------------ --------------------
By: /s/ Timothy R. Harvey
-----------------------
Title: Trustee
--------------------
By: /s/ Karen L. Howard
-----------------------
Title: Trustee
--------------------
By: /s/ R. L. Montgomery
-----------------------
Title: Trustee
--------------------
THIRD AMENDMENT
TO AMENDED AND RESTATED
LOAN AGREEMENT AMONG
COLUMBUS MCKINNON CORPORATION
EMPLOYEE STOCK OWNERSHIP TRUST,
COLUMBUS MCKINNON CORPORATION,
AND MARINE MIDLAND BANK
This Third Amendment to Amended and Restated Loan Agreement
("Amendment") is made as of the 30th day of November, 1998 by and among Columbus
McKinnon Corporation Employee Stock Ownership Trust, a trust which was created
under the laws of the State of New York ("Borrower"), Columbus McKinnon
Corporation, a corporation organized under the laws of the State of New York
("Guarantor"), and Marine Midland Bank, a banking corporation organized under
the laws of the State of New York ("Bank").
W I T N E S S E T H
WHEREAS, Bank, Guarantor and Borrower were parties to a Loan Agreement
dated October 27, 1994 ("Original Loan Agreement"); and
WHEREAS, Guarantor, the banks, financial institutions and other
institutional lenders party thereto, and Fleet National Bank, as Administrative
Agent, have previously entered into a Credit Agreement dated as of March 31,
1998 ("Credit Agreement"); and
WHEREAS, the Original Loan Agreement was amended and restated on
August 5, 1996 and further amended by the First Amendment thereto dated as of
October 16, 1996, and by the Second Amendment thereto dated as of March 31, 1998
(the Original Loan Agreement, as so amended, the "Restated Agreement"); and
WHEREAS, the Credit Agreement has been amended pursuant to Amendment
No. 1 thereto dated as of September 23, 1998 to allow the Guarantor to make
certain secured loans to the Borrower in an aggregate amount up to $10,000,000
to purchase shares of stock of the Guarantor which shares of stock will be
pledged as security for the repayment of such loans ("Guarantor Loans");
WHEREAS, the Borrower has requested that the term of the Restated
Agreement be extended until April 1, 2002 and as consideration for such
extension, Guarantor has agreed that principal payments on the Guarantor Loans
shall not commence until after the maturity date of the loans under the Restated
Agreement;
WHEREAS, Bank, Guarantor and Borrower wish to amend the Restated
Agreement to provide for the Guarantor Loans, to provide for an extension of the
term of the Restated Agreement and to make certain other changes, as and to the
extent set forth in this Amendment and subject to the terms and conditions
<PAGE>
- 2 -
stated herein; it being understood that no additional money is being advanced in
connection with this Amendment and that the Note (as defined in the Restated
Agreement) is being replaced in its entirety in connection herewith
("Replacement Note").
NOW, THEREFORE, it is agreed as follows:
A. Definitions. All capitalized terms used but not herein defined
shall have the meanings set forth in the Restated Agreement.
B. Amendments. The Restated Agreement is hereby amended as follows:
1. Section 2.2 of the Restated Agreement is hereby deleted and
replaced in its entirety by the following:
"2.2 The Note. The Credit is evidenced by a replacement note made
by Borrower to Bank dated as of November 30, 1998 ("Note"), payable in
accordance with the terms and conditions set forth therein. The Note is
also subject to mandatory prepayment as set forth in Section 2.4(c) of this
Agreement."
2. Section 5.1 of the Restated Agreement is hereby deleted in its
entirety and replaced with the following:
"5.1 Borrowed Money. Create, incur, assume or suffer to exist any
liability for borrowed money (i) except to the Bank, (ii) except for an
existing loan from Fleet National Bank in the original amount of
$4,000,000.00 which loan was used only to purchase shares of stock of the
Guarantor, and (iii) except for a certain loan or loans from the Guarantor
in an aggregate principal amount up to $10,000,000 which loans shall be
used only to purchase shares of stock of the Guarantor ("Guarantor Loans"),
provided however that principal repayments on the Guarantor Loans shall not
commence until after the scheduled maturity date of the existing loans in
favor of the Bank."
3. Section 5.2 of the Restated Agreement is hereby deleted in its
entirety and replaced with the following:
"5.2 Encumbrances. Create, incur, assume or suffer to exist any
mortgage, lien, security interest, pledge or other encumbrance on any of
its property or assets, whether now owned or hereafter owned or acquired,
other than encumbrances in favor of the Bank and other than a pledge of
shares in favor of Fleet National Bank and/or Guarantor to secure payment
of the loans described in Section 5.1 above."
<PAGE>
- 3 -
C. Representations and Warranties.
1. The Borrower and the Guarantor have full power, authority and
legal right to enter into this Amendment, and to take all action required of
them under this Amendment. The Borrower hereby represents and warrants that the
execution, delivery and performance by the Borrower of this Amendment has been
duly authorized by all necessary action, if any, and that this Amendment is a
legal, valid and binding obligation of the Borrower enforceable against the
Borrower in accordance with its terms, except as the enforcement hereof may be
subject to the effect of any applicable bankruptcy, insolvency, reorganization,
moratorium or similar law affecting creditors' rights generally or to general
principles of equity.
2. The Borrower and the Guarantor each hereby represents and
warrants that the execution, delivery and performance of this Amendment by the
Borrower and the Guarantor, respectively does not, and will not, contravene or
conflict with any provision of (i) law or (ii) any judgment, decree or order,
and does not, and will not, contravene or conflict with, or cause any lien to
arise under, any provision of the Trust Agreement or any other agreement,
instrument or other document binding upon or otherwise affecting the Borrower,
the Guarantor, any property subject to the Trust Agreement or Plan, or any
property of the Guarantor.
3. All of the representations and warranties contained in the
Restated Agreement, after giving effect to this Amendment, including, without
limitation, those contained in Article 3 thereof, and each other agreement and
document executed in connection therewith are true and correct on and as of the
date hereof as though made on the date hereof, and no Event of Default exists
under the Restated Agreement or will exist after or be triggered by the
execution and delivery of this Amendment or any of the other agreements and
documents contemplated hereby. In addition, the Borrower hereby represents,
warrants and affirms that each of the other agreements and documents executed in
connection with or relating to the Restated Agreement remain in full force and
effect.
4. Guarantor hereby acknowledges that it has read the Amendment
and consents to the terms hereof and further confirms and agrees that,
notwithstanding the effectiveness of the Amendment, the obligations of the
Guarantor under the Guaranty shall not be impaired or affected and the Guaranty
<PAGE>
- 4 -
is and shall continue to be in full force and effect and is hereby confirmed.
D. Conditions Precedent to Amendments. The effectiveness of this
Amendment shall be subject to the fulfillment (to the satisfaction of the Bank)
of the following conditions precedent:
1. Amendment Documentation. The Borrower shall have delivered to
Bank all of the following, each duly executed if required, and dated the date
hereof, and each in form and substance satisfactory to Bank:
a. Amendment. The Borrower, the Bank and the Guarantor shall
have executed and delivered this Amendment.
b. Replacement Note. The Borrower shall have executed and
delivered to Bank the Replacement Note dated the date hereof in the principal
amount of $1,008,699.79.
c. Opinion of Counsel. Counsel to the Borrower shall have
delivered to Bank an opinion in form and substance satisfactory to Bank and its
counsel, which opinion shall include an express statement to the effect that
Bank is authorized to rely on such opinion.
d. Other. Such other documents and such other actions as
Bank may reasonably request.
2. No Default. As of the closing date of this Amendment, no Event
of Default shall have occurred or be continuing under the Restated Agreement
after giving effect to this Amendment.
3. Representations and Warranties. The representations and
Warranties set forth in Section C hereof shall be true and correct on the
closing date of this Amendment.
4. Legal Matters. All legal matters incident hereto shall be
satisfactory to counsel to the Bank.
E. Miscellaneous.
1. Except as specifically amended by this Amendment, the Restated
Agreement and each other agreement and document executed in connection therewith
shall remain in full force and effect and are hereby ratified and confirmed.
2. The execution, delivery and effect of this Amendment shall be
limited precisely as written and shall not be deemed to (i) be a consent to any
waiver of any term or condition or to any amendment or modification of any term
<PAGE>
- 5 -
or condition of the Restated Agreement or any other agreement or document
executed in connection therewith, except, upon the effectiveness of this
Amendment, as specifically amended hereby, or (ii) prejudice any right, power or
remedy which Bank now has or may have in the future under or in connection with
the Restated Agreement or any other agreement or document executed in connection
therewith. Upon the effectiveness of this Amendment, each reference in the
Restated Agreement to "this Agreement", "hereunder", "hereof", "herein" or any
other word or words of similar import shall mean and be a reference to the
Restated Agreement as amended hereby and each reference in any other agreement
or document executed in connection with the Restated Agreement to the Restated
Agreement or any word or words of similar import shall be and mean a reference
to the Restated Agreement as amended hereby.
3. Counterparts. This Amendment may be executed in any number of
counterparts, each of which when so executed shall be deemed an original but all
such counterparts shall constitute one and the same instrument.
4. Costs and Expenses. The Guarantor and the Borrower jointly and
severally shall reimburse Bank promptly for all reasonable costs and expenses,
including reasonable counsel fees and expenses, incurred by Bank in connection
with this Amendment, any indebtedness created or evidenced hereunder and, in the
case of Guarantor, any other obligations; and for costs and expenses, including
reasonable counsel fees, of Bank incident to the enforcement of any provision of
this Amendment, the Note, any other documents executed in connection with the
Restated Agreement and, in the case of the Guarantor, any other obligations.
5. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO CONFLICTS OF LAW
PROVISIONS) OF THE STATE OF NEW YORK.
6. Headings. Section headings in this Amendment are included
herein for convenience of reference only and shall not constitute a part of this
Amendment for any other purpose.
[SIGNATURE PAGE FOLLOWS]
<PAGE>
- 6 -
IN WITNESS WHEREOF, Borrower, Guarantor and Bank have entered into
this Third Amendment to Amended and Restated Loan Agreement on the date first
written above.
COLUMBUS McKINNON CORPORATION
EMPLOYEE STOCK OWNERSHIP TRUST
By: /s/ Karen L. Howard
---------------------------
KAREN L. HOWARD, as Trustee
under the Columbus McKinnon
Corporation Employee Stock
Ownership Trust Agreement
By: /s/ Timothy R. Harvey
-----------------------------
TIMOTHY R. HARVEY, as Trustee
under the Columbus McKinnon
Corporation Employee Stock
Ownership Trust Agreement
By: /s/ Robert L. Montgomery, Jr.
------------------------------
ROBERT L. MONTGOMERY, JR.,
as Trustee under the Columbus
McKinnon Corporation Employee
Stock Ownership Trust
Agreement
COLUMBUS McKINNON CORPORATION
By: /s/ Robert L. Montgomery, Jr.
------------------------------
Robert L. Montgomery, Jr.
Executive Vice President
MARINE MIDLAND BANK
By: /s/ M. F. Brown
--------------------------
M.F. Brown
Authorized Signatory
SECOND AMENDMENT TO
CREDIT AGREEMENT AND CONSENT
THIS SECOND AMENDMENT TO CREDIT AGREEMENT AND CONSENT (this
"AMENDMENT"), dated as of February __, 1999, is by and among COLUMBUS MCKINNON
CORPORATION, a New York corporation (the "BORROWER"), the banks, financial
institutions and other institutional lenders which are parties to the Credit
Agreement (as such term is defined below) (the "LENDERS"), FLEET NATIONAL BANK,
as Initial Issuing Bank (the "INITIAL ISSUING BANK"), FLEET NATIONAL BANK, as
the Swing Line Bank (the "SWING LINE BANK"; each of the Lenders, the Initial
Issuing Bank and the Swing Line Bank, individually, a "LENDER PARTY" and,
collectively, the "LENDER PARTIES"), and FLEET NATIONAL BANK, as administrative
agent (together with any successor appointed pursuant to Article VII of the
Credit Agreement, the "ADMINISTRATIVE AGENT") for the Lender Parties.
W I T N E S S E T H :
WHEREAS, the Borrower, Lenders, Initial Issuing Bank, Swing Line Bank
and Administrative Agent are party to that certain Credit Agreement, dated as of
March 31, 1998, as amended by that certain First Amendment to Credit Agreement,
dated as of September 23, 1998 (the "FIRST AMENDMENT") (as so amended and as it
may hereafter be further amended, supplemented, restated, extended or otherwise
modified from time to time, the "CREDIT AGREEMENT");
WHEREAS, the Borrower desires to consummate certain acquisitions which
would require the consent of the Lenders to the waiver or amendment of certain
provisions of the Credit Agreement in order to permit such acquisitions;
WHEREAS, for administrative simplicity, operational efficiency and
other reasons, the Borrower has proposed making certain changes in the
organizational structure of the Borrower and its Subsidiaries, including the
merger of Yale Industrial Products, Inc. ("YALE") with and into the Borrower,
with the Borrower as the surviving corporation (the "YALE MERGER"), the merger
of LICO Conveyor Company ("LICO CONVEYOR") with and into Automatic Systems, Inc.
("ASI"), with ASI as the surviving corporation (the "LICO CONVEYOR MERGER"), the
merger of LICO, Inc. ("LICO") with and into ASI, with ASI as the surviving
corporation (the "LICO MERGER");
WHEREAS, for administrative simplicity, operational efficiency and
other reasons, the Borrower has proposed making certain other changes in the
organizational structure of the Borrower and its Subsidiaries, and certain other
related changes;
-1-
<PAGE>
WHEREAS, the Borrower, the Administrative Agent and the Lender Parties
are mutually desirous of amending the Credit Agreement to make certain changes
in connection with the recent adoption of the Euro as the common currency of
certain participating member states of the European Union, including the Federal
Republic of Germany;
WHEREAS, the Borrower has requested that the Administrative Agent and
the Lender Parties amend the Credit Agreement to allow the Borrower to incur
additional senior subordinated debt in an amount not to exceed $50,000,000;
WHEREAS, the Borrower has requested that the Administrative Agent and
Lender Parties amend the Credit Agreement and certain of the other Loan
Documents to permit the proposed acquisitions and proposed changes in the
organizational structure of the Borrower and its Subsidiaries; and
WHEREAS, the Administrative Agent and Lender Parties are agreeable to
the foregoing, in each instance as and to the extent set forth in this Amendment
and subject to each of the terms and conditions stated herein.
NOW THEREFORE, in consideration of the premises and the mutual
covenants set forth herein and of the loans or other extensions of credit
heretofore, now or hereafter made to, or for the benefit of, the Borrower and
its Subsidiaries by the Lender Parties, the parties hereto hereby agree as
follows:
1. DEFINITIONS. Except to the extent otherwise specified herein, capitalized
terms used in this Amendment shall have the same meanings ascribed to them in
the Credit Agreement.
2. AMENDMENTS.
2.1 Section 1.01 of the Credit Agreement is amended to include the
following definitions in the appropriate alphabetical order:
"'ADDITIONAL SENIOR SUBORDINATED DEBT' has the meaning
specified in Section 5.02(b)(viii)."
"'ADDITIONAL SENIOR SUBORDINATED DEBT DOCUMENTS' means the
indenture, notes and all other documents, instruments and agreements
executed and delivered in connection with the original issuance of any
Additional Senior Subordinated Debt, each of which indenture, notes and
other documents, instruments and agreements shall satisfy the
requirements set forth in Section 5.02(b)(viii), and in each case, as
the same shall, subject to the terms of this Agreement, be amended,
supplemented or otherwise modified and in effect from time to time."
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"'CONVERSION DATE' means, for any European country, the date,
if any, on which such country adopts the Euro as a lawful currency of
such country and on which the European Central Bank sets an official
exchange rate for such country's currency against the Euro."
"'EURO' means the common currency adopted by those member
states of the European Union participating in the program of
introducing, changing over to and operating a single or unified
European currency."
2.2 Section 1.01 of the Credit Agreement is further amended by
inserting in the definition of "ALTERNATIVE CURRENCY" after the words
"Alternative Currency Letters of Credit," and before the words "Danish Crowns"
the words "the Euro".
2.3 Section 1.01 of the Credit Agreement is further amended by
inserting in the definition of "ASSIGNED DOLLAR VALUE" before the words "Pounds
Sterling" in clause (b)(ii)(A) thereof the words "the Euro,".
2.4 Section 1.01 of the Credit Agreement is further amended by deleting
the definition of "Exchange Rate" in its entirety and replacing with the
following:
"'EXCHANGE RATE' shall mean, on any day, (a) with respect to
the Euro, Pounds Sterling (prior to the Conversion Date for the United
Kingdom), Danish Crowns (prior to the Conversion Date for Denmark) and
Deutsche Marks (prior to the Conversion Date for the Federal Republic
of Germany), the spot rate at which U.S. Dollars are offered on such
day by the Administrative Agent in London for such Alternative Currency
at approximately 11:00 A.M. (London time), (b) with respect to U.S.
Dollars in relation to the Euro, Pounds Sterling (prior to the
Conversion Date for the United Kingdom), Danish Crowns (prior to the
Conversion Date for Denmark) and Deutsche Marks (prior to the
Conversion Date for the Federal Republic of Germany), the spot rate at
which such Alternative Currency is offered on such day by the
Administrative Agent in London for U.S. Dollars at approximately 11:00
A.M. (London time) and (c) with respect to Pounds Sterling (on and
after the Conversion Date for the United Kingdom), Danish Crowns (on
and after the Conversion Date for Denmark) and Deutsche Marks (on and
after the Conversion Date for the Federal Republic of Germany), the
official exchange rate for such currency as recognized by the European
Central Bank on the Conversion Date for such country. For purposes of
determining the Exchange Rate in connection with an Alternative
Currency Revolving Credit Borrowing, such Exchange Rate shall be
determined as of the Exchange Rate Determination Date for such
Borrowing. The Administrative Agent shall provide Borrower with the
then current Exchange Rate from time to time upon Borrower's request
therefor."
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2.5 Section 4.01(c) of the Credit Agreement is amended in the following
respects:
(a) By inserting in the third line thereof after the words
"Senior Subordinated Note Document" the words "and Additional Senior
Subordinated Debt Document, if any, "; and
(b) By inserting in the fourth line thereof after the words
"Senior Subordinated Notes" the words "and Additional Senior
Subordinated Debt (if such an offering is made)".
2.6 Section 4.01(d) of the Credit Agreement is amended in the following
respects:
(a) By inserting in the fifth line thereof after the words
"Senior Subordinated Note Document" the words "or Additional Senior
Subordinated Debt Document"; and
(b) By inserting in the sixth line thereof after the words
"Senior Subordinated Notes" the words "or Additional Senior
Subordinated Debt (if such an offering is made)".
2.7 Section 4.01(e) of the Credit Agreement is amended by inserting the
following additional sentence at the end thereof:
"If any Additional Senior Subordinated Debt is incurred (it being
understood that any such incurrence must be made in compliance with the
terms and conditions of this Agreement), each Additional Senior
Subordinated Debt Document, when delivered, will have been duly
executed and delivered by each Loan Party thereto and will be the
legal, valid and binding obligation of each Loan Party thereto,
enforceable against such Loan Party in accordance with its terms."
2.8 Section 4.01(hh) of the Credit Agreement is amended in the
following respects:
(a) By inserting before the words "Senior Subordinated Notes"
in the first line thereof the words "Additional Senior Subordinated
Debt or";
(b) By inserting in the twelfth line thereof before the period
(I.E. ".") at the end of the first sentence of such Section 4.01(hh)
the following:
"or Senior Debt or any comparable term (as defined in the Additional
Senior Subordinated Debt Documents) and Designated Senior Debt or any
comparable term (as defined in the Additional Senior Subordinated Debt
Documents)";
(c) By inserting in the fourteenth line thereof after the
words "Senior Subordinated Note Documents" the words "or Additional
Senior Subordinated Debt Documents, as the case may be,"; and
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(d) By inserting in the sixteenth line thereof after the words
"(and to the holders thereof)" the following:
"or, in the case of the Additional Senior Subordinated Debt Documents,
in respect of Senior Debt and Designated Senior Debt or any comparable
terms (as defined in the Additional Senior Subordinated Debt
Documents)(and to the holders thereof)".
2.9 Section 5.02(a) of the Credit Agreement is amended by deleting from
clause (v) thereof the words "Section 5.02(b)(iii)(B)" and inserting in place
thereof the words "Section 5.02(b)(iv)(B)".
2.10 Section 5.02(b) of the Credit Agreement is amended as follows:
(a) By deleting the word "and" from the end of clause (vi)
thereof; and
(b) By deleting the period at the end of clause (vii) thereof
and replacing it with the following:
";
(viii) Debt of a Target assumed in connection with a Permitted
Acquisition; PROVIDED, THAT, (A) such Debt was pre-existing Debt of the
Target not incurred in connection with, or contemplation of, the
Permitted Acquisition, (B) such Debt is unsecured, (C) the amount of
such Debt is included as part of the sum of all amounts payable in
connection with all Permitted Acquisitions during the relevant Fiscal
Year as required for purposes of determining whether the condition to
such Permitted Acquisition set forth in clause (4) of Section
5.02(d)(iii)(B) has been satisfied and (D) all of the conditions to
such Permitted Acquisition set forth in Section 5.02(d)(iii)(B),
including, without limitation, the conditions set forth in clauses (4),
(5), (6) and (7) of such Section 5.02(d)(iii)(B), are fully satisfied;
and
(ix) unsecured, fully subordinated Debt of the Borrower and those of
its Subsidiaries which are Restricted Subsidiaries under the Senior
Subordinated Note Indenture in an aggregate amount not to exceed
$50,000,000 (the "ADDITIONAL SENIOR SUBORDINATED DEBT"); PROVIDED,
THAT, (A) such Additional Senior Subordinated Debt is issued pursuant
to and evidenced by Additional Senior Subordinated Debt Documents
containing subordination provisions which are at least as favorable, as
determined by the Administrative Agent, to the interests and rights of
the Administrative Agent and the Lender Parties as those contained in
the Senior Subordinated Note Indenture and the other Senior
Subordinated Note Documents, (B) the Additional Senior Subordinated
Debt Documents contain terms and conditions, other than interest rate
and other pricing terms, which are no less favorable, as determined by
the Administrative Agent, to the Administrative Agent and the Lender
Parties than those contained in the Senior Subordinated Note Indenture
and the other Senior Subordinated Note Documents (it being understood
that the Borrower, in its discretion, may agree to interest rate and
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other pricing terms which are then available for such subordinated Debt
in the financial marketplace) and (C) no Default or Event of Default
shall have occurred and be continuing, either before or after giving
effect to the incurrence of such Additional Senior Subordinated Debt.
If Additional Senior Subordinated Debt is issued pursuant to and
evidenced by the Senior Subordinated Note Indenture and the other
Senior Subordinated Note Documents it shall automatically be deemed to
have satisfied the requirements set forth in subclauses (A) and (B) of
this clause (ix) (it being understood that the Borrower, in its
discretion, may agree to interest rate and other pricing terms which
are then available for such subordinated Debt in the marketplace) and
with respect to such Additional Senior Subordinated Debt, the Senior
Subordinated Note Indenture and other Senior Subordinated Note
Documents shall for all purposes of this Credit Agreement be deemed to
be and constitute the Additional Senior Subordinated Debt Documents
governing such Additional Senior Subordinated Debt.".
2.11 Section 5.02(d)(iii)(6) of the Credit Agreement is amended as
follows:
(a) By inserting in the first line thereof after the words
"Permitted Acquisition," the following: "(A) if the Target is an entity
organized under the laws of the United States of America or any State
thereof,";
(b) By inserting before the word "Significant" in the sixth
line thereof the word "Domestic";
(c) By inserting after the words "capital stock" and before
the comma (I.E. ",") in the seventh line thereof the following: "and in
sixty-five percent (65%) of each of its Foreign Significant
Subsidiaries' capital stock"; and
(d) By inserting at the end thereof after the words "in
connection therewith;" the following:
"or (B) if the Target is an entity organized under the laws of any
jurisdiction other than the United States of America or any State
thereof and if, after giving pro forma effect to the Permitted
Acquisition, the Target would be a Significant Subsidiary, the
Administrative Agent, on behalf of the Secured Parties, shall be
granted a first priority Lien (subject to no other Liens) in sixty-five
percent (65%) of the Target's capital stock and the Borrower, each of
the Borrower's Subsidiaries and the Target and each of the Target's
Subsidiaries shall each have executed and delivered all such Collateral
Documents, legal opinions and other documents and taken all such
actions as may be required by the Administrative Agent in connection
therewith".
2.12 Section 5.02(f) of the Credit Agreement is amended as follows:
(a) By deleting the word "and" from the end of clause (iv)
thereof; and
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(b) By deleting the period at the end of clause (v) thereof
and replacing it with the following:
"; and
(vi) Investments consisting of Permitted Acquisitions.".
2.13 Section 5.02(k) of the Credit Agreement is amended as follows:
(a) By inserting in the fifth and sixth lines of clause (i)
thereof, in each such case, after the words "the Senior Subordinated
Notes" the following:
"or Additional Senior Subordinated Debt";
(b) By inserting in subclause (C) of clause (i) thereof after
the words "the Senior Subordinated Note Indenture" the following:
"or Additional Senior Subordinated Debt in accordance with the terms
and conditions of the Additional Senior Subordinated Debt Documents";
(c) By inserting in subclause (D) of clause (i) thereof after
the words "Senior Subordinated Notes" the following:
"or Additional Senior Subordinated Debt";
(d) By inserting in subclause (D) of clause (i) thereof after
the words "Senior Subordinated Note Indenture" the following:
"or Additional Senior Subordinated Debt Documents, as the case may
be,";
(e) By inserting in subclause (E) of clause (i) thereof after
the words "Senior Subordinated Note Documents" the following:
"or Additional Senior Subordinated Debt Documents"; and
(f) By inserting in clause (ii) thereof after the words
"Senior Subordinated Notes" the following:
"and Additional Senior Subordinated Debt".
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2.14 Section 5.02(l) of the Credit Agreement is amended as follows:
(a) By inserting in the first line thereof in the heading
before the words "or Senior Subordinated Note Documents" the words
"Additional Senior Subordinated Debt Documents,"; and
(b) By inserting in the second, fourth, sixth and eighth lines
thereof, in each such case, before the words "or Senior Subordinated
Note Document" the words ", Additional Senior Subordinated Debt
Document".
2.15 Section 5.03(o) of the Credit Agreement is amended by inserting in
the third and eighth lines thereof, in each such case, after the words "Senior
Subordinated Note Document" the words ", Additional Senior Subordinated Debt
Document".
2.16 Section 5.04 (c) of the Credit Agreement is amended by inserting
in subclause (x) of clause (ii) thereof after the words "Senior Subordinated
Notes" the words "and Additional Senior Subordinated Debt".
2.17 Section 6.01(e) of the Credit Agreement is amended by inserting in
the third line thereof after the words "Senior Subordinated Notes" the words "or
Additional Senior Subordinated Debt".
2.18 Section 6.01(r) of the Credit Agreement is amended as follows:
(a) By inserting in the first line thereof before the words
"Senior Subordinated Notes" the words "Additional Senior Subordinated
Debt,";
(b) By inserting in the thirteenth line thereof just before
the period (I.E. ".") at the end of the first sentence of such Section
6.01(r) the following:
"or Senior Debt or any comparable term (as defined in the Additional
Senior Subordinated Debt Documents) and Designated Senior Debt or any
comparable term (as defined in the Additional Senior Subordinated Debt
Documents)"; and
(c) By inserting in the fifteenth line thereof after the words
"(and to the holders thereof)" the following:
"or, in the case of the Additional Senior Subordinated Debt Documents,
in respect of Senior Debt and Designated Senior Debt or any comparable
terms (as defined in the Additional Senior Subordinated Debt
Documents)(and to the holders thereof)".
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2.19 Section 8.04 (b) of the Credit Agreement is amended as follows:
(a) By deleting the word "or" from immediately prior to clause
(v) in the eighteenth line thereof;
(b) By inserting after the words "Loan Party or any of its
Subsidiaries" in the twentieth line thereof the following:
"or (vi) the offering and/or issuance of the Additional Senior
Subordinated Debt or any related transaction of the Borrower or any of
its Subsidiaries or other Affiliates and any of the other transactions
contemplated by the Additional Senior Subordinated Debt Documents";
(c) By inserting in the thirtieth line thereof before the
words "the Facilities" the words "the Additional Senior Subordinated
Debt,"; and
(d) By inserting in the thirty-second line thereof after the
words "the Senior Subordinated Note Documents" the words ", the
Additional Senior Subordinated Debt Documents".
2.20 The following shall be inserted into the Credit Agreement after
Section 8.13 as a new Section 8.14:
"Section 8.14. THE EURO AND CONTINUITY OF CONTRACT. On the
Conversion Date for each of the United Kingdom, Denmark or the Federal
Republic of Germany, as the case may be, all references to Pounds
Sterling, Danish Crowns or Deutsche Marks, as the case may be, shall be
substituted in this Credit Agreement by the Euro for all purposes. From
and after the Conversion Date for each of the United Kingdom, Denmark
or the Federal Republic of Germany, as the case may be, any amount
payable hereunder or under any other Loan Document by the
Administrative Agent or any Lender Party to the Borrower, by the
Borrower or any Guarantor to the Administrative Agent or any Lender
Party, by any Lender Party to any other Lender Party or the
Administrative Agent or by the Administrative Agent to any Lender
Party, shall be paid in the Euro and not in Pounds Sterling, Danish
Crowns or Deutsche Marks, as the case may be. Neither the introduction
of the Euro, nor the substitution of Pounds Sterling, Danish Crowns or
Deutsche Marks, as the case may be, as a lawful currency of the United
Kingdom, Denmark or the Federal Republic of Germany, respectively, nor
the fixing of the official conversion rate, nor any economic
consequences that arise from or in connection with any of the
aforementioned events shall cause this Credit Agreement to terminate or
give rise to any right to terminate prematurely, contest, cancel,
rescind, modify or otherwise renegotiate or alter this Credit Agreement
or any of its provisions, or to raise any other objections and/or
exceptions or to assert any claims for compensation under or in
connection with this Credit Agreement. As of January 1, 1999, with
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respect to the Federal Republic of Germany and for all purposes of the
Credit Agreement and each of the other Loan Documents, the Conversion
Date has occurred."
3. CONSENTS TO CORPORATE RESTRUCTURING TRANSACTIONS.
3.1 Section 5.01(f) of the Credit Agreement, among other things,
requires that the Borrower preserve and maintain, and cause each of its
Subsidiaries to preserve and maintain, its existence, legal structure, legal
name and rights (charter and statutory). Notwithstanding the provisions of such
Section 5.01(f), but subject to the conditions precedent set forth in Section
3.4 and the other terms and conditions of this Amendment, the Administrative
Agent and Lender Parties hereby consent to (a) the Yale Merger, (b) the LICO
Conveyor Merger, (c) the LICO Merger, (d) the dissolution (the "LICO
INTERNATIONAL DISSOLUTION") of LICO International Corporation, a foreign sales
corporation and a wholly-owned Subsidiary of LICO ("LICO INTERNATIONAL"), or,
alternatively, the merger of LICO International with and into Audubon Export,
Inc., a foreign sales corporation and a direct wholly-owned Subsidiary of the
Borrower ("AUDUBON EXPORT"), with Audubon Export as the surviving corporation
(the "LICO INTERNATIONAL MERGER"), (e) the dissolution (collectively, the
"DUFF-NORTON ASIA DISSOLUTIONS") of Duff-Norton Asia Pacific Pty. Ltd.
("DUFF-NORTON ASIA") and Kunming Duff-Norton Machinery Company Limited ("KUNMING
DUFF-NORTON"), each of which is currently an inactive company, (f) the transfer
(the "YALE UK TRANSFER") of all of the outstanding shares of capital stock of
Yale Industrial Products Ltd., a wholly-owned Subsidiary of Yale ("YALE UK"), to
Yale Industrial Products GmbH, a direct wholly-owned Subsidiary of Yale ("YALE
GERMANY"); PROVIDED, THAT, there shall be no material tax impact as a result of
the Yale UK Transfer, as determined by the Administrative Agent, and (g) the
transfer (the "EGYPTIAN TRANSFER") of the ownership interest in Egyptian
American Crane Company, an existing joint venture, from Yale to Yale Germany;
PROVIDED, THAT, there shall be no material tax impact as a result of the
Egyptian Transfer, as determined by the Administrative Agent.
3.2 Section 5.02(d)(i) of the Credit Agreement, among other things,
prohibits the Borrower or any of its Subsidiaries from merging into or
consolidating with any Person or permitting any Person to merge into it. Section
5.02(d)(ii) of the Credit Agreement prohibits, among other things, the Borrower
or any of its Subsidiaries from liquidating, winding up or dissolving itself.
Notwithstanding the provisions of such Sections 5.02(d)(i) and 5.02(d)(ii), but
subject to the conditions precedent set forth in Section 3.4 and the other terms
and conditions of this Amendment, the Administrative Agent and Lender Parties
hereby consent to (a) the Yale Merger, (b) the LICO Conveyor Merger, (c) the
LICO Merger, (d) the LICO International Dissolution or, alternatively, the LICO
International Merger, (e) the Duff-Norton Asia Dissolutions, (f) the Yale UK
Transfer and (g) the Egyptian Transfer.
3.3 Section 5.02(i) of the Credit Agreement, among other things,
prohibits the Borrower or any of its Subsidiaries from amending its certificate
or articles of incorporation or bylaws. Notwithstanding the provisions of such
Section 5.02(i), but subject to the conditions precedent set forth in Section
3.4 and the other terms and conditions of this Amendment, the Administrative
Agent and Lender Parties consent to any amendments of the certificate or
articles of incorporation and bylaws of Yale, LICO Conveyor, ASI, LICO, LICO
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International, Audubon Export, Duff-Norton Asia, Kunming Duff-Norton, Yale UK or
Yale Germany, as the case may be, that are reasonably necessary to carry out the
Yale Merger, the LICO Conveyor Merger, the LICO Merger, the LICO International
Dissolution or, alternatively, the LICO International Merger, the Duff-Norton
Asia Dissolutions or the Yale UK Transfer, as the case may be, in each instance
to the extent, and solely to the extent, that such amendments are in form and
substance reasonably acceptable to the Administrative Agent.
3.4 Each transaction consented to in Section 3.1, 3.2 and 3.3 above is
subject to the satisfaction, as determined by the Administrative Agent, of each
of the following conditions precedent:
(a) The Borrower shall have delivered to the Administrative
Agent such Amended and Restated Schedules to each of the Credit
Agreement, Security Agreement and Intellectual Property Security
Agreement to replace such existing Schedules which, upon the
consummation of such transaction, shall no longer be true, correct and
complete, including, by way of example only and not of limitation, to
the extent applicable:
(i) Schedule 3.01(a)(ix to the Credit Agreement,
STATES IN WHICH LOAN PARTIES ARE QUALIFIED
TO DO BUSINESS;
(ii) Schedule 4.01(b) to the Credit Agreement,
SUBSIDIARIES;
(iii) Schedule 4.01(k) to the Credit Agreement,
PLANS, MULTIEMPLOYER PLANS AND WELFARE
PLANS;
(iv) Schedule 4.01(bb) to the Credit Agreement,
OWNED REAL ESTATE;
(v) Schedule 4.01(cc) to the Credit Agreement,
LEASED REAL ESTATE;
(vi) Schedule 4.01(ff) to the Credit Agreement,
INTELLECTUAL PROPERTY;
(vii) Schedule I to the Security Agreement,
PLEDGED SHARES AND PLEDGED DEBT;
(viii) Schedule III to the Security Agreement,
LOCATIONS OF EQUIPMENT AND INVENTORY;
(ix) Schedule IV to the Security Agreement,
TRADE NAMES;
(x) Schedule I to the Intellectual Property
Security Agreement, PATENTS AND PATENT
APPLICATIONS;
(xi) Schedule II to the Intellectual Property
Security Agreement, TRADEMARK REGISTRATIONS
AND APPLICATIONS;
(xii) Schedule III to the Intellectual Property
Security Agreement COPYRIGHT REGISTRATIONS
AND APPLICATIONS; and
(xiv) Schedule IV to the Intellectual Property
Security Agreement, LICENSES.
(b) The Borrower shall, and shall have caused each of its
Domestic Subsidiaries to, have executed and delivered such agreements,
instruments and other documents, including, without limitation, UCC-1
financing statements, UCC-3 amendments to financing statements and
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amendments to intellectual property filings, as shall be necessary or
as the Administrative Agent shall have otherwise requested in order to
maintain the perfected first priority status of the Administrative
Agent's security interests in the Collateral of the Borrower and its
Domestic Subsidiaries.
(c) As of the date of the consummation of such transaction, no
Default or Event of Default shall have occurred and be continuing.
(d) The representations and warranties contained in Section 5
of this Amendment, the Credit Agreement and each other Loan Document
shall be true, correct and complete on and as of the date of the
consummation of such transaction, as though made on such date.
(e) The Borrower shall, and shall have caused its Subsidiaries
to, have taken all such actions and executed and delivered all such
agreements, instruments, legal opinions and other documents as the
Administrative Agent shall have reasonably requested in connection with
such transaction.
3.5 The foregoing consents in Sections 3.1, 3.2 and 3.3 are only
applicable and shall only be effective in the specific instances and for the
specific purposes for which made. Such consents are expressly limited to the
facts and circumstances and subject to the conditions referred to herein and
shall not operate (a) as a waiver of or consent to non-compliance with any other
Section or provision of the Credit Agreement or any other Loan Document, (b) as
a waiver of any right, power or remedy of either the Administrative Agent or any
Lender Party under the Credit Agreement or any other Loan Document or (c) as a
waiver of or consent to any Event of Default or Default under the Credit
Agreement or any other Loan Document.
4. CONSENTS TO ACQUISITIONS
4.1 Section 5.02(d)(iii)(B) of the Credit Agreement permits the
Borrower or any wholly-owned Subsidiary of the Borrower to make Permitted
Acquisitions subject to the satisfaction of certain conditions, number (4) of
which is that the sum of all amounts payable in connection with all Permitted
Acquisitions (including all transaction costs and all Debt, liabilities and
contingent obligations incurred or assumed in connection therewith or otherwise
reflected on a balance sheet of the Target) shall not exceed $35,000,000 in the
aggregate in any Fiscal Year. Notwithstanding the provisions of such condition
number (4) of Section 5.02(d)(iii)(B), but subject to the conditions precedent
set forth in Section 4.3 and the other terms and conditions of this Amendment,
the Administrative Agent and Lender Parties hereby consent to (a) the
acquisition (the "TIGRIP/CAMLOK ACQUISITION") by Yale Germany of Camlok Lifting
Clamps Limited, a company organized under the laws of England and Wales, and the
assets of the Tigrip product line, in each case from Schmidt-Krantz & Co. GmbH;
PROVIDED, THAT, (i) the Tigrip/Camlok Acquisition shall be financed by Yale
Germany and not by the Borrower, (ii) no portion of the proceeds of any
Borrowing under the Credit Agreement shall be used to finance the Tigrip/Camlok
Acquisition, (iii) neither the Borrower nor any of its Domestic Subsidiaries
shall guarantee the payment of the purchase price for the Tigrip/Camlok
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Acquisition or any loan agreement or other financing incurred by Yale Germany to
finance the Tigrip/Camlok Acquisition, (iv) the aggregate purchase price paid by
Yale Germany for the Tigrip/Camlok Acquisition shall not exceed the Dollar
Equivalent of $11,000,000; and (v) the terms and conditions of the Tigrip/Camlok
Acquisition shall otherwise be satisfactory to the Administrative Agent; (b) the
acquisition (the "GL ACQUISITION") by the Borrower of all of the outstanding
shares of capital stock of GL International, Inc. ("GL"); PROVIDED, THAT, (i) no
more than 1,333,333 shares of common stock of the Borrower and no other
consideration, except for cash paid in lieu of fractional shares and the payment
of transaction costs, shall be exchanged for all of the outstanding shares of
capital stock of GL in full payment of the purchase price for the GL
Acquisition, (ii) the terms and conditions of the GL Acquisition shall otherwise
be satisfactory to the Administrative Agent and (iii) the Administrative Agent
and its counsel shall have completed a due diligence investigation in scope and
with results satisfactory to the Administrative Agent; and (c) the acquisition
(the "WASHINGTON EQUIPMENT ACQUISITION") by the Borrower of all of the
outstanding shares of capital stock of Washington Equipment Company ("WASHINGTON
EQUIPMENT"); PROVIDED, THAT, (i) the aggregate purchase price of the Washington
Equipment Acquisition shall not exceed $6,900,000, (ii) no portion of the
proceeds of any Borrowing under the Credit Agreement shall be used to finance
the Washington Equipment Acquisition and (iii) the terms and conditions of the
Washington Equipment Acquisition shall otherwise be satisfactory to the
Administrative Agent. In furtherance and not in limitation of the foregoing, and
notwithstanding the various provisions of the Credit Agreement and the other
Loan Documents, the Administrative Agent and Lender Parties consent to the
Borrower, if the Borrower so elects, (i) structuring the GL Acquisition by
having a newly-formed, wholly-owned Subsidiary merge into GL, or having GL merge
into such a Subsidiary, with GL being the surviving corporation of such merger
and thereupon being a wholly-owned Subsidiary of the Borrower and (ii)
structuring the Washington Equipment Acquisition by having a newly-formed,
wholly-owned Subsidiary merge into Washington Equipment, or having Washington
Equipment merge into such a Subsidiary, with Washington Equipment being the
surviving corporation of such merger and thereupon being a wholly-owned
Subsidiary of the Borrower.
4.2 Section 5.02(r) of the Credit Agreement, among other things,
prohibits the Borrower from issuing any shares of its capital stock, subject to
certain exceptions, none of which exceptions is available in connection with the
GL Acquisition. Notwithstanding the provisions of such Section 5.02(r), but
subject to the conditions precedent set forth in Section 4.3 and the other terms
and conditions of this Amendment, the Administrative Agent and Lender Parties
consent to the issuance of up to 1,333,333 shares of common stock of the
Borrower in exchange for all of the outstanding shares of capital stock of GL in
order to consummate the GL Acquisition.
4.3 Each transaction consented to in Section 4.1 and 4.2 above is
subject to the satisfaction, as determined by the Administrative Agent, of each
of the following conditions precedent:
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(a) Except as expressly set forth in Section 4.1 of this
Amendment, such transaction shall be consummated in full compliance
with each of the conditions set forth in Section 5.02(d)(iii) of the
Credit Agreement.
(b) Except as expressly set forth in Section 4.1 and 4.2 of
this Amendment, such transaction shall be consummated in full
compliance with each of the terms and conditions contained in the
Credit Agreement and each other Loan Document (it being understood
that, for purposes of determining whether the provisions set forth in
clauses (C) and (D) of the proviso of Section 5.02(b)(viii) of the
Credit Agreement have been satisfied, compliance with the provisions of
condition (4) of Section 5.02(d)(iii)(B) of the Credit Agreement is
waived as and to the extent expressly set forth in Section 4.1 of this
Amendment).
(c) Neither the Borrower nor any Subsidiary of the Borrower
shall consummate any additional Permitted Acquisition prior to the end
of the Fiscal Year ending March 31, 1999, without the prior written
consent of the Administrative Agent and Lenders.
(d) As of the date of the consummation of such transaction, no
Default or Event of Default shall have occurred and be continuing.
(e) The representations and warranties contained in Section 5
of this Amendment, the Credit Agreement and each other Loan Document
shall be true, correct and complete on and as of the date of the
consummation of such transaction, as though made on such date.
(f) The Borrower and the Target shall, and shall have caused
their respective Subsidiaries to, have taken all such actions and
executed and delivered all such agreements, instruments, legal opinions
and other documents as the Administrative Agent shall have reasonably
requested in connection with such transaction.
4.4 The foregoing consents in Sections 4.1 and 4.2 are only applicable
and shall only be effective in the specific instances and for the specific
purposes for which made. Such consents are expressly limited to the facts and
circumstances and subject to the conditions referred to herein and shall not
operate (a) as a waiver of or consent to non-compliance with any other Section
or provision of the Credit Agreement or any other Loan Document, (b) as a waiver
of any right, power or remedy of either the Administrative Agent or any Lender
Party under the Credit Agreement or any other Loan Document or (c) as a waiver
of or consent to any Event of Default or Default under the Credit Agreement or
any other Loan Document.
5. REPRESENTATIONS AND WARRANTIES OF THE BORROWER. The Borrower hereby
represents and warrants as follows:
5.1 Each of the representations and warranties set forth in the Credit
Agreement, including, without limitation, in Article IV of the Credit Agreement,
and in each other Loan Document, is true, correct and complete on and as of the
date hereof as though made on the date hereof. In addition, the Borrower hereby
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<PAGE>
represents, warrants and affirms that the Credit Agreement and each of the other
Loan Documents remains in full force and effect.
5.2 As of the date hereof, there exists no Default or Event of Default
under the Credit Agreement or any other Loan Document, and no event which, with
the giving of notice or lapse of time, or both, would constitute a Default or
Event of Default.
5.3 The execution, delivery and/or performance by each applicable Loan
Party of this Amendment, the reaffirmations and confirmations attached hereto,
each other Loan Document, each document comprising or effectuating the
transactions consented to in Sections 3 and 4 of this Amendment, and each other
agreement or document related to or contemplated by the foregoing to which it is
or is to be a party or otherwise bound, and the consummation of the transactions
consented to in Sections 3 and 4 of this Amendment, are within such Loan Party's
corporate powers, have been duly authorized by all necessary corporate action,
and do not, and will not, (i) contravene such Loan Party's charter or bylaws,
(ii) violate any law (including, without limitation, the Securities Act of 1933,
as amended, or the Securities Exchange Act of 1934, as amended), rule,
regulation (including, without limitation, Regulation T, U or X of the Board of
Governors of the Federal Reserve System), order, writ, judgment, injunction,
decree, determination or award, (iii) conflict with or result in the breach of,
or constitute a default under, any material contract, loan agreement, indenture,
mortgage, deed of trust, lease or other material instrument or agreement binding
on or affecting any Loan Party, any of its Subsidiaries or any of their
respective properties or (iv) except for the Liens created under the Collateral
Documents and except for the Liens created solely on the assets of Yale Germany
in connection with the financing by Yale Germany of the purchase price to be
paid for the Tigrip/Camlok Acquisition, result in or require the creation or
imposition of any Lien upon or with respect to any of the properties of any Loan
Party or any of its Subsidiaries. Neither any Loan Party nor any of its
Subsidiaries is in violation of any such law, rule, regulation, order, writ,
judgment, injunction, decree, determination or award or in breach of any such
contract, loan agreement, indenture, mortgage, deed of trust, lease or other
instrument or agreement, the violation or breach of which could reasonably be
expected to have a Material Adverse Effect.
5.4 Each of this Amendment and each other Loan Document has been duly
executed and delivered by each Loan Party party thereto. Each of this Amendment
and each other Loan Document is the legal, valid and binding obligation of each
Loan Party party thereto, enforceable against such Loan Party in accordance with
its terms.
5.5 No authorization or approval or other action by, and no notice to
or filing with, any governmental authority or regulatory body or any other third
party is required for (i) the due execu tion, delivery, recordation, filing or
performance by any Loan Party of this Amendment, any other Loan Document or any
other agreement or document related hereto or thereto or contemplated hereby or
thereby to which it is or is to be a party or otherwise bound, (ii) the grant by
any Loan Party of the Liens granted by it pursuant to the Collateral Documents,
(iii) the perfection or maintenance of the Liens created by the Collateral
Documents (including the first and only priority nature thereof) or (iv) the
exercise by the Administrative Agent or any Lender Party of its rights under the
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<PAGE>
Loan Documents or remedies in respect of the Collateral pursuant to the
Collateral Documents.
6. CONDITIONS PRECEDENT TO THIS AMENDMENT. The effectiveness of this Amendment
is subject to the satisfaction, in form and substance satisfactory to the
Administrative Agent, of each of the following conditions precedent:
6.1 AMENDMENT DOCUMENTATION.
(a) The Borrower shall have duly executed and delivered this
Amendment.
(b) The Borrower shall have delivered a certificate of its
Secretary or Assistant Secretary certifying as to each of the
following: (i) resolutions of the Borrower's Board of Directors
authorizing the execution and delivery of this Amendment and the other
agreements, instruments and documents contemplated hereby, and each of
the various transactions contemplated hereby, (ii) all documents
evidencing other necessary corporate action, if any, (iii) copies of
all approvals or consents, if any, necessary with respect to this
Amendment and (iv) the names and signatures of the Borrower's officers
authorized to sign this Amendment and all other documents,
certificates, instruments or agreements to be delivered hereunder or in
connection herewith.
(c) The Administrative Agent shall have received the opinion
of Phillips, Lytle, Hitchcock, Blaine & Huber, counsel for the
Borrower, and/or other counsel to the Borrower, all in form and
substance satisfactory to, and covering such matters as are requested
by, the Administrative Agent and its counsel and to include an express
statement to the effect that the Administrative Agent and Lender
Parties are authorized to rely on such opinion.
(d) No new UCC-1 Financing Statement, other financing
statement, mortgage or other instrument perfecting any Lien shall have
been filed with respect to any real or personal property owned, leased
or otherwise held by the Borrower, any Guarantor or any other
Subsidiary of the Borrower since March 31, 1998, other than filings in
favor of the Administrative Agent, on behalf of the Secured Parties.
(e) The Borrower and its Subsidiaries shall have delivered
such other documents and taken such other actions as the Administrative
Agent may reasonably request.
6.2 NO DEFAULT. No Default or Event of Default shall have occurred and
be continuing.
6.3 REPRESENTATIONS AND WARRANTIES. The representations and warranties
contained in Section 5 of this Amendment, the Credit Agreement and each other
Loan Document shall be true, correct and complete on and as of the closing date
of this Amendment as though made on such date.
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<PAGE>
6.4 AMENDMENT FEES. The Borrower shall have paid an amendment fee to
the Administrative Agent, for the account of each Lender which has approved this
Amendment, as evidenced by such Lender's timely execution and delivery of a
counterpart signature page to this Amendment (each such Lender being an
"APPROVING LENDER"), in an amount equal to 0.05% (i.e. 5 basis points) of such
Approving Lender's Revolving Credit Commitment.
6.5 OTHER CONDITIONS PRECEDENT.
(a) The Borrower shall have taken all actions and executed and
delivered all agreements, instruments and other documents necessary, or
otherwise requested by the Administrative Agent, in order to grant to
the Administrative Agent, on behalf of the Secured Parties, a perfected
first priority security interest in all personal property acquired by
the Borrower from Abell-Howe Company, including, without limitation,
the filing of UCC-1 financing statements and the making of all
intellectual property filings.
(b) The Administrative Agent shall have received such other
information, approvals, opinions, instruments, agreements or documents
as any Lender through the Administrative Agent may reasonably request,
the Borrower and its Subsidiaries shall have taken all such other
actions as any Lender through the Administrative Agent may reasonably
request, and all legal matters incident to the foregoing shall be
satisfactory to the Administrative Agent and its counsel.
7. COVENANTS.
7.1 COLLATERAL FILINGS The Borrower and its Subsidiaries hereby
covenant and agree to cooperate with the Administrative Agent in any manner
necessary or desirable in order to continue, or, in the case of after-acquired
property, create, the perfected first and only priority security interest of the
Administrative Agent, on behalf of the Secured Parties, in all Collateral of the
Borrower and its Subsidiaries, whether now owned or hereafter acquired by any of
them.
7.2 ASSUMPTION OF LIABILITIES UNDER THE LOAN DOCUMENTS. The Borrower
hereby covenants and agrees to assume and discharge, upon the consummation of
the Yale Merger, all liabilities and obligations of Yale under, in respect of or
otherwise relating to the Credit Agreement or any other Loan Document. ASI
hereby covenants and agrees to assume and discharge, upon the consummation of
the LICO Merger, all liabilities and obligations of LICO under, in respect of or
otherwise relating to the Credit Agreement or any other Loan Document.
8. EFFECTIVENESS OF AMENDMENT.
8.1 This Amendment shall not become effective unless and until each of
the conditions precedent set forth in Section 6 hereof has been satisfied.
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<PAGE>
8.2 In the event that the Borrower or any other Loan Party breaches or
otherwise fails to fulfill any of the conditions precedent, covenants,
agreements, representations and warranties or obligations under this Amendment
and the Borrower or such other Loan Party fails to remedy such breach or
otherwise fulfill or satisfy such condition precedent, covenant, agreement,
representation and warranty or obligation to the Administrative Agent's
satisfaction within thirty (30) days following notice thereof, then, upon
expiration of such thirty (30) day period, automatically and without any further
act or deed by the Administrative Agent, any Lender Party, any Loan Party or any
other Person, an Event of Default shall be deemed to have occurred under the
Credit Agreement and the Administrative Agent and the Lender Parties shall be
entitled to all of the rights and remedies available following the occurrence of
an Event of Default under the Credit Agreement and the other Loan Documents, at
law or in equity.
9. REFERENCE TO AND EFFECT UPON THE CREDIT AGREEMENT AND OTHER LOAN DOCUMENTS.
9.1 Except as specifically amended in Section 2 above, the Credit
Agreement and each of the other Loan Documents shall remain in full force and
effect and each is hereby ratified and confirmed.
9.2 The execution, delivery and effect of this Amendment shall be
limited precisely as written and shall not be deemed to (a) be a consent to any
waiver of any term or condition or to any amendment or modification of any term
or condition of the Credit Agreement or any other Loan Document, except as
specifically amended in Section 2 above and for the specific consents set forth
in Sections 3 and 4 hereof (in each instance subject to the terms and conditions
of such consents set forth herein), or (b) prejudice any right, power or remedy
which the Administrative Agent or any Lender Party now has or may have in the
future under or in connection with the Credit Agreement or any other Loan
Document. Upon the effectiveness of this Amendment, each reference in the Credit
Agreement to "this Agreement", "hereunder", "hereof", "herein" or any other word
or words of similar import shall mean and be a reference to the Credit Agreement
as amended hereby, and each reference in any other Loan Document to the Credit
Agreement or any word or words of similar import shall mean and be a reference
to the Credit Agreement as amended hereby.
10. COUNTERPARTS. This Amendment may be executed in any number of counterparts,
each of which when so executed shall be deemed an original, but all such
counterparts shall constitute one and the same instrument. Delivery of an
executed counterpart to this Amendment by telecopier shall be as effective as
delivery of a manually executed counterpart of this Amendment.
11. COSTS AND EXPENSES. The Borrower shall pay on demand all reasonable fees,
costs and expenses incurred by Administrative Agent (including, without
limitation, all reasonable attorneys' fees) in connection with the preparation,
execution and delivery of this Amendment and the taking of any actions by any
Person in connection herewith.
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<PAGE>
12. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO CONFLICTS OF LAW PROVISIONS) OF
THE STATE OF NEW YORK.
13. HEADINGS. Article headings in this Amendment are included herein for
convenience of reference only and shall not constitute a part of this Amendment
for any other purpose.
[Signature Pages Follow]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered as of the date first written above.
COLUMBUS MCKINNON CORPORATION
By: /s/ Robert L. Montgomery, Jr.
-----------------------------
Title: Executive Vice President
<PAGE>
The undersigned hereby acknowledge and agree to this Amendment, and
agree that the Guaranty, dated March 31, 1998, the Security Agreement, dated
March 31, 1998, and the Intellectual Property Security Agreement, dated March
31, 1998, and each other Loan Document executed by the undersigned shall remain
in full force and effect and each is hereby ratified and confirmed by and on
behalf of the undersigned, this 12th day of February, 1999.
YALE INDUSTRIAL PRODUCTS, INC.
By: /s/ Robert L. Montgomery, Jr.
------------------------------
Title: Treasurer
LICO, INC.
By: /s/ Robert L. Montgomery, Jr.
------------------------------
Title: Treasurer
AUTOMATIC SYSTEMS, INC.
By: /s/ Robert L. Montgomery, Jr.
------------------------------
Title: Treasurer
LICO STEEL, INC.
By: /s/ Robert L. Montgomery, Jr.
------------------------------
Title: Treasurer
<PAGE>
FLEET NATIONAL BANK, AS ADMINISTRATIVE
AGENT
By: /s/ John G. Tierney
--------------------------
Title: Vice President
--------------------------
FLEET NATIONAL BANK, AS INITIAL ISSUING
BANK
By: /s/ John G. Tierney
--------------------------
Title: Vice President
--------------------------
FLEET NATIONAL BANK, AS SWING LINE BANK
By: /s/ John G. Tierney
--------------------------
Title: Vice President
--------------------------
LENDERS
FLEET NATIONAL BANK
By: /s/ John G. Tierney
--------------------------
Title: Vice President
--------------------------
<PAGE>
LENDERS
ABN-AMRO BANK N.V. NEW YORK
BRANCH, AS A CO-AGENT AND LENDER
By: /s/ Lisa Megeaski
---------------------------
Title: Vice President
---------------------------
By: /s/ Donald Sutton
---------------------------
Title: Vice President
---------------------------
<PAGE>
LENDERS
THE BANK OF NOVA SCOTIA, AS A CO-AGENT
AND LENDER
By: /s/ J. Alan Edwards
-------------------------
Title: Authorized Signatory
-------------------------
<PAGE>
LENDERS
MANUFACTURERS AND TRADERS TRUST
COMPANY, AS A CO-AGENT AND LENDER
By: /s/ Stephen J. Wydysh
-------------------------
Title: Vice President
-------------------------
<PAGE>
LENDERS
MARINE MIDLAND BANK, AS A CO-AGENT AND
LENDER
By: /s/ Martin F. Brown
-------------------------
Title: Authorized Signatory
-------------------------
<PAGE>
LENDERS
COMERICA BANK
By: /s/ David W. Shirey
-------------------------
Title: Assistant Vice President
-------------------------
<PAGE>
LENDERS
FIRST UNION NATIONAL BANK
By: /s/ Mark B. Felker
-------------------------
Title: Senior Vice President
-------------------------
<PAGE>
LENDERS
KEYBANK NATIONAL ASSOCIATION
By: /s/ Lawrence A. Mack
--------------------------
Title: Senior Vice President
--------------------------
<PAGE>
LENDERS
MELLON BANK, N.A.
By: /s/ Edward J. Kloecker
--------------------------
Title: Vice President
--------------------------
<PAGE>
LENDERS
BANKERS TRUST COMPANY
By: /s/ Anthony LoGrippo
------------------------
Title: Principal
------------------------
<PAGE>
LENDERS
THE BANK OF NEW YORK
By: /s/ Thomas McCrohan
---------------------
Title: Vice President
---------------------
<PAGE>
LENDERS
NATIONAL BANK OF CANADA
By: /s/ Robert G Uhrig
---------------------------
Title: Vice President
---------------------------
By: /s/ Michael R. Brace
---------------------------
Title: Marketing Officer
---------------------------
<PAGE>
LENDERS
NATIONAL CITY BANK OF PENNSYLVANIA
By: /s/ William A. Feldmann
-----------------------
Title: Vice President
-----------------------
COLUMBUS MCKINNON CORPORATION AMENDED AND RESTATED
1995 INCENTIVE STOCK OPTION PLAN
---------------------------
WHEREAS, Columbus McKinnon Corporation, a New York corporation with
offices at 140 John James Audubon Parkway, Amherst, New York (the "Company") has
adopted an incentive stock option plan known as the Columbus McKinnon
Corporation 1995 Incentive Stock Option Plan (the "Original Plan") on October
27, 1995 to enable the Company to attract and retain highly qualified
individuals as officers and key employees of the Company by providing such
officers and key employees an equity based form of incentive compensation; and
WHEREAS, the Company desires to amend and restate the Original Plan;
NOW, THEREFORE, the Company hereby adopts the following as the
Amendment and Restatement of the Columbus McKinnon Corporation 1995 Incentive
Stock Option Plan effective as of June 16, 1999:
1. PURPOSE OF PLAN. The Columbus McKinnon Corporation Amended and
Restated 1995 Incentive Stock Option Plan (the "Plan") is intended to provide
officers and other key employees of the Company and officers and other key
employees of any subsidiaries of the Company as that term is defined in Section
3 below (hereinafter individually referred to as a "Subsidiary" and collectively
as "Subsidiaries") with an additional incentive for them to promote the success
of the business, to increase their proprietary interest in the success of the
Company and its Subsidiaries, and to encourage them to remain in the employ of
the Company or its Subsidiaries. The above aims will be effectuated through the
granting of certain stock options, as herein provided, which are intended to
qualify as Incentive Stock Options ("ISOs") under Section 422 of the Internal
Revenue Code of 1986, as the same has been and shall be amended ("Code").
2. ADMINISTRATION. The Plan shall be administered by a Committee (the
"Committee") composed of not less than two (2) Directors of the Company who
shall be appointed by and serve at the pleasure of the Board of Directors of the
Company. Any Director that serves as a member of the Committee shall not receive
or be eligible to receive a grant of an option or any other equity security of
the Company or any Subsidiary under this Plan during the period of his or her
<PAGE>
service as a member of the Committee and during the one year period prior to his
or her service as a member of the Committee. If the Committee is composed of two
(2) Directors, both members of the Committee must approve any action to be taken
by the Committee in order for such action to be deemed to be an action of the
Committee pursuant to the provisions of this Plan. If the Committee is composed
of more than two (2) Directors, a majority of the Committee shall constitute a
quorum for the conduct of its business, and (a) the action of a majority of the
Committee members present at any meeting at which a quorum is present, or (b)
action taken without a meeting by the approval in writing of a majority of the
Committee members, shall be deemed to be action by the Committee pursuant to the
provisions of the Plan. The Committee is authorized to adopt such rules and
regulations for the administration of the Plan and the conduct of its business
as it may deem necessary or proper.
Any action taken or interpretation made by the Committee under
any provision of the Plan or any option granted hereunder shall be in accordance
with the provisions of the Code, and the regulations and rulings issued
thereunder as such may be amended, promulgated, issued, renumbered or continued
from time to time hereafter in order that, to the greatest extent possible, the
options granted hereunder shall constitute "incentive stock options" within the
meaning of the Code. All action taken pursuant to this Plan shall be lawful and
with a view to obtaining for the Company and the option holder the maximum
advantages under the law as then obtaining, and in the event that any dispute
shall arise as to any action taken or interpretation made by the Committee under
any provision of the Plan, then all doubts shall be resolved in favor of such
having been done in accordance with the said Code and such revenue laws,
amendments, regulations, rulings and provisions as may then be applicable. Any
action taken or interpretation made by the Committee under any provision of the
Plan shall be final. No member of the Board of Directors or the Committee shall
be liable for any action, determination or interpretation taken or made under
any provision of the Plan or otherwise if done in good faith.
3. PARTICIPATION. The Committee shall determine from among the officers
and key employees of the Company and its Subsidiaries (as such term is defined
in Section 424 of the Code) those individuals to whom options shall be granted
(sometimes hereinafter referred to as "Optionees"), the terms and provisions of
the options granted (which need not be identical), the time or times at which
<PAGE>
options shall be granted and the number of shares of the Company's common stock,
$.01 par value per share (hereinafter "Common Stock"), (or such number of shares
of stock in which the Common Stock may at any time hereafter be constituted),
for which options are granted.
In selecting Optionees and in determining the number of shares
for which options are granted, the Committee may weigh and consider the
following factors: the office or position of the Optionee and his degree of
responsibility for the growth and success of the Company and its Subsidiaries,
length of service, remuneration, promotions, age and potential. The foregoing
factors shall not be considered to be exclusive or obligatory upon the
Committee, and the Committee may properly consider any other factors which to it
seems appropriate. The terms and conditions of any option granted by the
Committee under this Plan shall be contained in a written statement which shall
be delivered by the Committee to the Optionee as soon as practicable following
the Committee's establishment of the terms and conditions of such option.
An Optionee who has been granted an option under the Plan may
be granted additional options under the Plan if the Committee shall so
determine.
Notwithstanding the foregoing, if during the twelve (12) month
period following the effective date of this amendment and restatement, any
options are granted to employees of the Company that are also members of the
Board of Directors of the Company and if this amendment and restatement is not
approved by the shareholders of the Company during such twelve (12) month
period, any options granted to any employees that are also members of the
Company's Board of Directors shall continue to be binding upon the Company
according to their terms but shall not be deemed to be "incentive stock options"
as defined in Section 422(b) of the Code. In addition, if at the time an option
is granted to an individual under this Plan, the individual owns stock of the
Company possessing more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or any of its Subsidiaries, (or if
such individual would be deemed to own such percentage of such stock under
Section 424(d) of the Code) such option shall continue to be valid and binding
upon the Company according to its terms but shall not be deemed to be an
"incentive stock option" as defined in Section 422(b) of the Code unless: (a)
the price per share at which common stock of the Company may be acquired in
connection with the exercise of such options is not less than one hundred ten
<PAGE>
percent (110%) of the fair market value of such common stock, determined as of
the date of the grant of such options; and (b) the period of time within which
such options must be exercised does not exceed five (5) years from the date on
which such options are granted. Finally, in no event shall any options be
granted under this Plan at any time after the termination date set forth at the
end of this Plan.
4. SHARES SUBJECT TO THE PLAN. The aggregate number of shares of Common
Stock which have been reserved for issuance pursuant to the terms of options
granted pursuant to the terms of this Plan and the aggregate number of shares of
Common Stock which the Company is authorized to issue pursuant to options
granted pursuant to the terms of this Plan is 1,250,000, subject to
anti-dilutive adjustments, if any, made at any time after October 27, 1995,
pursuant to the provisions of Section 5 hereof. With respect to shares which may
be acquired pursuant to options which expire or terminate pursuant to the
provisions of this Plan without having been exercised in full, such shares shall
be considered to be available again for placement under options granted
thereafter under the Plan. Shares issued pursuant to the exercise of incentive
stock options granted under the Plan shall be fully paid and non-assessable.
5. ANTI-DILUTION PROVISIONS. The aggregate number of shares of Common
Stock and the class of such shares as to which options may be granted under the
Plan, the number and class of such shares subject to each outstanding option,
the price per share thereof (but not the total price), and the number of such
shares as to which an option may be exercised at any one time, shall all be
adjusted proportionately in the event of any change, increase or decrease in the
outstanding shares of Common Stock of the Company or any change in
classification of its Common Stock without receipt of consideration by the
Company which results either from a split-up, reverse split or consolidation of
shares, payment of a stock dividend, recapitalization, reclassification or other
like capital adjustment so that upon exercise of the option, the Optionee shall
receive the number and class of shares that he would have received had he been
the holder of the number of shares of Common Stock for which the option is being
exercised immediately preceding such change, increase or decrease in the
outstanding shares of Common Stock. Any such adjustment made by the Committee
shall be final and binding upon all Optionees, the Company, and all other
interested persons. Any adjustment of an incentive stock option under this
paragraph shall be made in such manner as not to constitute a "modification"
<PAGE>
within the meaning of Section 424(h)(3) of the Code.
Anything in this Section 5 to the contrary notwithstanding, no
fractional shares or scrip representative of fractional shares shall be issued
upon the exercise of any option. Any fractional share interest resulting from
any change, increase or decrease in the outstanding shares of Common Stock or
resulting from any reorganization, merger, or consolidation for which adjustment
is provided in this Section 5 shall disappear and be absorbed into the next
lowest number of whole shares, and the Company shall not be liable for any
payment for such fractional share interest to the Optionee upon his exercise of
the option.
6. OPTION PRICE. The purchase price for each share of Common Stock
which may be acquired upon the exercise of each option issued under the Plan
shall be determined by the Committee at the time the option is granted, but in
no event shall such purchase price be less than one hundred percent (100%) of
the fair market value of the Common Stock on the date of the grant.
Notwithstanding the foregoing, in the case of an individual that owns stock of
the Company possessing more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or any of its Subsidiaries (or if
such individual would be deemed to own such percentage of such stock under
Section 424 (d) of the Code), (any such individual being hereinafter referred to
as a "Ten Percent Shareholder") in no event shall the purchase price for each
share of Common Stock which may be acquired upon the exercise of each option
issued to such Ten Percent Shareholder be less than one hundred ten percent
(110%) of the fair market value of the Common Stock on the date of the grant. If
the Common Stock is listed upon an established stock exchange or exchanges on
the day the option is granted, such fair market value shall be deemed to be the
closing price of the Common Stock on such stock exchange or exchanges on the day
the option is granted, or if no sale of the Company's Common Stock shall have
been made on any stock exchange on that day, on the next preceding day on which
there was a sale of such stock.
If the Common Stock is listed in the NASDAQ National Market
System, the fair market value of the Common Stock shall be the average of the
high and low closing sale prices in the NASDAQ National Market System on the day
the option is granted, or if no sale of the Common Stock shall have been made on
the NASDAQ National Market System on that day, on the next preceding day on
which there was a sale of such stock.
<PAGE>
7. OPTION EXERCISE PERIODS. The time within which any option granted
hereunder may be exercised shall be, by its terms, not earlier than one (1) year
from the date such option is granted and not later than ten (10) years from the
date such option is granted; provided that, in the case of any options granted
to a Ten Percent Shareholder, the time within which any option granted to such
Ten Percent Shareholder may be exercised shall be, by its terms, not earlier
than one (1) year from the date such option is granted and not later than five
(5) years from the date such option is granted. Subject to the provisions of
Section 10 hereof, the Optionee must remain in the continuous employment of the
Company or any of its Subsidiaries from the date of the grant of the option to
and including the date of exercise of option in order to be entitled to exercise
his option. Options granted hereunder shall be exercisable in such installments
and at such dates as the Committee may specify. In addition, with respect to all
options granted under this Plan, unless the Committee shall specify otherwise,
the right of each Optionee to exercise his option shall accrue, on a cumulative
basis, as follows:
(a) one-fourth (1/4) of the total number of shares of Common
Stock which could be purchased (subject to adjustment as provided in Section 5
hereof) (such number being hereinafter referred to as the "Optioned Shares")
shall become available for purchase pursuant to the option at the end of the one
(1) year period beginning on the date of the option grant;
(b) one-fourth (1/4) of the Optioned Shares shall become
available for purchase pursuant to the option at the end of the two (2) year
period beginning on the date of the option grant;
(c) one-fourth (1/4) of the Optioned Shares shall become
available for purchase pursuant to the option at the end of the three (3) year
period beginning on the date of the option grant; and
(d) one-fourth (1/4) of the Optioned Shares shall become
available for purchase pursuant to the option at the end of the four (4) year
period beginning on the date of the option grant.
Continuous employment shall not be deemed to be interrupted by
transfers between the Subsidiaries or between the Company and any Subsidiary,
whether or not elected by termination from any Subsidiary of the Company and
<PAGE>
re-employment by any other Subsidiary or the Company. Time of employment with
the Company shall be considered to be one employment for the purposes of this
Plan, provided there is no intervening employment by a third party or no
interval between employments which, in the opinion of the Committee, is deemed
to break continuity of service. The Committee shall, at its discretion,
determine the effect of approved leaves of absence and all other matters having
to do with "continuous employment". Where an Optionee dies while employed by the
Company or any of its Subsidiaries, his options may be exercised following his
death in accordance with the provisions of Section 10 below.
Notwithstanding the foregoing provisions of this Section 7, in
the event that the Company or the stockholders of the Company enter into an
agreement to dispose of all or substantially all of the assets or stock of the
Company by means of a sale, merger, consolidation, reorganization, liquidation,
or otherwise, or in the event a Change of Control (as hereinafter defined) shall
occur, each outstanding option shall become immediately exercisable with respect
to the full number of shares subject to that option and shall remain exercisable
until the expiration of the original term of the option. The Committee may
provide in connection with such transaction for assumption of options previously
granted or the substitution for such options of new options covering the
securities of a successor corporation or an affiliate thereof, with appropriate
adjustments as to the number and kind of securities and prices.
For purposes of this Plan, a "Change in Control" shall be
deemed to have occurred if:
(a) there shall be consummated: (i) any consolidation or
merger of the Company in which the Company is not the continuing or surviving
corporation or pursuant to which shares of the Company's common stock would be
converted into cash, securities or other property, other than a merger of the
Company in which the holders of the Company's common stock immediately prior to
the merger have the same proportionate ownership of common stock of the
surviving corporation immediately after the merger; or (ii) any sale, lease,
exchange or other transfer (in one transaction or a series of related
transactions) of all, or substantially all, of the assets of the Company; or
(b) the stockholders of the Company approve any plan or
proposal for the liquidation or dissolution of the Company; or
<PAGE>
(c) any person (as such term is used in Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")
but excluding the Company and each of the Company's officers and directors,
whether individually or collectively), shall become the beneficial owner (within
the meaning of 13d-3 under the Exchange Act) of 20% or more of the Company's
outstanding common stock; or
(d) during any period of two (2) consecutive years,
individuals who at the beginning of such period constitute the entire Board of
Directors of the Company shall cease for any reason to constitute a majority
thereof unless the election, or the nomination for election by the Company's
shareholders, of each new director was approved by a vote of a least two-thirds
of the directors then still in office who were directors at the beginning of the
period.
Any change or adjustment made pursuant to the terms of this
paragraph shall be made in such a manner so as not to constitute a
"modification" as defined in Section 424 of the Code, and so as not to cause any
incentive stock option issued under this Plan to fail to continue to qualify as
an incentive stock option as defined in Section 422(b) of the Code.
Notwithstanding the foregoing, in the event that any agreement providing for the
sale or other disposition of all or substantially all the stock or assets of the
Company shall be terminated without consummating the disposition of said stock
or assets, any unexercised unaccrued installments that had become exercisable
solely by reason of the provisions of this paragraph shall again become
unaccrued and unexercisable as of said termination of such agreement; subject,
however, to such installments accruing pursuant to the normal accrual schedule
provided in the terms under which such option was granted. Any exercise of an
installment prior to said termination of said agreement shall remain effective
despite the fact that such installment became exercisable solely by reason of
the Company or its stockholders entering into said agreement to dispose of the
stock or assets of the Company.
8. EXERCISE OF OPTION. Options shall be exercised as follows:
(a) Notice and Payment. Each option, or any installment
thereof, shall be exercised, whether in whole or in part, by giving written
notice to the Company at its principal office, specifying the options being
exercised (by reference to the date of the grant of the option), the number of
<PAGE>
shares to be purchased and the purchase price being paid, and shall be
accompanied by the payment of all or such part of the purchase price as shall be
required to be paid in connection with the exercise of such option (as specified
in the written notice of exercise of such option) (i) in cash, certified or bank
check payable to the order of the Company, (ii) by tendering (either actually or
by attestation) shares (or a sufficient portion thereof) valued as determined by
the Committee at the time of exercise, (iii) by authorizing a third party to
sell shares (or a sufficient portion thereof) acquired upon exercise of an
option and to remit to the Company a sufficient portion of the sale proceeds to
pay for all the shares acquired through such exercise and any resulting tax
withholding obligations or (iv) by any other method prescribed by the Committee.
Each such notice shall contain representations on behalf of the Optionee that he
acknowledges that the Company is selling the shares being acquired by him under
a claim of exemption from registration under the Securities Act of 1933 as
amended (the "Act"), as a transaction not involving any public offering; that he
represents and warrants that he is acquiring such shares with a view to
"investment" and not with a view to distribution or resale; and that he agrees
not to transfer, encumber or dispose of the shares unless: (i) a registration
statement with respect to the shares shall be effective under the Act, together
with proof satisfactory to the Company that there has been compliance with
applicable state law; or (ii) the Company shall have received an opinion of
counsel in form and content satisfactory to the Company to the effect that the
transfer qualifies under Rule 144 or some other disclosure exemption from
registration and that no violation of the Act or applicable state laws will be
involved in such transfer, and/or such other documentation in connection
therewith as the Company's counsel may in its sole discretion require.
(b) Issuance of Certificates. Certificates representing the
shares purchased by the Optionee shall be issued as soon as practicable after
the Optionee has complied with the provisions of Section 8(a) hereof.
(c) Rights as a Stockholder. The Optionee shall have no rights
as a stockholder with respect to the shares of Common Stock purchased until the
date of the issuance to him of a certificate representing such shares.
9. ASSIGNMENT OF OPTION. (a) Subject to the provisions of Sections 9(b)
and 10(c) hereof, options granted under this Plan may not be assigned
<PAGE>
voluntarily or involuntarily or by operation of law and any attempt to transfer,
assign, pledge, hypothecate or otherwise dispose of, or to subject to execution,
attachment or similar process, any incentive stock option, or any right
thereunder, contrary to the provisions hereof shall be void and ineffective,
shall give no right to the purported transferee, and shall, at the sole
discretion of the Committee, result in forfeiture of the option with respect to
the shares involved in such attempt.
(b) Notwithstanding anything to the contrary contained in the
terms of the Plan as in effect at any time prior to the date hereof and
notwithstanding anything to the contrary contained in the terms of any
statement, letter or other document or agreement setting forth the terms and
conditions of any options previously issued pursuant to the terms of this Plan,
any and all Non-Qualified Options (as defined in Section 13 hereof) previously
issued to any officer of the Company (as defined in Rule 16A-a(f) issued under
the Securities and Exchange Act of 1934 (hereinafter an "Executive Officer"))
pursuant to the terms of the Plan and, subject to the approval of the Committee,
any Non-Qualified Options which may be granted or issued to any Executive
Officer of the Company at any time in the future pursuant to the terms of the
Plan shall be transferable by the Executive Officer to whom such Non-Qualified
Options have been or are granted to: (i) the spouse, children or grandchildren
of the Executive Officer (hereinafter "Immediate Family Members"); (ii) a trust
or trusts for the exclusive benefit of such Immediate Family Members; (iii) a
partnership or limited liability company in which such Immediate Family Members
are the only partners or members; or (iv) a private foundation established by
the Executive Officer; provided that: (x) there may be no consideration for any
such transfer; (y) in the case of Non-Qualified Options which may be granted in
the future, the statement, letter or other document or agreement setting forth
the terms and conditions of any such Non-Qualified Options must expressly
provide for and limit the transferability of such Non-Qualified Options to
transfers which are permitted by the foregoing provisions of this Section 9(b);
and (z) any subsequent transfer of transferred Non-Qualified Options shall,
except for transfers occurring as a result of the death of the transferee as
contemplated by Section 10(e), be prohibited. Following the transfer of any
Non-Qualified Options as permitted by the foregoing provisions of this Section
9(b), any such transferred Non-Qualified Options shall continue to be subject to
the same terms and conditions applicable to such Non-Qualified Options
immediately prior to the transfer; provided that, for purposes of this Plan, the
<PAGE>
term "Optionee" shall be deemed to refer to the transferee. Notwithstanding the
foregoing, the events of termination of employment of Section 10 hereof shall
continue to be applied with respect to the original Optionee for the purpose of
determining whether or not the Non-Qualified Options shall be exercisable by the
transferee and, upon termination of the original Optionee's employment, the
Non-Qualified Options shall be exercisable by the transferee only to the extent
and for the periods that the original Optionee (or his estate) would have been
entitled to exercise such Options as specified in Section 10 below.
10. EFFECT OF TERMINATION OF EMPLOYMENT, DEATH OR DISABILITY. (a) In
the event that an Optionee's employment with the Company or the Subsidiary by
whom the Optionee was employed is terminated either by reason of: (i) a
discharge for cause; (ii) voluntary separation on the part of the Optionee
(other than any termination of employment by the Optionee which qualifies as a
termination for "Good Reason" pursuant to the terms of a letter agreement
between the Optionee and the Company (a "Good Reason Termination")) and without
consent of the Company or the Subsidiary by whom the Optionee was employed, any
rights of the Optionee to purchase shares of Common Stock pursuant to the terms
of any option or options granted to him under this Plan shall terminate
immediately upon such termination of employment to the extent such options have
not theretofore been exercised by him.
(b) In the event of the termination of employment of an
Optionee (otherwise than by reason of death or retirement of the Optionee at his
Retirement Date) by the Company or by any of the Subsidiaries employing the
Optionee at such time or pursuant to a Good Reason Termination, any option or
options granted to him under the Plan to the extent not theretofore exercised
shall be deemed cancelled and terminated forthwith, except that, subject to the
provisions of subparagraph (a) of this Section, such Optionee may exercise any
options theretofore granted to him, which have not then expired and which, as of
the date the Optionee's employment with the Company is terminated, were
otherwise exercisable within the provisions of Section 7 hereof, within three
<PAGE>
(3) months after such termination. If the employment of an Optionee shall be
terminated by reason of the Optionee's retirement at his Retirement Date by the
Company or by any of the Subsidiaries employing the Optionee at such time, the
Optionee shall have the right to exercise such option or options held by him to
the extent that such options have not expired, at any time within three (3)
months after such retirement. The provisions of Section 7 to the contrary
notwithstanding, upon retirement, all options held by an Optionee shall be
immediately exercisable in full. The transfer of an Optionee from the employ of
the Company to a Subsidiary of the Company or vice versa, or from one Subsidiary
of the Company to another, shall not be deemed to constitute a termination of
employment for purposes of this Plan.
(c) In the event that an Optionee shall die while employed by
the Company or by any of the Subsidiaries or shall die within three (3) months
after retirement on his Retirement Date (from the Company or any Subsidiary),
any option or options granted to him under this Plan and not theretofore
exercised by him or expired shall be exercisable by the estate of the Optionee
or by any person who acquired such option by bequest or inheritance from the
Optionee in full, notwithstanding the provisions of Section 7 hereof, at any
time within one (1) year after the death of the Optionee. References herein
above to the Optionee shall be deemed to include any person entitled to exercise
the option after the death of the Optionee under the terms of this Section.
(d) In the event of the termination of employment of an
Optionee by reason of the Optionees' disability, the Optionee shall have the
right, notwithstanding the provisions of Section 7 hereof, to exercise all
options held by him, in full, to the extent that such options have not
previously expired or been exercised, at any time within one (1) year after such
termination. The term "disability" shall, for the purposes of this Plan, be
defined in the same manner as such term is defined in Section 22(e)(3) of the
Internal Revenue Code of 1986.
(e) For the purposes of this Plan, "Retirement Date" shall
mean, with respect an Optionee, the date the Optionee actually retires from his
employment with the Company or, if applicable, the Subsidiary by whom he is
employed; provided that such date occurs on or after the date the Optionee is
otherwise entitled to retire under the terms of the defined benefit pension plan
which the Optionee is a participant in (and which plan is maintained by the
Company or, if applicable, the Subsidiary by whom the Optionee is employed).
11. AMENDMENT AND TERMINATION OF THE PLAN. The Board of Directors of
the Company may at any time suspend, amend or terminate the Plan; provided,
however, that except as permitted in Section 13 hereof, no amendment or
modification of the Plan which would:
<PAGE>
(a) increase the maximum aggregate number of shares as to
which options may be granted hereunder (except as contemplated in Section 5); or
(b) reduce the option price or change the method of
determining the option price; or
(c) increase the time for exercise of options to be granted or
those which are outstanding beyond a term of ten (10) years; or
(d) change the designation of the employees or class of
employees eligible to receive options under this Plan,
may be adopted unless with the approval of the holders of a
majority of the outstanding shares of Common Stock represented at a
stockholders' meeting of the Company, or with the written consent of the holders
of a majority of the outstanding shares of Common Stock. No amendment,
suspension or termination of the Plan may, without the consent of the holder of
the option, terminate his option or adversely affect his rights in any material
respect.
12. INCENTIVE STOCK OPTIONS; POWER TO ESTABLISH OTHER PROVISIONS. It is
intended that the Plan shall conform to and (except as otherwise expressly set
forth herein) each option shall qualify and be subject to exercise only to the
extent that it does qualify as an "incentive stock option" as defined in Section
422 of the Code and as such section may be amended from time to time or be
accorded similar tax treatment to that accorded to an incentive stock option by
virtue of any new revenue laws of the United States. The Board of Directors may
make any amendment to the Plan which shall be required so to conform the Plan.
Subject to the provisions of the Code, the Committee shall have the power to
include such other terms and provisions in options granted under this Plan as
the Committee shall deem advisable. The grant of any options pursuant to the
terms of this Plan which do not qualify as "incentive stock options" as defined
in Section 422 of the Code is hereby approved provided that the maximum number
of shares of Common Stock of the Company which can be issued pursuant to the
terms of this Plan (as provided for in Section 4 hereof but subject to
anti-dilutive adjustments made pursuant to Section 5 hereof) is not exceeded by
the grant of any such options and, to the extent that any options previously
granted pursuant to the terms of this Plan were not "incentive stock options"
<PAGE>
within the meaning of Section 422 of the Code, the grant of such options is
hereby ratified, approved and confirmed.
13. MAXIMUM ANNUAL VALUE OF OPTIONS EXERCISABLE. Notwithstanding any
provisions of this Plan to the contrary if: (a) the sum of: (i) the fair market
value (determined as of the date of the grant) of all options granted to an
Optionee under the terms of this Plan which become exercisable for the first
time in any one calendar year; and (ii) the fair market value (determined as of
the date of the grant) of all options previously granted to such Optionee under
the terms of this Plan or any other incentive stock option plan of the Company
or its subsidiaries which also become exercisable for the first time in such
calendar year; exceeds (b) $100,000; then, (c) those options shall continue to
be binding upon the Company in accordance with their terms but, to the extent
that the aggregate fair market of all such options which become exercisable for
the first time in any one calendar year (determined as of the date of the grant)
exceeds $100,000, such options (referred to, for purposes of this Plan, as
"Non-Qualified Options") shall not be deemed to be incentive stock options as
defined in Section 422(b) of the Code. For purposes of the foregoing, the
determination of which options shall be recharacterized as not being incentive
stock options issued under the terms of this Plan shall be made in inverse order
of their grant dates and, accordingly, the last options received by the Optionee
shall be the first options to be recharacterized as not being incentive stock
options granted pursuant to the terms of the Plan.
14. GENERAL PROVISIONS (a) No incentive stock option shall be construed
as limiting any right which the Company or any parent or subsidiary of the
Company may have to terminate at any time, with or without cause, the employment
of an Optionee.
(b) The Section headings used in this Plan are intended solely
for convenience of reference and shall not in any manner amplify, limit, modify
or otherwise be used in the construction or interpretation of any of the
provisions hereof.
(c) The masculine, feminine or neuter gender and the singular
or plural number shall be deemed to include the other whenever the content so
indicates or requires.
(d) No options shall be granted under the Plan after ten (10)
years from the date the Plan is adopted by the Board of Directors of the Company
or approved by the stockholders of the Company, whichever is earlier.
<PAGE>
15. EFFECTIVE DATE AND DURATION OF THE PLAN. The Plan became effective
on October 27, 1995, the date the adoption of the Plan was approved by the Board
of Directors of the Company. On January 8, 1996, as required by Section 422 of
the Code, the Plan was approved by the Stockholders of the Company. The Plan
will terminate on October 27, 2005; provided however, that the termination of
the Plan shall not be deemed to modify, amend or otherwise affect the terms of
any options outstanding on the date the Plan terminates.
IN WITNESS WHEREOF, the undersigned has executed this Plan by and on
behalf of the Company as of the 16th day of June, 1999.
COLUMBUS MCKINNON CORPORATION
By: /s/ Robert L. Montgomery, Jr.
-----------------------------
DATE ADOPTED BY BOARD OF DIRECTORS: October 27, 1995
DATE APPROVED BY STOCKHOLDERS: January 8, 1996
TERMINATION DATE: October 27, 2005
COLUMBUS MCKINNON CORPORATION AMENDED AND RESTATED
NON-QUALIFIED STOCK OPTION PLAN
--------------------------
WHEREAS, Columbus McKinnon Corporation, a New York corporation with
offices at 140 John James Audubon Parkway, Amherst, New York (the "Company") has
adopted a non-qualified stock option plan known as the "First Amendment and
Restatement of the Columbus McKinnon Corporation Non-Qualified Stock Option
Plan") to enable the Company to attract to membership on the Board of Directors
of the Company, individuals with substantial consulting experience with respect
to the legal, financial and operational concerns of large public and privately
held corporations; and
WHEREAS, the Company desires to further amend and restate the Plan;
NOW, THEREFORE, the Company hereby adopts the following as the Columbus
McKinnon Corporation Amended and Restated Non-Qualified Stock Option Plan
effective as of June 16, 1999:
1. PURPOSE OF PLAN. The Columbus McKinnon Corporation Amended and
Restated Non-Qualified Stock Option Plan (the "Plan") is intended to provide a
tool to the management of the Company for attracting, motivating and retaining
highly qualified officers and key employees to employment with the Company, its
divisions and subsidiaries by providing such officers and other key employees
with an additional incentive to promote the success of the business, to increase
their proprietary interest in the success of the Company and to encourage them
to remain in the employ of the Company and its divisions, subsidiaries and
affiliates.
A further purpose of the Plan is to provide the Company's
management with an additional equity based program which can be used to attract
individuals with substantial consulting experience with respect to the legal,
financial and operational concerns of large public and privately held
corporations to membership on the Company's Board of Directors.
2. ADMINISTRATION. The Plan shall be administered by a Committee (the
"Committee") which shall be composed of not less than two (2) Directors of the
Company who shall be appointed by and serve at the pleasure of the Board of
Directors of the Company. If the Committee is composed of two (2) Directors,
<PAGE>
both members of the Committee must approve, in writing, any action to be taken
by the Committee in order for such action to be deemed an action of the
Committee pursuant to the provisions of this Plan. If the Committee is composed
of more than two (2) Directors, a majority of the Committee shall constitute a
quorum for the conduct of its business, and (a) the action of a majority of the
Committee members present at any meeting at which a quorum is present, or (b)
action taken without a meeting by the approval, in writing, of a majority of the
Committee members, shall be deemed to be action by the Committee pursuant to the
provisions of the Plan. The Committee is authorized to adopt such rules and
regulations for the administration of the Plan as it may deem necessary or
proper.
Any action taken or interpretation made by the Committee under any
provision of the Plan shall be final. No member of the Board of Directors or the
Committee shall be liable for any action, determination or interpretation taken
or made under any provision of the Plan or otherwise if done in good faith.
3. PARTICIPATION. The Committee shall determine which individuals shall
be granted options under the terms of this Plan, which individuals may, but are
not required to, include officers and employees of the Company, legal or
financial advisors to the Company and non-employee Directors of the Company (all
such individuals being sometimes hereinafter referred to as "Optionees").
4. OPTION TERMS. The Committee shall establish the terms and conditions
(which need not be identical) upon which the options granted hereunder may be
exercised, the time or times at which options to purchase shares of the
Company's common stock, $.01 par value per share (hereinafter "Common Stock")
shall be granted and the number of shares of Common Stock (or such number of
shares of stock in which such Common Stock may at any time hereafter be
constituted), for which options are granted. The terms and conditions
established by the Committee with respect to any option granted by the Committee
under this Plan shall be contained in a written statement which shall be
delivered by the Committee to the Optionee as soon as practicable following the
Committee's establishment of the terms and conditions of such Option.
Notwithstanding the foregoing, unless otherwise modified by
action of the Company's Board of Directors, the following terms and conditions
shall apply with respect to any options granted hereunder:
<PAGE>
(a) in the case of an individual that is an employee of the
Company or any of its direct or indirect subsidiaries or affiliates, the right
to exercise options granted hereunder shall be conditioned on the continuous
employment of such individual by the Company or any of its direct or indirect
subsidiaries or affiliates between the date of the grant of the option and the
date of exercise of the option;
(b) in the case of an individual that is a member of the Board
of Directors of the Company or the Board of Directors of any subsidiary or
affiliate of the Company but is not an employee of the Company or any direct or
indirect subsidiary or affiliate of the Company, the right to exercise options
granted hereunder shall be conditioned on the continuous membership by such
individual on the Board of Directors of the Company or any such subsidiary or
affiliate;
(c) except as otherwise specified by the Committee at the time
of the grant of any options under this Plan and except as provided in Section 7
hereof, the right to exercise such options shall accrue, on a cumulative basis,
as follows:
(i) one fourth (1/4) of the total number of shares of
Common Stock which could be purchased (subject to adjustment as provided for in
Section 6 hereof) (such number being hereinafter referred to as the "Optioned
Shares") shall become available for purchase pursuant to the option at the end
of the one (1) year period following the date of the option grant;
(ii) one-fourth (1/4) of the Optioned Shares shall
become available for purchase pursuant to the option at the end of the two (2)
year period following the date of the option grant;
(iii) one-fourth (1/4) of the Optioned Shares shall
become available for purchase pursuant to the option at the end of the three (3)
year period following the date of the option grant; and
(iv) one-fourth (1/4) of the Optioned Shares shall
become available for purchase pursuant to the option at the end of the four (4)
year period following the date of the option grant.
<PAGE>
An Optionee who has been granted an option under the Plan may be
granted additional options under the Plan if the Committee shall so determine.
The purchase price payable for Common Stock in connection with the
exercise of options granted hereunder shall be determined by the Committee at
the time of the grant of any options hereunder.
5. SHARES SUBJECT TO THE PLAN. The aggregate number of shares of the
Common Stock which have been reserved for issuance pursuant to the terms of
options granted pursuant to the terms of this Plan and the aggregate number of
shares of Common Stock which the Company is authorized to issue pursuant to
options granted pursuant to the terms of this Plan is two hundred fifty thousand
(250,000) shares, subject to anti-dilutive adjustments, if any, made at any time
after October 27, 1995, pursuant to the provisions of Section 6 hereof. With
respect to shares which may be acquired pursuant to options which expire or
terminate pursuant to the provisions of this Plan without having been exercised
in full, such shares shall be considered to be available again for placement
under options granted thereafter under the Plan. Shares issued pursuant to the
exercise of incentive stock options granted under the Plan shall be fully paid
and non-assessable.
6. ANTI-DILUTION PROVISIONS. The aggregate number of shares of Common
Stock and the class of such shares as to which options may be granted under the
Plan, the number and class of such shares subject to each outstanding option,
the price per share thereof (but not the total price), and the number of such
shares as to which an option may be exercised at any one time, shall all be
adjusted proportionately in the event of any change, increase or decrease in the
outstanding shares of Common Stock or any change in classification of its Common
Stock without receipt of consideration by the Company which results either from
a split-up, reverse split or consolidation of shares, payment of a stock
dividend, recapitalization, reclassification or other like capital adjustment so
that upon exercise of the option, the Optionee shall receive the number and
class of shares that he would have received had he been the holder of the number
of shares of Common Stock for which the option is being exercised immediately
preceding such change, increase or decrease in the outstanding shares of Common
Stock. Any such adjustment made by the Committee shall be final and binding upon
all Optionees, the Company and all other interested persons. Anything in this
Section 6 to the contrary, no fractional shares or scrip representative of
<PAGE>
fractional shares shall be issued upon the exercise of any option. Any
fractional share interest resulting from any change, increase or decrease in the
outstanding shares of Common Stock or resulting from any reorganization, merger
or consolidation for which adjustment is provided in this Section 6 shall
disappear and be absorbed into the next lowest number of whole shares, and the
Company shall not be liable for any payment for such fractional share interest
to the Optionee upon his exercise of the Option.
7. OPTION EXERCISES UPON A CHANGE IN CONTROL. Notwithstanding the
provisions of Section 4 hereof, in the event that the Company or the
stockholders of the Company enter into an agreement to dispose of all or
substantially all of the assets or stock of the Company by means of a sale,
merger, consolidation, reorganization, liquidation, or otherwise, or in the
event a Change of Control (as hereinafter defined) shall occur, each outstanding
option shall become immediately exercisable with respect to the full number of
shares subject to such option and shall remain exercisable until the expiration
of the original term of the option. The Committee may provide in connection with
such transaction for assumption of options previously granted or the
substitution for such options of new options covering the securities of a
successor corporation or an affiliate thereof, with appropriate adjustments as
to the number and kind of securities and prices.
For purposes of this Plan, a "Change in Control" shall be deemed to
have occurred if:
(a) there shall be consummated: (i) any consolidation or
merger of the Company in which the Company is not the continuing or surviving
corporation or pursuant to which shares of the Company's common stock would be
converted into cash, securities or other property, other than a merger of the
Company in which the holders of the Company's common stock immediately prior to
the merger have the same proportionate ownership of common stock of the
surviving corporation immediately after the merger; or (ii) any sale, lease,
exchange or other transfer (in one transaction or a series of related
transactions) of all, or substantially all, of the assets of the Company; or
(b) the stockholders of the Company approve any plan or
proposal for the liquidation or dissolution of the Company; or
(c) any person (as such term is used in Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")
<PAGE>
but excluding the Company and each of the Company's officers and directors,
whether individually or collectively), shall become the beneficial owner (within
the meaning of 13d-3 under the Exchange Act) of 20% or more of the Company's
outstanding common stock; or
(d) during any period of two (2) consecutive years,
individuals who at the beginning of such period constitute the entire Board of
Directors of the Company shall cease for any reason to constitute a majority
thereof unless the election, or the nomination for election by the Company's
shareholders, of each new director was approved by a vote of a least two-thirds
of the directors then still in office who were directors at the beginning of the
period.
Notwithstanding the foregoing, in the event that any
agreement providing for the sale or other disposition of all or substantially
all the stock or assets of the Company shall be terminated without consummating
the disposition of said stock or assets, any unexercised unaccrued installments
that had become exercisable solely by reason of the provisions of this paragraph
shall again become unaccrued and unexercisable as of said termination of such
agreement; subject, however, to such installments accruing pursuant to the
normal accrual schedule provided in the terms under which such option was
granted. Any exercise of an installment prior to said termination of said
agreement shall remain effective despite the fact that such installment became
exercisable solely by reason of the Company or its stockholders entering into
said agreement to dispose of the stock or assets of the Company.
8. EXERCISE OF OPTION. Options shall be exercised as follows:
(a) Notice and Payment. Each option, or any installment
thereof, shall be exercised, whether in whole or in part, by giving written
notice to the Company at its principal office, specifying the options being
exercised (by reference to the date of the grant of the option), the number of
shares to be purchased and the purchase price being paid, and shall be
accompanied by the payment of all or such part of the purchase price as shall be
required to be paid in connection with the exercise of such option (as specified
in the written notice of exercise of such option) (i) in cash, certified or bank
check payable to the order of the Company, (ii) by tendering (either actually or
by attestation) shares (or a sufficient portion thereof) valued as determined by
<PAGE>
the Committee at the time of exercise, (iii) by authorizing a third party to
sell shares (or a sufficient portion thereof) acquired upon exercise of an
option and to remit to the Company a sufficient portion of the sale proceeds to
pay for all the shares acquired through such exercise and any resulting tax
withholding obligations or (iv) by any other method prescribed by the Committee.
Each such notice shall contain representations on behalf of the Optionee that he
acknowledges that the Company is selling the shares being acquired by him under
a claim of exemption from registration under the Securities Act of 1933 as
amended (the "Act"), as a transaction not involving any public offering; that he
represents and warrants that he is acquiring such shares with a view to
"investment" and not with a view to distribution or resale; and that he agrees
not to transfer, encumber or dispose of the shares unless: (i) a registration
statement with respect to the shares shall be effective under the Act, together
with proof satisfactory to the Company that there has been compliance with
applicable state law; or (ii) the Company shall have received an opinion of
counsel in form and content satisfactory to the Company to the effect that the
transfer qualifies under Rule 144 or some other disclosure exemption from
registration and that no violation of the Act or applicable state laws will be
involved in such transfer, and/or such other documentation in connection
therewith as the Company's counsel may in its sole discretion require.
(b) Issuance of Certificates. Certificates representing the
shares purchased by the Optionee shall be issued as soon as practicable after
the Optionee has complied with the provisions of Section 8(a) hereof.
(c) Rights as a Stockholder. The Optionee shall have no rights
as a stockholder with respect to the shares purchased until the date of the
issuance to him of a certificate representing such shares.
9. ASSIGNMENT OF OPTION. (a) Subject to the provisions of Sections 9(b)
and 10(e) hereof, options granted under this Plan may not be assigned
voluntarily or involuntarily or by operation of law and any attempt to transfer,
assign, pledge, hypothecate or otherwise dispose of, or to subject to execution,
attachment or similar process, any stock option, or any right thereunder,
contrary to the provisions hereof shall be void and ineffective, shall give no
right to the purported transferee, and shall, at the sole discretion of the
Committee, result in forfeiture of the option with respect to the shares
involved in such attempt.
<PAGE>
(b) Notwithstanding anything to the contrary contained in the
terms of the Plan as in effect at any time prior to the date hereof and
notwithstanding anything to the contrary contained in the terms of any
statement, letter or other document or agreement setting forth the terms and
conditions of any options previously issued pursuant to the terms of this Plan,
any and all options previously issued pursuant to the terms of the Plan and,
subject to the approval of the Committee, any options which may be granted or
issued at any time in the future pursuant to the terms of the Plan shall be
transferable by the Optionee to whom such options have been or are granted to:
(i) the spouse, children or grandchildren of the Optionee (hereinafter
"Immediate Family Members"); (ii) a trust or trusts for the exclusive benefit of
such Immediate Family Members; (iii) a partnership or limited liability company
in which such Immediate Family Members are the only partners or members; or (iv)
a private foundation established by the Optionee; provided that (x) there may be
no consideration for any such transfer; (y) in the case of options which may be
granted in the future, the statement, letter or other document or agreement
setting forth the terms and conditions of any such options must be approved by
the Committee and must expressly provide for and limit the transferability of
such options to transfers which are permitted by the foregoing provisions of
this Section 9(b); and (z) any subsequent transfer of transferred options shall,
except for transfers occurring as a result of the death of the transferee as
contemplated by Section 10(e), be prohibited. Following the transfer of any
options as permitted by the foregoing provisions of this Section 9(b), any such
transferred options shall continue to be subject to the same terms and
conditions applicable to such options immediately prior to the transfer;
provided that, for purposes of this Plan, the term "Optionee" shall be deemed to
refer to the transferee. Notwithstanding the foregoing, the events of
termination of employment of Section 10 hereof shall continue to be applied with
respect to the original Optionee for the purpose of determining whether or not
the options shall be exercisable by the transferee and, upon termination of the
original Optionee's employment, the options shall be exercisable by the
transferee only to the extent and for the periods that the original Optionee (or
his estate) would have been entitled to exercise such Options as specified in
Section 10 below.
10. EFFECT OF TERMINATION OF EMPLOYMENT, REMOVAL, DEATH OR DISABILITY.
(a) If an Optionee is employed by the Company or any direct or indirect
subsidiary or affiliate of the Company on the date he receives a grant of an
<PAGE>
option and if such Optionee's employment with the Company, or any direct or
indirect subsidiary or affiliate of the Company, is terminated by reason of: (i)
a discharge for cause; (ii) voluntary separation on the part of the Optionee
(other than any termination of employment by the Optionee which qualifies as a
termination for "Good Reason" pursuant to the terms of a letter agreement
between the Optionee and the Company (a "Good Reason Termination")) and without
consent of the Company or such direct or indirect subsidiary or affiliate of the
Company that the Optionee is employed by, any rights of the Optionee to purchase
shares of Common Stock pursuant to the terms of any option or options granted to
him under this Plan shall terminate immediately upon such termination of
employment to the extent such options have not theretofore been exercised by
him.
(b) If an Optionee is a non-employee member of the Board of
Directors of the Company or a non-employee member of the Board of Directors of
any direct or indirect subsidiary or affiliate of the Company on the date he
receives the grant of an option and if such Optionee's membership on the Board
of Directors of the Company and on the Board of Directors of all other direct or
indirect subsidiaries and affiliates of the Company is terminated by reason of:
(i) removal for cause; or (ii) voluntary resignation on the part of the Optionee
without the consent of the other members of the Board of Directors of the
Company or the other members of each direct or indirect subsidiary or affiliate
of the Company whose Board of Directors the Optionee is a member of, any rights
of the Optionee to purchase shares of Common Stock pursuant to the terms of any
option or options granted to him under this Plan during the two (2) year period
ending on the date of the termination of his membership on the Board of
Directors of the Company and any direct or indirect subsidiary and affiliate
whose Board of Directors the Optionee is a member of, shall be terminated
immediately upon termination of such Optionee's membership on the Board of
Directors of the Company and on the Board of Directors of all other direct or
indirect subsidiaries and affiliates to the extent such options have not
theretofore been exercised by him.
(c) If an Optionee is employed by the Company or any direct or
indirect subsidiary or affiliate of the Company at the time he receives a grant
of an option hereunder and if such Optionee's employment with the Company or any
such direct or indirect subsidiary or affiliate of the Company is terminated (i)
by reason of the Optionee's retirement at or after his attainment of his normal
<PAGE>
retirement date as defined under the terms of the defined benefit pension plan
which the Optionee is a participant in (and which plan is maintained by the
Company or the direct or indirect subsidiary or affiliate of the Company that is
the employer of such Optionee), the Optionee shall, notwithstanding the
provisions of Section 4(c) hereof, have the right to exercise such option or
options held by him, in full, to the extent that such options have not expired,
at any time within three (3) months after such retirement; or (ii) pursuant to a
Good Reason Termination or by the Company or such direct or indirect subsidiary
or affiliate that the Optionee is employed by (otherwise than by reason of
death) any option or options granted to him under the Plan to the extent not
theretofore exercised shall be deemed cancelled and terminated forthwith except
that, subject to the provisions of subparagraph (a) of this Section, such
Optionee may exercise any options theretofore granted to him, which have not
then expired and which, as of the date the Optionee's employment is terminated,
were otherwise exercisable within the provisions of Section 4 hereof, within
three (3) months after such termination.
(d) If an Optionee is a non-employee member of the Board of
Directors of the Company or any direct or indirect subsidiary or affiliate of
the Company at the time he receives a grant of an option hereunder and if such
Optionee's membership on the Board of Directors of the Company and all other
direct or indirect subsidiaries and affiliates of the Company is terminated by
reason of the Optionee's resignation at or after his attainment of age 65, the
Optionee shall, notwithstanding the provisions of Section 4(c) hereof, have the
right to exercise such option or options held by him, in full, to the extent
that such options have not expired, at any time within three (3) months after
such retirement.
(e) In the event that an Optionee shall die at any time that
options granted hereunder are outstanding, any option or options granted to him
under this Plan and not theretofore exercised by him or expired shall,
notwithstanding the provisions of Section 4(c) hereof, be exercisable by the
estate of the Optionee or by any person who acquired such option by bequest or
inheritance from the Optionee, in full, at any time within one (1) year after
the death of the Optionee. References hereinabove to the Optionee shall be
deemed to include any person entitled to exercise the option after the death of
the Optionee under the terms of this Section.
(f) If an Optionee is employed by the Company or any direct or
indirect subsidiary or affiliate of the Company at the time he receives a grant
<PAGE>
of an option hereunder and if his employment with the Company or any direct or
indirect subsidiary or affiliate of the Company is terminated by reason of his
disability, the Optionee shall, notwithstanding the provisions of Section 4(c)
hereof, have the right to exercise all options held by him, in full, to the
extent that such options have not previously expired or been exercised, at any
time within one (1) year after such termination. If an Optionee is a
non-employee member of the Board of Directors of the Company or any direct or
indirect subsidiary or affiliate of the Company at the time he receives a grant
of an option hereunder and if his membership on the Board of Directors of the
Company and all other direct or indirect subsidiaries and affiliates of the
Company is terminated by reason of his disability, the Optionee shall,
notwithstanding the provisions of Section 4(c) hereof, have the right to
exercise all options held by him, in full, to the extent that such options have
not previously expired or been exercised, at any time within one (1) year after
such termination. The term "disability" shall, for the purposes of this Plan, be
defined in the same manner as such term is defined in Section 22(e)(3) of the
Internal Revenue Code of 1986.
11. INDEMNITY. The Company shall indemnify and hold harmless any person
who is or has been a member of the Committee appointed under Section 2 hereof or
the Board of Directors of the Company, from and against any and all loss,
expense, liability or costs, including, without limitation, reasonable
attorney's fees that may be imposed upon or reasonably incurred by him in
connection with or resulting from any claim, action, suit or proceeding to which
he may be a party or in which he may be involved by reason of any action taken
or failure to act under the Plan provided that such person provides the Company
prompt written notice of any such claim together with the opportunity to defend
against claim or action at the Company's expense.
12. AMENDMENT AND TERMINATION OF THE PLAN. The Board of Directors of
the Company may at any time suspend, amend or terminate the Plan; provided, that
no suspension, amendment or termination of the Plan may, without the consent of
the holder of the option, terminate his option or adversely affect his rights in
any material respect.
13. GENERAL PROVISIONS. (a) No stock option granted hereunder shall be
construed as limiting any right which the Company or any parent or subsidiary of
the Company may have to terminate at any time, with or without cause, the
<PAGE>
employment of an Optionee or an Optionee's membership on the Board of Directors
of the Company or the Board of Directors of any direct or indirect subsidiary or
affiliate of the Company.
(b) The Section headings used in this Plan are intended solely
for convenience of reference and shall not in any manner amplify, limit, modify
or otherwise be used in the construction or interpretation of any of the
provisions hereof.
(c) The masculine, feminine or neuter gender and the
singular or plural number shall be deemed to include the other whenever the
content so indicates or requires.
14. EFFECTIVE DATE AND DURATION OF THE PLAN. The Plan became effective
on October 27, 1995 and shall continue until terminated by the Board of
Directors of the Company or, if earlier, the date that all shares of Common
Stock which may be issued in connection with the exercise of options which may
be granted under the terms of the Plan have been issued.
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Plan as of the
16th day of June, 1999.
COLUMBUS MCKINNON CORPORATION
By: /s/ Robert L. Montgomery, Jr.
-----------------------------
COLUMBUS McKINNON CORPORATION THRIFT 401(K) PLAN
AMENDMENT NO. 1 OF THE 1998 PLAN RESTATEMENT
Columbus McKinnon Corporation (the "Corporation") hereby amends the
Columbus McKinnon Corporation Thrift 401(K) Plan (the "Plan"), as amended and
restated in its entirety effective April 1, 1998, as permitted under
Section 14.1 of the Plan, as follows:
1. Section 3.3, entitled "Rollover Contributions", is amended effective
January 1, 1999, by changing subsection 3.3(d) thereof to read as follows:
(d) In-Service Distribution. Participant may, upon written request
to the Committee, withdraw from his rollover account such amount as he
shall specify. Such a withdrawal will be effective as of the first
Valuation Date that occurs at least 15 days after his withdrawal request
is filed.
2. Section 10.4, entitled "Loans", is amended effective January 1, 1998 by
changing the first sentence of such section (before subsection (a)) to read as
follows:
10.4 Loans. A Participant may borrow from his Salary reduction
Contribution Account (but not from his Matching Contribution Account,
Rollover Account or any other Account) in accordance with the rules set
forth in this Section 10.4.
3. New Schedule B, entitled "Special Rules for Acquired Employees", is
added to the Plan effective September 1, 1998 and shall read as follows:
Columbus McKinnon Corporation Thrift 401(k) Plan
Schedule B -- Special Rules for Acquired Employees
SB.1 Certain Former Employees of Abell-Howe Company. Each Employee who is an
Eligible Employee on September 1, 1998 and who was a nonunion employee of
Abell-Howe Company when that entity was acquired by the Corporation in August
1998--
(a) Special Participation Rule-- shall be eligible to become a Participant
in the Plan on September 1, 1998 or, if later, on the first day of the month
coinciding with or next following the expiration of 90 calendar days since the
first day on which the Employee was entitled to payment for the performance of
duties by Abell-Howe Company, and
<PAGE>
Columbus McKinnon Corporation Thrift 401(k) Plan
Page 2 of Amendment No. 1 of 1998 Restatement
(b) Special Vesting Rule-- shall be credited with Years of Vesting Service
calculated on the assumption that Hours of Service earned as an employee of
Abell-Howe Company before September 1, 1998 were Hours of Service earned as an
Employee of the Corporation.
IN WITNESS WHEREOF, this instrument of amendment has been executed
by a duly authorized officer of the Corporation this 10th day of December, 1998.
COLUMBUS McKINNON CORPORATION
By: /s/ Robert L. Montgomery, Jr.
-----------------------------
Title: Executive Vice President
-----------------------------
COLUMBUS McKINNON CORPORATION
MONTHLY RETIREMENT BENEFIT PLAN
Amendment No. 1 of the 1998 Plan Restatement
Columbus McKinnon Corporation (the "Company") hereby amends the
Columbus McKinnon Corporation Monthly Retirement Benefit Plan (the "Plan"), as
amended and restated in its entirety effective April 1, 1998, as permitted under
Section 10.1 of the Plan, as follows:
1. Section 1.22, entitled "Highly Compensated Employee", is amended
effective April 1, 1998 to read as follows:
1.22 "Highly Compensated Employee" includes highly compensated active
employees and highly compensated former employees.
(a) A highly compensated active employee means any Employee who:
(1) was a 5-percent owner (as defined in Section 416(i)(1)
of the Code) of the Corporation or an Affiliate at any time
during the current or preceding year, or
(2) for the preceding year--
(A) had compensation from the Corporation and all
Affiliates in excess of $80,000 (as adjusted by the
Secretary of the Treasury pursuant to Section 415(d) of the
Code, except that the base period shall be the calendar
quarter ending September 30, 1996), and
(B) if the Corporation elects the application of
this clause 1.22(a)(2)(B) for the preceding year, was in
the top-paid group of Employees for such preceding year.
For this purpose, an Employee is in the top-paid group of
Employees for any year if the Employee is in a group
consisting of the top 20 percent of the Employees when
ranked on the basis of compensation paid during such year.
(b) A former Employee shall be highly compensated employee if:
(1) the Employee was a Highly Compensated Employee when the
Employee separated from service, or
(2) the Employee was a Highly Compensated Employee at any
time after attaining age 55.
<PAGE>
COLUMBUS McKINNON CORPORATION MONTHLY RETIREMENT BENEFIT PLAN
Page 2 of Amendment No. 1 of 1998 Plan Restatement
(c) Meaning of "Compensation". For the purpose of this Section
1.22, the term "compensation" means compensation within the meaning of
Section 415(c)(3) of the Code. For Plan Years beginning before January
1, 1998, the determination of "compensation" shall be made without
regard to Sections 125, 402(e)(3), and 402(h)(1)(B) of the Code and, in
the case of employer contributions made pursuant to a salary reduction
agreement, without regard to Section 403(b) of the Code.
(d) Application of Code and Regulations. The determination of
who is a Highly Compensated Employee, including the determinations of
the number and identity of Employees in the top-paid group, shall be
made in accordance with Section 414(q) of the Code and the regulations
thereunder.
2. Section 4.4, entitled "55/15 Early Retirement Benefit", is amended
effective April 1, 1998 to correct a typographical error by changing the
reference to "62/25 early retirement benefit" to "55/15 early retirement
benefit."
3. Section 11.1, entitled "Definitions and Rules of Interpretation", is
amended effective April 1, 1998 by changing subsection (b) thereof to read as
follows:
(b) "Annual Benefit" means the benefit payable annually in the
form of a straight life annuity under the terms of the Plan (aggregated
with other defined benefit plans as described in (j) below) exclusive
of any benefit not required to be considered for purposes of applying
the limitations of Code Section 415 to the Plan. If the Annual Benefit
is payable in any form other than a straight life annuity or a
qualified joint and survivor annuity within the meaning of Code Section
417, it shall be adjusted to an Actuarial Equivalent benefit in the
form of a straight life annuity. In the case of the adjustment of a
benefit that is not subject to Code Section 417(e)(3), the adjustment
shall be made using an interest rate equal to the greater of the rate
specified in the Plan or 5 percent.
4. Table 3 of Appendix A is amended effective April 1, 1998 to read as
follows:
APPENDIX A
TABLE 3
TABLE OF ACTUARIAL EQUIVALENT FACTORS TO BE USED IN DETERMINING THE AMOUNT OF
LIFE ANNUITY COMMENCING ON AN EARLY RETIREMENT DATE
<PAGE>
COLUMBUS McKINNON CORPORATION MONTHLY RETIREMENT BENEFIT PLAN
Page 3 of Amendment No. 1 of 1998 Plan Restatement
Age at Early Actuarial
Retirement Date Equivalent Factor
--------------- -----------------
65 1.000
64 .906
63 .824
62 .750
61 .685
60 .626
59 .574
58 .527
57 .484
56 .446
55 .411
Factors will be determined by interpolation based on the attained age to the
completed month.
5. New Schedule 2, entitled "Pension Plan for Non-Union Hourly Employees
of Columbus McKinnon Corporation, Merger into the MRB Plan, Treatment of Former
Participants" is added to the Plan effective December 31, 1998 in the form
attached to this Amendment No. 1 and incorporated herein by this reference.
6. New Schedule 5, entitled "Duff-Norton Company, Inc. Pension Plan for
Salaried Employees of Yale Hoists, Merger into the MRB Plan, Treatment of Former
Participants" is added to the Plan effective December 31, 1998 in the form
attached to this Amendment No. 1 and incorporated herein by this reference.
7. New Schedule 6, entitled "Duff-Norton Company, Inc. Retirement Plan
for Employees of American Lifts Division, Merger into the MRB Plan, Treatment of
Former Participants" is added to the Plan effective February 28, 1999 in the
form attached to this Amendment No. 1 and incorporated herein by this reference.
<PAGE>
COLUMBUS McKINNON CORPORATION MONTHLY RETIREMENT BENEFIT PLAN
Page 4 of Amendment No. 1 of 1998 Plan Restatement
8. Schedule 3, entitled "Retirement Plan for Salaried Employees of the
Duff-Norton Companies, Merger into the MRB Plan, Treatment of Former
Participants" is amended and restated effective June 30, 1998 in the form
attached to this Amendment No. 1 and incorporated herein by this reference.
9. Schedule 4, entitled "Duff-Norton Company, Inc. Retirement Plan for
Wadesboro Hourly Employees, Merger into the MRB Plan, Treatment of Former
Participants" is amended and restated effective June 30, 1998 in the form
attached to this Amendment No. 1 and incorporated herein by this reference.
IN WITNESS WHEREOF, this instrument of amendment has been
executed by a duly authorized officer of the Corporation this 10th day of
December, 1998, to be effective as of the dates recited herein.
COLUMBUS McKINNON CORPORATION
By: /s/ Robert L. Montgomery, Jr.
-----------------------------
Title: Executive Vice President
-----------------------------
COLUMBUS MCKINNON CORPORATION
MONTHLY RETIREMENT BENEFIT PLAN
AMENDMENT NO. 2 OF THE 1998 PLAN RESTATEMENT
IRS TECHNICAL AMENDMENT
Columbus McKinnon Corporation (the "Company") hereby amends the
Columbus McKinnon Corporation Monthly Retirement Benefit Plan (the "Plan"), as
amended and restated in its entirety effective April 1, 1998, as permitted under
Section 10.1 of the Plan, as follows:
1. Section 11.1, entitled "Definitions and Rules of Interpretation", is
amended effective April 1, 1998 by changing subsection (b) thereof to read as
follows:
"(b) "ANNUAL BENEFIT" means the benefit payable annually in the
form of a straight life annuity under the terms of the Plan (aggregated
with other defined benefit plans as described in (j) below) exclusive of
any benefit not required to be considered for purposes of applying the
limitations of Code Section 415 to the Plan. If the Annual Benefit is
payable in any form other than a straight life annuity or a qualified
joint and survivor annuity within the meaning of Code Section 417, it
shall be adjusted to an Actuarial Equivalent benefit in the form of a
straight life annuity.
(1) In the case of the adjustment of a benefit that is not
subject to Code Section 417(e)(3), the adjustment shall be
made using the mortality table described in Section 1.4(b) and
an interest rate equal to the greater of the rate specified in
Section 1.4(c) or 5 percent.
(2) In the case of the adjustment of a benefit that is subject
to Code Section 417(e)(3), the adjustment shall be made using
the mortality table described in Section 1.4(b) and an
interest rate equal to the greater of the rate specified in
Section 1.4(b) or Section 1.4(c)."
2. Section 11.2, entitled "Maximum Annual Benefit" is amended effective
April 1, 1998 by changing Section 11.2(b)(2) to read as follows:
"(2) BENEFITS COMMENCING BEFORE SOCIAL SECURITY RETIREMENT
AGE. If the Annual Benefit begins before the Participant's
Social Security Retirement Age, then the Dollar Limit shall be
reduced as provided in this Section 11.2(b)(2) or in such
other manner as the Secretary of the Treasury shall prescribe
as consistent with the reduction for old-age insurance
<PAGE>
COLUMBUS McKINNON CORPORATION MONTHLY RETIREMENT BENEFIT PLAN
Page 2 of Amendment No. 2 of 1998 Plan Restatement
benefits commencing before the Social Security Retirement Age
under the Social Security Act:
(A) If the benefit begins after the
Participant has attained age 62, the Dollar Limit
shall be reduced 5/9 of 1% for each month by which
the Annuity Starting Date precedes the Participant's
Social Security retirement age for the first 36
months and shall be reduced 5/12 of 1% for each
additional month by which the Annuity Starting Date
precedes his Social Security retirement age.
(B) If the benefit begins before the
Participant has attained age 62, the Dollar Limit
shall be reduced as provided in Section 11.2(b)(2)(A)
in order to determine the Dollar Limit in effect at
age 62. The Dollar Limit in effect on the Annuity
Starting Date shall be the Actuarial Equivalent of
the Dollar Limit in effect at age 62. For the purpose
of determining Actuarial Equivalence, the interest
rate shall be the greater of 5 percent or the rate
set forth in Section 1.4(c) and the mortality table
shall be the table described in Section 1.4(b)
provided, however, that the mortality decrement shall
be ignored to the extent that a forfeiture does not
occur at death."
3. Section 11.2, entitled "Maximum Annual Benefit" is amended effective
April 1, 1998 by changing Section 11.2(b)(3) to read as follows:
"(3) BENEFITS COMMENCING AFTER SOCIAL SECURITY RETIREMENT AGE.
If the Annual Benefit begins after the Participant's Social
Security Retirement Age, then the Dollar Limit shall be
increased so that the Dollar Limit in effect on the Annuity
Starting Date shall be the Actuarial Equivalent of the Dollar
Limit as of the Participant's Social Security Retirement Age.
For the purpose of determining Actuarial Equivalence, the
interest rate shall be the lesser of 5 percent or the rate set
forth in Section 1.4(c) and the mortality table shall be the
table described in Section 1.4(b) provided, however, that the
mortality decrement shall be ignored to the extent that a
forfeiture does not occur at death."
IN WITNESS WHEREOF, this instrument of amendment has been
executed by a duly authorized officer of the Corporation this 26th day of May,
1999, to be effective as of the dates recited herein.
COLUMBUS McKINNON CORPORATION
By: /s/ Robert L. Montgomery, Jr.
-----------------------------
Title: Executive Vice President
-----------------------------
PRIVILEGED AND CONFIDENTIAL
[Date]
[Executive]
[Position]
Columbus McKinnon Corporation
140 John James Audubon Parkway
Amherst, New York l4228-1197
Dear [Executive]:
Columbus McKinnon Corporation (the "Company") considers it
essential to the best interests of its stockholders to foster the continuous
employment of key management personnel. In this connection, the Board of
Directors of the Company (the "Board") recognizes that, as is the case with many
publicly held corporations, the possibility of a change in control of the
Company may exist and that such possibility, and the uncertainty and questions
which it may raise among management, may result in the departure or distraction
of management personnel to the detriment of the Company and its stockholders.
The Board has determined that appropriate steps should be
taken to reinforce and encourage the continued attention and dedication of
members of the Company's management, including you, to their assigned duties
without distraction in the face of potentially disturbing circumstances arising
from the possibility of a change in control of the Company.
In order to induce you to remain in the employ of the Company
in your current executive position, the Company agrees that you shall receive
the severance benefits set forth in this letter agreement (the "Agreement") in
the event your employment in your current executive position with the Company is
terminated under the circumstances described below subsequent to a "change in
control of the Company" (as defined in Section 2).
<PAGE>
1. TERM OF AGREEMENT. This agreement shall commence on [Date],
and shall continue in effect through [Date]; provided, however, that commencing
on [Date], and each [Day] thereafter, the term of this Agreement shall
automatically be extended for one additional year unless, not later than [Day]
of such year, the Company shall have given notice that it does not wish to
extend this Agreement (provided that no such notice may be given during the
pendency of a potential change in control of the Company, as defined in Section
2); and provided, further, that if a change in control of the Company, as
defined in Section 2, shall have occurred during the original or extended term
of this Agreement, this Agreement shall continue in effect for a period of not
less than thirty-six (36) months beyond the month in which such change in
control occurred. Notwithstanding anything provided herein to the contrary, the
term of this Agreement shall not extend beyond the end of the month in which you
attain "normal retirement age" under the provisions of the Columbus McKinnon
Corporation Monthly Retirement Benefit Plan (or any amendment, restatement or
successor thereto) or any other tax-qualified retirement plan of the Company or
any of its subsidiaries in which you are participating (any such plan being
referred to herein as the "Company Pension Plan").
2. CHANGE IN CONTROL, POTENTIAL CHANGE IN CONTROL.
(i) No benefits shall be payable hereunder unless there shall have been
a change in control of the Company, as set forth below. For purposes of this
Agreement, a "change in control of the Company" shall be deemed to have occurred
if
(a) any "Person," as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")
(other than the Company, any trustee or other fiduciary holding securities under
an employee benefit plan of the Company, or any Company owned, directly or
indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company), is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Company representing 20% or more of either
(i) the then outstanding shares of common stock of the Company or (ii) the
combined voting power of the Company's then outstanding voting securities;
(b) during any period of two consecutive years (not including
any period prior to the execution of this Agreement), individuals who at the
beginning of such period constitute the Board, and any new director (other than
a director designated by a person who has entered into an agreement with the
Company to effect a transaction described in clause (a), (c), (d) or (e) of this
Section) whose election by the Board or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors at the beginning of the
period or whose election or nomination for election was previously so approved,
cease for any reason to constitute at least a majority thereof;
<PAGE>
(c) the consummation of a reorganization, merger or
consolidation of the Company with any other company, other than (1) a
reorganization, merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than 50% of the combined voting power
of the voting securities of the Company or such surviving entity outstanding
immediately after such reorganization, merger or consolidation or (2) a
reorganization, merger or consolidation effected to implement a recapitalization
of the Company (or similar transaction) in which no "person" (as herein above
defined) beneficially owns, directly or indirectly, 20% or more of the combined
voting power of the Company's then outstanding voting securities;
(d) any Person or Persons acquire all or substantially all of
the assets of the Company, whether in a single transaction or series of
transactions; or
(e) the stockholders of the Company approve a plan of
dissolution or complete liquidation of the Company or an agreement for the sale
or disposition by the Company of all or substantially all of the Company's
assets.
(ii) For purposes of this Agreement, a "potential change in control of
the Company" shall be deemed to have occurred if:
(a) the Company enters in an agreement, the consummation of
which would result in the occurrence of a change in control of the Company;
(b) any person (including the Company) publicly announces an
intention to take or to consider taking actions which if consummated would
constitute a change in control of the Company;
(c) any person (other than a trustee or other fiduciary
holding securities under an employee benefit plan of the Company or a company
owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the Company,
or a person who is then currently properly eligible to file and has properly
filed a Schedule 13G (or any successor filing) pursuant to the Exchange Act and
the rules and regulations thereunder, indicating beneficial ownership of
securities of the Company and stating that the securities were acquired in the
ordinary course of business and were not acquired with the purpose nor with the
effect of changing or influencing the control of the Company, for so long as
such statement is true and correct) who is or becomes the beneficial owner,
directly or indirectly, of securities of the Company representing 9.5% or more
of the combined voting power of the Company's then outstanding securities and,
without the written consent of the Company, increases within a one-year period
his beneficial ownership of such securities by 3 percentage points or more; or
<PAGE>
(d) the Board adopts a resolution to the effect that, for
purposes of this Agreement, a potential change in control of the Company has
occurred.
3. TERMINATION FOLLOWING CHANGE IN CONTROL.
(i) GENERAL. If any of the events described in Section 2 constituting a
change in control of the Company shall have occurred, you shall be entitled to
the benefits provided in Section 4(iii) upon termination of your employment
within thirty-six (36) months following such a change in control of the Company
unless such termination is (a) because of your death or Disability, (b) by the
Company for Cause, or (c) by you other than for Good Reason. In the event your
employment with the Company is terminated for any reason and subsequently a
change in control of the Company should have occurred, you shall not be entitled
to any benefits hereunder.
(ii) DISABILITY. If, as a result of your incapacity due to physical or
mental illness, you shall have been absent from the full-time performance of
your duties with the Company for six (6) consecutive months, and within thirty
(30) days after written notice of termination is given you shall not have
returned to the full-time performance of your duties, your employment may be
terminated for "Disability."
(iii) CAUSE. Termination by the Company of your employment for "Cause"
shall mean termination (a) upon the commission by you of a willful serious act,
such as embezzlement, against the Company which is intended to enrich you at the
expense of the Company or upon your conviction of a felony involving moral
turpitude or (b) in the event of willful, gross neglect or willful, gross
misconduct resulting in either case in material harm to the Company. For
purposes of this Subsection, no act, or failure to act, on your part shall be
deemed "willful" unless done, or omitted to be done, by you not in good faith
and without reasonable belief that your action or omission was in the best
interest of the Company.
(iv) GOOD REASON. You shall be entitled to terminate your employment
for Good Reason. For purposes of this Agreement, "Good Reason" shall mean,
without your express written consent, the occurrence after a change in control
of the Company of any of the following circumstances unless such circumstances
are fully corrected prior to the Date of Termination (as defined in Section
3(vi)) specified in the Notice of Termination (as defined in Section 3(v)) given
in respect thereof:
(a) a reduction by the Company in your annual base salary as
in effect on the date hereof or as the same may be increased from time to time;
<PAGE>
(b) the Company's requiring you to be based at a Company
office more than 50 miles from the Company's offices at which you are
principally employed immediately prior to the date of the change in control
except for required travel on the Company's business to an extent substantially
consistent with your present business travel obligations;
(c) the failure by the Company to pay to you any portion of
your current compensation within seven (7) days of the date such compensation is
due or any portion of your compensation under any deferred compensation program
of the Company within thirty (30) days of the date such compensation is due;
(d) any purported termination of your employment that is not
effected pursuant to a Notice of Termination satisfying the requirements of
Subsection (v) hereof (and, if applicable, the requirements of Subsection (iii)
hereof), which purported termination shall not be effective for purposes of this
Agreement; or
(e) the assignment to you of any duties or responsibilities
that are inconsistent with your position, duties, responsibilities or status
immediately preceding such change in control, or any other action by the Company
which results in a diminution in such position, duties, responsibilities or
status.
Your right to terminate your employment pursuant to this
Subsection shall not be affected by your incapacity due to physical or mental
illness. Your continued employment shall not constitute consent to, or a waiver
of rights with respect to, any circumstance constituting Good Reason hereunder.
(v) NOTICE OF TERMINATION. Any purported termination of your employment
by the Company or by you shall be communicated by written Notice of Termination
to the other party hereto in accordance with Section 6. "Notice of Termination"
shall mean a notice that shall indicate the specific termination provision in
this Agreement relied upon and shall set forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of your employment
under the provision so indicated.
<PAGE>
(vi) DATE OF TERMINATION, ETC. "Date of Termination" shall mean (a) if
your employment is terminated for Disability, thirty (30) days after Notice of
Termination is given (provided that you shall not have returned to the full-time
performance of your duties during such 30-day period), and (b) if your
employment is terminated pursuant to Subsection (iii) or (iv) hereof or for any
other reason (other than Disability), the date specified in the Notice of
Termination (which, in the case of a termination for Cause shall not be less
than thirty (30) days from the date such Notice of Termination is given, and in
the case of a termination for Good Reason shall not be less than thirty (30) nor
more than sixty (60) days from the date such Notice of Termination is given);
provided, however, that if within fifteen (15) days after any Notice of
Termination is given, or, if the Notice of Termination is not properly given,
prior to the Date of Termination (as determined without regard to an extension
of such Date of Termination as described in this proviso), the party receiving
such Notice of Termination notifies the other party that a dispute exists
concerning the termination, then the Date of Termination shall be the date on
which the dispute is finally determined, either by mutual written agreement of
the parties or by a binding arbitration award; and provided, further, that the
Date of Termination shall be extended by a notice of dispute only if such notice
is given in good faith and the party giving such notice pursues the resolution
of such dispute with reasonable diligence. During the pendency of any dispute,
(i) the Company will continue to pay you your full compensation in effect when
the notice giving rise to the dispute was given (including, but not limited to,
base salary) and continue you as a participant in all compensation, benefit and
insurance plans in which you were participating when the notice giving rise to
the dispute was given, until the dispute is finally resolved in accordance with
this Subsection and (ii) you will have no obligation to perform any duties as an
employee of the Company on or after the Date of Termination (as determined
without regard to an extension of such Date of Termination as described in the
preceding sentence). Amounts paid under this Subsection are in addition to all
other amounts due under this Agreement, and shall not be offset against or
reduce any other amounts due under this Agreement and shall not be reduced by
any compensation earned by you as the result of employment by another employer.
4. COMPENSATION UPON TERMINATION OR DURING DISABILITY.
Following a change in control of the Company, you shall be entitled to the
following benefits during a period of disability, or upon termination of your
employment as the case may be, provided that such period of disability or
termination occurs during the term of this Agreement:
(i) During any period that you fail to perform your full-time duties
with the Company as a result of incapacity due to physical or mental illness,
you shall continue to receive your base salary at the rate in effect at the
commencement of any such period, together with all compensation payable to you
under the Company's disability plan or program or other similar plan during such
period, until this Agreement is terminated pursuant to Section 3(ii) hereof.
Thereafter, or in the event your employment shall be terminated by reason of
your death, your benefits shall be determined under the Company's retirement,
insurance and other compensation programs then in effect in accordance with the
terms of such programs.
<PAGE>
(ii) If your employment shall be terminated by the Company for Cause or
by you other than for Good Reason, the Company shall pay you your full base
salary through the Date of Termination at the rate in effect at the time Notice
of Termination is given, plus all other amounts to which you are entitled under
any compensation plan of the Company at the time such payments are due, and the
Company shall have no further obligations to you under this Agreement.
(iii) If your employment by the Company should be terminated by the
Company other than for Cause or Disability or if you should terminate your
employment for Good Reason, you shall be entitled to the benefits provided
below:
(a) the Company shall pay to you your full base salary through
the Date of Termination at the rate in effect at the time Notice of Termination
is given, plus all other amounts to which you are entitled under any
compensation plan of the Company, at the time such payments are due;
(b) in lieu of any further salary payments to you for periods
subsequent to the Date of Termination, the Company shall pay as severance pay to
you, at the time specified in Subsection (iv), a lump sum severance payment
(together with the payments provided in paragraphs (c), (d), (e) and (f) below,
the "Severance Payments") equal to THREE (3) TIMES the sum (such sum, the
"Compensation Level") of (x) the greater of your annual rate of base salary in
effect on the Date of Termination and your annual rate of base salary in effect
immediately prior to such change in control of the Company, plus (y) the greater
of (a) the annual target bonus (annualized in the case of any bonus paid with
respect to a partial year) under the Company's then current Management EVA(R)
Incentive Compensation Plan or any then current similar plan (the "Management
Incentive Plan") in effect on the Date of Termination or (b) the annual target
bonus (annualized in the case of any bonus paid with respect to a partial year)
under the Management Incentive Plan in effect immediately prior to such change
in control;
(c) the Company shall pay to you all reasonable legal fees and
expenses incurred by you as a result of such termination, including all such
fees and expenses, if any, as incurred in contesting or disputing any such
termination or in seeking to obtain or enforce any right or benefit provided by
this Agreement; provided that you shall repay such amounts to the Company if it
is finally determined by a court of competent jurisdiction that such contest or
dispute was brought by you frivolously and in bad faith;
(d) for a period of thirty-six (36) months after such
termination, the Company shall (i) arrange to provide you with all benefits
under the Company's medical, prescription, dental, employee life and group life
plans and programs, which are substantially similar to those which you were
receiving immediately prior to the change in control or (ii) reimburse you for
your out-of-pocket costs for providing yourself with any medical, prescription,
dental, employee life and group life plans and programs which are substantially
similar to those which you were receiving immediately prior to the change in
control;
<PAGE>
(e) at your option, you may either elect in writing (i) to
continue to participate in the Company Pension Plan (and be deemed to have
continued to be employed by the Company for a period of three (3) additional
years and deemed to have accumulated three (3) additional calendar years of
compensation (for purposes of determining your pension benefits under the
Company Pension Plan), in an amount equal to the Compensation Level determined
under Section 4(iii)(b) hereof), in which case you would be fully vested under
the Company Pension Plan as of the Date of Termination, but in no event shall
you be deemed to have continued to be employed by the Company after your normal
retirement age, or (ii) to receive from the Company a lump sum payment, in cash,
equal to the actuarial equivalent of the retirement pension (determined as a
straight life annuity commencing at age 65) which you would have accrued under
the terms of the Company Pension Plan (without regard to the limitations imposed
by section 401(a)(17) of the Internal Revenue Code of 1986, as amended (the
"Code"), or any amendment to the Plan made subsequent to a change in control of
the Company and on or prior to the Date of Termination, which amendment
adversely affects in any manner the computation of retirement benefits
thereunder), determined as if you were fully vested thereunder and had continued
to be employed by the Company (after the Date of Termination) for three (3)
additional years and as if you had accumulated three (3) additional calendar
years of compensation (for purposes of determining your pension benefits
thereunder), each in an amount equal to the Compensation Level determined under
Section 4(iii)(b) hereof, but in no event shall you be deemed to have continued
to be employed by the Company after your normal retirement age. For purposes of
this Subsection, "actuarial equivalent" shall be determined using the same
methods and assumptions utilized under the Company Pension Plan immediately
prior to the change in control of the Company;
(f) the Company shall provide to you outplacement services
with an outplacement firm selected by you for a period of up to six months and
for an amount not to exceed $25,000; and
(g) notwithstanding anything to the contrary contained in any
stock option agreement, you shall be fully vested as of the date of the change
in control in any and all stock options held by you immediately prior to such
change in control; and
<PAGE>
(iv) The payments provided for in Subsection (iii) shall be made not
later than the fifth day following the Date of Termination; provided, however,
that if the amounts of such payments cannot be finally determined on or before
such day, the Company shall pay to you on such day an estimate, as determined in
good faith by the Company, of the minimum amount of such payments and shall pay
the remainder of such payments (together with interest at the rate provided in
section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be
determined but in no event later than the thirtieth day after the Date of
Termination. In the event that the amount of the estimated payments exceeds the
amount subsequently determined to have been due, such excess shall constitute a
loan by the Company to you payable on the fifth day after demand therefor by the
Company (together with interest at the rate provided in section 1274(b)(2)(B) of
the Code).
(v) You shall not be required to mitigate the amount of any payment
provided for in this Section 4 by seeking other employment or otherwise, nor
shall the amount of any payment or benefit provided for in this Section 4 be
reduced by any compensation earned by you as the result of employment by another
employer, by retirement benefits, by offset against any amount claimed to be
owed by you to the Company, or otherwise.
(vi) Notwithstanding any provision of this Agreement to the contrary,
the aggregate present value of all "payments in the nature of compensation"
(within the meaning of Section 28OG of the Code) provided to you in connection
with a change in control of the Company or the termination of your employment
shall be one dollar less than the amount that is fully deductible by the Company
under Section 28OG of the Code and, to the extent necessary, payments and
benefits under this Agreement shall be reduced in order that this limitation not
be exceeded. It is the intention of this Subsection (vi) to avoid excise taxes
on you under Section 4999 of the Code or the disallowance of a deduction to the
Company pursuant to Section 28OG of the Code.
5. SUCCESSORS, BINDING AGREEMENT.
(i) The Company will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of the Company to expressly assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place.
Failure of the Company to obtain such assumption and agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement and
shall entitle you to compensation from the Company in the same amount and on the
same terms to which you would be entitled hereunder if you terminate your
employment for Good Reason following a change in control of the Company, except
that for purposes of implementing the foregoing, the date on which any such
succession becomes effective shall be deemed the Date of Termination. As used in
this Agreement, "Company" shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid which assumes and agrees to
perform this Agreement by operation of law, or otherwise.
<PAGE>
(ii) This Agreement shall inure to the benefit of and be enforceable by
you and your personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If you should die while
any amount would still be payable to you hereunder had you continued to live,
all such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to your devisee, legatee or other designee or,
if there is no such designee, to your estate.
(iii) The Company expressly acknowledges and agrees that you shall have
a contractual right to the benefits provided hereunder, and the Company
expressly waives any ability, if possible, to deny liability for any breach of
its contractual commitment hereunder upon the grounds of lack of consideration,
accord and satisfaction or any other defense. In any dispute arising after a
change in control of the Company as to whether you are entitled to benefits
under this Agreement, there shall be a presumption that you are entitled to such
benefits and the burden of proving otherwise shall be on the Company.
(iv) All benefits to be paid hereunder shall be in addition to any
disability, workers' compensation, or other Company benefit plan distribution,
unpaid vacation or other unpaid benefits that you have at the Date of
Termination.
6. NOTICE. For the purpose of this Agreement, notices and all
other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered or mailed by United
States certified or registered mail, return receipt requested, postage prepaid,
addressed to the respective addresses set forth on the first page of this
Agreement, provided that all notice to the Company shall be directed to the
attention of the Board with a copy to the Secretary of the Company, or to such
other address as either party may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be effective
only upon receipt.
<PAGE>
7. MISCELLANEOUS. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by you and such officer as may be specifically
designated by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not expressly set forth in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of New York without regard to its conflicts of law
principles. All references to sections of the Exchange Act or the Code shall be
deemed also to refer to any successor provisions to such sections. Any payments
provided for hereunder shall be paid net of any applicable withholding required
under federal, state or local law. In the event of a change in control of the
Company during the term of this Agreement, the obligations of the Company under
Section 4 shall survive the expiration of the term of this Agreement consistent
with the periods referenced in Section 4.
8. VALIDITY. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
9. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
10. ARBITRATION. Any dispute or controversy arising under or
in connection with this Agreement shall be settled exclusively by arbitration,
conducted before a panel of three arbitrators in the State of New York, in
accordance with the rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitrator's award in any court having
jurisdiction; provided, however, that you shall be entitled to seek specific
performance of your right to be paid until the Date of Termination during the
pendency of any dispute or controversy arising under or in connection with this
Agreement.
<PAGE>
11. ENTIRE AGREEMENT. This Agreement sets forth the entire
agreement of the parties hereto in respect of the subject matter contained
herein and during the term of the Agreement supersedes the provisions of all
prior change in control agreements entered into between you and the Company and
all other prior agreements, promises, covenants, arrangements, communications,
representations or warranties, whether oral or written, by any officer, employee
or representative of any party hereto with respect to the subject matter hereof.
12. APPLICABLE LAW. This Agreement shall be governed and
construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed wholly within such State.
If this letter sets forth our agreement on the subject matter
thereof, kindly sign and return to the Company the enclosed copy of this letter,
which will then constitute our agreement on this subject.
Sincerely,
COLUMBUS McKINNON CORPORATION
By:
Name: Timothy T. Tevens
Title: President and Chief
Executive Officer
Agreed as of the
------------
day of ,
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Executive
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of February 16, 1999,
by and among Columbus McKinnon Corporation, a New York corporation ("Parent"),
GL Delaware, Inc., a Delaware corporation and a wholly-owned subsidiary of
Parent ("Sub"), G.L. International Inc., a Delaware corporation (the "Company")
and Larco Industrial Services, Ltd. an Ontario corporation ("Larco"), the
holders of all outstanding capital stock of the Company (the "GL Shareholders"),
and the holders of Non-Voting Exchangeable Shares (the "Larco Shareholders") of
Larco all of the voting stock of which is owned by the Company. The GL
Shareholders and the Larco Shareholders are sometimes referred to herein
individually as a "Shareholder" and collectively as the "Shareholders".
WHEREAS, the Boards of Directors of Parent and Sub and the
Board of Directors of the Company and Larco and the Shareholders deem it
advisable and in their best interests to approve and consummate the business
combination transaction provided for in this agreement ("Agreement") in which
Sub would merge with and into the Company and the Company would become a
wholly-owned subsidiary of Parent (the "Merger");
WHEREAS, concurrently with the execution and delivery of this
Agreement and as a condition and inducement to Parent's and Sub's willingness to
enter into this Agreement, the Shareholders are executing an agreement dated as
of the date hereof regarding voting in favor of this Agreement ("Voting
Agreement");
WHEREAS, for accounting purposes, it is intended that the
Merger shall be accounted for as a pooling of interests under United States
generally accepted accounting principles ("GAAP");
WHEREAS, for Federal income tax purposes, it is intended that
the Merger shall qualify as a reorganization within the meaning of the Internal
Revenue Code of 1986, as amended (the "Code"); and
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements set forth
herein and in the Related Agreements (as hereinafter defined) the parties hereto
agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01 The Merger; Effective Time of the Merger. Upon
the terms and subject to the conditions of this Agreement and in accordance with
the Delaware General Corporation Law (the "DGCL"), Sub shall be merged with and
into the Company at the Effective Time (as hereinafter defined). Subject to the
<PAGE>
provisions of this Agreement, a certificate of merger (the "Certificate of
Merger") shall be duly prepared and properly executed and thereafter duly filed
with the Secretary of State of the State of Delaware, as provided in the DGCL,
as soon as practicable on or after the Closing Date (as hereinafter defined).
The Merger shall become effective upon the filing of the Certificate of Merger
with the Secretary of State of the State of Delaware or at such time thereafter
as is provided in the Certificate of Merger (the "Effective Time").
SECTION 1.02 Closing. The closing of the Merger (the
"Closing") will take place at 10:00 a.m. on a date to be specified by Parent
which shall be no later than the second business day after the earlier of (i)
early termination under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act") or (ii) expiration of the HSR Act waiting
period, provided that the other closing conditions set forth in Article X have
been met or waived as provided in Article X at or prior to the Closing (the
"Closing Date"), at the offices of Phillips, Lytle, Hitchcock, Blaine & Huber
LLP, 3400 Marine Midland Center, Buffalo, New York 14203 unless another date or
place is agreed to in writing by Parent and the Company.
SECTION 1.03 Effects of the Merger. At the Effective Time (i)
the separate existence of the Sub shall cease and the Sub shall be merged with
and into the Company (Sub and the Company are sometimes referred to herein as
the "Constituent Corporations" and the Company is sometimes referred to herein
as the "Surviving Corporation") and the Surviving Corporation shall be a
wholly-owned subsidiary of Parent, (ii) the Certificate of Incorporation of the
Company shall be the Certificate of Incorporation of the Surviving Corporation,
(iii) the By-laws of the Company as in effect immediately prior to the Effective
Time shall be the By-laws of the Surviving Corporation, and (iv) the Merger
shall have all the effects provided by applicable law, including Section 259 of
the DGCL.
SECTION 1.04 Directors and Officers of the Surviving
Corporation. From and after the Effective Time (i) Robert L. Montgomery, Jr.,
Lois H. Demler and Timothy T. Tevens shall be the directors of the Surviving
Corporation and (ii) the present officers of Sub shall be the officers of the
Surviving Corporation until their successors shall have been duly elected or
appointed or qualified or until their earlier death, resignation or removal in
accordance with the Surviving Corporation's Certificate of Incorporation, as
amended, and By-laws, as amended.
<PAGE>
ARTICLE II
CONVERSION OF SECURITIES
SECTION 2.01 Conversion of Capital Stock. As of the Effective
Time, by virtue of the Merger and without any action on the part of the holder
of any shares of capital stock of the Constituent Corporations or Parent:
(a) Capital Stock of Sub. Each share of the common stock of
Sub, par value $1.00 per share ("Sub Common Stock"), which is issued and
outstanding immediately prior to the Effective Time, shall be converted into and
shall become one fully paid and nonassessable share of common stock, par value
$.01 per share, of the Surviving Corporation.
(b) Cancellation of Treasury Stock. All shares of common stock
of the Company, par value $.01 per share, (the "Company Common Stock") that are
owned by the Company as treasury shares shall be canceled and retired and shall
cease to exist and no stock of Parent or other consideration shall be delivered
in exchange therefor.
(c) Shares of Dissenting Holders. Notwithstanding any of the
provisions of this Agreement, any issued and outstanding shares of the Company
Common Stock held by a person who shall not have voted in favor of the Merger or
consented thereto in writing and who shall have demanded properly in writing
appraisal of such shares in accordance with Section 262 of the DGCL and who
objects to the Merger and complies with all provisions of the DGCL concerning
the right of such person to dissent from the Merger and demand appraisal of such
shares ("Dissenting Holder") shall not be converted into the right to receive
the Merger Consideration (as hereinafter defined), but shall from and after the
Effective Time represent only the right to receive such consideration as may be
determined to be due to such Dissenting Holder pursuant to the DGCL; PROVIDED,
HOWEVER, that shares of the Company Common Stock outstanding immediately prior
to the Effective Time and held by a Dissenting Holder who shall, after the
Effective Time, effectively withdraw the demand for appraisal or lose the right
of appraisal of such shares, in either case pursuant to the DGCL shall be deemed
to be converted, as of the Effective Time, into the right to receive the Merger
Consideration specified in Section 2.01(d), without interest. Nothing in this
Section 2.01(c) shall relieve any Shareholder of such Shareholder's obligation
under a voting agreement which shall be entered into by the Shareholders in the
form and on substantially the same terms as Schedule 2.01(c) hereto (the "Voting
Agreement").
<PAGE>
(d) Exchange Ratio for the Company Common Stock. Subject to
Section 2.02(e), each issued and outstanding share of the Company Common Stock
(other than shares to be canceled in accordance with Section 2.01(b)) shall be
converted into the right to receive that number of fully paid and nonassessable
shares of common stock, par value $0.01 per share, of Parent ("Parent Common
Stock"), including the corresponding number of rights ("Parent Rights") to
purchase shares of Parent Preferred Stock pursuant to the Rights Agreement dated
as of October 25, 1997, as amended, between American Stock Transfer & Trust
Company, as Rights Agent and Columbus McKinnon Corporation determined by
dividing the Preliminary Aggregate Merger Consideration determined in accordance
with Section 2.01(e) below ("the Preliminary Merger Consideration") by
4,562,833. The Preliminary Merger Consideration shall be subject to reduction by
virtue of the adjustment provided for in Section 2.04 and, as so adjusted shall
be deemed to be the "Merger Consideration". All such shares of the Company
Common Stock shall no longer be outstanding and shall automatically be canceled
and retired and shall cease to exist, and each holder of a certificate
representing any such shares shall cease to have any rights with respect
thereto, except the right to receive the Merger Consideration (or any cash in
lieu of fractional shares of Parent Common Stock) to be issued or paid in
consideration therefor upon the surrender of such certificate in accordance with
Section 2.02, without interest. All references in this Agreement to Parent
Common Stock to be received pursuant to the Merger shall be deemed to include
Parent Rights.
The determination of the exchange ratio, the Preliminary
Aggregate Merger Consideration and the Merger Consideration are based upon the
representations, warranties and covenants of the Company and the Shareholders
that the number of outstanding shares of Company Common Stock (as hereafter
defined), the Exchangeable Shares (as hereafter defined), the outstanding
Company Options (as hereafter defined) and Larco Options (as hereafter defined)
are as represented in this Agreement and remain unchanged through the Effective
Time, except for the exchange of the Exchangeable Shares which shall occur as
provided in Section 5.04 hereof.
(e) Calculation of Preliminary Aggregate Merger Consideration.
The Preliminary Aggregate Merger Consideration shall be that number of shares of
Parent Common Stock determined on the basis of the average closing price per
share of Parent Common Stock on each of the days on which Parent Common Stock is
traded beginning on the day after the date of this Agreement and ending five
business days prior to the Closing ("Closing Price") equal to the difference
between: (A)(i) if the Closing Price is $27.25 or more the Preliminary Aggregate
Merger Consideration shall be 950,000 shares of Parent Common Stock; (ii) if the
<PAGE>
Closing Price is equal to or greater than $17.7418 but less than $27.25, the
Preliminary Aggregate Merger Consideration shall be that number of shares of
Parent Common Stock equal to $25,887,500 divided by the product of: (A) the
Closing Price and (B) one plus the product of (x) .03096 and (y) the difference
between $27.25 and the Closing Price; (iii) if the Closing Price is less than
$17.7418 but greater than $15.00, the Preliminary Aggregate Merger Consideration
shall be that number of shares of Parent Common Stock equal to the quotient of
$20,000,000 divided by the Closing Price; and (iv) if the Closing Price is less
than $15.00, the Preliminary Aggregate Merger Consideration shall be 1,333,333
shares of Parent Common Stock; and (B) that number of shares of Parent Common
Stock equal to $200,000 divided by the Closing Price.
Schedule 2.01(e) hereto shows examples of the determination of
the Preliminary Aggregate Merger Consideration at various Closing Prices.
SECTION 2.02 Exchange of Certificates.
(a) Exchange of Certificates. As of the Effective Time, Parent
shall make available, for the benefit of the holders of shares of the Company
Common Stock, for exchange in accordance with this Article II, certificates
representing the shares of Parent Common Stock issuable pursuant to Section 2.01
as the Preliminary Merger Consideration in exchange for Company Common Stock.
Such shares of Parent Common Stock, together with any dividends or distributions
with respect thereto, if any, are sometimes collectively referred to herein as
the "Exchange Fund".
(b) Exchange Procedures. Prior to the Effective Time, Parent
shall mail to each holder of record of a certificate or certificates which
immediately prior to the Effective Time represented outstanding shares of the
Company Common Stock (the "Certificates") whose shares are to be converted
pursuant to Section 2.01 into the right to receive the Merger Consideration (i)
a letter of transmittal (which shall specify that delivery shall be effected,
and risk of loss and title to the Certificates shall pass, only upon delivery of
the Certificates to Parent and shall be in such form and have such other
provisions as Parent may reasonably specify) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for the Merger
Consideration. Immediately after the Effective Time, upon surrender of a
Certificate for cancellation to Parent or to such other agent or agents as may
be appointed by Parent, together with such letter of transmittal, duly executed,
the holder of such Certificate shall be entitled to receive in exchange therefor
a certificate representing that number of whole shares of Parent Common Stock
which such holder has the right to receive as the Preliminary Merger
Consideration, less the number of shares
<PAGE>
deposited into escrow pursuant to the terms of Section 12.01(i) without
interest, pursuant to the provisions of this Article II, and the Certificate so
surrendered shall forthwith be canceled. In the event of a transfer of ownership
of the Company Common Stock which is not registered in the transfer records of
the Company, a certificate representing the proper number of shares of Parent
Common Stock may be issued to a transferee if the Certificate representing such
Company Common Stock is presented to Parent, accompanied by all documents
required to evidence and effect such transfer and by evidence that any
applicable stock transfer taxes have been paid. Until surrendered as
contemplated by this Section 2.02, each Certificate shall be deemed at any time
after the Effective Time to represent only the right to receive upon such
surrender the Merger Consideration (or the cash payment in lieu of any
fractional shares of Parent Common Stock) as contemplated by this Section 2.02.
(c) Distributions with Respect to Unexchanged Shares. No
dividends or other distributions declared or made after the Effective Time with
respect to Parent Common Stock with a record date after the Effective Time shall
be paid to the holder of any unsurrendered Certificate with respect to the
shares of Parent Common Stock represented thereby until the holder of record of
such Certificate shall surrender such Certificate. Subject to the effect of
applicable law, following surrender of any such Certificate, there shall be paid
to the record holder of the certificates representing whole shares of Parent
Common Stock issued in exchange therefor, without interest, (i) at the time of
such surrender, the amount of dividends or other distributions with a record
date after the Effective Time theretofore paid with respect to such whole shares
of Parent Common Stock, and (ii) at the appropriate payment date, the amount of
dividends or other distributions with a record date after the Effective Time but
prior to surrender and a payment date subsequent to surrender payable with
respect to such whole shares of Parent Common Stock.
(d) No Further Ownership Rights in the Company Common Stock.
The Merger Consideration (including any cash paid pursuant to Section 2.02(e))
issued upon the surrender for exchange of shares of the Company Common Stock in
accordance with the terms hereof shall be deemed to have been issued in full
satisfaction of all rights pertaining to such shares of the Company Common
Stock. There shall be no further registration of transfers on the stock transfer
books of the Surviving Corporation of the shares of the Company Common Stock
which were outstanding immediately prior to the Effective Time. If, after the
Effective Time, the Certificates are presented to the Surviving Corporation for
any reason, they shall be canceled and exchanged as provided in this Article II.
<PAGE>
(e) No Fractional Shares. No certificate or scrip representing
fractional shares of Parent Common Stock shall be issued upon the surrender for
exchange of the Certificates, and such fractional share interests will not
entitle the owner thereof to vote or to any rights of a shareholder of Parent;
however, in lieu thereof, each owner who would otherwise be entitled to a
fraction of a share, will upon the surrender of the Certificates relating
thereto, be issued a check by Parent representing the cash amount, if any, equal
to such fraction multiplied by the Closing Price. No interest shall be paid on
such amount. All shares of the Company Common Stock held by a holder will be
aggregated for purposes of computations of the Merger Consideration (or cash in
lieu of fractional shares payable hereunder).
(f) Anti-Dilution Provision. If between the date of this
Agreement and the Effective Time the outstanding shares of Parent Common Stock
shall have been changed into a different number of shares or a different class,
in both cases by reason of any stock dividend, subdivision, reclassification,
recapitalization, split-up, combination or exchange of shares, Parent shall
appropriately adjust the Preliminary Aggregate Merger Consideration.
(g) No Liability. Neither Parent nor the Company shall be
liable to any holder of shares of the Company Common Stock or Parent Common
Stock, as the case may be, for such shares, Merger Consideration (or dividends
or distributions with respect thereto) delivered to a public official pursuant
to any applicable abandoned property, escheat or similar law.
SECTION 2.03 Exchange Ratio for Options. As of the Effective
Time each outstanding option (a "Company Option") under the Company's 1997 Stock
Option Plan (the "Company Plan"), to purchase Company Common Stock and each
outstanding option (a "Larco Option") under Larco's 1997 Stock Option Plan (the
"Larco Plan") to purchase Non-Voting Exchangeable Shares ("Exchangeable Shares")
shall be assumed by Parent and converted into an option to purchase shares of
Parent Common Stock, as provided below. Following the Effective Time, each
Company Option and Larco Option shall continue to have, and shall be subject to,
the same terms and conditions set forth in the Company Plan and Larco Plan,
respectively, pursuant to which such Company Option or Larco Option was granted,
as in effect immediately prior to the Effective Time, except that (i) each such
Company Option and Larco Option shall be exercisable for that number of shares
of Parent Common Stock that the holder of such Company Option or Larco Option
would have received pursuant to Section 2.01(d) hereof, after taking into
account the adjustment, if any, provided in Section 2.04 hereof, if such Company
Option had been exercised or such Larco Option had been exercised and the
<PAGE>
Exchangeable Shares so received exchanged for shares of Company Common Stock,
all immediately prior to the Effective Time, rounded, in the case of any Company
Option other than any incentive stock option and any Larco Option, up and, in
the case of any Company Option which is an incentive stock option, down to the
nearest whole share, if necessary, and (ii) the exercise price per share of such
Company Option or Larco Option, shall be equal to the aggregate exercise price
of such Company Option or Larco Option immediately prior to the Effective Time
divided by the number of shares of Parent Common Stock for which such Company
Option or Larco Option shall be exercisable as determined in accordance with the
preceding clause (i), rounded up to the next highest cent, if necessary. It is
the intention of the parties that, to the extent that any Company Option
constitutes an incentive stock option immediately prior to the Effective Time,
such Company Option shall continue to qualify as an incentive stock option to
the maximum extent permitted by Section 422 of the Code, and that the amendment
of the Company Options provided by this Agreement shall satisfy the conditions
of Section 424(a) of the Code.
SECTION 2.04 Adjustment of Merger Consideration. The Merger
Consideration shall be reduced if the consolidated stockholders equity of the
Company as of the date immediately preceding the Closing Date results in a
"Performance Deficit" as hereinafter determined.
(a) Final Financial Statement Determination. Parent shall
cause Ernst & Young LLP ("E & Y"), Parent's independent certified public
accountants, with the assistance of Deloitte & Touche LLP, the Company's
independent certified public accountants, as requested by E & Y, to prepare and
deliver to each of Parent and the Representative (as hereinafter defined) within
forty-five (45) days following the Closing, a proposed consolidated final
balance sheet of the Company and its Subsidiaries (as hereinafter defined), as
of the close of business on the day preceding the Closing Date ("Final Balance
Sheet") and profit and loss statement for the period than ended ("Final P&L
Statement"). The Final Balance Sheet and Final P&L Statement shall be prepared
by E&Y in accordance with GAAP and applying the same accounting principles and
practices as the Company has applied in the preparation of audited, consolidated
financial statements for the fiscal year ended March 31, 1998 (notwithstanding
that such Final Balance Sheet and Final P&L Statement will be for an interim
financial period) and shall not include footnote disclosure. Preparation of the
Final Balance Sheet and Final P&L Statement on this basis will mean
specifically, among other things, that accruals, for example for reserves for
doubtful accounts receivable, taxes, bonuses and health, welfare and benefit
plans, will be adjusted as if the Company's and the Subsidiaries' fiscal year
had ended as of the close of business on the day preceding the Closing Date with
<PAGE>
appropriate year-end type adjustments for reserves for doubtful accounts
receivable, tax, bonus, health, welfare and benefit plans and similar accruals.
E & Y shall audit the Final Balance Sheet and Final P&L Statement with respect
to those matters requested by Parent for the purposes of expressing an opinion
on such matters. The inventory reflected on the Final Balance Sheet shall
reflect the inventory of the Company and the Subsidiaries as of the close of
business on the day preceding the Closing Date and shall be determined based on
the physical inventory conducted before the Closing Date and observed by E & Y,
and rolled forward to the close of business on the day preceding the Closing
Date. In determining stockholders' equity in the Final Balance Sheet, all costs
and expenses of the Company and any of its Subsidiaries related to this
transaction up to $500,000 ($200,000 of which shall be a fee paid to Cardinal
Investment Company, Inc.) will be added back.
(b) Disputes. The Representative shall have thirty (30) days
from the date of its receipt of the Final Balance Sheet and Final P&L Statement
to raise any objection to the Final Balance Sheet and Final P&L Statement. In
the event the Representative disputes the Final Balance Sheet or the Final P&L
Statement, it shall notify Parent in writing (the "Dispute Notice") setting
forth the amount, nature and basis of the dispute in reasonable detail. Within
the thirty (30) days following the delivery of a Dispute Notice to Parent, the
parties shall use their best efforts to resolve such dispute. Upon their failure
to do so, Parent and the Representative shall, within ten (10) days from the end
of such 30 day period, refer the dispute to a third accounting firm, which
accounting firm shall be in the first instance Arthur Anderson LLP, or in the
event such firm is unwilling or unable to serve in such capacity, to the firm of
PriceWaterhouseCoopers LLP, or to any other firm as the parties may mutually
select. If Parent and the Representative fail to agree upon or obtain the
agreement of an accounting firm to make a final determination of the Final
Balance Sheet and Final P&L Statement, the American Arbitration Association
shall, upon the request of either Parent or the Representative, select an
independent accounting firm, which shall be one of the "Big Five" public
accounting firms with no existing or previous relationship with either Parent,
the Company, Larco or any of the Shareholders, if possible, to make such
determination.
The third accounting firm so selected shall be engaged jointly
by Parent and the Representative to decide the dispute within thirty (30) days
from its appointment. Parent and the Representative shall use their best efforts
to cooperate with such third accounting firm in providing, or providing access
to, any documents or witnesses reasonably requested by the third accounting
firm. The decision of the third accounting firm shall be final and binding upon
<PAGE>
the parties, and accordingly a judgment by a court of competent jurisdiction may
be entered in accordance therewith. Such decision shall be set forth in writing
and shall be accompanied by a copy of the Final Balance Sheet and Final P&L
Statement, modified to the extent necessary to give effect to such decision. A
copy thereof shall be delivered to each of Parent and the Representative.
(c) Performance Deficit. The performance deficit ("Performance
Deficit"), if any, shall be an amount equal to the amount by which the
consolidated stockholders equity in the Final Balance Sheet (after any disputes
are resolved pursuant to Section 2.04(b)) is less than the sum of (i) $5,008,344
and (ii) $6,149 times the number of days between April 1, 1998 and the Effective
Time.
(d) Adjustment. Any Performance Deficit shall reduce the
Preliminary Aggregate Merger Consideration by that number of shares of Parent
Common Stock determined by dividing the amount of the Performance Deficit by the
Closing Price (the "Reduction Amount"). The Reduction Amount shall not exceed
that number of shares equal to five percent (5%) of the Preliminary Aggregate
Merger Consideration. To give effect to any reduction in the Preliminary
Aggregate Merger Consideration, the GL Shareholders shall deliver written
instructions to the Escrow Agent to deliver from the Escrow Deposit to Parent
for cancellation that number of shares of Parent Common Stock equal to 0.8527957
multiplied by the Reduction Amount (together with any dividends or other
distributions in respect thereof) and such reduction shall be borne by all of
the GL Shareholders in proportion to the percentage of outstanding shares of
Company Common Stock owned by each GL Shareholder immediately prior to the
Effective Time. The holders of the Company Options and the Larco Options shall
have the number of shares of Parent Common Stock to be received upon exercise of
such options reduced as provided in Section 2.03.
(e) Fees and Expenses. The fees and expenses of E & Y
hereunder shall be borne by Parent. The fees and expenses of Deloitte & Touche
LLP hereunder shall be borne by the Company. The fees and expenses of the third
accounting firm in connection with the resolution of disputes above shall be
equally shared between Parent on the one hand and Shareholders on the other
hand.
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent as follows:
SECTION 3.01 Organization. The Company and each Subsidiary (as
hereinafter defined) is a corporation duly organized, validly existing and in
good standing under the jurisdiction of its incorporation and has all requisite
power and authority, corporate and other, and all necessary governmental
approvals to own, lease and operate its properties and to carry on its business
as now being conducted, except where the failure to be so organized, existing
and in good standing or to have such power, authority, and governmental
approvals would not have a material adverse effect on the Company or such
Subsidiary, as the case may be. The Company and each Subsidiary is duly
qualified or licensed to do business and in good standing in each jurisdiction
in which the property owned, leased or operated by it or the nature of the
business conducted by it makes such qualification or licensing necessary, except
where the failure to be so duly qualified or licensed and in good standing would
not have a material adverse effect. As used in this Agreement, any reference to
any event, change or effect being "material" or being "materially adverse" to,
or having a "material adverse effect" on, or with respect to an entity means
such event, change or effect is materially adverse to the condition (financial
or other), properties, assets (including intangible assets), liabilities
(including contingent liabilities), businesses, business prospects or results of
operations of such entity and its direct and indirect subsidiaries taken as a
whole. Gaffey, Inc., an Oklahoma corporation, Gaffey, Inc. of Texas, a Texas
corporation, Handling Systems and Conveyors, Inc., a Delaware corporation,
Larco, an Ontario corporation and Larco Material Handling Inc., an Ohio
corporation are sometimes referred to in this Agreement individually as a
"Subsidiary" and collectively as the "Subsidiaries." The Subsidiaries, excluding
Larco, are sometimes referred to in this Agreement as the "US Subsidiaries".
SECTION 3.02 Capital Stock; Subsidiaries. Schedule 3.02
accurately sets forth with respect to the Company and each Subsidiary, its
authorized capital stock, its capital stock issued and outstanding and its
capital stock held in treasury. All the outstanding shares of the Company's and
each Subsidiary's capital stock are duly authorized, validly issued, fully paid
and non-assessable and, except as disclosed in Schedule 3.02, free of any
preemptive rights with respect thereto. Schedule 3.02 hereto sets forth a
complete and accurate list showing the record and beneficial ownership of the
outstanding capital stock of the Company and each Subsidiary. There are no
bonds, debentures, notes or other indebtedness having the right to vote (or
<PAGE>
convertible into securities having the right to vote) on any matters on which
shareholders of the Company or any Subsidiary may vote ("Voting Debt") issued or
outstanding. Except as set forth on Schedule 3.02, there are no options,
warrants, calls, subscriptions or other rights or other agreements or
commitments of any character relating to the issued or unissued capital stock of
the Company or any Subsidiary or obligating the Company or any Subsidiary to
issue, transfer or sell or cause to be issued, transferred or sold any shares of
capital stock or Voting Debt of, or other equity interests in, the Company or
any Subsidiary or securities convertible into or exchangeable for such shares or
equity interests or obligating the Company or any Subsidiary to grant, extend or
enter into any such option, warrant, call, subscription or other right,
agreement or commitment. Schedule 3.02 lists the holders of all outstanding
options, the number of shares of capital stock of the Company or any Subsidiary
subject to such options, the dates when such options are exercisable, the
exercise price for such options and whether such options are incentive stock
options within the meaning of Section 422 of the Code. Except as disclosed in
Schedule 3.02, there are no outstanding contractual obligations of the Company
or any Subsidiary to repurchase, redeem or otherwise acquire any shares of
capital stock of the Company or any Subsidiary. Except for the Subsidiaries, the
Company does not have any ownership interest, direct or indirect, in any other
business organization or entity. The various Schedules referred to in Article
III are collectively referred to as the "Disclosure Schedules."
SECTION 3.03 Authority. The Company, and holders of Company
Options and Larco Options and Shareholders have the requisite power and
authority, corporate and other, to execute and deliver this Agreement and the
other agreements contemplated hereby (the "Related Agreements") and to
consummate the transactions contemplated hereby and thereby (other than, with
respect to the Merger, the approval and adoption of this Agreement by the
holders of a majority of the outstanding shares of the Company Common Stock).
The execution, delivery and performance of this Agreement and the Related
Agreements and the consummation of the Merger and of the other transactions
contemplated hereby and thereby have been duly and effectively authorized by all
necessary corporate action on the part of the Company and each Subsidiary and no
other corporate proceedings on the part of the Company or any Subsidiary are
necessary to authorize this Agreement or the Related Agreements or to consummate
the transactions contemplated hereby and thereby (other than, with respect to
the Merger, the approval and adoption of this Agreement by the holders of a
majority of the outstanding shares of the Company Common Stock). This Agreement
and the Related Agreements have been duly executed and delivered by the Company,
the Shareholders, the holders of Company Options and Larco Options, as the case
<PAGE>
may be, and constitute the valid and binding obligations of the Company, and the
Shareholders, and the holders of Company Options and Larco Options, enforceable
against each of them in accordance with their respective terms, subject to
bankruptcy, insolvency, moratorium and other similar laws relating to creditors'
rights and the discretion of courts to award equitable relief ("Enforceability
Qualifications").
SECTION 3.04 No Violation. Except as set forth in Schedule
3.04 or as contemplated by Section 3.05, the execution and delivery of this
Agreement and the Related Agreements and the consummation of the transactions
contemplated hereby and thereby will not conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any obligation or the loss of a material benefit under, or the creation of a
lien, pledge, security interest or other encumbrance on the Company's or any
Subsidiary's properties or assets (any such conflict, violation, default, right
of termination, cancellation or acceleration, loss or creation, shall be
referred to as a "Violation"), pursuant to (i) any provision of the Certificate
of Incorporation, as amended, or By-laws, as amended, of the Company, or the
certificate of incorporation or other charter document, as the case may be, or
By-laws, as amended, of any Subsidiary (ii) any provision of any loan or credit
agreement, note, mortgage, indenture, lease, Benefit Plans (as defined in
Section 3.18) or other agreement, obligation, instrument, permit, concession,
franchise or license, or (iii) any judgment, order, decree, statute, law,
ordinance, rule, promulgation or regulation ("Applicable Laws") applicable to
the Company, any Subsidiary, or any of the Shareholders or their respective
properties or assets, which Violation, in the case of each of clauses (ii) and
(iii), would have a material adverse effect on the Company, any Subsidiary, or
the consummation of the transactions contemplated hereby.
SECTION 3.05 Consents and Approvals. No consent, approval,
order or authorization of, or registration, declaration or filing with any
court, administrative or regulatory agency, tribunal or commission or other
governmental agency, authority or instrumentality, federal, state, provincial,
county or municipal, domestic or foreign (a "Governmental Entity"), is required
by or with respect to the Company, any Subsidiary, any of the Shareholders or
any of the holders of Company Options or Larco Options in connection with the
execution and delivery of this Agreement and the Related Agreements or the
consummation by the Company, any Subsidiary, the Shareholders or any of the
holders of Company Options or Larco Options of the transactions contemplated
hereby and thereby, the failure to obtain which would have a material adverse
<PAGE>
effect on the Company or any Subsidiary or the consummation of the transactions
contemplated hereby, except for:
(i) the filing of a pre-merger notification report by the
Company under the HSR Act,
(ii) the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware in accordance with Section 251 of
the DGCL and the filing of the appropriate documents with the relevant
authorities of other states in which the Company is qualified to transact
business, and
(iii) such filings, authorization orders and approvals as
may be required of state and local governmental authorities (the "Local
Approvals") which are specified in Schedule 3.05 hereto.
SECTION 3.06 Financial Statements. The audited consolidated
balance sheet of the Company and the Subsidiaries as at March 31, 1998, and the
related consolidated statement of income, changes in stockholder's equity and
cash flows for the fiscal year then ended (including the notes thereto) and the
unaudited consolidated balance sheet of the Company and the Subsidiaries as at
December 31, 1998 and the related unaudited statement of income for the nine (9)
month period then ended attached hereto as Schedule 3.06 present fairly the
financial position of such entities as of such dates and the results of their
operations and changes in their financial position for such periods, and have
been prepared in conformity with generally accepted accounting principles
applied on a basis consistent with that of similar periods for preceding years
except that the unaudited consolidated balance sheet and statement of income
will not have the usual year end adjustments and notes. Copies of all such
financial statements are attached to Schedule 3.06 hereto. The Balance Sheet of
the Company as of March 31, 1998 is referred to herein as the "Base Balance
Sheet", and March 31, 1998 is referred to herein as the "Base Balance Sheet
Date". The books and records of the Company and the Subsidiaries accurately
reflect the basis for the financial condition and results of operations of the
Company and the Subsidiaries as set forth in the financial statements attached
as Schedule 3.06 hereto. The Company does not believe that it and its
Subsidiaries will experience materially adverse financial performance for the
quarter beginning on January 1, 1999.
SECTION 3.07 Absence of Certain Changes or Events. Since the
Base Balance Sheet Date except as specified in Schedule 3.07 hereto, neither the
Company nor any Subsidiary has (i) undergone any change in its condition
(financial or other), properties, assets, liabilities, business, operations or
prospects except changes in the ordinary and usual course of its business and
<PAGE>
consistent with its past practice and which have not been, either in any case or
in the aggregate, materially adverse to its condition (financial or other),
properties, assets, liabilities, business, operations or prospects; (ii)
declared, set aside or paid any dividend or other distribution in respect of its
capital stock or made any direct or indirect redemption, purchase or other
acquisition of any shares of its capital stock or made any payment to any of its
shareholders except for employment compensation in the ordinary and usual course
of business and consistent with past practice; (iii) issued or sold any shares
of its capital stock or any options, warrants or other rights to purchase any
such shares or any securities convertible into or exchangeable for such shares
or taken any action to reclassify or recapitalize or split up its capital stock;
(iv) mortgaged, pledged or subjected to any lien, lease, security interest,
pledge, liability, claim, encumbrance or other restriction ("Liens"), any of its
properties or assets; (v) acquired or disposed of any interest in any material
asset or material property except the purchase of materials and supplies and the
sale of inventory in the ordinary and usual course of its business and
consistent with its past practice; (vi) forgiven or canceled any debt or claim,
waived any right, or, except in the ordinary and usual course of its business
and consistent with its past practice, incurred or paid any liability or
obligation; (vii) adopted or amended any profit sharing plan, agreement,
arrangement or practice for the benefit of any director, officer or employee or
changed the compensation (including bonuses) to be paid to any director,
officer, or employee; (viii) suffered any damage, destruction or loss (whether
or not covered by insurance) which has a material adverse effect on its
condition (financial or other), properties, assets, business, operations or
prospects; (ix) amended or terminated any material contract, agreement, or
lease; (x) experienced any material labor difficulty or loss of employees or
customers; (xi) entered into any collective bargaining agreement; (xii) sold or
granted or transferred to any party or parties any contract or license, or
granted an option to acquire a license, to manufacture or sell any of the
products of the Company or any Subsidiary, or to use any trademark, service
mark, trade name, copyright, patent or any pending application for any
foregoing, or any trade secret or know-how of the Company or any Subsidiary;
(xiii) amalgamated, merged, consolidated or entered into any binding share
exchange or other business combination, or acquired any stock, equity interest
or business of any other person or undertaken a corporate reorganization; (xiv)
changed the accounting methods or practices followed by it; (xv) without
limiting the generality of any of the foregoing, entered into any transaction
except in the ordinary and usual course of its business and consistent with its
past practice; or (xvi) agreed to, permitted or suffered any of the acts,
transactions or other things described in Subsections (i) through (xv) of this
Section 3.07.
<PAGE>
SECTION 3.08 Liabilities. Neither the Company nor any
Subsidiary has any liabilities or obligations of any nature, whether accrued,
absolute, contingent or otherwise, except (i) as set forth in the unaudited
consolidated balance sheet of the Company and its Subsidiaries as December 31,
1998 included in Schedule 3.06 or identified as such in Schedule 3.08 hereto;
and (ii) those liabilities and obligations incurred since December 31, 1998 in
the ordinary and usual course of its business and consistent, in type and
amount, with its past practice and experience.
SECTION 3.09 Taxes.
(A) Company and US Subsidiaries:
Each of the Company and the US Subsidiaries (including any
predecessors) has timely filed when due all Tax returns required to be filed by
it and has paid, or has made adequate provision for or set up in accordance with
generally accepted accounting principles an adequate accrual or reserve for the
payment of, all Taxes required to be paid in respect of all periods for which
returns have been filed or are due (whether or not shown as being due on any Tax
returns), and has established an adequate accrual or reserve for the payment of
all Taxes payable in respect of any period for which no return has been filed or
is due, and the Base Balance Sheet reflects in accordance with generally
accepted accounting principles a reserve for all Taxes payable by the Company or
any of the US Subsidiaries accrued through the Base Balance Sheet Date. Except
as set forth in Schedule 3.09, no material deficiencies for Taxes have been
proposed, asserted in writing or assessed against the Company or any of the US
Subsidiaries, and no audit of any of the Tax returns of the Company or any of
the US Subsidiaries is currently being conducted by any Taxing authority. Copies
of all Tax returns required to be filed by the Company and each of the
Subsidiaries for each of the last five years, together with all schedules and
attachments thereto, have been delivered by the Company to Parent. Neither the
Company nor any of the US Subsidiaries is a party to, is bound by, and has any
obligation under any Tax sharing or similar agreement. For the purpose of this
Agreement, the term "Tax" (including, with correlative meaning, the terms
"Taxes", "Taxing", and "Taxable") shall include, whether disputed or not, all
Federal, state, local, provincial, municipal and foreign income, profits,
franchise, gross receipts, payroll, sales, employment, use, real and personal
property, capital gains, transfer, recording, license, value-added, withholding,
excise, goods and services, capital, alternative, net worth and employer health
and other taxes, duties, charges, fees, levies, imposts or similar charges in
the nature of a tax including Canada Pension Plan and provincial pension plan
contributions, unemployment insurance payments and workers' compensation
<PAGE>
premiums, together with any installments with respect thereto or assessments of
any nature whatsoever (whether payable directly or by withholding), together
with any and all information reporting and estimated Tax, interest, fines and
penalties and additions to Tax imposed with respect to such amounts and any
obligations in respect thereof under any Tax sharing, Tax allocation, Tax
indemnity or similar agreement as well as any obligations arising pursuant to
Treasury Regulation Section 1.1.502-6 or comparable state, local or foreign
provision.
(B) Larco:
(a) Tax Filings. Larco has prepared and filed
on time with all appropriate governmental bodies all Tax returns, declarations,
remittances, information returns, reports and other documents of every nature
required to be filed by or on behalf of Larco in respect of any Taxes or in
respect of any other provision in any domestic or foreign federal, provincial,
municipal, state, territorial or other taxing statute for all fiscal periods
ending prior to the date hereof and will continue to do so in respect of any
fiscal period ending on or before the Closing Date. All such returns,
declarations, remittances, information returns, reports and other documents are
correct and complete in all material respects, and no material fact has been
omitted therefrom. No extension of time in which to file any such returns,
declarations, remittances, information returns, reports or other documents is in
effect. All Taxes shown on all such returns, or on any assessments or
reassessments in respect of any such returns have been paid in full.
(b) Taxes Paid. Larco has paid in full all Taxes
required to be paid on or prior to the date hereof and has made adequate
provision in the Base Balance Sheet in accordance with generally accepted
accounting principles for the payment of all Taxes in respect of all fiscal
periods ending on or before the Base Balance Sheet Date. Larco will show as a
liability in the Final Balance Sheet all Taxes payable in respect of all fiscal
periods ending on or before the Closing Date.
(c) Reassessments of Taxes. There are no
reassessments of Larco's Taxes that have been issued and are outstanding and
there are no outstanding issues which have been raised and communicated to Larco
by any governmental body for any taxation year in respect of which a Tax return
of Larco has been audited. No governmental body has challenged, disputed or
questioned Larco in respect of Taxes or of any returns, filings or other reports
filed under any statute providing for Taxes. Larco is not negotiating any draft
assessment or reassessment with any governmental body. The Company is not aware
of any contingent liabilities for Taxes or any grounds for an assessment or
<PAGE>
reassessment of Larco, including, without limitation, unreported benefits
conferred on any shareholder of Larco, other than as disclosed in the Base
Balance Sheet. Neither Larco nor the Company has received any indication from
any governmental body that an assessment or reassessment of Larco is proposed in
respect of any Taxes, regardless of its merits. Larco has not executed or filed
with any governmental body any agreement or waiver extending the period for
assessment, reassessment or collection of any Taxes.
(d) Withholdings and Remittances. Larco has withheld
from each payment made to any of its present or former employees, officers and
directors, and to all persons who are non-residents of Canada for the purposes
of the Income Tax Act (Canada) all amounts required by law to be withheld, and
furthermore, has remitted such withheld amounts within the prescribed periods to
the appropriate governmental body. Larco has remitted all Canada Pension Plan
contributions, provincial pension plan contributions, unemployment insurance
premiums, employer health taxes and other Taxes payable by it in respect of its
employees and has remitted such amounts to the proper governmental body within
the time required under the applicable legislation. Larco has charged, collected
and remitted on a timely basis all Taxes as required under applicable
legislation on any sale, supply or delivery whatsoever, made by Larco.
(e) Depreciable Property. At the Closing Date,
for purposes of the Income Tax Act (Canada), Larco will own depreciable property
of the prescribed classes and having undepreciated capital costs as set out in
Schedule 3.09.
(f) Capital Gains. Larco will not at any time
be deemed to have a capital gain pursuant to subsection 80.03(2) of the Income
Tax Act (Canada) as a result of any transaction or event taking place in any
taxation year ending on or before the Closing Date.
SECTION 3.10 Title to and Condition of Real Estate.
(a) All of the real property presently owned,
occupied or used by the Company or any Subsidiary or in which the Company or any
Subsidiary otherwise has an interest and the owners thereof are identified in
Schedule 3.10 hereto (the "Premises"). Except as set forth in the Environmental
Reports (as hereinafter defined), the Premises, all improvements located
thereon, and the use thereof, comply in all material respects with all zoning,
land use, environmental, building, health, safety and fire laws, by-laws, codes,
permits, licenses and certificates, rules, orders, ordinances, regulations and
all restrictions and conditions applicable to the Premises or the operations
conducted by the Company or any Subsidiary thereon. To the best knowledge of the
<PAGE>
Company there are no actions, suits, proceedings or investigations pending or
threatened before any federal, state, provincial, foreign, municipal, regulatory
or administrative authority affecting the Premises. The Company, any of the
Subsidiaries and, to the Company's knowledge, the owners of the Leased Premises
(as hereinafter defined) are not in default with respect to any order, judgment,
injunction or decree of any court or other governmental authority with respect
to the Premises. The improvements located on the Premises are in good condition
and are free from all latent and patent structural defects. To the Company's
knowledge, all mechanical systems serving the Premises, including, but not
limited to the heating, ventilation, air conditioning, plumbing and electrical
systems, are in good working order. To the Company's knowledge, the Premises
have adequate access to public streets. The improvements located on the Premises
do not contain asbestos of any kind whatsoever, or urea formaldehyde foam
insulation. To the Company's knowledge, all water, sewer, gas, electric,
telephone and drainage facilities and all other utilities required for the use
and operations of the Company and each Subsidiary at the Premises are available,
and such utilities enter the boundaries of such facilities through adjoining
public streets or easement rights-of-way. To the best of the Company's
knowledge, such public utilities are all connected pursuant to valid permits,
are all in good working order and are adequate to service the operations of the
Premises as currently conducted. Except as may be set forth in the title
policies described in Schedule 3.10-2, neither the Company nor any Subsidiary
has any knowledge of any pending or threatened assessments for municipal
improvements which may affect or become a Lien on the Premises.
Schedule 3.10-1 hereto sets forth the legal description of the
Premises owned by the Company or any of the Subsidiaries ("Owned Premises"). All
loan and fee title insurance policies, title opinions, title searches and
surveys relating to the Owned Premises in the Company's possession have been
delivered to Parent. The Company or a Subsidiary, as the case may be, has good,
insurable and indefeasible fee simple title to the Owned Premises, free and
clear of all mortgages, Liens, easements, covenants or rights-of-way of any
nature whatsoever, except mortgages, Liens, easements, covenants, rights-of-way
and other encumbrances or restrictions identified on Schedule 3.10-2, hereto
("Permitted Encumbrances"), and zoning restrictions, none of which prohibit or
in any material respect interfere with the operations of the Company or any
Subsidiary on the Owned Premises or materially detract from its value or
marketability. Except as may be set forth in the title policies described in
Schedule 3.10-2, all structures and other improvements on the Owned Premises are
within the lot lines and do not encroach on the properties of any other person.
Except as otherwise disclosed in the environmental reports identified in
Schedule 3.11 ("Environmental Reports"), no portion of the Owned Premises is
<PAGE>
located in a 100 year flood plain, flood hazard area or designated conservation
or wetlands area, is in an area designated or zoned as hazardous or
environmentally significant or sensitive in any official plan, zoning by-law or
other planning instrument or is listed on the National Priorities List, CERCLIS
or any similar listing of contaminated sites. Except as may be set forth in the
title policies described in Schedule 3.10-2, neither the Company nor any
Subsidiary has received any written or, to the Company's knowledge, oral notice
of assessments for public improvements against the Owned Premises (or any
portion thereof) or any written or oral notice or order by any Governmental
Entity any insurance company which has issued a policy with respect to any of
the Owned Premises or any board of fire underwriters or other body exercising
similar functions that (A) relates to violations of building, safety or fire
ordinances or regulations, (B) claims any defect or deficiency with respect to
any of the Owned Premises or (C) requests the performance of any repairs,
alterations or other work to or in any of the Owned Premises or in the streets
bounding the same. There is no pending condemnation, expropriation, eminent
domain or similar proceeding against the Company or any Subsidiary affecting all
or any portion of the Owned Premises. Except as set forth in Schedule 3.10-2,
none of the Owned Premises is subject to any leases (oral or written).
(b) Any of the Premises not owned by the Company or any
Subsidiary ("Leased Premises") are leased to the Company or its Subsidiary
pursuant to leases ("Leases") that are valid and binding agreements, enforceable
in accordance with their respective terms subject to the Enforceability
Qualifications and are in full force and effect. Schedule 3.10-3 provides a
summary of the material terms of each Lease. The Company and each of the
Subsidiaries has performed all material obligations required to be performed by
them to date under the Leases and are not in material breach in any respect
thereunder, and there has been no event which, with the giving of notice or the
lapse of time or both, would become a material breach thereunder by the Company
or a Subsidiary. To the knowledge of the Company, no other party to any of the
Leases is in material breach thereunder. Neither the Company nor any Subsidiary
has received any notice of default under any of the Leases that have not been
cured, and all rental and other payments due under each of the Leases have been
fully paid. To the knowledge of the Company, except as shown in Schedule 3.10-3,
none of the Leased Premises is subject to any Lien, easement, right-of-way,
building or use restriction, variance or reservation that materially interferes
with or impairs the use thereof in the usual and normal conduct of the business
and operations of the Company or any of the Subsidiaries.
<PAGE>
SECTION 3.11 Environmental Compliance.
(a) Definition of "Environmental Laws". As used in this
Agreement, the term "Environmental Laws" shall mean any and all applicable laws,
statutes, codes, rules, regulations, ordinances, by-laws, permits, directives,
orders, codes of practice and judicial and administrative law decisions
applicable to, affecting or relating to the protection, preservation or
remediation of the environment or public health enacted, issued, promulgated,
published, passed, made, decided or required by any United States of America
federal, state, county or municipal or any Canadian federal, provincial,
regional or municipal legislative, executive, judicial or regulatory authority,
as the case may be. Because some of the Premises are located in the United
States of America, while other of the Premises are located in Canada, it is the
intent of the parties to this Agreement that the term "Environmental Laws" shall
include any and all such applicable laws in any of the jurisdictions of the
United States of America or Canada in which the Premises are located, including,
but not limited to, the following: (x) with reference to the laws of the United
States of America, (1) Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended by the Superfund Amendments and
Reauthorization Act of 1986, 42 USCA 9601 ET SEQ., (2) Solid Waste Disposal Act,
as amended by the Resource Conservation and Recovery Act of 1976, as amended by
the Hazardous and Solid Waste Amendments of 1984, 42 USCA 6901 ET SEQ., (3)
Federal Water Pollution Control Act of 1972, as amended by the Clean Water Act
of 1977, as amended, 33 USCA 1251 ET SEQ., (4) Toxic Substances Control Act of
1976, as amended, 15 USCA 2601 ET SEQ., (5) Emergency Planning and Community
Right-To-Know Act of 1986, 42 USCA 11001 ET SEQ., (6) Clean Air Act of 1966, as
amended by the Clean Air Act Amendments of 1990, 42 USCA 7401 ET SEQ., (7)
National Environmental Policy Act of 1970, as amended, 42 USCA 4321 ET SEQ., (8)
Rivers and Harbors Act of 1899, as amended, 33 USCA 401 ET seq., (9) Endangered
Species Act of 1973, as amended, 16 USCA 1531 ET SEQ., (10) Occupational Safety
and Health Act of 1970, as amended, 29 USCA 651 ET SEQ., (11) Safe Drinking
Water Act of 1974, as amended, 42 USCA 300(f) ET SEQ., (12) Pollution Prevention
Act of 1990, 42 USCA 13101 ET SEQ., (13) Oil Pollution Act of 1990, 33 USCA 2701
ET SEQ., and similar state and municipal laws in the jurisdictions in which the
Premises are located; and (y) with reference to the laws of Canada, (1) Canadian
Environmental Protection Act, R.S.C. 1985, c.C-16, as amended, (2) Canadian
Environmental Assessment Act, S.C. 1992, c.37, as amended, (3) Transportation of
Dangerous Goods Act, 1992, S.C. 1992, c.34, as amended, (4) Fisheries Act,
R.S.C. 1995, c.F-14, as amended, (5) Environmental Protection Act, R.S.O. 1990,
c.E.19, (6) Ontario Water Resources Act, R.S.O. 1990, c.O.40, (7) Dangerous
Goods Transportation Act, R.S.O. 1990, c.D.1, (8) Health Protection and
Promotion Act, R.S.O. 1990, c.H.7, (9) Occupational Health and Safety Act,
<PAGE>
R.S.O. 1990, c.O.1, (10) Public Health Act, R.S.O. 1980, c. 409; all as amended
from time to time. The term "Environmental Laws" shall also include any rules,
regulations, ordinances, permits, by-laws, orders, directives, and judicial and
administrative law decisions enacted, issued, promulgated, published, decided or
required by or under the laws referred to in this Section 3.11(a), as well as
any similar laws applicable to, affecting or relating to the protection,
preservation or remediation of the environment or public health in the
jurisdictions in which the Premises are located.
(b) Definition of "Environmental Permits". As used in this
Agreement, the terms "Environmental Permits" shall mean any and all permits,
licenses, certificates, approvals, authorizations, orders, directives,
requirements, consents or registrations required by any Environmental Laws in
connection with the ownership, construction, equipping, use and/or operation of
the business of the Company and the Subsidiaries or the Premises, for the
storage, treatment, generation, transportation, processing, handling,
production, recycling or disposal of Hazardous Substances or the sale, transfer
or conveyance of the Premises.
(c) Definition of "Hazardous Substance". As used in this
Agreement, the term "Hazardous Substance" shall mean, without limitation, any
flammable, explosive or radioactive materials, radon, asbestos, urea
formaldehyde foam insulation polychlorinated biphenyls, petroleum, petroleum
constituents, petroleum products, methane, hazardous materials, hazardous
wastes, contaminants, hazardous or toxic substances or related materials,
pollutants, and toxic pollutants, as defined, prescribed, regulated or
controlled in any Environmental Law including without limitation the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended (42 USCA Sections 9601, ET SEQ.), the Hazardous Materials Transportation
Act, as amended (49 USCA 1801, ET SEQ., the Solid Waste Disposal Act as amended
by the Resource Conservation and Recovery Act, (42 USCA Section 6901, ET SEQ.),
the Toxic Substances Control Act, as amended (15 USCA Sections 2601, ET SEQ.),
the Federal Waters Pollution Control Act, as amended, (33 USCA Sections 1251 ET
SEQ.), for the Premises located in Canada, the Canadian Environmental Protection
Act, R.S.C. 1988, c.15.3, and similar state, provisional, regional and municipal
laws in the jurisdictions in which the Premises are located, as well as any
rules, regulations, ordinances, permits and judicial and administrative law
decisions issued, promulgated, published, decided or required thereunder by any
United States of America federal, state, county or municipal or any Canadian
federal, provincial, regional or municipal executive, judicial or regulatory
authority.
<PAGE>
(d) Definition of "Release". As used in this Agreement, the
term "Release" shall have the same meaning as given to that term in the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended (42 USCA Section 9601, ET SEQ.), and the regulations promulgated
thereunder.
(e) Definition of "Customer". As used in this Agreement, the
term "Customer" shall mean those individuals, corporations, partnerships or
other entities or organizations with whom the Company or any Subsidiary enters
into contractual arrangements and for whom the Company performs services on the
Customers' Properties pursuant to or in connection with any such contractual
arrangements.
(f) Definition of "Customers' Properties". As used in this
Agreement, the term "Customers' Properties" shall mean any real estate
(including, without limitation, any improvements thereon) owned, operated,
leased or otherwise under the control of the Company's or any Subsidiaries'
Customers.
(g) Except as otherwise disclosed on Schedule 3.11 or in the
Environmental Reports:
(i) Neither the Premises nor, to the Company's
knowledge, any property adjacent to or within the
immediate vicinity of the Premises is being or has
been used in violation of any Environmental Laws for
the storage, treatment, generation, transportation,
processing, handling, production or disposal of any
Hazardous Substance or as a landfill or other waste
management or disposal site or for military purposes.
(ii) Underground storage tanks are not and have not
been located on the Owned Premises nor, to the
Company's knowledge, on the Leased Premises.
(iii) The soil, subsoil, bedrock, surface water and
groundwater of the Owned Premises and, to the
Company's knowledge, the Leased Premises, are free of
Hazardous Substances, other than any such substances
that occur naturally or are in compliance with
Environmental Laws.
(iv) There has been no Release or threat of a Release
of any Hazardous Substance on, at, under or from the
Owned Premises or, to the best of the Company's
knowledge, the Leased Premises or any property
adjacent to or within the immediate vicinity of the
Premises which through soil, subsoil, bedrock,
<PAGE>
surface water, groundwater or airborne migration
could come to be located on, at, in or under the
Premises. The Company has not received any form of
notice or inquiry from any federal, provincial, state
or local Governmental Entity or authority, any prior
owner, operator, tenant, subtenant, licensee or
occupant of the Premises or any owner or operator of
property adjacent to or within the immediate vicinity
of the Premises or any other person with regard to a
Release or the threat of a Release of any Hazardous
Substance on, at or from the Premises or any property
adjacent to or within the immediate vicinity of the
Premises. The Company has not received any form of
notice or inquiry from any Customer with regard to a
Release or a threat of a Release of any Hazardous
Substance on, at, under or from any of the Customers'
Properties resulting or allegedly resulting from
activities undertaken thereon by the Company or any
Subsidiary.
(v) All Environmental Permits necessary for the
construction, equipping, ownership, use or operation
of the business of the Company or any of the
Subsidiaries or the Premises by the Company and the
Subsidiaries have been obtained and are in full force
and effect and the Company and each of the
Subsidiaries is in material compliance therewith.
(vi) No event has occurred with respect to the
operations of the Company or any Subsidiary or the
Owned Premises or, to the Company's knowledge, the
Leased Premises which, with the passage of time or
the giving of notice, or the failure to give notice,
would constitute a violation of or non-compliance
with, any applicable Environmental Laws or
Environmental Permits.
(vii) All wastes generated, stored, handled,
transported, treated, recycled or disposed of by the
Company and each of the Subsidiaries on, at, in or
under the Premises have been generated, stored,
handled, transported, treated, recycled or disposed
of, as the case may be, in strict compliance with
Environmental Laws.
(viii) To the best of Company's knowledge, no act or
omission of the Company or the Subsidiaries at, upon
<PAGE>
or in any of the Customers' Properties has been or is
in violation of any applicable Environmental Law.
(ix) There are no agreements, consent orders,
decrees, judgments, licenses or permit conditions or
other orders or directives of any federal,
provincial, state or local court, administrative
tribunal, officers, inspectors, or other official or
Governmental Entity relating to the past, present or
future construction, equipping, ownership, use,
operation, sale, transfer or conveyance of the
business of the Company or the Premises which require
any change in the present condition of the business
of the Company or the Premises or any notice, work,
repairs, construction, containment, clean up,
investigations, studies, removal or remedial action
or capital expenditures in order for the business of
the Company or the Premises to be in compliance with
any Environmental Laws or Environmental Permits.
(x) There are no charges, prosecutions, actions,
suits, claims or proceedings, pending or, to the
Company's knowledge, threatened against the Company
or any Subsidiary, which could cause the incurrence
of expenses or costs of any name or description or
which seek money damages, injunctive relief, remedial
action or remedy that arise out of, relate to or
result from (1) environmental conditions at, on,
under or in the vicinity of the Premises, (2) a
violation or alleged violation of any Environmental
Laws or non-compliance or alleged non-compliance with
any Environmental Permits, (3) the presence of any
Hazardous Substance or a Release or the threat of a
release of any Hazardous Substance on, at or from the
Premises or property adjacent to or within the
immediate vicinity of the Premises or (4) human
exposure to any Hazardous Substance, noises,
vibrations or nuisances of whatever kind to the
extent the same arise from the businesses of the
Company or any Subsidiary or the condition of the
Premises or the acquisition, construction, equipping,
ownership, use, operation, sale, transfer or
conveyance thereof, or (5) to the knowledge of the
Company, the Release, threat of Release or generation
of any Hazardous Substance at, on, in or from any of
the Customers' Properties resulting from activities
undertaken thereon by the Company or the
Subsidiaries.
<PAGE>
SECTION 3.12 Title to and Condition of Properties and Assets.
The material tangible assets owned or leased (which shall be designated as
leased on Schedule 3.12) by the Company or any Subsidiary including, without
limitation, all machinery, equipment, fixtures, furniture, office equipment,
computer equipment, tooling and vehicles are listed or described in the
Disclosure Schedules (the "Fixed Assets"). The Company and each Subsidiary has
good and marketable title to all of the properties and assets reflected in the
Base Balance Sheet, those listed in Schedule 3.12 hereto, and those used by the
Company or any Subsidiary, subject to no Lien other than the Liens disclosed in
the Disclosure Schedules. Except as otherwise specified in Schedule 3.12 hereto,
the Fixed Assets are, in all material respects, in good condition and repair for
their current use, reasonable wear and tear excepted and subject to replacement
in the ordinary course of business; have been properly maintained, and conform
with all Applicable Laws; and the Company does not know of any pending or
threatened change of any Applicable Laws or zoning or other law, standard or
requirement with which any of such property would not conform.
SECTION 3.13 Proprietary Rights; Date Calculation. Schedule
3.13 hereto contains a brief description of all patents, trademarks, service
marks, trade names, copyrights (including any pending applications and
registrations for any of the foregoing), inventions, trade secrets and any other
material intellectual or intangible rights owned or used under license by the
Company or any Subsidiary other than standard off-the-shelf third party software
(collectively referred to as "Proprietary Rights"). The Proprietary Rights are
not subject to any outstanding licenses, liens, encumbrances, claims or other
restrictions or rights of others and there are no pending or threatened
challenges against the Company or a Subsidiary with respect to any of the
Proprietary Rights. Schedule 3.13 hereto also includes a complete list of all
inventions for which patent applications have not yet been filed but as to which
the Company or any Subsidiary may hereafter file patent applications. The
business of the Company and each of the Subsidiaries as heretofore conducted
does not infringe or constitute, and has not infringed or constituted, an
unlawful invasion of any rights of any person and no notice of any infringement
or invasion has been received by the Company or any Subsidiary. The Company and
each Subsidiary has the right to use all of the Proprietary Rights, including
without limitation, formulae, trade secrets, customer lists, processes and
know-how used in connection with the conduct of its business and no other
intellectual property is used or necessary to be used in the conduct of its
business. Neither the Company nor any Subsidiary has sold, licensed or otherwise
disposed of any Proprietary Rights to any person or agreed to indemnify any
person for patent, trademark or copyright infringement. Neither the Company nor
any Subsidiary has any obligation to pay any royalty, fee or other compensation
to any person in respect of the Proprietary Rights.
<PAGE>
The computer systems and software used by the Company or the
Subsidiaries and any other equipment or products used by the Company or the
Subsidiaries that use software or embedded chips (the "Company's Equipment")
will accurately accept, create, manipulate, sort, store, output and otherwise
process calendar-related data from, into and between the twentieth and
twenty-first centuries and will operate before, during and after the year 2000
without error relating to calendar-related or "date" data (including data
received from or passed to other computer systems or programs), including
without limitation error that relates to, or is the result of, calendar-related
data that represents or refers to different centuries or to more than one
century or that reflects the existence of a leap year. Without limiting the
generality of the foregoing, the Company's Equipment will not, because of
calendar-related or "date" data (including without limitation data that
represents or refers to different centuries or to more than one century or that
reflects the existence of a leap year), cease prematurely or abnormally to
function before completing its intended operation or generate invalid or
incorrect results. The Company's Equipment that is date aware is capable, or is
in the process of being made (and is scheduled to be made) capable on a timely
basis, of storing explicit values with respect to century data and uses a
four-digit year in all date data elements, whether internal to the software
logic, external at interfaces with other programs or stored on-line or off-line,
and recognizes and correctly processes dates for leap year. The next date when
the manipulation of calendar-related data could cause any of the Company's
Equipment to cease prematurely or abnormally to function or to generate invalid
or incorrect results is at least 50 years from the date of this Agreement.
SECTION 3.14 Contracts; No Defaults; Major Clients.
(a) Schedule 3.14 attached hereto contains a true, complete
and correct list and description of the following contracts and agreements,
whether written or oral:
(i) all loan agreements, indentures, mortgages
and guaranties to which the Company or any Subsidiary is a party or by which the
Company or any Subsidiary or their respective property is bound;
(ii) all pledges, conditional sale or title retention
agreements, security agreements, equipment obligations, personal property leases
and lease purchase agreements to which the Company or any Subsidiary is a party
or by which the Company or any of the Subsidiary or any of their respective
property is bound;
<PAGE>
(iii) all contracts, agreements, commitments,
purchase orders to which the Company or any Subsidiary is a party or by which
any of their respective property is bound (other than for product deliveries to
customers in the normal course of business upon the Company's or any
Subsidiary's standard terms) or other understandings or arrangements which (A)
involve payments or receipts by any of them of not more than $25,000 in the case
of any single contract, agreement, commitment, understanding or arrangement
under which full performance (including payment) has not been rendered by all
parties thereto or (B) will, if not performed, not materially adversely affect
the condition (financial or otherwise) or the properties, assets, business or
prospects of the Company or any Subsidiary;
(iv) all collective bargaining agreements,
employment and consulting agreements, non-competition agreements, trust
agreements, executive compensation plans, bonus, 401(k), or profit-sharing
plans, deferred compensation agreements, pension plans, retirement plans,
employee stock option or stock purchase plans and group life, health and
accident insurance and other employee benefit plans, agreements, memoranda of
understanding, arrangements or commitments to which the Company or any
Subsidiary is a party or by which the Company or any Subsidiary or any of their
respective properties is bound;
(v) all material agency, distributor, sales
representative and similar agreements to which the Company or any Subsidiary is
a party;
(vi) all material contracts, agreements or other
understandings or arrangements, whether written or oral, between the Company or
any Subsidiary and any shareholder, employee, officer or director of the Company
or any Subsidiary;
(vii) all material leases of personal property
whether operating, capital or otherwise, under which the Company or any
Subsidiary is lessor or lessee;
(viii) all contracts, agreements and other material
documents relating to disposal of waste (whether or not hazardous);
(ix) all return policies and product warranties
relating to products, goods or systems manufactured, distributed or installed by
the Company or any Subsidiary as the same are currently in effect or may have
been in effect from time to time since March 26, 1997 as well as any exception
to such policies, all cooperative advertising arrangements and all rebate,
discount or allowance arrangements;
<PAGE>
(x) all material contracts related to operation,
maintenance or management of the Premises;
(xi) all material agreements relating to the
licensing of intellectual property under which the Company or any Subsidiary is
licensor or licensee.
(b) With respect to each contract to which the Company or any
Subsidiary is a party or pursuant to which it is bound (whether or not
identified in Schedule 3.14):
(i) such contract is a valid and binding agreement
of the Company or the Subsidiary that is a party thereto, enforceable against
the Company or the Subsidiary and, to the Company's knowledge, the other parties
thereto in accordance with its terms subject to the Enforceability
Qualifications;
(ii) except as disclosed in Schedule 3.14, the
Company and each of the Subsidiaries that is a party
thereto has fulfilled all material obligations required to have been performed
by it prior to the date hereof, and neither the Company nor any Subsidiary has
any reason to believe that it will not be able to fulfill, when due, all of its
obligations under such contract which remain to be performed after the date
hereof to the Closing;
(iii) except as disclosed in Schedule 3.14, neither
the Company nor any of the Subsidiary is in material breach of such contract,
and no event has occurred which with the passage of time or giving notice or
both would constitute a default by the Company or any Subsidiary, result in a
loss of rights or result in the creation of any lien, charge or encumbrance,
thereunder or pursuant thereto;
(iv) to the knowledge of the Company, there is no
existing material breach by any other party to such contract, and, to the
Company's knowledge, no event has occurred which with the passage of time or
giving of notice or both would constitute a default by such other party, result
in a loss of rights or result in the creation of any lien, charge or encumbrance
thereunder or pursuant thereto;
(v) neither the Company nor any Subsidiary is
restricted or, so far as the Company or any of the Shareholders now reasonably
foresees, may be restricted in the future, by such contract, from carrying on
its respective business anywhere in the world;
<PAGE>
(vi) except as otherwise disclosed in Schedule 3.14,
the continuation, validity and effectiveness of such contract would not be
affected by this Agreement and the transactions contemplated hereby and, except
as disclosed in Schedules 3.05 and 3.14, such contract does not require the
consent or approval of any party thereto in connection with this Agreement or
the transactions contemplated hereby;
(vii) a true, correct and complete copy of such
contract has been heretofore made available to Parent; and
(viii) The Company has no reason to believe such
contract will not be renewed (if renewable under its terms) and neither the
Company nor any Subsidiary has received any notification that such contract is
not likely to be renewed (if renewable under its terms).
(c) Except as disclosed in Schedules 3.05 and 3.14, this
Agreement and the transactions contemplated hereby will not create a default
under or permit the termination of or otherwise have any materially adverse
effect on any material contract of the Company or any Subsidiary.
(d) Schedule 3.14 hereto includes a complete and correct list
of the ten (10) largest customers of the Company and each Subsidiary in terms of
revenue recognized in respect of such customers during the current fiscal year
showing the amount of revenue recognized for each such customer during such
period. Except as set forth in Schedule 3.14, the Company and the Shareholders
have no reason to believe that any of the customers so listed in Schedule 3.14
hereto will terminate or reduce in any material respect, or otherwise materially
and adversely change, the business or relationship between such customer and the
Company or any Subsidiary.
(e) Except as disclosed in Schedules 3.14 and 3.16, neither
the Company nor any Subsidiary has accrued for a loss in respect of any
uncompleted customer contract nor is such an accrual warranted under generally
accepted accounting principles or anticipated based upon current information.
SECTION 3.15 Inventories; Order Backlog. The inventory of the
Company and each Subsidiary consists of items of good and merchantable quality,
salable at normal prices or usable in the ordinary and usual course of its
business, subject to reserves for obsolete inventory. The amounts at which
inventories are carried on the Base Balance Sheet and the Company's December 31,
1998 consolidated balance sheet and on the books of the Company reflect the
normal inventory valuation policy of the Company and each Subsidiary of valuing
inventory at the lower of cost or market value in accordance with generally
accepted accounting principles.
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SECTION 3.16 Accounts Receivable. All accounts receivable of
the Company and each Subsidiary have arisen only through sales in the ordinary
course of business consistent with past practice for goods sold or services
performed. Except as set forth in Schedule 3.16, the accounts receivable of the
Company and each Subsidiary shown on the Base Balance Sheet and all accounts
receivable of the Company and each Subsidiary which have arisen subsequent to
the Base Balance Sheet Date are good and collectable in the ordinary and usual
course of its business and are not subject to any claims or offsets.
SECTION 3.17 Labor Matters. Except as set forth in Schedule
3.19, there are no strikes, arbitrations, material grievances, other labor
disputes or union organizational drives or labor relations board proceedings
pending or, to the Company's knowledge, threatened between the Company or any
Subsidiary and any of its employees or union representing or seeking to
represent its employees. Except as described in Schedule 3.17 hereto, neither
the Company nor any Subsidiary is party to any union, collective bargaining or
other similar agreements or is under any current or anticipated obligation to
engage in collective bargaining with respect to any of its employees. Except as
set forth in Schedule 3.17, the Company and each Subsidiary has paid or accrued
in full all wages, salaries, commissions, bonuses and other compensation
(including severance pay and vacation benefits) for all services performed by
its employees. Neither the Company nor any Subsidiary is liable for any arrears
of wages or any payroll taxes or any penalties or other damages for failure to
comply with any applicable foreign, federal, state, foreign and local laws
relating to the employment of labor. There is no pending or, to the Company's
knowledge, threatened claim or proceeding against the Company or any of its
Subsidiaries relating to occupational health and safety, workers' compensation,
employment standards, human rights or pay equity legislation or to constructive
or wrongful dismissal.
SECTION 3.18 Other Employee Matters.
A. In General
(a) "Controlled Group". For purposes of this Section,
"Controlled Group" shall mean the Company and the Subsidiaries and any trade or
business, whether or not incorporated, which is part of a controlled group under
common control or affiliated with the Company within the meaning of Section
4001(b)(1) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or Sections 414(b), (c), (m) or (o) of the Code. Each member of the
Controlled Group is listed in Schedule 3.18(A)(a).
<PAGE>
(b) Schedule 3.18(A)(b) hereto sets forth the name, title,
total annual compensation for the most recently completed fiscal year (including
bonus and commissions), current base salary rate, accrued bonus, accrued sick
leave, accrued severance pay and accrued vacation benefits, of each present
employee of the Company and the Subsidiaries and each other member of the
Controlled Group.
(c) Except as disclosed in Schedule 3.18(A)(c) hereto, neither
the Company nor any other member of the Controlled Group maintains or is a party
to or contributes to, or is obligated to maintain or be a party to or contribute
to, or has ever maintained or been a party to or contributed to, nor entered
into an agreement with respect to, any compensation plan, fund, arrangement or
practice, whether or not in writing and whether or not enforceable, including,
without limitation, any retirement, deferred compensation, incentive
compensation, pension, profit sharing, thrift, stock bonus, stock purchase,
stock grant, stock option, phantom stock or bonus program, which provides for or
promises benefits to any current or former officer, consultant, director or
employee of the Company or of any other member of the Controlled Group, that is
not a Welfare Plan (as hereinafter defined), a Pension Plan (as hereinafter
defined) or an Employee Program (as hereinafter defined).
B. Company and U.S. Subsidiaries
(a) Delivery of Benefit Plan Materials. With respect to each
of the plans, funds, arrangements or practices, set forth in the schedules
identified below ("Benefit Plans"), the Company has heretofore delivered to
Parent true and complete copies of: (A) all plan documents relating to the
Benefit Plan and all amendments thereto and, where applicable, related trust
agreements and group annuity contracts, and all amendments thereto, and
insurance policies, certificates and related documents, and current financial
statements, (B) all material contracts relating to the Benefit Plan, including,
without limitation, insurance contracts, investment management agreements,
subscription and participation agreements and record keeping agreements; (C) in
the case of a Pension Plan (as defined below) which is a defined benefit plan,
3
<PAGE>
the three most recent actuarial reports or valuations relating to the Benefit
Plan; (D) the most recent Summary Plan Description of the Benefit Plan and any
Summary of Material Modifications or other writings furnished to employees with
respect to the Benefit Plan; (E) the three most recent annual returns/reports in
the Form 5500 series relating to the Benefit Plan, and any amendments thereto,
as filed with the Internal Revenue Service, together with all enclosures and
attachments thereto, including, without limitation, audited financial
statements, and related Summary Annual Reports; (F) with respect to each Pension
Plan (as defined below) intended to qualify under the Code, the most recent
Internal Revenue Service determination letter determining that the Benefit Plan
is qualified for federal income tax purposes under Section 401(a) or Section
403(a) of the Code and that any related trust is exempt from taxation under
Section 501(a) of the Code, and complete copies of the application for such
determination letter, including all correspondence, attachments and supplemental
materials and information furnished to the Internal Revenue Service with respect
to the Benefit Plan; and (G) any and all collective bargaining agreements under
which the Benefit Plan is maintained.
(b) Employee Welfare Benefit Plans. Except as disclosed in
Schedule 3.18(B)(b) hereto, neither the Company nor any other member of the
Controlled Group directly or indirectly maintains, or is a party to or
contributes to, or is obligated to maintain or be a party to or contribute to,
or has ever maintained or been a party to or contributed to, any employee
welfare benefit plan, fund, arrangement or practice, whether or not in writing,
which provides or promises to provide employee benefits including, without
limitation, benefits payable by reason of termination of employment (other than
benefits provided by a Pension Plan as defined below) to employees or former
employees employed in the United States by the Company or any other member of
the Controlled Group or their dependents or other individuals, including,
without limitation, health, accident, disability, cafeteria, dependent care,
employee assistance, unemployment severance benefits, fringe benefits, or life
insurance or other death benefits, or any "employee welfare benefit plan" as
defined in Section 3(1) of ERISA, whether formal or informal, written.
With respect to each plan, fund, arrangement or practice
listed in Schedule 3.18(B)(b) ("Welfare Plan"), except as disclosed in Schedule
3.18(B)(b): (A) the Welfare Plan is, and has at all times been, operated in
compliance in all material respects with its governing documents (except as
otherwise required by applicable law), ERISA, the Code, all regulations, rulings
and announcements promulgated or issued under ERISA and the Code, and all other
applicable law, including, without limitation, the reporting and disclosure
requirements of ERISA; (B) neither the Company, nor any other member of the
Controlled Group, nor the Welfare Plan, nor, to the Company's and the
Shareholders' knowledge, any "party in interest" (as defined in Section 3(14) of
ERISA) or "disqualified person" (as defined in Section 4975 of the Code), nor,
to the Company's and the Shareholders' knowledge, any fiduciary with respect to
the Welfare Plan, nor, to the Company's and the Shareholders' knowledge, any
other party, has engaged in any "prohibited transaction" (as defined in Section
406 of ERISA or Section 4975 of the Code) other than a transaction subject to a
statutory or administrative exemption; (C) all contributions, premiums or
4
<PAGE>
benefit payments required to be made to or on behalf of the Welfare Plan by law,
contract or the terms of the Welfare Plan have been made, and all expenses
relating to contributions, premiums or benefit payments due or owing with
respect to the Welfare Plan have been properly accrued and reflected in the Base
Balance Sheet; (D) except for the processing of routine claims in the ordinary
course of administration, there is no pending, or, the Company's knowledge,
anticipated or threatened litigation, arbitration, or claim, by or against or
otherwise involving the Welfare Plan or any fiduciary thereof in respect of the
Welfare Plan, nor is there any judgment, decree, injunction, rule or order of
any court, governmental body, commission, agency or arbitrator, outstanding
against or in favor of or otherwise involving the Welfare Plan or any fiduciary
thereof in respect of the Welfare Plan; (E) the Welfare Plan is not a "voluntary
employees' beneficiary association" (as defined in Section 501(c)(9) of the Code
("VEBA")) nor is there any related trust or arrangement described in Section
501(c) of the Code which is intended to be exempt from taxation under Section
501(a) of the Code; (F) the Welfare Plan, if funded, and any related trust, is
in compliance with Sections 419 and 419(A) of the Code and, if intended to be a
VEBA, is in compliance with Section 501(c)(9) of the Code; (G) the Welfare Plan,
if a group health plan within the meaning of Section 607(1) of ERISA and Section
5000(b)(1) of the Code, is and at all times has been in compliance with Sections
601 through 608 of ERISA and Section 4980B of the Code; (H) there is no
"disqualified benefit" (as such term is defined in Section 4976(b) of the Code)
which would subject the Company or any other member of the Controlled Group or
Parent or Sub to a tax under Section 4976 of the Code; (I) if the Welfare Plan
is intended to meet the requirements for tax favored treatment under Subchapter
B of Chapter 1 of the Code, it meets such requirements; (J) the Welfare Plan may
be amended or terminated by Parent or the Company on or at any time after the
Closing Date, without liability to any person; (K) the Welfare Plan, if a group
health plan within the meaning of Section 706(a) of ERISA and Section 9832(a) of
the Code, is in compliance with Sections 701 through 707 of ERISA and Sections
4980D and 9801 through 9803 of the Code; and (L) the execution and delivery of
this Agreement and the consummation of the transactions contemplated hereunder
will not result in any obligation or liability of the Company or any other
member of the Controlled Group, or of Parent or Sub to the Welfare Plan or to
any employee, former employee or other person.
Except as required under Sections 601 through 608 of ERISA or
by other applicable law, neither the Company nor any other member of the
Controlled Group provides or has ever provided health benefits to any retiree,
other former employee or dependent or survivor of a retiree or other former
employee.
<PAGE>
(c) Employee Pension Benefit Plans. Except as disclosed in
Schedule 3.18(B)(c) hereto, neither the Company nor any other member of the
Controlled Group directly or indirectly maintains, or is a party to or
contributes to, or is obligated to maintain, be a party to or contribute to, or
has ever maintained or been a party to or contributed to, any deferred
compensation plan or any plan, fund, arrangement or practice, whether formal or
informal, whether or not in writing, and whether or not legally binding, that is
or may be an "employee pension benefit plan" (as defined in Section 3(2) of
ERISA) or any "multiemployer plan" (as defined in Section 3(37) or 4001(a)(3) of
ERISA), nor has the Company nor any other current or former member of the
Controlled Group withdrawn from any such multiemployer plan in a complete or
partial withdrawal within the meaning of Title IV of ERISA.
With respect to each plan, fund, arrangement or practice
listed in Schedule 3.18(B)(c) ("Pension Plan"): (A) each Pension Plan that is
intended to be qualified under Section 401(a) or 403(a) of the Code has received
a favorable determination letter which is currently effective, and no fact or
circumstance exists or has existed at any time which would adversely affect the
qualified status of the Pension Plan or any trust through which the Pension Plan
is funded; (B) the Pension Plan is, and at all times has been, operated in
compliance in all material respects with its governing documents (except as
otherwise required by applicable law), ERISA, the Code, all regulations, rulings
and announcements promulgated or issued under ERISA and the Code, and all other
applicable law, including, without limitation, the reporting and disclosure
requirements of ERISA; (C) the Pension Plan has not suffered an "accumulated
funding deficiency" (as defined in Section 302(a)(2) of ERISA or Section 412(a)
of the Code) whether or not waived; (D) if the Pension Plan is subject to Title
IV of ERISA, the present value of all accrued benefits under the Pension Plan
does not exceed the present value of the assets of such Pension Plan allocable
to such accrued benefits, based upon reasonable actuarial assumptions utilized
for the Pension Plan in its most recent actuarial valuation; (E) neither the
Company nor any other member of the Controlled Group, nor the Pension Plan, nor,
to the Company's and the Shareholders' knowledge, any "party in interest" (as
defined in Section 3(14) of ERISA) or "disqualified person" (as defined in
Section 4975 of the Code), nor, to the Company's and the Shareholders'
knowledge, any fiduciary with respect to the Pension Plan, nor, to the Company's
and the Shareholders' knowledge, any other party, has engaged in any "prohibited
transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code)
other than a transaction subject to statutory or administrative exemption; (F)
if the Pension Plan is subject to Title IV of ERISA, it has not been subject to
a "reportable event" (as defined in Section 4043(b) of ERISA), the reporting of
<PAGE>
which has not been waived by regulation; (G) no termination or partial
termination of the Pension Plan within the meaning of Section 4042 of ERISA or
Section 411(d)(3) of the Code has occurred, and no condition exists that would
constitute grounds for the termination or partial termination of the Pension
Plan; (H) all material contributions, premiums and benefit payments required to
be made to or on behalf of the Pension Plan by law, contract or the terms of the
Pension Plan have been made, and all expenses relating to contributions,
premiums or benefit payments due or owing with respect to the Pension Plan have
been properly accrued and reflected in the Company's financial statements as of
the Closing Date; (I) except for the processing of routine claims in the
ordinary course of administration, there is no pending, or to the Company's and
the Shareholders' knowledge, anticipated or threatened litigation, arbitration,
or claim by or against or otherwise involving the Pension Plan or any fiduciary
thereof, nor is there any judgment, decree, injunction, rule or order of any
court, governmental body, commission, agency or arbitrator, outstanding against
or in favor of or otherwise involving the Pension Plan or any fiduciary thereof
in respect of the Pension Plan; (J) if the Pension Plan is subject to Title IV
of ERISA, all premiums due to the Pension Benefit Guaranty Corporation ("PBGC")
for plan termination insurance have been paid in full on a timely basis, and a
variable rate premium was not due as of the most recent premium due date; (K)
neither the Company nor any other member of the Controlled Group has incurred or
expects to incur, either directly or indirectly, any liability under Title IV of
ERISA, including, without limitation, any withdrawal liability within the
meaning of Title IV of ERISA with respect to any multiemployer plan (as defined
in Section 4001(a)(3) of ERISA), but excluding liability for premiums to the
PBGC; (L) the Pension Plan may be amended or terminated by Parent or the
Surviving Corporation on or at any time after the Closing Date without material
liability to any person; and (M) the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereunder will not result
in any material obligation or liability, individually or in the aggregate, of
the Company or any other member of the Controlled Group, or of Parent or Sub to
the Pension Plan or to any employee, former employee or other person.
Neither the Company nor any other member of the Controlled
Group maintains an "employee stock ownership plan" (as defined in Section
4975(e)(7) of the Code) or a tax credit employee stock ownership plan (within
the meaning of Section 409(a) of the Code).
Neither the Company nor any other member of the Controlled
Group has any "leased employees" (as defined in Section 414(n) of the Code) who
must be taken into account for the requirements of Section 414(n)(3) of the
Code.
<PAGE>
Nothing in this Section 3.18(B) applies to the Employee
Programs (as hereinafter defined in Section 3.18(C).
C. Larco:
(a) Schedule 3.18(C)(a) sets forth all the employee benefit,
health, welfare, supplemental unemployment benefits, bonus, pension, profit
sharing, deferred compensation, stock compensation, stock purchase, retirement,
hospitalization insurance, medical, dental, legal, disability and similar plans
or arrangements or practices relating to the employees employed by Larco (the
"Employees") which are currently maintained or were maintained, at any time in
the last five calendar years (the "Employee Programs").
(b) All of the Employee Programs are and have been registered,
invested and administered, in all material respects, in accordance with all
laws, regulations, orders or other legislative, administrative or judicial
promulgations applicable to the Employee Programs ("Applicable Laws") and in
accordance with all understandings, written or oral, between the Company, Larco
and the Employees. To the Company's or Larco's knowledge, no fact or
circumstance exists that could adversely affect the tax-exempt status of an
Employee Program.
(c) All obligations regarding the Employee Programs have been
satisfied, there are no outstanding defaults or violations by any party thereto
and no taxes, penalties or fees are owing or exigible under any of the Employee
Programs.
(d) To the Company's or Larco's knowledge, no Employee
Program, nor any related trust or other funding medium thereunder, is subject to
any pending investigation, examination or other proceeding, action or claim
initiated by any governmental agency or instrumentality, or by any other party
(other than routine claims for benefits), and there exists no state of facts
which after notice or lapse of time or both could reasonably be expected to give
rise to any such investigation, examination or other proceeding, action or claim
or to affect the registration of any Employee Program required to be registered.
(e) All contributions or premiums required to be made by the
Company and/or Larco under the terms of each Employee Program or by Applicable
Laws have been made in a timely fashion in accordance with Applicable Laws and
the terms of the Employee Programs, and none of the Company or any of the
Subsidiaries has, and as of Closing will not have, any liability (other than
liabilities accruing after the Closing Date) with respect to any of the Employee
Programs. Contributions or premiums will be paid by the Company and the
Subsidiaries on an accrual basis for the period up to Closing even though not
otherwise required to be made until a later date in respect of the period that
includes Closing.
<PAGE>
(f) No amendments have been made to any Employee Program and
no improvements to any Employee Program have been promised and, except where
required by Applicable Laws, no amendments or improvements to an Employee
Program will be made or promised after the date hereof and prior to the Closing
Date by the Company or Larco. There have been no improper withdrawals, and, to
the knowledge of the Company and Larco, there have been no improper applications
or transfers of assets from any Employee Program or the trusts or other funding
media relating thereto.
(g) The Company has furnished or made available to Parent
true, correct and complete copies of all plan text relating to the Employee
Programs as amended as of the date hereof together with all related
documentation including, without limitation, funding agreements, actuarial
reports, (if any) funding and financial information returns and statements,
copies of material correspondence with all regulatory authorities with respect
to each Employee Program in the possession of the Company or Larco and plan
summaries, booklets and personnel manuals.
(h) To the knowledge of the Company or Larco, none of the
Employee Programs enjoys any special tax status under the Income Tax Act
(Canada) or under other applicable legislation, nor have any advance tax rulings
been sought or received in respect of the Employee Programs. All employee data
necessary to administer each Employee Program has been provided or made
available by the Company to Parent and, to the knowledge of the Company or
Larco, is true and correct as of the date hereof and the Company will notify
Parent of any material changes thereto occurring prior to the Closing Date. To
the knowledge of the Company or Larco, no insurance policy or any other contract
or agreement affecting any Employee Program requires or permits a retroactive
increase in premiums or payments due thereunder. The level of insurance reserves
held for the account of Larco under each insured Employee Program is reasonable
and sufficient to provide for all incurred but unreported claims.
(i) Except as disclosed in Schedule 3.18(C)(a), none of the
Employee Programs provides benefits to retired employees or to the beneficiaries
or dependents of retired employees.
SECTION 3.19 Litigation and Claims. Except as summarized in
Schedule 3.19 hereto, there is no pending or, to the Company's knowledge,
threatened action, suit, proceeding, claim, investigation or notice by or
against the Company or any of the Subsidiaries whether or not covered by
<PAGE>
insurance, and there is no outstanding order, notice, writ, injunction or decree
of any court, government or governmental agency against or affecting the Company
or any of the Subsidiaries. The resolution of the matters referred to in
Schedule 3.19 will not have a material adverse effect on the Company or any of
the Subsidiaries taken as a whole. To the Company's knowledge, there are no
incidents or occurrences (whether or not covered by insurance) of any kind which
may give rise to material claims against the Company or any of the Subsidiaries,
whether or not covered by insurance.
SECTION 3.20 Insurance. Included in Schedule 3.20 hereto is a
list of all policies of property, fire, liability, life and other forms of
insurance, and indemnity bonds, carried by the Company or any Subsidiary
identifying the nature of risks covered and the amount of coverage in each case.
The amount of coverage for each such policy has been equal to or greater than
the amount required by contracts entered into by the Company or any of the
Subsidiaries. All such policies are in full force. The Company believes that the
Company and each of the Subsidiaries are adequately insured against the kinds of
risks usually incurred by corporations of similar size engaged in the same or
similar business. Since March 26, 1997, the Company and each Subsidiary has
given due and timely notice of any claim and of any occurrence known to the
Company which may give rise to a claim which may be covered by any such
insurance and has otherwise complied with the provisions of such policies. The
liability of the Company and its Subsidiaries arising out of the lawsuit
referred to as number 5 on Schedule 3.19 is covered by the Company's insurance
coverage subject to the deductible and maximum coverage set forth in Schedule
3.19.
SECTION 3.21 Compliance with Applicable Laws. The Company and
each Subsidiary holds all permits, licenses, variances, exemptions, orders and
approvals of all Governmental Entities which are material to the operation of
its business (the "Company Permits"). The Company and each Subsidiary is in
compliance with the terms of the Company Permits. Except as disclosed in
Schedule 3.21 hereto, neither the Company nor any Subsidiary is in material
violation of any Applicable Laws and no notice has been received from any
Governmental Entity alleging such violation.
SECTION 3.22 Warranty and Product Matters.
(a) Except as set forth on Schedules 3.19 and 3.22 (i) there
has not been any "Products Liability Claim" (as hereafter defined) since March
26, 1997, and, to the Company's knowledge, prior hereto, except for routine
<PAGE>
claims for warranty repair and service; (ii) since March 26, 1997, and, to the
Company's knowledge, prior thereto, there has not been any product recall,
rework, retrofit or post-sale warning (collectively, "Recalls") by the Company
or any Subsidiary concerning any products made or distributed by any of them or
any investigation or consideration of the Company or any Subsidiary concerning
whether to undertake or not to undertake any Recalls; and (iii) there are no
material defects in design, manufacturing, materials, or workmanship, including,
without limitation, any failure to warn which involve any product made or
distributed by the Company or any Subsidiary, except for defects which are or
have been or may be adequately satisfied and remedied by ordinary warranty
repairs and replacements and without any obligation of the Company or any
Subsidiary to pay material damages in connection therewith.
(b) For purposes of this Section 3.22, the term "Products
Liability Claim" shall mean any accident, happening or event which is caused or
allegedly caused by any alleged hazard or alleged defect in manufacture, design,
materials or workmanship including, without limitation, any alleged failure to
warn or any breach of express or implied warranties or representations with
respect to, or any such accident, happening or event otherwise involving, a
product (including any parts or components) made or distributed by the Company
or any Subsidiary on or prior to the Closing Date which results or is alleged to
have resulted in injury or death to any person or damage to or destruction of
property, or other consequential damages.
SECTION 3.23 Finders' Fees. Except as set forth in Schedule
3.23, no person acting on behalf of the Company, any Subsidiary or any of the
Shareholders has claims to, or is entitled to, under any contract or otherwise,
any payment as a broker, finder or intermediary in connection with the origin,
negotiation, execution or consummation of the transactions provided for in this
Agreement or the Related Agreements.
SECTION 3.24 Transactions with Certain Persons. Except as
disclosed on Schedule 3.24 hereto, no current or, to the Company's knowledge, no
former director, officer, employee or shareholder of the Company, any of the
Subsidiaries or any of their Affiliates (as defined below) or family members or
trusts for the benefit of any such person or persons has any interest in any
property, real or personal, tangible or intangible, used in or pertaining to the
business of the Company or any of the Subsidiaries and there have been no
transactions between the Company and any current or, to the Company's knowledge
any former director, officer, employee or shareholder of the Company, any of the
Subsidiaries or any of their Affiliates except employment arrangements as
disclosed in this Agreement or the Schedules hereto. As used in this Agreement,
the word "Affiliate" shall have the same meaning as defined in Rule 12b-2 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
<PAGE>
SECTION 3.25 General Representation and Warranty. Neither this
Agreement nor any Schedule or other documents and information furnished by or on
behalf of the Company or the Shareholders in connection with this Agreement
contains any untrue statement of a material fact or omits to state any material
fact necessary to make the statements contained herein or therein not
misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Each of Parent and Sub represents and warrants to the Company and each
Shareholder as follows:
SECTION 4.01 Organization. Each of Parent and the Significant
Subsidiaries (as hereinafter defined) is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization and has all requisite power and authority,
corporate and all other necessary governmental approvals to own, lease and
operate its properties and to carry on its business as now and heretofore being
conducted except where the failure to be so organized, existing and in good
standing or to have such power, authority, and governmental approvals would not
have a material adverse effect on Parent. Parent and each of its Significant
Subsidiaries is duly qualified or licensed to do business and in good standing
in each jurisdiction in which the property owned, leased or operated by it or
the nature of the business conducted by it makes such qualification or licensing
necessary, except where the failure to be so duly qualified or licensed and in
good standing would not in the aggregate have a material adverse effect on
Parent. As used in this Agreement, the Significant Subsidiaries shall mean Sub
and each other subsidiary of Parent that is a "significant subsidiary" as
described in Rule 12b-1 of the Exchange Act.
SECTION 4.02 Capital Stock. As of the date hereof, the
authorized capital stock of Parent consists of: (i) 50,000,000 shares of Parent
Common Stock of which, as of August 14, 1998, 13,756,858 shares were issued and
outstanding and no shares were held in treasury; and (ii) 1,000,000 shares of
preferred stock, par value $1.00 per share, of which, as of August 14, 1998,
none were issued and outstanding. As of August 14, 1998, 198,500 shares of
Parent Common Stock were reserved for issuance upon exercise of outstanding
options pursuant to Parent's stock options plan ("Parent Stock Plan") and
250,000 shares of Parent Preferred Stock were reserved for issuance in
accordance with Parent Rights Agreement. The authorized capital stock of Sub
consists of 1000 shares of common stock, par value $1.00 per share, all of which
<PAGE>
are validly issued, fully paid and nonassessable and are owned by Parent. All
outstanding shares of Parent Common Stock and Sub Common Stock are, and all
shares of Parent Common Stock which are to be issued pursuant to the Merger will
be, when issued in accordance with the respective terms thereof, duly
authorized, validly issued, fully paid and, except as provided by Section 630 of
the New York Business Corporation Law ("NYBCL"), non-assessable and free of any
preemptive rights with respect thereto. As of the date hereof, no Voting Debt of
Parent is issued or outstanding. Except as set forth above and except in
connection with Parent Rights Agreement and this Agreement, as of August 14,
1998 there are no existing options, warrants, calls, subscriptions or other
rights or other agreements or commitments of any character relating to the
issued or unissued capital stock or Voting Debt of Parent or obligating Parent
to issue, transfer or sell or cause to be issued, transferred or sold any shares
of capital stock or Voting Debt of, or other equity interests in, Parent or
securities convertible into or exchangeable for such shares or equity interests
or obligating Parent to grant, extend or enter into any such option, warrant,
call, subscription or other right, agreement or commitment.
SECTION 4.03 Corporate Authority. Parent and Sub have all
requisite power and authority, corporate and other, to execute and deliver this
Agreement and the Related Agreements and to consummate the transactions
contemplated hereby and thereby. The execution, delivery and performance of this
Agreement and the Related Agreements and the consummation of the Merger and of
the other transactions contemplated hereby and thereby have been duly and
effectively authorized by all necessary corporate action on the part of Parent
or Sub and no other corporate proceedings on the part of Parent and Sub are
necessary to authorize this Agreement and the Related Agreements or to
consummate the transactions contemplated hereby and thereby. This Agreement and
the Related Agreements have been duly executed and delivered by Parent and Sub,
as the case may be, and constitute valid and binding obligations of Parent and
Sub, enforceable against each of them in accordance with their respective terms
subject to the Enforceability Qualifications.
SECTION 4.04 No Violation. Except as described in Schedule
4.04 or as contemplated by Section 4.05, the execution and delivery of this
Agreement and the Related Agreements and the consummation of the transactions
contemplated hereby and thereby will not result in any Violation pursuant to (i)
any provision of the Certificate of Incorporation, as amended, or By-laws, as
amended, of Parent or the Certificate of Incorporation or By-laws of Sub or (ii)
any provision of any loan or credit agreement, note, mortgage, indenture, lease,
benefit plan or other agreement, obligation, instrument, permit, concession,
<PAGE>
franchise, license or (iii) any Applicable Laws applicable to Parent or Sub or
their respective properties or assets, which Violation, in the case of each of
clauses (ii) and (iii), would have a material adverse effect on Parent or the
transactions contemplated hereby.
SECTION 4.05 Consents and Approvals. No consent, approval,
order or authorization of, or registration, declaration or filing with, any
Governmental Entity is required by or with respect to Parent or Sub in
connection with the execution and delivery of this Agreement and the Related
Agreements by Parent and Sub or the consummation by Parent or Sub of the
transactions contemplated hereby and thereby, the failure to obtain which would
have a material adverse effect on Parent or the transactions contemplated
hereby, except for:
(i) the filing of a pre-merger notification report by
Parent under the HSR Act,
(ii) the filing of such documents with, and the
qualification with, the various state securities authorities under state
securities or legal investment laws (the "Blue-Sky Laws"), that may be required
in connection with the transactions contemplated by this Agreement (the
"Blue-Sky Filings"),
(iii) the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware in accordance with Section 251 of
the DGCL and the filing of appropriate documents with the relevant authorities
of other states in which Parent and Sub are qualified to transact business; and
(iv) the Local Approvals.
SECTION 4.06 SEC Filings; Financial Statements.
(a) Parent has filed all forms, reports and documents required
to be filed with the United States Securities and Exchange Commission ("SEC")
since April 1, 1996, and has heretofore delivered or made available to Company
in the form filed with the SEC, together with any amendments thereto, its (i)
Annual Reports on Form 10-K for the fiscal years ended March 31, 1997 and 1998,
(ii) all proxy statements relating to Parent's last two meetings of
shareholders, (iii) Quarterly Report on Form 10-Q for the fiscal quarter ended
June 28, 1998, and (iv) all other reports or registration statements filed by
Parent with the SEC since January 1, 1998 (collectively, the "Parent SEC
Reports"). The SEC Reports (i) were prepared substantially in accordance with
the requirements of the Securities Act of 1933, as amended (the "Securities
Act") or the Exchange Act, as the case may be, and the rules and regulations
promulgated under each of such respective acts, and (ii) did not at the time
they were filed contain any untrue statement of a material fact or omit to state
<PAGE>
a material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. Parent does not believe that it will experience materially
adverse financial performance for the quarter beginning on January 1, 1999.
(b) The financial statements, including all related notes and
schedules, contained in the Parent SEC Reports (or incorporated by reference
therein) fairly present the consolidated financial position of Parent and its
Subsidiaries as at the respective dates thereof and the consolidated results of
operations and cash flows of Parent and its Subsidiaries for the periods
indicated in accordance with GAAP applied on a consistent basis throughout the
periods involved (except for changes in accounting principles disclosed in the
notes thereto) and subject in the case of interim financial statements to normal
year-end adjustments.
SECTION 4.07 Absence of Certain Changes or Events. Except as
disclosed in the Parent SEC Reports filed prior to the date hereof and on
Schedule 4.07, since December 31, 1998, Parent and its Subsidiaries have not
incurred any material liability, except in the ordinary course of their
businesses, and there has not been any change, or any event involving a
prospective change, in the business, financial condition or results of
operations of Parent and its Subsidiaries which has had, or is reasonably likely
to have, a Material Adverse Effect on Parent, and Parent and its Subsidiaries
have conducted their respective businesses in the ordinary course consistent
with their past practices.
SECTION 4.08 Interim Operations of Sub. Sub was formed solely
for the purpose of engaging in the transactions contemplated hereby, has engaged
in no other business activities and has conducted its operations only as
contemplated hereby.
SECTION 4.09 Finders' Fees. No person acting on behalf of
Parent or Sub has claims to, or is entitled to, under any contract or otherwise,
any payment as a broker, finder or intermediary in connection with the origin,
negotiation, execution or consummation of the transactions provided for in this
Agreement or the Related Agreements.
SECTION 4.10 General Representation and Warranty. Neither this
Agreement nor any Schedule or other documents and information furnished by or on
behalf of Parent in connection with this Agreement contains any untrue statement
of a material fact or omits to state any material fact necessary to make the
statements contained herein or therein not misleading.
<PAGE>
SECTION 4.11 Environmental Reports. Parent and Sub represent
that they have engaged an environmental consultant to conduct an environmental
assessment of the Premises. Parent and Sub have received reports from the
environmental consultant that identify certain environmental conditions and
environmental compliance issues at the Premises. Parent and Sub will be
responsible for all fees and expenses charged by such environmental consultant.
SECTION 4.12 Date Calculation. The computer systems and
software used by Parent and any other equipment or products used by Parent that
use software or embedded chips (the "Parent's Equipment") will accurately
accept, create, manipulate, sort, store, output and otherwise process
calendar-related data from, into and between the twentieth and twenty-first
centuries and will operate before, during and after the year 2000 without error
relating to calendar-related or "date" data (including data received from or
passed to other computer systems or programs), including without limitation
error that relates to, or is the result of, calendar-related data that
represents or refers to different centuries or to more than one century or that
reflects the existence of a leap year. Without limiting the generality of the
foregoing, the Parent's Equipment will not, because of calendar-related or
"date" data (including without limitation data that represents or refers to
different centuries or to more than one century or that reflects the existence
of a leap year), cease prematurely or abnormally to function before completing
its intended operation or generate invalid or incorrect results. The Parent's
Equipment is capable, or is in the process of being made (and is scheduled to be
made) capable on a timely basis, of storing explicit values with respect to
century data and uses a four-digit year in all date data elements, whether
internal to the software logic, external at interfaces with other programs or
stored on-line or off-line, and recognizes and correctly processes dates for
leap year. The next date when the manipulation of calendar-related data could
cause any of the Parent's Equipment to cease prematurely or abnormally to
function or to generate invalid or incorrect results is at least 50 years from
the date of this Agreement.
SECTION 4.13 Federal Income Tax Representations.
(a) Prior to the Merger, Parent will be in control of Sub
within the meaning of Section 368(c) of the Internal Revenue Code of 1986, as
amended (the "Code").
(b) Parent has no present plan or intention to cause Company
to issue additional shares of its stock that would result in Parent losing
control of the Surviving Corporation within the meaning of Section 368(c) of the
Code.
<PAGE>
(c) Parent has no present plan or intention to reacquire any
of its stock issued in the Merger, except for any escrowed shares pursuant to
Section 12.01(i).
(d) Parent has no present plan or intention to liquidate the
Surviving Corporation; to merge the Surviving Corporation with or into another
corporation; to sell or otherwise dispose of the stock of the Surviving
Corporation except for a merger with or transfers of stock to another
corporation controlled by Parent; or to cause the Surviving Corporation to sell
or otherwise dispose of any of its assets, except for dispositions made in the
ordinary course of business or transfers of assets to a corporation controlled
by Parent.
(e) Following the Merger, Parent's present intent is that the
Surviving Corporation will continue the historic business of Company or use a
significant portion of the historic business assets of Company in a business.
(f) Parent does not own, nor has it owned during the past five
years, any shares of stock of Company.
(g) Each of Parent and Sub is undertaking the Merger for a
bona fide business purpose and not merely for the avoidance of federal income
tax.
(h) Sub will have no liabilities assumed by Company, and will
not transfer to Company any assets subject to liabilities, in the Merger.
(i) Neither Parent nor Sub is an investment company as defined
in Section 368(a)(2)(F)(iii) and (iv) of the Code.
(j) The payment under Section 2.02(e) of this Agreement of
cash in lieu of fractional shares of Parent Common Stock is solely for the
purpose of avoiding the expense and inconvenience to Parent of issuing
fractional shares and does not represent separately bargained-for consideration.
(k) As of the Effective Time, the fair market value of the
assets of Sub will exceed the sum of Sub's liabilities plus the amount of other
liabilities, if any, to which Sub's assets are subject.
(l) Parent has no present plan or intention to settle at a
discount any intercompany indebtedness existing between Company and Parent or
between Sub and Company.
(m) No stock of Sub will be issued in the Merger.
<PAGE>
(n) As of the Effective Time, the Parent Common Stock does not
constitute nonqualified preferred stock as defined in Section 351(g)(2) of the
Code.
ARTICLE V
CERTAIN REPRESENTATIONS, WARRANTIES
AND COVENANTS OF THE SHAREHOLDERS
SECTION 5.01 Shareholder Representations, Warranties and
Covenants. Each of the Shareholders represents, warrants and covenants to
Parent, and to Sub as follows:
(i) such Shareholder is the sole and exclusive record and
beneficial owner of the shares of the Company Common Stock or Exchangeable
Shares set forth opposite such Shareholder's name in Schedule 3.02 hereto, free
and clear of any claims, Liens, pledges, options, rights of first refusal or
other encumbrances or restrictions of any nature whatsoever (other than pursuant
to the Shareholders' Agreement), and, except as set forth on Schedule 3.02
hereto, there are no agreements, arrangements or understandings with respect to
the Company any Subsidiary or securities issued by the Company or any Subsidiary
to which such Shareholder is a party;
(ii) except as specifically provided Section 5.04 with respect
to the Exchangeable Shares, such Shareholder shall not sell, transfer or
otherwise dispose of or in any way encumber any of such Shareholder's shares of
the Company Common Stock or Exchangeable Shares prior to the Effective Time and
shall take no action inconsistent with the approval and consummation of this
Agreement, the Related Agreements and the transactions contemplated hereby and
thereby;
(iii) such Shareholder has all necessary legal capacity,
right, power and authority to execute and deliver this Agreement and the Related
Agreements executed by such Shareholder and to consummate the transactions
contemplated hereby and thereby, and this Agreement and the Related Agreements
executed by such Shareholder constitute valid and binding obligations of such
Shareholder enforceable against such Shareholder in accordance with their
respective terms, and
(iv) the execution and delivery of this Agreement and the
Related Agreements by such Shareholder and the consummation of the transactions
contemplated hereby and thereby will not result in any Violation pursuant to (A)
any provision of any note, bond, indenture, mortgage, security agreement, lease
franchise, permit, agreement or other instrument or obligation to which such
Shareholder is a party, or by which such Shareholder or any of such
<PAGE>
Shareholder's properties or assets may be bound, or result in the creation of
any material Lien, or other right of any third party of any kind whatsoever upon
the properties or assets of such Shareholder pursuant to the terms of any such
instrument or obligation, which Violation would have a material adverse effect
on such Shareholder's ability to perform such Shareholder's obligations under
this Agreement or the Related Agreements, or (B) Applicable Laws applicable to
such Shareholder or such Shareholder's properties or assets.
SECTION 5.02 Restrictive Legends. The Shareholders hereby
acknowledge and agree that the transfer agent for Parent Common Stock shall have
the authority to place the legend, substantially in the following form, on each
certificate representing shares of Parent Common Stock issued to any Shareholder
pursuant to the Merger:
"The sale, transfer or other disposition of shares represented
by this certificate is not permitted unless effected pursuant
to an effective registration statement or compliance with Rule
145 of the Securities Act of 1933, as amended.
SECTION 5.03 Accredited Investor Status. Each Shareholder is
an "accredited investor" as that term is defined in Rule 501(a) promulgated
under the Securities Act.
SECTION 5.04 Exchangeable Shares. All the parties agree that
immediately prior to the Effective Time, without the necessity of any further
action by any of the parties hereto, all Exchangeable Shares shall for all
purposes be thereupon deemed to be exchanged for and converted into the shares
of Company Common Stock into which they are exchangeable.
ARTICLE VI
COVENANTS OF THE COMPANY AND THE SHAREHOLDERS
SECTION 6.01 Conduct of Business Pending Closing. From the
date of this Agreement to the Closing Date:
(a) Negative Covenants. Except as otherwise expressly provided
by this Agreement or as Parent may otherwise consent to in writing, the Company
shall not and shall cause each of the Subsidiaries not to, engage in any
activity or enter into any transaction outside of the ordinary and usual course
of its business or which would be inconsistent with its past practice or with
the terms of this Agreement or which would render inaccurate as of the Closing
Date any of the representations and warranties set forth in Article III as if
<PAGE>
such representations and warranties were made at and as of the Closing Date.
Without limiting the generality of the foregoing, the Company shall not and
shall cause each of the Subsidiaries not to, do any of the following: (i)
undergo any change in its condition (financial or other), properties, assets,
liabilities, business or operations except changes in the ordinary and usual
course of its business and consistent with its past practice and which have not
been, either in any case or in the aggregate, materially adverse to its
condition (financial or other), properties, assets, liabilities, business,
operations or prospects; (ii) declare, set aside, or pay any dividend or other
distribution in respect of its capital stock or make any direct or indirect
redemption, purchase or other acquisition of any shares of its capital stock or
make any payment to the Shareholders except payments of employment compensation
in the ordinary and usual course of the Business consistent with past practice;
(iii) issue, grant or sell any shares of its capital stock or any options,
warrants or other rights to purchase any such shares or any securities
convertible into or exchangeable for such shares or take any action to
reclassify or recapitalize or split up its capital stock; (iv) except as
provided in its agreements with lenders identified in Schedule 3.05, mortgage,
pledge or subject to any material Lien, lease, security interest, encumbrance,
or other restriction, any of its properties or assets or to such restriction
outside of the ordinary course of its business whether or not material; (v)
acquire or dispose of any interest in any asset or property except the purchase
of materials and supplies and the sale of inventory in the ordinary and usual
course of its business and consistent with its past practice; (vi) forgive or
cancel any debt or claim (other than accounts receivable write offs in Schedule
3.16 or in the ordinary course of business), waive any right, or, except in the
ordinary and usual course of its business and consistent with its past practice
incur or pay any liability or obligation; (vii) except as required by this
Agreement, adopt or amend any Employee Program, profit sharing plan, agreement,
arrangement or practice for the benefit of any director, officer or employee or
change the compensation (including bonuses) to be paid to any director, officer
or employee; (viii) suffer any damage, destruction or loss (whether or not
covered by insurance); (ix) amend or terminate any material contract, agreement
or lease other than renewals in the ordinary course of business; (x) experience
any material labor difficulty, or loss of employees or customers; (xi) enter
into any collective bargaining agreement; (xii) sell or grant or transfer to any
party or parties any license, or grant an option to acquire a license to
manufacture or sell any of the products of the Company or any of the
Subsidiaries, or to use any trademark, service mark, trade name, copyright,
patent or pending application for any of the foregoing, or any trade secret or
know-how of the Company or any of the Subsidiaries; (xiii) amalgamate, merge or
<PAGE>
consolidate or enter into a binding share exchange or any other business
combination or acquire any stock, equity interest or business of any other
person or undertake a corporate reorganization; (xiv) declare any bonus or
increase in the salary or compensation of any employee except in the ordinary
course of business consistent with past practices or as disclosed in the
Disclosure Schedules; (xv) change the accounting methods or practices followed
by it; (xvi) amend its Certificate of Incorporation or By-Laws or those of any
of the Subsidiaries or (xvii) without limiting the generality of any of the
foregoing, enter into any transaction except in the ordinary and usual course of
its business and consistent with its past practice; (xviii) or agree to, permit
or suffer any of the acts, transactions or other things described in Subsections
(i) through (xvii) of this Section 6.01.
(b) Conduct of Business. The Company and the Shareholders
shall each use their reasonable best efforts to cause the Company and each of
the Subsidiaries to preserve intact its business organization, to retain its
present officers and employees and to preserve its good will with all suppliers,
customers, employees and others having business relations with it.
(c) Access to Information. The Company and each of the
Subsidiaries shall afford Parent and its representatives access, during normal
business hours and upon reasonable notice, to all of the assets, properties,
books, records, and agreements of the Company or any of the Subsidiaries, and
shall furnish to Parent and its representatives all other information concerning
its business, properties and personnel as Parent may reasonably request. The
confidentiality and other obligations of the parties referred to in Section
13.04 hereof shall be applicable to all such information. The Company shall
cooperate with Parent in visiting or contacting employees and customers of, and
persons having other business relationships with the Company or any of the
Subsidiaries as Parent shall specify prior to the Closing. The Company shall
also cooperate with Parent in an inspection of the Premises and all improvements
thereon, including, without limitation, an environmental audit of the Premises.
(d) Transfers or Restrictions. No Shareholder shall sell,
transfer or otherwise dispose of any of the shares of the Company common stock
or any interest therein or subject the same to any Lien.
SECTION 6.02 Change in Representations and Warranties. In the
event the Company or any Shareholder learns that any of the representations and
warranties of the Company or Shareholders contained in or referred to in this
<PAGE>
Agreement is or will become inaccurate, such party shall give prompt detailed
written notice thereof to Parent.
SECTION 6.03 Acquisition Proposals. Until the earlier of (i)
May 30, 1999 or (ii) the termination of this Agreement pursuant to Article XI,
Shareholders, the Company and each of the Subsidiaries and their respective
representatives will not initiate, solicit or encourage, directly or indirectly,
any inquiries or the making of any proposal or offer (including, without
limitation, any proposal or offer to shareholders of the Company) with respect
to a merger, consolidation, binding share exchange or any other business
combination or similar transaction involving, or any purchase of all or any
significant portion of the assets or any equity securities of the Company or any
of the Subsidiaries (any such proposal or offer being hereinafter referred to as
an "Acquisition Proposal"), engage in any negotiations concerning, or provide
any confidential information or data to, or have any discussions with, any
person relating to an Acquisition Proposal or otherwise facilitate any effort or
attempt to make or implement an Acquisition Proposal. Shareholders, the Company
and each of the Subsidiaries will terminate any existing activities, discussion
or negotiations with any parties conducted heretofore with respect to any of the
foregoing. Shareholders, the Company and each of the Subsidiaries will notify
Parent promptly if any such inquiries or proposals are received, any such
information is requested, or any such negotiations or discussions are sought to
be initiated or continued. The Shareholders represent and acknowledge that
compliance with Section 6.03 does not affect the fiduciary obligations of
directors of the Company because such Shareholders have agreed to vote for the
transactions contemplated hereby.
SECTION 6.04 Certain Shareholder Obligation Efforts. The
Shareholders shall cause the Company to comply with its obligations under this
Article VI from the date hereof through the Effective Time.
SECTION 6.05 Shareholders Approval. The Company shall call a
meeting of its shareholders to be held as promptly as practicable for the
purpose of obtaining the requisite shareholder approval of this Agreement and
the transactions contemplated hereby. The Company will, through its Board of
Directors, recommend to its shareholders approval of this Agreement.
SECTION 6.06 Rule 145 Affiliates. Prior to the Closing Date
the Company shall deliver to Parent a letter substantially in the form attached
hereto as Schedule 6.06(a), identifying all persons who may be, at the time this
Agreement is submitted for approval to the shareholders of the Company,
"affiliates" of the Company for purposes of Rule 145 under the Securities Act.
<PAGE>
The Company shall cause each such person to deliver to Parent on or prior to the
Closing Date a written agreement, substantially in the form attached as Schedule
6.06(b) hereto.
SECTION 6.07 Parent's Expenses. In the event that this
Agreement is terminated because of a failure of the Shareholders to approve this
Agreement (such termination being referred to as a "Section 6.07 Event") and
Parent is not in material violation of this Agreement, then the Company shall,
within three business days following notification by Parent to the Company of
the Section 6.07 Event, reimburse Parent up to $200,000 for out-of-pocket fees
and expenses incurred by Parent in connection with the transactions contemplated
by this Agreement. The existence of Parent's rights under this Section 6.07 does
not constitute an election of remedies or in any way limit or impair Parent's
right to pursue any other remedy against the Company or the Shareholders to
which Parent may be entitled under this Agreement, at law or in equity, or
otherwise.
SECTION 6.08 Company Options. Within 10 days after the date of
execution of this Agreement, the Company shall, if necessary, amend the Company
Plan to provide that, upon the Effective Time, each Company Option shall be
converted into an option to purchase that number of shares of Parent Common
Stock that the holder of such Company Option would have received had he fully
exercised his Company Option immediately prior to the Effective Time (assuming
such Company Option was then fully exercisable), subject to the adjustment set
forth in Section 2.04 hereof. In furtherance of such amendment, the Company
shall also enter into an agreement with each holder of a Company Option in form
and substance the same as Schedule 6.08 hereto. Such agreements shall be
delivered to Parent within 10 days after the date of execution of this
Agreement.
SECTION 6.09 Larco Options. Within 10 days after the date of
execution of this Agreement, the Company shall, if necessary, cause Larco to
amend the Larco Plan to provide that upon the Effective Time each Larco Option
shall be converted into an option to purchase that number of shares of Parent
Common Stock that the holder of such Larco Option would have received had he
fully exercised his Larco Option and exchanged his Exchangeable Shares
immediately prior to the Effective Time (assuming such Larco Option was then
fully exercisable), subject to the adjustment set forth in Section 2.04 hereof.
In furtherance of such amendment, the Company shall also cause Larco to enter
into an agreement with each holder of a Larco Option in the same form and
substance as Schedule 6.09 hereto. Such agreements shall be delivered to Parent
within 10 days after the date of execution of this Agreement.
<PAGE>
SECTION 6.10 Repayment of Debt. At least five (5) days prior
to the Closing, the Shareholders shall notify Parent of the amount necessary to
repay at the Closing all indebtedness for borrowed money of the Company or any
Subsidiary ("Debt"). If Parent elects to repay all Debt at the Closing, Parent
will arrange to have representatives of the lender or lenders present to, or
will otherwise make provision for, tender to Parent at the Closing evidence of
the payment and discharge of the Debt and releases of all security interests on
the assets of the Company and the Subsidiaries securing the Debt.
SECTION 6.11 SHAREHOLDER AGREEMENTS. THE SHAREHOLDERS SHALL
TERMINATE OR AMEND THE STOCKHOLDER AGREEMENTS AND OTHER DOCUMENTS REFERRED TO IN
SCHEDULE 3.02(B)(1), (B)(6) AND (B)(7) IN SUCH A MANNER AS WILL PERMIT
CONSUMMATION OF THE TRANSACTIONS AS CONTEMPLATED BY THIS AGREEMENT AND SHALL
PROVIDE PARENT COPIES OF DOCUMENTS EFFECTING SUCH TERMINATION OR AMENDMENT PRIOR
TO THE DAY OF CLOSING.
ARTICLE VII
COVENANTS OF PARENT
SECTION 7.01 Conduct of Business Pending the Closing. Except
as otherwise provided in this Agreement, or as the Company may otherwise consent
to in writing, Parent shall not, pending the Closing, engage in any activity or
enter into any transaction which would render inaccurate as of the Closing Date
any of its representations and warranties set forth in this Agreement as if such
representations and warranties were made at and as of the Closing Date.
SECTION 7.02 Access to Information. Upon reasonable notice,
Parent shall afford to representatives of the Company, reasonable access, during
normal business hours during the period prior to the Effective Time, to its
properties, books, contracts, commitments and records and, during such period,
shall furnish all other information concerning its business, properties and
personnel as Company may reasonably request. The confidentiality and other
obligations of the parties referred to in Section 13.04 hereof shall be
applicable to all such information. The investigation by and knowledge of the
Company and furnishing of information to the Company shall not affect its right
to rely on the representations, warranties, covenants and agreements of Parent.
SECTION 7.03 Notice of Breach. In the event Parent has actual
knowledge prior to the Effective Time that the Company or a Shareholder has
<PAGE>
breached any of its or his representations or warranties Parent shall give
prompt written notice thereof to the Company.
SECTION 7.04 Mark Kirkpatrick Employment. Following the
Merger, the Company will offer Mark Kirkpatrick ("Kirkpatrick") an employment
arrangement pursuant to which he would continue to be employed by the Company at
his current salary for at least three months following the Effective Time. If
Kirkpatrick continues his employment with the Company for at least three months
following the Effective Time, he shall be paid a bonus of one month's salary
upon termination of his employment. Nothing in this paragraph will preclude the
Company from offering to extend the term of this employment arrangement. Unless
Parent notifies the Company in writing that it intends to account for this
transaction using the pooling method, all unvested Company Options shall vest
upon termination of Kirkpatrick's employment with the Company and shall be
exercisable, in whole or in part, at any time within six (6) months of such
termination.
SECTION 7.05 Compliance with Post-Closing Obligations. Parent
will timely comply with its post-closing obligations in this Agreement.
SECTION 7.06 Registration of Parent Options. As soon as
reasonably practicable following the Closing, Parent will cause the Parent
Common Stock to be issued pursuant to Options and Larco Options to be registered
with the SEC pursuant to an appropriate Registration Statement.
ARTICLE VIII
CERTAIN OTHER COVENANTS
SECTION 8.01 Legal Conditions to Merger. Subject to the
limitations contained in Section 10.01(b), Company, Parent and the Shareholders
will each take all reasonable actions necessary to comply promptly with all
legal requirements which may be imposed on them with respect to this Agreement
(including furnishing all information (i) required under the HSR Act, the
Securities Act and the Exchange Act and (ii) the Certificate of Merger and the
Local Approvals and approvals of or filings with any other Governmental Entity
and will promptly cooperate with and furnish information to each other in
connection with any such requirements imposed upon any of them in connection
with the Merger. Subject to the limitations contained in Section 10.01(b), the
Company, Parent and the Shareholders will each take all reasonable actions
necessary to obtain (and will cooperate with each other in obtaining) any
consent, authorization, order or approval of, or any exemption by, any
Governmental Entity or other public or private third party, required to be
<PAGE>
obtained or made by Parent or the Company in connection with the Merger or the
taking of any action contemplated thereby or by this Agreement or the Related
Agreements. Parent and the Company will make their HSR Act filing within one
business day after the signing of this Agreement and both agree to seek early
termination of the HSR Act waiting period as of the initial HSR Act filing.
SECTION 8.02 Pooling of Interests. The Company, Parent and the
Shareholders will each use all commercially reasonable efforts to cause the
transactions contemplated by this Agreement to be accounted for as a pooling of
interests in accordance with GAAP, and such accounting treatment to be accepted
by Parent and Parent's independent certified public accountants and, if
requested by Parent, the SEC. In that connection each Shareholder, in order to
preserve pooling treatment, represents he has not sold or transferred any shares
of Company Common Stock or Exchangeable Shares since January 1, 1999 and
covenants that to the extent necessary to preserve pooling treatment he will not
do so and will not sell or transfer any shares of Parent Common Stock until the
financial results covering at least 30 days of the combined operations of the
Company and Parent have been published.
SECTION 8.03 Tax Treatment. Parent, Sub and the Company each
agree to treat the Merger as a reorganization within Section 368(a) of the Code.
SECTION 8.04 Escrow Agreement. Each of the Shareholders
(including spouses of the Shareholders) and Parent shall enter into an escrow
agreement ("Escrow Agreement") with the Escrow Agent (as hereinafter defined)
within 10 days after the date hereof on the same terms as are contained in
Schedule 8.04 hereto ("Escrow Agreement").
SECTION 8.05 Market Activity. Parent will not repurchase any
of its capital stock prior to the Effective Time. Further, Parent shall give the
Company written notice of any "road shows" or unusual promotional activities it
intends to undertake prior to the Effective Time. The Company and the
Shareholders shall not, and shall cause their affiliates not to, make any
transactions in securities of Parent or otherwise take any actions that, may
adversely affect the market price of Parent Common Stock prior to the Effective
Time.
SECTION 8.06 Certain Employee Benefit Matters. Parent agrees
to the following with respect to any individual who is an employee of the
Company or its Subsidiaries on the Closing Date (individually, a "Company
Employee", and collectively, the "Company Employees"):
<PAGE>
(a) Service before the Closing Date which was performed for
the Company, a Subsidiary or a predecessor of either by a Company Employee will
be treated as service with Parent for purposes of determining eligibility to
participate in Parent's employee benefit plans; provided, however, that nothing
contained herein shall require Parent to provide for the participation by any
Company Employees in any such plan; and
(b) Employees affected by subparagraph (a) above who are
offered eligibility by Parent in one or more employee benefit plans sponsored by
Parent will be eligible to commence participation in such plan(s) as of the
relevant entry date defined in each such plan as of which each such Company
Employee satisfies all eligibility requirements for that plan.
(c) Service before the Closing Date which was performed for
the Company, a Subsidiary or a predecessor of either by a Company Employee will
be treated as service with Parent for purposes of calculating severance pay
under Parent's severance pay plan; provided, however, that such service shall
not be credited under the Parent's severance pay plan to the extent that it is
taken into account under any other severance arrangement.
SECTION 8.07 Consent of Lenders. Parent agrees to use
commercially reasonable efforts to obtain in a timely fashion the consent of the
lenders referred to in Section 10.02(f).
ARTICLE IX
NON-COMPETITION AND NON-DISCLOSURE
SECTION 9.01 Non-competition and Non-disclosure. Following the
Closing Date and thereafter:
(a) each of Larry Di Stefano and Andy Everett agrees not to,
except to the extent limited in Schedule 9.01A, for a period of 5 years
following the Closing Date, engage or become interested, directly or indirectly,
as owner, employee, partner, through stock ownership (except ownership of less
than five percent (5%) of the number of shares outstanding of any securities
which are listed for trading on any securities exchange), investment of capital,
lending of money or property, rendering of services, or otherwise, whether alone
or in association with others, in the operation of any business or enterprise in
any way competitive to the business heretofore conducted by the Company or any
of its Subsidiaries anywhere in the world;
<PAGE>
(b) each of Larry Di Stefano and Andy Everett agrees not to
solicit or accept orders for goods or services competitive to those heretofore
provided or sold by the Company or any of its Subsidiaries from any then or
previous customer of the Company or any of its Subsidiaries or otherwise induce
or attempt to induce any such customer to reduce such customer's patronage of
the Company or any of its Subsidiaries;
(c) each of Larry Di Stefano and Andy Everett agrees not to
solicit any employee of the Company or any of its Subsidiaries to leave the
employ of the Company or any of its Subsidiaries;
(d) each of the Shareholders agrees not to use the names "GL",
"GL International", "Gaffey", "Larco", "Handling Systems and Conveyors", "HSC",
or any variation thereof in any organization or enterprise or business; or
(e) each of the Shareholders agrees not to divulge,
communicate, or utilize any confidential information of or pertaining to the
business of Company or any of its Subsidiaries.
The obligations of Larry Di Stefano and Andy Everett under
this Section 9.01(a) are expressly subject to the terms of the severance
agreements in Schedule 9.01A.
SECTION 9.02 Equitable Remedies. Each of the Shareholders
specifically acknowledges and agrees that the remedy at law for any breach of
any provision of this Article IX will be inadequate and that Parent, in addition
to any other relief available to it, shall be entitled to temporary and
permanent injunctive relief without the necessity of proving actual damage.
SECTION 9.03 Severability. If any provision of this Article IX
shall for any reason be held to be excessively broad as to any activity or
subject, it shall be construed, by limiting and reducing it, to be enforceable
to the extent compatible with applicable law. If any provision in this Article
IX shall, notwithstanding the preceding sentence, be held illegal or
unenforceable, such illegality or unenforceability shall not affect any other
provision of this Article IX but this Agreement shall be construed as if such
illegal or unenforceable provision had never been contained herein.
SECTION 9.04 No Waiver. The rights of Parent and obligations
of the Shareholders set forth in this Article IX are in addition to, and not in
lieu of, all other rights and obligations provided by applicable law.
<PAGE>
ARTICLE X
CONDITIONS
SECTION 10.01 Conditions to Each Party's Obligation To Effect
the Merger. The respective obligation of the Company and Parent to effect the
Merger shall be subject to the satisfaction prior to the Closing Date of the
following conditions:
(a) Certain Approvals. Other than the filing provided for by
Section 1.01, all authorizations, consents, orders or approvals of, or
declarations or filings with, or expirations of waiting periods imposed by, any
Governmental Entity the failure to obtain which would have a material adverse
effect on Parent, shall have been filed, occurred or been obtained including,
but not limited to, the HSR Act and the Local Approvals (and all applicable
waiting periods, if any, including any extensions thereof, under any Applicable
Laws, including, but not limited to, the HSR Act, shall have expired or
terminated).
(b) Absence of Certain Injunctions and Government Actions.
There (i) shall not be in effect a temporary restraining order or a preliminary
or permanent injunction or other order, decree or ruling by a Governmental
Entity which (A) restrains or prohibits the Merger or the consummation of all or
any of the other transactions contemplated hereby, or (B) prohibits or restricts
the ownership or operation by Parent (or any of its subsidiaries) of any portion
of its (or their) or the Company's or any Subsidiary's business or assets which
is material to the business of such entities, or compels Parent (or any of its
subsidiaries) to dispose of or hold separate any portion of its (or their) or
the Company's or any Subsidiary's business or assets which, if required to be
disposed of, would be likely to materially diminish the value of the Company or
any Subsidiary to Parent, or would be likely to have a material adverse effect
on Parent following the Closing, including the Surviving Corporation, or (C)
imposes any limitations on the ability of Parent or any of its subsidiaries
effectively to control in any material respect the business and operation of the
Company or any Subsidiary, or (D) is otherwise reasonably likely to have a
material adverse effect on Parent or any of its subsidiaries; or (ii) shall not
be pending before any Governmental Entity, any action or proceeding, whether in
law or in equity or otherwise, brought by any Governmental Entity which seeks as
relief a result described in clause (i) above; or (iii) shall not have been
promulgated or enacted by a Governmental Entity a statute, rule, regulation or
executive order which has an effect described in clauses (i) (A), (B) or (C)
above; provided, however, that (x) the parties shall use their best efforts to
litigate against the entry of, or to obtain the lifting of, such temporary
restraining order or preliminary or permanent injunction or other governmental
<PAGE>
action; (y) in no event shall a party be obligated to take or accept or refrain
from taking any action if the taking, acceptance or refraining from taking such
action is reasonably likely to materially diminish the value of the Company or
any Subsidiary to Parent; and (z) the existence of a temporary restraining order
as described in clause (i) or the pendency of an action or proceeding as
described in clause (ii) shall operate only to delay the Closing until the 30th
day following the lifting of such temporary restraining order or the conclusion
of such action or proceeding, except that there shall be deemed to be a failure
of this condition if such action or proceeding shall not have concluded, the
parties agreeing, subject to the other provisions of this Agreement by May 30,
1999, to exercise their best efforts to close as soon as reasonably practicable
following the lifting of any such temporary restraining order or the conclusion
of any such action or proceeding.
SECTION 10.02 Conditions to Obligations of Parent. The
obligations of Parent to effect the Merger are subject to the satisfaction of
the following conditions unless waived by Parent.
(a) Representations and Warranties. The representations and
warranties of the Company and the Shareholders set forth in this Agreement shall
be true and correct in all material respects as of the date of this Agreement
and as of the Closing Date as though made on and as of the Closing Date, except
as otherwise provided in this Agreement, and Parent shall have received a
certificate signed on behalf of the Company by the chief executive officer and
the chief financial officer of the Company to such effect and such certificate
shall be deemed to be a representation and warranty of the Company and the
Shareholders only as of the time immediately preceding the Closing.
(b) Performance of Obligations of the Company and
Shareholders. The Company and the Shareholders shall have performed all
obligations required to be performed by them under this Agreement at or prior to
the Closing Date, and Parent shall have received a certificate signed on behalf
of the Company by the chief executive officer and the chief financial officer of
the Company to such effect.
(c) Affiliate Letters. Parent shall have received the letters
and agreements contemplated by Section 6.06 hereof.
(d) Opinions. Parent shall have received the opinions from
counsel to the Company, dated the Closing Date, in substantially the same form
and substance as Schedule 10.02(d) hereto.
<PAGE>
(e) Dissenters. No Shareholders shall have demanded appraisal
rights in respect of the Merger and not waived such appraisal rights.
(f) Consent of Lenders. At or prior to the Closing Parent
shall have received, pursuant to its loan agreements with Fleet National Bank as
administrative agent for a syndicate of lenders, Fleet National Bank's consent
to this Agreement and the transactions contemplated hereby.
(g) Releases. The directors and executive officers of the
Company and each Subsidiary shall each have furnished the Company with duly
executed general releases of liabilities and obligations of the Company, other
than the Company's obligations to provide compensation and employee benefits
pursuant to arrangements disclosed in the Schedules hereto. Such releases shall
be in the form attached hereto as Schedule 10.02(g).
(h) Certain Authorizations. Parent shall have received all
permits and other authorizations necessary under the Blue-Sky Laws to issue
Parent Common Stock pursuant to this Agreement.
(i) Other Closing Documents. Parent shall have received, on
and as of the Closing Date, the duly executed Certificate of Merger, the Related
Agreements and such other agreements and instruments as Parent shall reasonably
request, in each case reasonably satisfactory in form and substance to Parent.
(j) Shareholder Approval. This Agreement and the transactions
contemplated hereby, shall have been approved and adapted by the affirmation
vote of the holders of a majority of the outstanding shares of Company Common
Shares.
(k) Exchangeable Shares. All of the Exchangeable Shares shall
have been exchanged for shares of Company Common Stock.
(l) Severance Agreement. Parent shall have received the
agreement of Andrew G. Everett and Larry DiStefano to the Severance Agreement
attached hereto as Schedule 9.01A.
(m) Discharge of Debt. If Parent elects to repay Debt at
Closing pursuant to Section 6.10, then upon such payment Parent shall have
received from the lender or lenders evidence of payment and discharge of the
Debt and releases of all security interests on the assets of the Company and the
Subsidiaries securing the Debt in form and substance reasonably satisfactory to
Parent.
<PAGE>
(n) Estoppel Certificates. The Company shall have used all
reasonable efforts to obtain from each lessor of the Leased Premises
certificates reasonably satisfactory in form and substance to Parent regarding
the continuing validity of the leases of the Leased Premises and the absence of
any breach or basis for termination thereof.
SECTION 10.03 Conditions of Obligations of the Company and the
Shareholders. The obligation of the Company and the Shareholders to effect the
Merger is subject to the satisfaction of the following conditions unless waived
by the Company:
(a) Representations and Warranties. The representa-tions and
warranties of Parent set forth in this Agreement shall be true and correct in
all material respects as of the date of this Agreement and as of the Closing
Date as through made on and as of the Closing Date, except as otherwise provided
by this Agreement, and the Company shall have received a certificate signed on
behalf of Parent by the chief executive officer and the chief financial officer
of Parent to such effect and such certificate shall be deemed to be a
representation and warranty of Parent only as of the time immediately preceding
the Closing.
(b) Performance of Obligations of Parent. Parent shall have
performed all obligations required to be performed by it under this Agreement at
or prior to the Closing Date, and the Company shall have received a certificate
signed on behalf of Parent by the chief executive officer and the chief
financial officer of Parent to such effect.
(c) Opinion. The Company shall have received an opinion from
Phillips, Lytle, Hitchcock, Blaine & Huber LLP, counsel to Parent, dated the
Closing Date, in substantially the same form and substance as Schedule 10.03(c)
hereto.
(d) Registration Agreement. The Shareholders shall have
received the Registration Agreement duly executed by Parent on substantially the
same terms as set forth in Schedule 10.03(d) hereto.
(e) Other Closing Documents. The Company shall have received,
on and as of the Closing Date, the duly executed Certificate of Merger, the
Related Agreements and such other agreements and instruments as the Company
shall reasonably request, in each case reasonably satisfactory in form and
substance to the Company.
<PAGE>
ARTICLE XI
TERMINATION AND AMENDMENT
SECTION 11.01 Termination. This Agreement may be terminated at
any time prior to the Effective Time, whether before or after approval of the
matters presented in connection with the Merger by the Shareholders of the
Company:
(a) by mutual consent of Parent and the Company;
(b) by Parent (i) if there has been a breach of any
representation, warranty, covenant or agreement on the part of the Company or
the Shareholders set forth in this Agreement, or (ii) if any permanent
injunction or other order of a court or other competent authority preventing the
consummation of the Merger shall have become final and non-appealable;
(c) by the Company (i) if there has been a breach of any
representation, warranty, covenant or agreement on the part of Parent set forth
in this Agreement, or (ii) if any permanent injunction or other order of a court
or other competent authority preventing the consummation of the merger shall
have become final or nonappealable;
(d) by either Parent or the Company if the Merger shall not
have been consummated on or before May 30, 1999;
(e) by Parent if any required approval of the Shareholders of
the Company shall not have been obtained by reason of the failure to obtain the
required vote at a duly held meeting of Shareholders or at any adjournment
thereof however, such termination shall not relieve the Company or any of the
Shareholders of any liability for violation of this Agreement or any of the
Related Agreements.
(f) by Parent if, since December 31, 1998, there has been a
materially adverse change in the financial condition, operations, business or
prospects of the Company;
(g) by the Company if, since December 31, 1998, there has been
a materially adverse change in the financial condition, operations, business or
prospects of Parent.
SECTION 11.02 Effect of Termination. In the event of a
termination of this Agreement by either the Company or Parent as provided in
Section 11.01, this Agreement shall forthwith become void and there shall be no
liability or obligation on the part of Parent or the Company or their respective
officers or directors or the Shareholders, EXCEPT (a) with respect to the
penultimate sentence of Section 7.02 and Section 6.07 and (b) to the extent that
<PAGE>
such termination results from the breach by a party hereto of any of its
representations and warranties or a breach of its covenants or agreements set
forth in this Agreement or the Related Agreements. Notwithstanding the
foregoing, but subject to clause (a) of this Section 11.02 any party who
terminates this Agreement as a result of an unintentional breach by another
party of a representation, warranty, covenant or agreement shall have no further
remedy with respect thereto. Nothing in this Section 11.02 shall preclude the
availability of equitable relief.
SECTION 11.03 Amendment. This Agreement may be amended by
Parent and the Company, by action duly taken or authorized, at any time before
or after approval of the matters presented in connection with the Merger by the
Shareholders or the Shareholders of Parent, but, after any such approval, no
amendment shall be made which by law requires further approval by such
shareholders without such further approval. This Agreement may not be amended
except by an instrument in writing signed on behalf of Parent and the Company.
SECTION 11.04 Extension; Waiver.
(a) Parent. At any time prior to the Effective Time, Parent,
by action duly taken, may, to the extent legally allowed, (i) extend the time
for the performance of any of the obligations or other acts of the other parties
hereto, (ii) waive any inaccuracies in the representations and warranties of the
other parties hereto contained herein or in any document delivered pursuant
hereto and (iii) waive compliance of the other parties hereto with any of the
agreements or conditions contained herein.
(b) The Company. At any time prior to the Effective Time, the
Company, by action duly taken, may, to the extent legally allowed, (i) extend
the time for the performance of any of the obligations or other acts of Parent,
(ii) waive any inaccuracies in the representations and warranties of Parent
contained herein or in any document delivered pursuant hereto and (iii) waive
compliance of Parent with respect to any of the agreements or conditions
contained herein.
(c) Form of Waiver or Extension. Any agreement on the part of
Parent or the Company hereto to any such extension or waiver shall be valid only
if set forth in a written instrument signed on behalf of such party and no party
can assert a claim with respect to a matter so waived, it being understood that
all Shareholders shall be deemed to have no rights with respect to any matter
waived by the Company.
<PAGE>
ARTICLE XII
SURVIVAL AND INDEMNIFICATION
SECTION 12.01 Survival of Representations, Warranties,
Covenants and Agreements.
(a) Survival. The representations, warranties, covenants,
agreements and undertakings of the Company, Larco, the Shareholders and Parent
in this Agreement, the Related Agreements and in any instrument delivered
pursuant to this Agreement and all rights of Parent, Sub and the Surviving
Corporation and the Shareholders with respect thereto shall survive the Closing
and the Merger and continue except to the extent otherwise provided in this
Article XII.
(b)(i) Indemnity Obligations of the Shareholders. Following
the Closing, each of the Shareholders hereby agrees to indemnify and hold Parent
and Sub harmless from and against, and to reimburse Parent and Sub for or in
respect of, any and all losses, damages, deficiencies, liabilities, claims,
economic injury, obligations, expenses (including, without limitation, all
out-of-pocket expenses, reasonable investigation expenses and reasonable fees
and disbursements of accountants and counsel), net of any tax benefit actually
realized and any insurance proceeds and other third party reimbursement actually
received (which Parent agrees in both cases to use its best efforts to pursue if
reasonably available), suffered or incurred by Parent or Sub (collectively,
"Parent Damages") arising out of, based upon, or by reason of (A) any breach of
any representation or warranty of the Company or any of the Shareholders which
is contained in this Agreement, or in any Schedule or certificate delivered
pursuant thereto; (B) any breach or nonfulfillment of, or any failure to
perform, any of the covenants, agreements or undertakings of the Company, Larco
or any of the Shareholders which are contained in or made pursuant to this
Agreement, which, as to the Company or Larco, occur prior to the Effective Time;
or (C) any claim for indemnification or advances made by any person by reason of
his service as an officer or director of the Company or any Subsidiary or any
predecessor against the Company or any Subsidiary. In order to provide for
Shareholders Indemnification Threshold and Parent's Indemnification Threshold
(each as hereafter defined), the parties agree that for the purposes of this
Article XII a representation shall be deemed false and a warranty, agreement,
covenant or undertaking shall be deemed breached or not fulfilled if the same
would have been false, breached or not fulfilled had the representation,
warranty, agreement, covenant or undertaking not been qualified by the words
"material", "materially", "in all material respects" or words of similar import.
<PAGE>
(b)(ii) Indemnity Obligations of Parent. Following the
Closing, Parent hereby agrees to indemnify and hold the Shareholders harmless
from and against, and to reimburse the Shareholders for or in respect of, any
and all losses, damages, deficiencies, liabilities, claims, economic injury,
obligations, expenses (including, without limitation, all out-of-pocket
expenses, reasonable investigation expenses and reasonable fees and
disbursements of accountants and counsel), net of any tax benefit actually
realized and any insurance proceeds and other third party reimbursement actually
received (which Shareholders agree in both cases to use their best efforts to
pursue, if reasonably available) (collectively "Shareholder Damages") suffered
or incurred by the Shareholders arising out of, based upon, or by reason of (A)
any breach of any representation or warranty of Parent which is contained in
this Agreement or (B) any breach or non-fulfillment of, or any failure to
perform, any of the covenants, agreements or undertakings of Parent in this
Agreement. Any amounts owed by Parent to the Shareholders under this Article XII
shall be allocated among them in accordance with their proportionate share
("Proportionate Share") as set forth in Schedule 12.01(b)(ii) hereto.
(c)(i) Certain Limitations on Shareholders' Indemnification
Obligations. Subject to the remaining provisions of this Section 12.01(c)(i),
notwithstanding anything to the contrary herein, any claim by Parent or Sub
against the Shareholders under Article XII of this Agreement for breach of
representation or warranty (other than for breach of the Unlimited Warranties,
as hereafter defined), shall be payable by the Shareholders only in the event
and to the extent that the accumulated amount of Parent Damages, for breaches of
representations or warranties shall exceed $925,000 in the aggregate (the
"Shareholders' Indemnification Threshold"); and that at such time as the
aggregate amount of Parent Damages for breaches of representations or warranties
shall exceed the Shareholders' Indemnification Threshold, the Shareholders shall
thereafter be liable on a dollar-for-dollar basis for the full amount of all
Parent Damages, for breach of representation or warranty, in excess of the
Shareholders' Indemnification Threshold, it being the intention of the parties
that the initial $925,000 of Parent Damages excluded by reason of the
Shareholders' Indemnification Threshold would not be recoverable against the
Shareholders but would be borne by Parent. In no event shall the Shareholders'
aggregate liability for Parent Damages, for breach of representations and
warranties (other than for breach of the Unlimited Warranties), exceed
$3,000,000 ("Ceiling Amount").
The liability of any Shareholder for a breach of a
representation or warranty contained in Article V (the "Unlimited Warranties")
shall not be subject to the Shareholders' Indemnification Threshold, shall not
<PAGE>
count against the Shareholders' Indemnification Threshold and shall not be
limited by the Ceiling Amount. No Shareholder shall have any liability for a
breach of any representation or warranty or covenant contained in Article V by
any other Shareholder, it being the intention of the parties that the
representations and warranties and covenants in Article V are being made
severally and not jointly and severally.
Subject to the immediately preceding paragraph no Shareholder
shall be liable for more than such Shareholder's Proportionate Share of Parent
Damages.
(c)(ii) Certain Limitations on Parent's Indemnification
Obligations. Subject to the remaining provisions of this Section 12.01(c)(ii),
notwithstanding anything to the contrary herein, any claim by the Shareholders
against Parent under Article XII of this Agreement shall be payable by Parent
only in the event and to the extent that the accumulated amount of Shareholder
Damages for breach of representation or warranty shall exceed in the aggregate
the amount of $925,000 (the "Parent's Indemnification Threshold"); and that at
such time as the aggregate amount of Shareholder Damages for breach of
representation or warranty shall exceed the Parent's Indemnification Threshold,
Parent shall thereafter be liable on a dollar-for-dollar basis for the full
amount of all Shareholder Damages, for breach of representation or warranty, in
excess of the Parent's Indemnification Threshold, it being the intention of the
parties that the initial $925,000 of Shareholder Damages excluded by reason of
the Parent's Indemnification Threshold would not be recoverable against Parent
but would be borne by the Shareholders. In no event shall Parent's aggregate
liability for Shareholder Damages, for breach of representations and warranties,
exceed $3,000,000.
(d) Duration. Except in respect of any claims for breach of
representation or warranty as to which a notice of claim for Shareholders
Damages or Parent Damages shall have been given prior to the First Anniversary
of the Effective Time, all representations and warranties contained in Articles
III and IV and all rights with respect thereto shall expire on the First
Anniversary of the Effective Time.
(e) Indemnification Procedures. In the event that subsequent
to the Effective Time any person or entity entitled to indemnification under
this Agreement (an "Indemnified Party") receives notice of the assertion of any
claim, or of the commencement of any action or proceeding by any person who is
not a party to this Agreement or an Affiliate of a party (a "Third Party Claim")
against such Indemnified Party, against which a party to this Agreement is
required to provide indemnification under this Agreement (an "Indemnitor"), the
<PAGE>
Indemnified Party shall give written notice thereof together with a statement of
any available information regarding such claim to the Indemnitor within thirty
(30) days after receiving written notice of such claim (or within such shorter
time as may be necessary to give the Indemnitor a reasonable opportunity to
respond to and defend such claim). The Indemnitor shall have the right, upon
written notice to the Indemnified Party (the "Defense Notice") within thirty
(30) days after receipt from the Indemnitor of notice of such claim, to conduct
at its expense the defense against such claim in its own name, or if necessary
in the name of the Indemnified Party; provided, however, that the Indemnified
Party shall have the right to approve the defense counsel selected by the
Indemnitor, which approval shall not be unreasonably withheld, and in the event
the Indemnitor and the Indemnified Party cannot agree upon such counsel within
ten days after the Defense Notice is provided, then the Indemnitor shall propose
an alternate defense counsel, who shall be subject again to the Indemnified
Party's reasonable approval. The Indemnified Party shall take all action
reasonably necessary to preserve all rights and defenses of the Indemnitor until
the earlier of: (i) the Indemnitor's assumption of the defense of such claim, or
(ii) thirty (30) days after the Indemnitor's receipt of the notice of the Third
Party Claim.
In the event that the Indemnitor shall fail to give the
Defense Notice, it shall be deemed to have elected not to conduct the defense of
the subject claim, and in such event the Indemnified Party shall have the right
to conduct such defense in good faith. If an offer is made to settle such
subject claim, and the Indemnified Party desires to accept and agree to such
offer, the Indemnified Party will give written notice to the Indemnitor to that
effect. The Indemnitor must either consent to such firm offer within fifteen
(15) calendar days after its receipt of such notice, or the Indemnitor must
assume the contest or defense of such claim;and in the event that the Indemnitor
does not consent to such firm offer and assumes the contest or defense of such
claim, then the maximum liability of the Indemnified Party as to such claim will
not exceed any amount that the Indemnified Party would have had to pay under
such settlement offer and the balance of any such claim shall be borne by the
Indemnitor regard-less of any limitations imposed under subsection (c)(i) or
(c)(ii), as the case may be, and any Parent Damages or Shareholder Damages, as
the case may be, in excess of such settlement offer shall not count towards the
limitations set forth in subsection (c)(i) or (c)(ii), as the case may be. The
Indemnitor will not enter into any settlement of such claim, if as a result of
such settlement or cessation, (i) injunctive or other equitable relief would be
imposed against the Indemnified Party, (ii) such settlement or cessation would
lead to liability or create any financial or other obligation on the part of the
<PAGE>
Indemnified Party for which the Indemnified Party is not entitled to
indemnification hereunder, (iii) such settlement includes a written admission of
guilt, or (iv) such settlement results in a material interference with the
business, operations, assets or condition (financial or otherwise) of the
Indemnified Party, unless any of the consequences described in (i), (ii), (iii)
or (iv) above was part of, or was included in, the original settlement offer.
In the event that the Indemnitor does elect to conduct the
defense of the subject claim, the Indemnified Party will cooperate with and make
available to the Indemnitor such assistance and materials as may be reasonably
requested by it, all at the expense of the Indemnitor, and the Indemnified Party
shall have the right at its expense to participate in the defense assisted by
counsel of its own choosing and at its own expense, provided that the
Indemnified Party shall have the right to compromise and settle the claim only
with the prior written consent of the Indemnitor, which consent shall not be
unreasonably withheld or delayed. Without the prior written consent of the
Indemnified Party, which shall not be unreasonably withheld or delayed, the
Indemnitor will not enter into any settlement of any Third Party Claim or cease
to defend against such claim, if pursuant to or as a result of such settlement
or cessation, (i) injunctive or other equitable relief would be imposed against
the Indemnified Party, (ii) such settlement or cessation would lead to liability
or create any financial or other obligation on the part of the Indemnified Party
for which the Indemnified Party is not entitled to indemnification hereunder,
(iii) such settlement includes a written admission of guilt, or (iv) such
settlement results in a material interference with the business, operations,
assets or condition (financial or otherwise) of the Indemnified Party.
The Indemnitor shall not be entitled to control, and the
Indemnified Party shall be entitled to have sole control over, the defense or
settlement of any claim to the extent that claim seeks an order, injunction or
other equitable relief against the Indemnified Party which, if successful, could
materially interfere with the business, operations, assets, condition (financial
or otherwise) or prospects of the Indemnified Party (and the reasonable cost of
such defense shall constitute an amount for which the Indemnified Party is
entitled to indemnification hereunder). If an offer is made to settle a Third
Party Claim, which offer the Indemnitor is not permitted to settle under this
Section without the consent of the Indemnified Party, and the Indemnitor desires
to accept and agree to such offer, the Indemnitor will give written notice to
the Indemnified Party to that effect. If the Indemnified Party fails to consent
to such firm offer within 15 calendar days after its receipt of such notice, the
Indemnified Party shall continue to contest or defend such Third Party Claim
<PAGE>
and, in such event, the maximum liability of the Indemnitor as to such Third
Party Claim will not exceed the amount of such settlement offer and without the
prior written consent of the Indemnitor, which consent shall not be unreasonably
withheld or delayed, the Indemnified Party will not enter into any settlement of
any Third Party Claim or cease to defend against such claim, if pursuant to or
as a result of such settlement or cessation, (i) injunctive or other equitable
relief would be imposed against the Indemnitor, (ii) such settlement includes a
written admission of guilt, or (iii) such settlement results in a material
interference with the business, operations, assets or condition (financial or
otherwise) of the Indemnitor, unless such consequence described in (i), (ii) or
(iii) above was part of, or was included in, the original settlement offer.
Any judgment entered or settlement agreed upon in the manner
provided herein shall be binding upon the Indemnitor and Indemnified Party, if
necessary, and each party will comply with such settlement.
The Indemnitor shall be subrogated to the Indemnified Party's
rights of recovery to the extent of any Parent Damages or Shareholder Damages,
as the case may be, reimbursed by the Indemnitor. The Indemnified Party shall
execute and deliver such instruments and papers as are necessary to assign
without recourse such rights and assist in the exercise thereof, including
access to books and records of such party.
(f) Remedies. With the exception of contribution and cost
recovery actions authorized under the Comprehensive Environmental Response
Compensation and Liability Act of 1980, as amended by the Superfund Amendments
and Reauthorization Act of 1986, 42 USCA 9601, ET. SEQ., as amended, and similar
state laws, each party hereto shall not be liable or responsible in any manner
whatsoever to the other party, whether for indemnification or otherwise, with
respect to any matter arising out of the representations, warranties or
covenants of this Agreement or any Schedule hereto or any opinion or certificate
delivered in connection herewith except for (i) equitable relief, (ii) pursuant
to remedies expressly provided for elsewhere in this Agreement and (iii)
indemnification and other rights provided in this Article XII, all of which
provide the exclusive remedy of the parties hereto after the Effective Time.
Nothing in this Agreement shall operate to limit any remedies of the parties
with respect to any breach or violation of any of the Related Agreements.
(g) Appointment of Representative. Each of the Shareholders
hereby appoints Marshall B. Payne as such Shareholder's exclusive agent to act
on such Shareholder's behalf with respect to any and all claims arising under
this Agreement. In such representative capacity, Marshall B. Payne or any person
<PAGE>
who shall succeed him in such representative capacity is sometimes referred to
in this Agreement as the "Representative." The Representative shall take, and
the Shareholders agree that the Representative shall take, any and all actions
which such Representative believes are necessary or appropriate under this
Agreement for and on behalf of the Shareholders, as fully as if the Shareholders
were acting on their own behalf, including, without limitation, defending,
consenting to, compromising or settling all claims for Parent Damages or
Shareholder Damages, conducting negotiations with Parent and its representatives
regarding such claims, taking any and all actions specified in or contemplated
by Article XII of this Agreement and engaging counsel, accountants or other
representatives in connection with the foregoing matters provided however, on
any matter for which a Shareholder is solely liable, such as a breach of Article
V, such Shareholder may elect to represent himself or herself alone, outside
this Section 12.01(g). Parent shall have the right to rely upon all actions
taken or omitted to be taken by the Representative pursuant to this Agreement,
all of which actions or omissions shall be legally binding upon each of the
Shareholders. In the event of a dispute among the Shareholders with respect to
any action to be taken by the Representative on the Shareholders' behalf, the
Representative shall be fully entitled to act as directed by the Shareholders
who received a majority of the Parent Common Stock included in the Merger
Consideration and such action of the Representative shall be binding on all
Shareholders.
(i) Each Shareholder hereby authorizes and empowers
the Representative to execute any other notice, waiver, or other direction
required hereunder on behalf of such Shareholder pursuant to this Agreement.
(ii) The Shareholders jointly and severally agree to
indemnify and save the Representative harmless from all loss, cost, damages,
fees and expenses, including, but not limited to attorney's fees and court costs
suffered or incurred by the Representative in connection with this Agreement
other than as a result of the Representative's own gross negligence or wilful
misconduct.
(iii) The Shareholders agree that the Representative
shall be protected in acting upon any written notice, request, waiver, consent,
certificate, receipt, opinion of counsel, authorization, power of attorney or
other paper or document which the Representative in good faith believes to be
(a) genuine and what it purports to be and (b) in compliance with the terms of
this Agreement.
<PAGE>
(iv) The Shareholders agree that the Representative
shall not be liable to the Shareholders for anything which the Representative
may do or refrain from doing in connection herewith, except the Representative's
own gross negligence or willful misconduct.
(v) The Representative may consult with legal counsel
in the event of any dispute or question as to the construction of any of the
provisions hereof or the Representative's duties hereunder, and the
Representative shall incur no liability and shall be fully protected in acting
in accordance with this Agreement and the reasonable opinion and instructions of
such counsel.
(vi) The Representative's duties are not intended to
create any fiduciary or other duty on the part of the Representative with
respect to the Shareholders. The Representatives has no implied duties to the
Shareholders.
(vii) The Shareholders shall be responsible for all
costs or expenses of the Representative.
(h) Arbitration. Notwithstanding anything herein to the
contrary, in the event that there shall be a dispute among the parties after the
Closing concerning the obligations of the parties under this Article XII, the
parties agree that such dispute shall be submitted to binding arbitration in New
York City, New York before a single arbitrator jointly agreed to by the parties,
in accordance with the rules of the American Arbitration Association. Any award
issued as a result of such arbitration shall be final and binding between the
parties thereto, and shall be enforceable by any court having jurisdiction over
the party against whom enforcement is sought.
(i) Escrow. Parent and the Shareholders acknowledge that, out
of the shares of Parent Common Stock to be issued to the Shareholders in the
Merger, the Exchange Agent on behalf of the Shareholders shall and is hereby
authorized by and on their behalf as their agent to deposit into escrow, with
the Escrow Agent named in the Escrow Agreement, a number of shares equal to 5%
of the Preliminary Aggregate Merger Consideration (such deposit, being referred
to as the "Escrow Deposit"), with each Shareholder being deemed to have received
such shares of Parent Common Stock and having thereupon transferred into such
Escrow Deposit that number of shares of Parent Common Stock (rounded to the
nearest whole number of shares of Parent Common Stock to eliminate any
fractional shares) equal to such Shareholder's Proportionate Share of the Escrow
Deposit. The Shareholders authorize the Exchange Agent to register such Shares
of Parent Common Stock in the name of the Escrow Agent. Other than with respect
to a Shareholder's Unlimited Warranties, Parent and the Shareholders agree that
<PAGE>
Parent Damages shall be satisfied first out of the shares of Parent Common Stock
held in the Escrow Deposit, as further provided under the terms of the Escrow
Agreement. For purposes hereof, each share of Parent Common Stock returned to
Parent in settlement of any Parent Damages under the Escrow Agreement shall be
valued at the Closing Market Price. At such time as the aggregate amount of
Parent Damages which have been definitively resolved in favor of Parent shall
exceed the value of Parent Common Stock then remaining in the Escrow Deposit,
each of the Shareholders shall thereafter be jointly and severally liable to
Parent for the amount of such excess (for purposes hereof, an "Excess Claim"),
subject to the limitations herein. Any liability of the Shareholders for Parent
Damages for an Excess Claim may be satisfied by the Shareholder either through
(A) the delivery of shares of Parent Common Stock to Parent, such shares to be
valued as set forth above or (B) a cash payment to Parent equal to the amount of
the Excess Claim.
(i) Environmental Reports. Notwithstanding any-
thing to the contrary in this Agreement, neither Parent, Sub, nor anyone
claiming through Parent or Sub shall be entitled to make any claim against the
Shareholders with respect to the environmental matters disclosed in the
Environmental Reports and no amounts incurred in connection with such
environmental matters will count against the Shareholders' Indemnification
Threshold.
ARTICLE XIII
MISCELLANEOUS
SECTION 13.01 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given if delivered personally,
telecopied (which is confirmed) or mailed by registered or certified mail
(return receipt requested) to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
if to Parent or Sub, to
Columbus McKinnon Corporation
140 James Audubon Parkway
Amherst, New York 14228
Attention: Robert L. Montgomery, Jr.
<PAGE>
with a copy to
Frederick G. Attea, Esq.
Phillips, Lytle, Hitchcock, Blaine & Huber LLP
3400 Marine Midland Center
Buffalo, New York 14203
and
if to the Company, to
G.L. International Inc.
2350 Airport Freeway, Suite 380
Bedford, Texas 76022
Attention: Andy Everett
with a copy to
Richard L. Waggoner, Esq.
Gardere & Wynne, L.L.P.
1601 Elm Street
Suite 3000
Dallas, Texas 75201
If to the Representative, to
Marshall B. Payne
500 Crescent Court
Suite 250
Dallas, Texas 75201
with a copy to
Richard L. Waggoner, Esq.
Gardere & Wynne, L.L.P.
1601 Elm Street
Suite 3000
Dallas, Texas 75201
SECTION 13.02 Interpretation. When a reference is made in this
Agreement to Sections, such reference shall be to a Section of this Agreement
unless otherwise indicated. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include", "includes" or
"including" are used in this Agreement they shall be deemed to be followed by
the words "without limitation". For purposes of this Agreement (i) the Company
shall be deemed to "know", "have knowledge of" or "best knowledge of" any matter
known by an executive officer or Shareholder of the Company; and (ii) Parent
<PAGE>
shall be deemed to "know", "have knowledge of" or "best knowledge of" any matter
known by an executive officer or Shareholder of Parent.
SECTION 13.03 Counterparts. This Agreement may be executed in
two or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when two or more counterparts have been
signed by each of the parties and delivered to the other parties, it being
understood that all parties need not sign the same counterpart.
SECTION 13.04 Entire Agreement; No Third Party Beneficiaries;
Schedules. This Agreement (including the documents and the instruments referred
to herein or reasonably contemplated hereby) and the Confidentiality Agreement
dated April 27, 1998 entered into by Parent and the Company (a) constitute the
entire agreement and supersedes all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof,
and (b) are not intended to, and shall not, confer upon any person other than
the parties hereto any rights or remedies hereunder. Inclusion of or reference
to matters in a schedule does not constitute an admission of what is material or
the materiality of such matter.
SECTION 13.05 Action by the Shareholders. The Shareholders
hereby irrevocably authorize and appoint the Representative as their agent and
attorney who may on behalf of the Shareholders make any amendments or
modifications of this Agreement and all other agreements and documents
contemplated hereby and to waive inaccuracies of representations and warranties
or performance or compliance with any of the provisions herein contained that
such agent believes in such agent's sole discretion, to be in the best interest
of the Shareholders.
SECTION 13.06 Governing Law. This Agreement shall be governed
and construed in accordance with the internal laws of the State of New York
without regard to any applicable conflicts of law.
SECTION 13.07 Assignment. Neither this Agreement nor any of
the rights, interests or obligations hereunder shall be assigned or delegated by
any of the parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other parties, except that Parent may assign, in
its sole discretion, any or all of its rights, interests and obligations
hereunder to any direct or indirect wholly-owned subsidiary of Parent or to any
person to whom it transfers by operation of law; agreement or otherwise a
substantial portion of the business or assets of the Company. Any purported
assignment or delegation in violation of this Section 13.07 shall be null and
<PAGE>
void. Subject to the preceding sentence, this Agreement will be binding upon,
inure to the benefit of and be enforceable by the parties and their respective
successors and assigns.
SECTION 13.08 Severability. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by any rule of
law or public policy, all other terms and provisions of this Agreement will
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party hereto. Upon any such determination that any
term or other provision is invalid, illegal or incapable of being enforced, the
parties hereto will negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in an
acceptable manner, to the end that the transactions contemplated by this
Agreement are consummated to the extent possible.
SECTION 13.09 Publicity. Parent and the Company shall promptly
consult with each other as to the form and substance thereof prior to the
release or issuance of any press release or other public disclosure related to
this Agreement, the Merger or any other transactions contemplated hereby. The
Shareholders, Parent and the Company agree not to release or issue any such
press release or other public disclosure without the approval of the Company and
Parent unless otherwise required by applicable law.
SECTION 13.10 Enforcement of the Agreement. The parties hereto
agree that irreparable damage would result in the event that any provision of
this Agreement is not performed in accordance with specific terms or is
otherwise breached. It is accordingly agreed that the parties hereto will be
entitled to equitable relief including an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
hereof.
Section 13.11 Consent To Jurisdiction. Except as otherwise
provided in Section 12.01(h), any action, suit or proceeding arising out of or
relating to this Agreement or any of the Related Agreements may be brought in
any Supreme Court of the State of New York or in any United States District
Court in New York, in each case having situs in New York City and each of the
Shareholders, the Company and Parent hereby irrevocably submits to the exclusive
jurisdiction of any of such courts for the purpose of any such action, suit or
proceeding (or if any such court refuses to exercise jurisdiction, such suit may
be commenced in any other court that will assert jurisdiction. Each of the
Shareholders hereby irrevocably appoints the firm of Gardere & Wynne, L.L.P.,
with an office at 1601 Elm Street, Suite 3000, Dallas, Texas 75201, as such
<PAGE>
Shareholder's agent to receive on behalf of such Shareholder and such
Shareholder's property, service of copies of the summons and complaint and any
other process which may be served in any such action, suit or proceeding or any
arbitration proceeding as provided in Section 12.01(h) hereto. Such service may
be made by mailing or delivering a copy of such process to such firm at such
firm's above address, and each Shareholder hereby irrevocably authorizes and
directs each such firm to accept such service on such Shareholder's behalf. If
and to the extent that service of any summons, complaint or other process cannot
for any reason be effected upon such firm as herein above provided, each
Shareholder further irrevocably consents to the service of any and all process
in any such actions, suit, proceeding or arbitration by the mailing of copies of
such process to such Shareholder in the same manner specified in Section 13.01
of this Agreement for the giving of notices. Nothing in this Section shall
affect the right of Parent, Sub or Surviving Corporation to serve legal process
in any other manner permitted by law or affect the right of Parent, Sub or
Surviving Corporation to bring any action, suit or proceeding against any such
Shareholder or such Shareholder's properties in the courts of any other
jurisdiction.
[rest of page intentionally left blank]
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto have duly
executed this Agreement as of the date first above written.
COLUMBUS McKINNON CORPORATION
By /s/ Robert L. Montgomery
------------------------
Robert L. Montgomery, Executive
Vice President
GL DELAWARE, INC.
By /s/ Robert L. Montgomery
------------------------
Robert L. Montgomery, Treasurer
G. L. INTERNATIONAL INC.
By /s/ Larry Di Stefano
------------------------
Larry Di Stefano, President
LARCO INDUSTRIAL SERVICES, LTD.
By /s/ Larry Di Stefano
----------------------------
Larry Di Stefano, President
SHAREHOLDERS:
GL PARTNERS, L.P.
By Cardinal Holding Corporation
Sole General Partner
By: /s/ Marshall B. Payne
----------------------------
Marshall B. Payne, President
/s/ Andy Everett
----------------------------
Andy Everett
/s/ Larry DiStefano
----------------------------
Larry DiStefano
/s/ Dominic Stefano
----------------------------
Dominic DiStefano
/s/ Steven DiStefano
----------------------------
Steven DiStefano
/s/ Cesare Cagnin
----------------------------
Cesare Cagnin
THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING SECURITIES THAT HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
COLUMBUS MCKINNON CORPORATION
G.L. INTERNATIONAL INC.
1997 STOCK OPTION PLAN
INTRODUCTION
This prospectus provides important information regarding the
G.L. International inc. 1997 Stock Option Plan ("Plan"). However, the prospectus
is qualified in its entirety by reference to the Plan, copies of which may be
obtained upon request and without charge from Lois H. Demler, Secretary,
Columbus McKinnon Corporation, 140 John James Audubon Parkway, Amherst, New York
14228-1197, (716) 689-5409, and to your Stock Option Agreement. If you have any
questions regarding this prospectus or the Plan, please contact Robert L.
Montgomery, Jr., Executive Vice President and Chief Financial Officer, Columbus
McKinnon Corporation, 140 John James Audubon Parkway, Amherst, New York
14228-1197, (716) 689-5405.
In this prospectus "Company", "Columbus McKinnon", "we", "us",
and "our" refer to Columbus McKinnon Corporation. "GL" refers to G.L.
International inc.
WHERE YOU CAN FIND MORE INFORMATION
Columbus McKinnon files annual, quarterly and current reports,
proxy statements and other documents with the Securities and Exchange
Commission. The SEC allows us to "incorporate" into this prospectus information
we file with the SEC in other documents. This means that we can disclose
important information to you by referring to other documents that contain that
information. The information may include documents filed after the date of this
prospectus. We incorporate by reference the documents listed below and all
future documents filed with the SEC under Sections 13(a), 13(c), 14 or 15(d) of
the Securities Exchange Act of 1934 until we terminate the offering of shares
covered by this prospectus.
SEC Filing
(FILE NO. 0-27618) PERIOD/FILING DATE
- ------------------ ------------------
Annual Report on Form 10-K Year ended March 31, 1998
<PAGE>
Quarterly Reports on Form 10-Q Quarters ended June 28, 1998;
September 27, 1998 and
December 27,1998
Current Reports on Form 8-K April 8, 1998; October 29, 1998;
May 18, 1999 and May 26, 1999
Description of Capital Stock
contained in the Company's
(1) Registration Statement on Form 8-A January 22, 1996
(2) Form 8-A/A Amendment No. 1 February 21, 1996
Description of Preferred Stock
Purchase Rights contained in
Registration Statement on Form 8-A October 27, 1997
You may request a copy of these documents and a copy of our
most recent annual report to shareholders, and any other reports, proxy
statement and other communications distributed to shareholders. These copies
will be provided at no cost to you. Please make your request to Lois H. Demler,
Secretary of the Company at the address and telephone number shown above.
RECENT DEVELOPMENTS
A group of New York City based stock traders and speculators
owning 8.44% of Columbus McKinnon common stock has proposed a slate of five
directors for election at the Company's Annual Meeting of Shareholders in August
1999. The group's platform is to seek a sale of the Company. The value of
Columbus McKinnon's common stock could be affected by the outcome of this proxy
contest.
GENERAL INFORMATION REGARDING THE PLAN
The Plan was adopted by the Board of Directors of G.L.
International Inc. ("GL") on March 25, 1997, and subsequently approved by
stockholders, for the purposes set forth below. However, the Board of Directors
terminated the Plan effective March 1, 1999, pursuant to an arrangement whereby
GL became a wholly owned subsidiary of the Company. Although the Plan has been
terminated and no new options will be granted under the Plan, all outstanding
options granted pursuant to the Plan remain outstanding and will be exercisable
in accordance with the terms of the Plan and any applicable Stock Option
Agreement. In this regard, all outstanding options have been converted to stock
options for shares of Columbus McKinnon Corporation common stock, par value
$0.01 per share. A total of 92,599 shares of the Company's common stock are
covered by such outstanding options.
<PAGE>
The Plan is not a qualified plan under Section 401(a) of the
Internal Revenue Code nor is it subject to any provisions of the Employee
Retirement Income Security Act of 1974.
PURPOSE OF THE PLAN
- -------------------
The Plan was established to:
o create stockholder value by providing incentives to
selected key employees and directors who contribute
materially to the success of GL and its subsidiaries,
o provide a means of rewarding outstanding performance
by those key employees, and
o enhance the interests of those key employees and
directors in the continued success and progress of GL
by providing them a proprietary interest in GL
The Plan was designed to enhance GL's ability to maintain a competitive position
in attracting and retaining qualified key personnel and directors.
ADMINISTRATION OF THE PLAN
- --------------------------
The Plan provides for administration of the Plan by the Board
of Directors of GL or, at the option of the Board, a committee which is
comprised of two or more non-employee directors appointed by the Board. The Plan
currently is administered by the Board of Directors which, in its capacity as
administrator of the Plan, is referred to in this prospectus as the "Committee."
As directors of GL, members of the Committee serve until their successors are
duly elected and qualified, and are subject to removal in accordance with
applicable law.
Among the powers granted to the Committee are the authority to:
o grant options and determine the terms and conditions
of those options, including the exercise price,
vesting and exercise period of the options
o determine the form and provisions of the Stock Option
Agreements
o interpret the Plan and the Stock Option Agreements
and waive any provisions of any Stock Option
Agreement, provided such waiver is not inconsistent
with the terms of the Plan
o prescribe rules and regulations relating to the Plan
<PAGE>
o make all determinations necessary or advisable for
administration of the Plan
The Committee's address and telephone number is: c/o Lois H.
Demler, Secretary, Columbus McKinnon Corporation, 140 John James Audubon
Parkway, Amherst, New York 14228-1197, (716) 689-5409.
GRANTS TO ELIGIBLE PARTICIPANTS IN THE PLAN
- --------------------------------------------
Pursuant to the provisions of the Plan, the Committee granted
options to employees of GL who were determined by it to be key employees on the
date of grant.
TYPES OF OPTIONS THAT HAVE BEEN GRANTED
- ---------------------------------------
Grants of Incentive Stock Options and Nonstatutory Stock
Options have been granted to Key Employees under the Plan. It is intended that
the Incentive Stock Options qualify for special tax treatment under the Internal
Revenue Code. In order to qualify for special tax treatment, the Plan provides,
among other things, that the aggregate fair market value (determined at the time
of grant) of the shares of common stock with respect to which Incentive Stock
Options are exercisable for the first time by you in any calendar year under the
Plan and all plans of GL or its parent or subsidiaries shall not exceed
$100,000. Neither GL, its directors, officers or employees, among others, shall
be liable if the Incentive Stock Options do not in fact qualify for special tax
treatment.
Please refer to the tax discussion of stock options beginning
on page 7.
TERMS AND CONDITIONS OF OPTIONS
- -------------------------------
Each stock option granted under the Plan is evidenced by a
written Stock Option Grant and accompanying Stock Option Agreement, as amended
by an Amendment to Stock Option Agreement effective as of March 1, 1999,
(together the Stock Option Grant, accompanying Stock Option Agreement and
Amendment to Stock Option Agreement are referred to as the Stock Option
Agreement) which contain such terms and conditions as the Committee determined,
consistent with the provisions of the Plan, including those shown below. You
should refer to your Stock Option Agreement for the terms and conditions
applicable to your stock options.
<PAGE>
(a) EXERCISE PRICE. The Committee determined the exercise
prices of options it granted, subject to the Plan requirement that the exercise
price for any Incentive Stock Option shall not be less than the fair market
value of the GL common stock at the date of grant (or 110% of the fair market
value in the case of an Incentive Stock Option granted to a person who owned
more than 10% of the total combined voting power of all classes of stock of GL
or any of its subsidiaries). Fair market value is the value at the date of grant
of GL as an on-going concern, as determined in good faith by the Committee. The
exercise price of your options is set forth in your Stock Option Agreement.
(b) VESTING. The Committee determined the vesting schedule for
all options granted. The vesting schedule for your options is set forth in your
Stock Option Agreement.
(c) TERM OF STOCK OPTIONS. The Plan authorizes the Committee
to determine the period during which options are exercisable, except that the
Plan provides that no option shall be exercisable more than five years after the
date it was granted. The period during which your options are exercisable is set
forth in your Stock Option Agreement.
(d) OPTIONS NON-TRANSFERRABLE. All options granted are
non-transferrable other than by will or the laws of descent and distribution.
During an optionee's lifetime the options may be exercised only by him, or if he
is disabled, his legal representative.
TERMINATION OF EMPLOYMENT AND DEATH
- -----------------------------------
Your Stock Option Agreement describes the conditions that
apply to the exercise of your options in the event you cease to be employed by
GL or a subsidiary of Columbus McKinnon. In the event of your death while
employed by GL or a subsidiary of Columbus McKinnon, your estate or the person
or persons to whom your rights under the option are passed under your will or
the laws of descent and distribution may exercise your option to the same extent
that you would be entitled to exercise the option at the date of your death. The
option may only be exercised within the 90-day period following the date of your
death or such other period as may be specified in your Stock Option Agreement,
but in no case later than the expiration date of the option.
DILUTION OR OTHER ADJUSTMENTS
- -----------------------------
The number of shares of common stock issuable under any option
granted to you, as well as the exercise price of any option, is subject to
adjustment to reflect any
o stock split
o stock dividend
o recapitalization
o merger
o consolidation
o reorganization
o combination or exchange of shares
o or other similar events
<PAGE>
RESTRICTIONS ON ISSUANCE OF SHARES
- ----------------------------------
Columbus McKinnon is not obligated to sell or issue any shares
of its common stock upon the exercise of any option granted to you unless:
o the shares with respect to which your option is being
exercised have been registered under applicable
federal securities laws or the issuance of the shares
is exempt from such registration
o the prior approval of the sale or issuance has been
obtained from any applicable state regulatory body
having jurisdiction or the sale or issuance is exempt
from such prior approval requirement
o if the common stock of Columbus McKinnon has been
listed on any exchange, the shares with respect to
which your option is being exercised have been duly
listed on that exchange
Your Stock Option Agreement may include other restrictions on
the ownership and transfer of shares of common stock.
RESTRICTIONS ON RESALE OF SHARES ACQUIRED UPON EXERCISE OF OPTIONS
- ------------------------------------------------------------------
Subject to any restrictions imposed by the Plan or any Stock
Option Agreement, shares of common stock acquired by a non-affiliate of Columbus
McKinnon upon exercise of an option may be freely resold in ordinary brokerage
transactions pursuant to Sections 4(1) and 4(4) of the Securities Act of 1933.
However, securities acquired by an affiliate of Columbus McKinnon must be
registered for resale by such affiliate unless the resale is made in compliance
with the provisions of Rule 144 under the Securities Act of 1933 or is entitled
to another exemption from the registration requirements of the Securities Act of
1933. For these purposes the term affiliate means a person who directly or
indirectly controls, is controlled by or is under common control with Columbus
McKinnon.
In addition, if you are or become a director or officer of
Columbus McKinnon, or a beneficial owner of 10 percent or more of its common
stock, you should consider the effect of Section 16 of the Securities Exchange
Act of 1934, and the rules thereunder, upon your ability to effect transactions
in the common stock of Columbus McKinnon.
MODIFICATIONS OF THE PLAN
- -------------------------
<PAGE>
The Plan may be modified or amended at any time, both
prospectively and retroactively, and in such a manner as to affect outstanding
Incentive Stock Options, if such amendment or modification is necessary for the
Plan and the Incentive Stock Options to qualify under the Internal Revenue Code.
Also, the Plan may be abandoned, suspended or terminated at any time except with
respect to any options then outstanding. As noted above, the Plan was terminated
effective March 1, 1999 and no new options will be granted under the Plan. All
outstanding options remain outstanding and will be exercisable in accordance
with the terms of the Plan and any applicable Stock Option Agreement.
OTHER PROVISIONS
- ----------------
Nothing in the Plan or any Stock Option Agreement confers upon
you the right to continue in the employment of GL or any other subsidiary of
Columbus McKinnon or restricts the rights of GL or any such other subsidiary to
terminate your employment.
You will not have any rights as a stockholder of Columbus
McKinnon with respect to any share covered by options granted to you unless and
until you become a holder of record of such share.
FEDERAL INCOME TAX TREATMENT
The following is a brief summary of the federal income tax
aspects of the Plan, based on existing law and regulations which are subject to
change. The application of state and local income taxes and other federal taxes,
including, without limitation, gift and estate taxes, is not discussed.
An optionee who is granted an Incentive Stock Option under the
Plan is not required to recognize taxable income at the time of the grant or at
the time of exercise. Under certain circumstances, however, an optionee may be
subject to the alternative minimum tax with respect to the exercise of his
Incentive Stock Options. GL is not entitled to a deduction at the time of grant
or at the time of exercise. If an optionee does not dispose of the shares
acquired pursuant to the exercise of an Incentive Stock Option before the later
of two years from the date of grant of the Incentive Stock Option and one year
from the transfer of the shares to him, any gain or loss realized on a
subsequent disposition of the shares will be treated as capital gain or loss.
Under such circumstances, GL will not be entitled to any deduction for federal
income tax purposes with respect to the Incentive Stock Option. The shares must
be held for more than one year for the gain or loss realized on the disposition
to qualify for long-term capital gain or loss treatment.
<PAGE>
If an optionee disposes of the shares received upon the
exercise of an Incentive Stock Option either (1) within one year from the
transfer of the shares to him or (2) within two years after the Incentive Stock
Option was granted, the optionee will generally recognize ordinary compensation
income equal to the lesser of (a) the difference between the fair market value
of the shares on the date the Incentive Stock Option was exercised and the
exercise price of the shares, and (b) the amount of gain realized on the sale.
Any gain realized in excess of the compensation income recognized, and any loss
realized, will be long-term or short-term capital gain or loss, depending upon
the length of the period the optionee held the shares. If an optionee is
required to recognize ordinary compensation income as a result of the
disposition of shares acquired on the exercise of an Incentive Stock Option, GL
, subject to any applicable rules otherwise limiting an employer's deduction of
compensation, will be entitled to a deduction for an equivalent amount.
An optionee who is granted a Nonstatutory Stock Option is not
required to recognize taxable income at the time of grant, but, at the time of
exercise, must include in his gross income, for federal tax purposes, an amount
equal to the excess of the fair market value of the shares on the date of
exercise over the exercise price paid therefor. Subject to any applicable rules
otherwise limiting an employer's deduction of compensation, GL is entitled to a
corresponding deduction for the same amount.
The foregoing summary does not purport to be complete, and you
are advised to consult with your personal tax advisor as to the specific
consequences to you of the issuance of the options, the exercise thereof, and
the disposition of shares acquired upon such exercise, as well as the
consequences under applicable state law.
THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING SECURITIES THAT HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
COLUMBUS MCKINNON CORPORATION
LARCO INDUSTRIAL SERVICES LTD.
1997 STOCK OPTION PLAN
INTRODUCTION
This prospectus provides important information regarding the
Larco Industrial Services Ltd. 1997 Stock Option Plan ("Plan"). However, the
prospectus is qualified in its entirety by reference to the Plan, copies of
which may be obtained upon request and without charge from Lois H. Demler,
Secretary, Columbus McKinnon Corporation, 140 John James Audubon Parkway,
Amherst, New York 14228-1197, (716) 689-5409, and to your Stock Option
Agreement. If you have any questions regarding this prospectus or the Plan,
please contact Robert L. Montgomery, Jr., Executive Vice President and Chief
Financial Officer, Columbus McKinnon Corporation, 140 John James Audubon
Parkway, Amherst, New York 14228-1197, (716) 689-5405.
In this prospectus "Company", "Columbus McKinnon", "we", "us",
and "our" refer to Columbus McKinnon Corporation. "Larco" refers to Larco
Industrial Services Ltd.
WHERE YOU CAN FIND MORE INFORMATION
Columbus McKinnon files annual, quarterly and current reports,
proxy statements and other documents with the Securities and Exchange
Commission. The SEC allows us to "incorporate" into this prospectus information
we file with the SEC in other documents. This means that we can disclose
important information to you by referring to other documents that contain that
information. The information may include documents filed after the date of this
prospectus. We incorporate by reference the documents listed below and all
future documents filed with the SEC under Sections 13(a), 13(c), 14 or 15(d) of
the Securities Exchange Act of 1934 until we terminate the offering of shares
covered by this prospectus.
SEC Filing
(FILE NO. 0-27618) PERIOD/FILING DATE
- ------------------ ------------------
Annual Report on Form 10-K Year ended March 31, 1998
Quarterly Reports on Form 10-Q Quarters ended June 28, 1998;
<PAGE>
September 27, 1998 and
December 27, 1998
Current Reports on Form 8-K April 8, 1998; October 29, 1998;
May 18, 1999 and May 26, 1999
Description of Capital Stock
contained in the Company's
(1) Registration Statement on Form 8-A January 22, 1996
(2) Form 8-A/A Amendment No. 1 February 21, 1996
Description of Preferred Stock
purchase rights contained in
Registration Statement on Form 8-A October 27, 1997
You may request a copy of these documents and a copy of our
most recent annual report to shareholders, and any other reports, proxy
statement and other communications distributed to shareholders. These copies
will be provided at no cost to you. Please make your request to Lois H. Demler,
Secretary of the Company at the address and telephone number shown above.
RECENT DEVELOPMENTS
A group of New York City based stock traders and speculators
owning 8.44% of Columbus McKinnon common stock has proposed a slate of five
directors for election at the Company's Annual Meeting of Shareholders in August
1999. The group's platform is to seek a sale of the Company. The value of
Columbus McKinnon's common stock could be affected by the outcome of this proxy
contest.
GENERAL INFORMATION REGARDING THE PLAN
The Plan was adopted by the Board of Directors of Larco on
March 26, 1997 for the purposes set forth below. However, the Board of Directors
terminated the Plan effective March 1, 1999, pursuant to an arrangement whereby
Larco became an indirect wholly owned subsidiary of the Company. Although the
Plan has been terminated and no new options will be granted under the Plan, all
outstanding options granted pursuant to the Plan remain outstanding and will be
exercisable in accordance with the terms of the Plan and any applicable Stock
Option Agreement. In this regard, all outstanding options have been converted to
stock options for shares of Columbus McKinnon Corporation common stock, par
value $0.01 per share. A total of 62,249 shares of the Company's common stock
are covered by such outstanding options.
<PAGE>
The Plan is not a qualified plan under Section 401(a) of the
Internal Revenue Code nor is it subject to any provisions of the Employee
Retirement Income Security Act of 1974.
PURPOSE OF THE PLAN
- -------------------
The Plan was established to:
o create stockholder value by providing incentives to
selected key employees and directors who contribute
materially to the success of Larco and its
affiliates, as defined in the Plan,
o provide a means of rewarding outstanding performance
by those key employees, and
o enhance the interests of those key employees and
directors in the continued success and progress of
Larco and its affiliates by providing them a
proprietary interest in Larco
The Plan was designed to enhance Larco's ability to maintain a competitive
position in attracting and retaining qualified key personnel and directors.
ADMINISTRATION OF THE PLAN
- --------------------------
The Plan provides for administration of the Plan by the Board
of Directors of Larco or, at the option of the Board, a committee which is
comprised of two or more non-employee directors appointed by the Board. The Plan
currently is administered by the Board of Directors which, in its capacity as
administrator of the Plan, is referred to in this prospectus as the "Committee."
As directors of Larco, members of the Committee serve for one-year terms and
until their successors are duly elected and qualified, and are subject to
removal in accordance with applicable law.
Among the powers granted to the Committee are the authority to:
o grant options and determine the terms and conditions
of those options, including the exercise price,
vesting and exercise period of the options
o determine the form and provisions of the Stock Option
Agreements
o interpret the Plan and the Stock Option Agreements
and waive any provisions of any Stock Option
Agreement, provided such waiver is not inconsistent
with the terms of the Plan
<PAGE>
o prescribe rules and regulations relating to the Plan
o make all determinations necessary or advisable for
administration of the Plan
The Committee's address and telephone number is c/o Lois H. Demler,
Secretary, Columbus McKinnon Corporation, 140 John James Audubon Parkway,
Amherst, New York 14228-1197, (716) 689-5409.
GRANTS TO ELIGIBLE PARTICIPANTS IN THE PLAN
- --------------------------------------------
Pursuant to the provisions of the Plan, the Committee has
granted options to employees of Larco who were determined by it to be key
employees on the date of grant. The Committee also granted options to a
non-employee director of Larco.
TERMS AND CONDITIONS OF OPTIONS
- -------------------------------
Each stock option granted under the Plan is evidenced by a
written Stock Option Grant and accompanying Stock Option Agreement, as amended
by an Amendment to Stock Option Agreement effective as of March 1, 1999,
(together the Stock Option Grant, accompanying Stock Option Agreement and
Amendment to Stock Option Agreement are referred to as the Stock Option
Agreement) which contain such terms and conditions as the Committee determined,
consistent with the provisions of the Plan, including those shown below. You
should refer to your Stock Option Agreement for the terms and conditions
applicable to your stock options.
(a) EXERCISE PRICE. The Committee determined the exercise
prices of options it granted. The exercise price of your options is set forth in
your Stock Option Agreement.
(b) VESTING. The Committee determined the vesting schedule for
all options granted. The vesting schedule for your options is set forth in your
Stock Option Agreement.
(c) TERM OF STOCK OPTIONS. The Plan authorizes the Committee
to determine the period during which options are exercisable, except that the
Plan provides that no option shall be exercisable more than five years after the
date it was granted. The period during which your options are exercisable is set
forth in your Stock Option Agreement.
(d) OPTIONS NON-TRANSFERRABLE. All options granted are
non-transferrable other than by will or the laws of descent and distribution.
During an optionee's lifetime the options may be exercised only by him, or if he
is disabled, his legal representative.
<PAGE>
TERMINATION OF EMPLOYMENT AND DEATH
- -----------------------------------
Your Stock Option Agreement describes the conditions that
apply to the exercise of your options in the event you cease to be employed by
Larco or an affiliate of Larco. In the event of your death while employed by
Larco or an affiliate, your estate or the person or persons to whom your rights
under the option are passed under your will or the laws of descent and
distribution may exercise your option to the same extent that you would be
entitled to exercise the option at the date of your death. The option may only
be exercised within the 90-day period following the date of your death or such
other period as may be specified in your Stock Option Agreement, but in no case
later than the expiration date of the option.
DILUTION OR OTHER ADJUSTMENTS
The number of shares of common stock issuable under any option
granted to you, as well as the exercise price of any option, is subject to
adjustment to reflect any
o stock split
o stock dividend
o recapitalization
o merger
o consolidation
o reorganization
o combination or exchange of shares
o or other similar events
RESTRICTIONS ON ISSUANCE OF SHARES
- ----------------------------------
Columbus McKinnon is not obligated to sell or issue any shares
of its common stock upon the exercise of any option granted to you unless:
o the shares with respect to which your option is being
exercised have been registered under applicable
securities laws or the issuance of the shares is
exempt from such registration
o the prior approval of the sale or issuance has been
obtained from any applicable state regulatory body
having jurisdiction or the sale or issuance is exempt
from such prior approval requirement
o if the common stock of Columbus McKinnon has been
listed on any exchange, the shares with respect to
which your option is being exercised have been duly
listed on that exchange
<PAGE>
Your Stock Option Agreement may include other restrictions on
the ownership and transfer of shares of common stock.
RESTRICTIONS ON RESALE OF SHARES ACQUIRED UPON EXERCISE OF OPTIONS
- ------------------------------------------------------------------
Subject to any restrictions imposed by the Plan or any Stock
Option Agreement, shares of common stock acquired by a non-affiliate of Columbus
McKinnon upon exercise of an option may be freely resold provided such resale is
effected in the United States of America in ordinary brokerage transactions
pursuant to Sections 4(1) and 4(4) of the Securities Act of 1933. However,
securities acquired by an affiliate of Columbus McKinnon must be registered for
resale by such affiliate unless the resale is made in compliance with the
provisions of Rule 144 under the Securities Act of 1933 or is entitled to
another exemption from the registration requirements of the Securities Act of
1933. For these purposes the term affiliate means a person who directly or
indirectly controls, is controlled by or is under common control with Columbus
McKinnon.
In addition, if you are or become a director or officer of
Columbus McKinnon, or a beneficial owner of 10 percent or more of its common
stock, you should consider the effect of Section 16 of the Securities Exchange
Act of 1934, and the rules thereunder, upon your ability to effect transactions
in the common stock of Columbus McKinnon.
MODIFICATIONS OF THE PLAN
- -------------------------
The Plan may be abandoned, suspended or terminated at any time
except with respect to any options then outstanding. As noted above, the Plan
was terminated effective March 1, 1999 and no new options will be granted under
the Plan. All outstanding options remain outstanding and will be exercisable in
accordance with the terms of the Plan and any applicable Stock Option Agreement.
OTHER PROVISIONS
- ----------------
Nothing in the Plan or any Stock Option Agreement confers upon
you the right to continue in the employment of Larco or any of its affiliates or
restricts the rights of Larco or any affiliate to terminate your employment.
You will not have any rights as a stockholder of Columbus
McKinnon with respect to any share covered by options granted to you unless and
until you become a holder of record of such share.
<PAGE>
CANADIAN FEDERAL INCOME TAX TREATMENT
The following is a brief summary of the Canadian federal
income tax aspects of the Plan, based on existing law and regulations which are
subject to change. The application of provincial income taxes and any other
taxes, is not discussed.
An optionee is not required to recognize taxable income at the
time of grant of an option, but, at the time of exercise, must include in his
gross income, for Canadian federal tax purposes, an amount equal to the excess
of the fair market value of the shares on the date of exercise over the exercise
price paid therefor and any amount paid by the optionee to acquire the option.
If the exercise price related to the option is not less than
the fair market value of the shares at the time the agreement relating to the
option was made and the optionee is not related to Columbus McKinnon, the
optionee may deduct an amount equal to one-quarter of the amount otherwise
included in his income.
Neither Larco nor Columbus McKinnon is entitled to a deduction
for Canadian federal tax purposes with respect to the grant or exercise of an
option.
The foregoing summary does not purport to be complete, and you
are advised to consult with your personal tax advisor as to the specific
consequences to you of the issuance of the options, the exercise thereof, and
the disposition of shares acquired upon such exercise, as well as the
consequences under any applicable U.S., foreign, provincial, or state law.
EXHIBIT 21.1
EXHIBIT A
COLUMBUS MCKINNIN CORPORATION
SUBSIDIARIES OF THE REGISTRANT
Abell-Howe Crane, Inc. (US)
ASI of Australia Pty. Ltd. (Australia)
Audubon Export, Inc. (FSC) (US)
Automatic Systems, Inc. (US)
Automatic Systems Conveyors Limited (Canada)
Camlok Lifting Clamps Ltd. (UK)
CM Insurance Company, Inc. (US)
Columbus McKinnon Limited (Canada)
Columbus McKinnon Finance Corporation (Canada)
Duff-Norton Asia Pacific Pty. Ltd. (Singapore)
Egyptian-American Crane Co. (Joint Venture)(Egypt)
Endor, S.A. de C.V. (Mexico)
G. L. International inc. (US)
Gaffey, Inc. (US)
Handling Systems and Conveyors, Inc. (US)
Hangzhou LILA Lifting and Lashing Co. Ltd. (China)
Larco Industrial Services, Ltd. (Canada)
Larco Material Handling, Inc. (US)
LICO International Corporation (FSC)
LICO Steel, Inc. (US)
Manutention Connection (France)
Societe d'Exploitation des Raccords Gautier (France)
Spreckels Consolidated Industries, Inc. (US)
Spreckels Land Company, Inc. (US)
Spreckels Water Company, Inc. (US)
Spreckels Development Company, Inc. (US)
Univeyor A/S (Denmark)
Univeyor Conveying Systems Ltd. (UK)
Univeyor Electronic A/S (Denmark)
Yale Hangzhou Industrial Products (China)
Yale Industrial Products, Inc. (US)
Yale Industrial Products GmbH (Austria)
Yale Industrial Products Ltd. (UK)
Yale Industrial Products GmbH (Germany)
Yale Industrial Products Pty. Ltd. (South Africa)
Yale Industrial Products Asia (Thailand) Co. Ltd. (Thailand)
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in (a) the Registration Statement
(Form S-8 No. 333-3212) pertaining to the Columbus McKinnon Corporation 1995
Incentive Stock Option Plan, the Columbus McKinnon Corporation Non-Qualified
Stock Option Plan, the Columbus McKinnon Corporation Restricted Stock Plan and
the Columbus McKinnon Corporation Employee Stock Ownership Plan Restatement
Effective April 1, 1989 of Columbus McKinnon Corporation and (b) the
Registration Statement (Form S-8 No. 333-81719) pertaining to the Options
assumed by Columbus McKinnon Corporation originally granted under the G.L.
International Inc. 1997 Stock Option Plan and the Larco Industrial Services Ltd.
1997 Stock Option Plan of our report dated May 17, 1999, with respect to the
consolidated financial statements and financial statement schedule of Columbus
McKinnon Corporation included in this Annual Report (Form 10-K) for the year
ended March 31, 1999.
/s/ Ernst & Young LLP
Buffalo, New York
June 29, 1999
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in the Registration Statements No.
333-3212 and No. 333-81719 on Form S-8 of Columbus McKinnon Corporation, of our
report dated August 24, 1998, with respect to the consolidated financial
statements of GL International, Inc. and subsidiaries appearing in this Annual
Report of Columbus McKinnon Corporation on Form 10-K for the year ended March
31, 1999.
/s/ Deloitte & Touche LLP
Tulsa, Oklahoma
June 29, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SEC
FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CIK> 0001005229
<NAME> COLUMBUS MCKINNON CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-01-1998
<PERIOD-END> MAR-31-1999
<CASH> 6,867
<SECURITIES> 0
<RECEIVABLES> 136,988
<ALLOWANCES> 2,271
<INVENTORY> 115,979
<CURRENT-ASSETS> 286,029
<PP&E> 90,004
<DEPRECIATION> 42,048
<TOTAL-ASSETS> 766,911
<CURRENT-LIABILITIES> 120,556
<BONDS> 421,686
0
0
<COMMON> 146
<OTHER-SE> 188,528
<TOTAL-LIABILITY-AND-EQUITY> 766,911
<SALES> 735,445
<TOTAL-REVENUES> 735,445
<CGS> 542,975
<TOTAL-COSTS> 542,975
<OTHER-EXPENSES> 107,388
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 35,923
<INCOME-PRETAX> 50,724
<INCOME-TAX> 23,288
<INCOME-CONTINUING> 27,436
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 27,436
<EPS-BASIC> 1.94
<EPS-DILUTED> 1.92
</TABLE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 11-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 [NO FEE REQUIRED]
For the fiscal year ended March 31, 1999
/ / TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission file number
A. Full title of the plan and the address of the plan, if different from that of
the issuer named below:
Columbus McKinnon Corporation
Employee Stock Ownership Plan
Restatement Effective April 1, 1989
B. Name of issuer of the securities held pursuant to the plan and the address of
its principal executive office:
COLUMBUS McKINNON CORPORATION
140 John James Audubon Parkway
Amherst, NY 14228-1197
<PAGE>
Financial Statements and Schedules
Columbus McKinnon Corporation
Employee Stock Ownership Plan
Years ended March 31, 1999 and 1998
with Report of Independent Auditors
<PAGE>
Columbus McKinnon Corporation
Employee Stock Ownership Plan
Financial Statements and Schedules
Years ended March 31, 1999 and 1998
CONTENTS
Report of Independent Auditors .........................................1
Financial Statements
Statements of Net Assets Available for Benefits.........................2
Statements of Changes in Net Assets Available for Benefits..............3
Notes to Financial Statements...........................................4
Schedules
Item 27a - Schedule of Assets Held for Investment Purposes.............10
Item 27d - Schedule of Reportable Transactions.........................11
<PAGE>
Report of Independent Auditors
The Pension Committee
Columbus McKinnon Corporation
Employee Stock Ownership Plan
We have audited the accompanying statements of net assets available for benefits
of the Columbus McKinnon Corporation Employee Stock Ownership Plan (ESOP) as of
March 31, 1999 and 1998, and the related statements of changes in net assets
available for benefits for the years then ended. These financial statements are
the responsibility of the ESOP's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the ESOP at
March 31, 1999 and 1998, and the changes in its net assets available for
benefits for the years then ended, in conformity with generally accepted
accounting principles.
Our audits were made for the purpose of forming an opinion on the financial
statements taken as a whole. The accompanying supplemental schedules of assets
held for investment purposes as of March 31, 1999, and reportable transactions
for the year then ended, are presented for purposes of complying with the
Department of Labor's Rules and Regulations for Reporting and Disclosure under
the Employee Retirement Income Security Act of 1974, and are not a required part
of the financial statements. The supplemental schedules have been subjected to
the auditing procedures applied in our audit of the 1999 financial statements
and, in our opinion, are fairly stated in all material respects in relation to
the 1999 financial statements taken as a whole.
/s/ Ernst & Young LLP
Buffalo, New York
June 11, 1999
1
<PAGE>
<TABLE>
<CAPTION>
Columbus McKinnon Corporation
Employee Stock Ownership Plan
Statements of Net Assets Available for Benefits
MARCH 31
1999 1998
---------------------------------
ASSETS
<S> <C> <C>
Cash ................................................... $ 4,544 $ 50
Investments:
Columbus McKinnon Corporation common stock at market:
Allocated (cost - $6,698,620 in 1999 and
$6,124,294 in 1998) ........................... 17,844,495 23,521,768
Unallocated (cost - $9,864,296 in 1999 and
$3,202,156 in 1998; held in suspense account) . 14,256,148 8,940,030
----------- -----------
32,100,643 32,461,798
Stable asset fund at market ......................... 100,166 85,604
Employer contribution receivable ....................... 29,975 18,116
Interest receivable .................................... 2,137 2,127
----------- -----------
Total assets ........................................... $32,237,465 $32,567,695
=========== ===========
LIABILITIES AND NET ASSETS
AVAILABLE FOR BENEFITS
Exempt loans payable ................................... $10,523,255 $ 3,764,789
Accrued interest payable ............................... 29,975 18,116
----------- -----------
Total liabilities ...................................... 10,553,230 3,782,905
Net assets available for benefits:
Allocated ........................................... 17,951,342 23,609,549
Unallocated ......................................... 3,732,893 5,175,241
----------- -----------
Total net assets available for benefits ................ 21,684,235 28,784,790
----------- -----------
Total liabilities and net assets available for benefits $32,237,465 $32,567,695
=========== ===========
See accompanying notes.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Columbus McKinnon Corporation
Employee Stock Ownership Plan
Statements of Changes in Net Assets Available for Benefits
YEAR ENDED MARCH 31
1999 1998
---------------------------------
Additions:
<S> <C> <C>
Employer contributions .............................. $ 1,186,271 $ 1,007,383
Dividend income ..................................... 355,508 338,861
Interest income ..................................... 3,219 5,436
------------ -----------
Total additions ........................................ 1,544,998 1,351,680
Deductions:
Participant termination payments .................... 1,383,517 923,965
Interest expense on exempt loans payable............. 594,271 415,383
Transfer to other qualified plan .................... 101,600 --
Administrative expense .............................. 5,273 2,814
------------ -----------
Total deductions ....................................... 2,084,661 1,342,162
Net (depreciation) appreciation in fair
value of investments ................................ (6,560,892) 11,638,204
------------ -----------
Net (decrease) increase in assets available
for benefits ........................................ (7,100,555) 11,647,722
Net assets available for benefits:
Beginning of year ...................................... 28,784,790 17,137,068
------------ ------------
End of year ............................................ $ 21,684,235 $ 28,784,790
============ ============
See accompanying notes.
</TABLE>
3
<PAGE>
Columbus McKinnon Corporation
Employee Stock Ownership Plan
Notes to Financial Statements
March 31, 1999 and 1998
1. DESCRIPTION OF THE PLAN AND MAJOR PLAN PROVISIONS
The Columbus McKinnon Corporation Employee Stock Ownership Plan (ESOP), a
defined contribution plan, was established as a result of amending the
previously existing Columbus McKinnon Corporation Personal Retirement Account
Plan (PRA Plan), effective November 1, 1988. The PRA Plan was restated and its
assets became part of the ESOP. The ESOP is an employee stock ownership plan and
a stock bonus plan within the meanings of the applicable sections of the
Internal Revenue Code of 1986, as amended. It is also an eligible individual
account plan as defined in the applicable section of the Employee Retirement
Income Security Act of 1974 (ERISA).
The plan was amended effective February 23, 1996 and October 1, 1996 to
incorporate valuation and distribution procedures as required for a public
entity. The Plan was also amended effective April 1, 1998, to extend coverage to
all domestic non-union employees of the Durbin Durco and Positech Divisions of
Columbus McKinnon Corporation (the Company/CMC), and all domestic non-union
employees of Yale Industrial Products, Inc.
In accordance with the plan document, employees who have attained 55 years of
age and ten years of participation in the Plan have the option to diversify the
investments in their stock accounts by selling a specified percentage of their
shares at the current market value and transferring the sale proceeds to another
defined contribution plan maintained by the Company. As of March 31, 1999,
$101,600 has been transferred to the Company's thrift 401(k) plan.
A summary of the ESOP's provisions follows. Refer to the ESOP document or the
summary plan description (SPD) for a complete description of provisions.
PARTICIPATION
Substantially all of Columbus McKinnon Corporation's domestic non-union
employees are eligible to participate in the ESOP, excluding domestic employees
of certain companies acquired in fiscal 1998 and 1999.
Eligible employees must have attained age 21 and completed one year of
eligibility service to be a participant.
4
<PAGE>
Columbus McKinnon Corporation
Employee Stock Ownership Plan
Notes to Financial Statements (continued)
1. DESCRIPTION OF THE PLAN AND MAJOR PLAN PROVISIONS (CONTINUED)
VESTING OF PARTICIPANTS
A participant will be fully vested and will have a non-forfeitable interest in
the participant's account balance upon completion of five years of vesting
service, excluding any service rendered prior to the calendar year in which
he/she attained age 18, or upon attainment of normal retirement age while in the
employ of the Company or any affiliated company. For participants with prior
employment with the Company in an ineligible classification or with an affiliate
of the Company, such employment shall be included in the calculation of
eligibility and vesting service.
RETIREMENT AND TERMINATION OF EMPLOYMENT
Upon a vested participant's termination, the value of his/her account will be
distributed if the value of the account is less than $5,000 or, at the
participant's option, either immediately or at any valuation date until
retirement, as provided in the ESOP. A retiree may elect to defer distribution
up to 69 1/2 years of age, where at the following valuation date distribution is
mandatory. Valuation dates for share distribution are September 30 and March 31.
During 1999, $1,383,517, or 58,739 shares, were distributed to vested
participants in the form of stock certificates ($923,965 or 44,617 shares,
distributed in 1998). This resulted in the sale of 27 shares held by the ESOP
back to the Company for $637 in 1999 as a result of fractional shares (27 shares
for $578 in 1998). At March 31, 1999, $1,249,077 ($792,339 at March 31, 1998) is
included in the ESOP assets for future distribution to terminated participants.
Forfeiture of a non-vested interest shall occur in the fifth consecutive
calendar year following a break in service. The forfeited accounts will be
allocated among the accounts of active participants. At March 31, 1999, the ESOP
assets include $212,574 ($249,682 at March 31, 1998) of undistributed forfeited
accounts.
ALLOCATION TO PARTICIPANT ACCOUNTS
As of each valuation date (March 31), each participant account is appropriately
adjusted to reflect any contributions or stock to be allocated as of such date,
the income of the trust fund during the period and the increase or decrease in
the fair market value of the trust fund during the period. The allocation will
be based on the fraction, the numerator of which is the participant's annual
earnings for the preceding calendar year and the denominator of which is the
aggregate annual earnings for such calendar year of all participants entitled to
an allocation.
5
<PAGE>
Columbus McKinnon Corporation
Employee Stock Ownership Plan
Notes to Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVESTMENTS
The ESOP's investment in Columbus McKinnon Corporation common stock is at fair
market value as of March 31, 1999 and 1998 based on quoted market prices. The
investment in the Stable Asset Fund is also reported at market value as
determined by open trading.
CONTRIBUTIONS
The Company will contribute to the ESOP such amount as its Board of Directors
shall determine. Each participant (a) who is actively employed as an employee on
the allocation date (December 31) and who has earned at least 1,000 hours of
service as an employee in the calendar year ending on the allocation date, or
(b) who terminates employment on or after January 1 during a plan year after
attaining age 60 and completing at least five years of eligibility service, or
(c) who dies on or after January 1 during a plan year, after attaining age 60
and completing at least five years of eligibility service, shall be entitled to
share in the contributions made for such plan year. Contributions shall be made
in cash or in shares of stock as determined by the Company, and need not be made
out of current or accumulated earnings and profits.
DIVIDENDS
Dividends paid on stock allocated to a participant's stock account will be
allocated to the participant's nonstock account. The pension committee may
direct that such dividends shall be either (a) paid directly to the participant,
former participant, or beneficiary within 90 days after the close of the plan
year in which such dividend was paid, or (b) applied as payment on the exempt
loans. Dividends paid on unallocated stock held by the trustee and acquired with
the proceeds of an exempt loan shall be held by the trustee until the end of the
plan year in which it was paid, and then, along with any interest or earnings,
be applied as payment on the exempt loans which shall trigger a release of stock
from the suspense account.
ESOP TERMINATION
The Company intends to continue the ESOP indefinitely, but reserves the right to
terminate it at any time. If the ESOP is terminated, each participant shall be
fully and nonforfeitably vested in his interest in the ESOP trust fund.
6
<PAGE>
Columbus McKinnon Corporation
Employee Stock Ownership Plan
Notes to Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements.
Estimates also affect the reported amounts of revenue and expenses. Actual
results could differ from those estimates.
3. EMPLOYER CONTRIBUTIONS
The employer contribution to the ESOP for the March 31, 1999 plan year end was
$1,186,271 ($1,007,383 in 1998). This includes interest on the exempt loans
payable April 1, 1999; therefore, a contribution receivable from the ESOP
sponsor in the amount of $29,975 has been recognized at March 31, 1999 ($18,116
at March 31, 1998 for interest due April 1, 1998). Participants are not
permitted to make contributions to the ESOP.
4. INVESTMENTS
At March 31, 1999 and 1998, the assets of the ESOP Plan consist of Columbus
McKinnon Corporation common stock and a stable asset fund with Fleet Bank.
The fair value of individual investments that represent 5% or more of the Plan's
assets at the plan years ended March 31, 1999 and 1998, are as follows:
1999 1998
---------------------------------
Columbus McKinnon Corporation common stock $ 32,100,643 $ 32,461,798
7
<PAGE>
Columbus McKinnon Corporation
Employee Stock Ownership Plan
Notes to Financial Statements (continued)
5. EXEMPT LOANS PAYABLE AND SHARE RELEASE
On October 27, 1994, the ESOP obtained $6,000,000 of new debt ($2,000,000 from
Marine Midland Bank and $4,000,000 from Fleet Bank). The Fleet loan is payable
in quarterly installments of $103,000 through January 2002, and $770,627 in
April 2002, plus interest at a Eurodollar rate based upon LIBOR plus a spread
determined by the Company's leverage ratio (6.62% and 7.34% at March 31, 1999
and 1998, respectively). The Marine loan is payable in quarterly installments of
$45,000 through January 2002, and $328,257 in April 2002, plus interest at a
Eurodollar rate based upon LIBOR plus a spread determined by the Company's
leverage ratio (6.62% and 7.34% at March 31, 1999 and 1998, respectively).
On October 13, 1998, the ESOP obtained $7,682,281 of new debt from the Company.
The CMC loan is payable in quarterly installments of interest only through April
2002, and thereafter quarterly installments of $150,000 through July 2014, and
$298,371 in October 2014, plus interest at the prime rate (7.75% at March 31,
1999).
In October 1994 and October 1998, the ESOP purchased 609,144 and 479,900 shares,
respectively, of common stock of the Company with the debt proceeds, which were
recorded by the trustee in the suspense account. Such stock ceases to be
collateral and is released from the suspense account as the exempt loan is
repaid. In each year prior to full payment of the loan, the number of shares of
stock released will equal the number of shares of stock held as collateral
immediately before the release for such plan year multiplied by the release
fraction.
Employer contributions of $592,000 were applied to principal in 1999 and 1998.
Employer contributions of $594,271 and $415,383 were applied to interest in 1999
and 1998, respectively. Dividend and interest income of $331,815 and $325,161
was applied to principal in 1999 and 1998, respectively. The loans, which are
guaranteed by the Company, are collateralized by an equivalent number of shares
of common stock recorded by the trustees in a suspense account.
8
<PAGE>
Columbus McKinnon Corporation
Employee Stock Ownership Plan
Notes to Financial Statements (continued)
5. EXEMPT LOANS PAYABLE AND SHARE RELEASE (CONTINUED)
The numerator of the release fraction is the amount of principal and interest
payments made toward the loan during the plan year and the denominator is the
sum of the numerator plus the principal and interest payments to be made on the
loan in the future, using the interest rate applicable at the end of the plan
year. Shares of stock released from the suspense account for a plan year shall
be held in the trust on an unallocated basis until allocated by the pension
committee as of the last day of that plan year. That allocation shall be
consistent with the method for allocating contributions to participants'
accounts, which is based on a fraction of each participant's annual earnings
during the preceding calendar year to the total earnings of those participants
during such calendar year. The allocation of shares released resulting from
dividends on participants' allocated shares, however, was based upon the
fraction of each participant's allocated shares to the total number of allocated
shares.
As of March 31, 1999, 708,382 shares were held as collateral for the loan
(325,092 shares held as of March 31, 1998); 96,610 shares were released from the
suspense account in 1999 (101,416 shares released in 1998). These shares were
allocated to participant accounts as of March 31, 1999.
6. TAX STATUS
The Plan has received a determination letter from the Internal Revenue Service
dated July 28, 1997, stating that the Plan is qualified under Section 401(a) of
the Internal Revenue Code of 1986 (the "Code") and that the trust, therefore, is
exempt from taxation under Section 501(a) of the Code. Once qualified, the Plan
is required to operate in conformity with the Code and ERISA to maintain its
tax-exempt status. The Plan was amended subsequent to the IRS determination
letter. Therefore, the amendments are not covered by the determination letter.
The administrator is not aware of any course of action or series of events that
have occurred that might adversely affect the Plan's qualified status.
9
<PAGE>
Schedules
<PAGE>
Columbus McKinnon Corporation
Employee Stock Ownership Plan
EIN: 16-0547600
Plan No. 016
Item 27a - Schedule of Assets Held for Investment Purposes
March 31, 1999
IDENTITY OF ISSUE DESCRIPTION OF INVESTMENT COST CURRENT VALUE
- ------------------ ------------------------- ------------ -------------
*Columbus McKinnon Employer Common Stock,
Corporation 1,595,066 shares $ 16,562,916 $32,100,643
Fleet Investment Stable Asset Fund $ 100,166 $ 100,166
Services
* Indicates a party-in-interest
10
<PAGE>
<TABLE>
<CAPTION>
Columbus McKinnon Corporation
Employee Stock Ownership Plan
EIN: 16-0547600
Plan No. 016
Item 27d - Schedule of Reportable Transactions
For the year ended March 31, 1999
Identity of Description Number Number Total Total Net
Party Involved of Assets of Purchases of Sales Purchases Sales Gain (Loss)
- --------------------------- --------------------- ------------- ------------ ------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Columbus McKinnon Columbus McKinnon
Corp Common
Stock 486,426
shares 3 2 $7,682,000 $ 101,600 $ (2,030)
</TABLE>
11
<PAGE>
SIGNATURES
The Plan. Pursuant to the requirements of the Securities Exchange Act
of 1934, the trustees (or other persons who administer the employee benefit
plan) have duly caused this annual report to be signed on its behalf by the
undersigned hereunto duly authorized.
COLUMBUS McKINNON CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
RESTATEMENT EFFECTIVE APRIL 1, 1989
By: /s/ Timothy R. Harvey
----------------------------------
Timothy R. Harvey, Trustee
/s/ Karen L. Howard
----------------------------------
Karen L. Howard, Trustee
/s/ Robert L. Montgomery, Jr.
----------------------------------
Robert L. Montgomery, Jr., Trustee
/s/ Neal E. Wixson
----------------------------------
Neal E. Wixson, Trustee
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in (a) the Registration Statement
(Form S-8 No. 333-3212) pertaining to the Columbus McKinnon Corporation 1995
Incentive Stock Option Plan, the Columbus McKinnon Corporation Non-Qualified
Stock Option Plan, the Columbus McKinnon Corporation Restricted Stock Plan and
the Columbus McKinnon Corporation Employee Stock Ownership Plan Restatement
Effective April 1, 1989 of Columbus McKinnon Corporation and (b) the
Registration Statement(Form S-8 No. 333-81719) pertaining to the Options assumed
by Columbus McKinnon Corporation originally granted under the G.L. International
Inc. 1997 Stock Option Plan and the Larco Industrial Services Ltd. 1997 Stock
Option Plan of our report dated June 11, 1999, with respect to the financial
statements and schedules of the Columbus McKinnon Corporation Employee Stock
Ownership Plan included in this Annual Report (Form 11-K) for the year ended
March 31, 1999.
/s/ Ernst & Young LLP
Buffalo, New York
June 29, 1999
