<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 12, 1996
REGISTRATION NO. 333-13181
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
OMNIQUIP INTERNATIONAL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 3531 43-1721419
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
------------------------
369 WEST WESTERN AVENUE
PORT WASHINGTON, WISCONSIN 53074
(414) 284-5571
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------------
P. ENOCH STIFF
PRESIDENT AND CHIEF EXECUTIVE OFFICER
OMNIQUIP INTERNATIONAL, INC.
369 WEST WESTERN AVENUE
PORT WASHINGTON, WISCONSIN 53074
(414) 284-5571
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------------
COPIES TO:
<TABLE>
<S> <C>
MATTHEW G. MALONEY, ESQ. JOHN J. SABL, ESQ.
REBECCA L. WRIGHT, ESQ. Sidley & Austin
Dickstein Shapiro Morin & Oshinsky LLP One First National Plaza
2101 L Street, N.W. Chicago, Illinois 60603
Washington, D.C. 20037 (312) 853-7000
(202) 785-9700
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------
<TABLE>
<CAPTION>
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE (1) REGISTRATION FEE
<S> <C> <C>
Common Stock, $.01 par value............................................................ $115,000,000 $34,849 (2)
</TABLE>
(1) Estimated solely for the purposes of calculating the registration fee
pursuant to Rule 457(o).
(2) Previously paid.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
EXPLANATORY NOTE
THIS REGISTRATION STATEMENT CONTAINS TWO FORMS OF PROSPECTUS: ONE TO BE USED
IN CONNECTION WITH A UNITED STATES OFFERING (THE "U.S. PROSPECTUS") AND ONE TO
BE USED IN CONNECTION WITH A CONCURRENT INTERNATIONAL OFFERING (THE
"INTERNATIONAL PROSPECTUS"). THE U.S. PROSPECTUS AND THE INTERNATIONAL
PROSPECTUS ARE IDENTICAL EXCEPT THAT THEY CONTAIN DIFFERENT FRONT COVER PAGES.
THE FORM OF U.S. PROSPECTUS IS INCLUDED HEREIN AND THE FRONT COVER PAGE OF THE
INTERNATIONAL PROSPECTUS WHICH IS LABELLED "ALTERNATE PAGE FOR INTERNATIONAL
PROSPECTUS" FOLLOWS THE FRONT COVER PAGE FOR THE U.S. PROSPECTUS.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
PROSPECTUS (SUBJECT TO COMPLETION)
ISSUED NOVEMBER , 1996
SHARES
OMNIQUIP INTERNATIONAL, INC.
COMMON STOCK
-----------------
OF THE SHARES OF COMMON STOCK BEING OFFERED, SHARES ARE BEING OFFERED
INITIALLY IN THE UNITED STATES AND CANADA BY THE U.S. UNDERWRITERS AND
SHARES ARE BEING OFFERED INITIALLY OUTSIDE OF THE UNITED STATES
AND CANADA BY THE INTERNATIONAL UNDERWRITERS. SEE "UNDERWRITERS." ALL
OF THE SHARES OF COMMON STOCK BEING OFFERED HEREBY ARE BEING SOLD
BY THE COMPANY. PRIOR TO THIS OFFERING, THERE HAS BEEN NO PUBLIC
MARKET FOR THE COMMON STOCK OF THE COMPANY. IT IS
CURRENTLY ANTICIPATED THAT THE INITIAL PUBLIC OFFERING
PRICE PER SHARE WILL BE BETWEEN $ AND
$ . SEE "UNDERWRITERS" FOR A DISCUSSION OF
FACTORS CONSIDERED IN DETERMINING THE
INITIAL PUBLIC
OFFERING PRICE.
------------------------
THE COMMON STOCK HAS BEEN APPROVED FOR QUOTATION ON THE NASDAQ NATIONAL MARKET
UNDER THE SYMBOL "OMQP."
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
-------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
-------------------
PRICE $ A SHARE
-------------------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY (2)
------------------------ ------------------------ ------------------------
<S> <C> <C> <C>
PER SHARE.............................. $ $ $
TOTAL (3).............................. $ $ $
</TABLE>
- ---------
(1) THE COMPANY AND ITS MAJORITY STOCKHOLDER HAVE AGREED TO INDEMNIFY THE
UNDERWRITERS AGAINST CERTAIN LIABILITIES, INCLUDING LIABILITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED.
(2) BEFORE DEDUCTING EXPENSES PAYABLE BY THE COMPANY ESTIMATED AT $1,000,000.
(3) THE COMPANY'S MAJORITY STOCKHOLDER HAS GRANTED TO THE U.S. UNDERWRITERS AN
OPTION, EXERCISABLE FOR 30 DAYS FROM THE DATE HEREOF, TO PURCHASE AN
AGGREGATE OF ADDITIONAL SHARES OF COMMON STOCK AT THE PRICE TO PUBLIC
LESS UNDERWRITING DISCOUNTS AND COMMISSIONS FOR THE PURPOSE OF COVERING
OVER-ALLOTMENTS, IF ANY. IF THE U.S. UNDERWRITERS EXERCISE SUCH OPTION IN
FULL, THE TOTAL PRICE TO PUBLIC, UNDERWRITING DISCOUNTS AND COMMISSIONS AND
PROCEEDS TO THE MAJORITY STOCKHOLDER WILL BE $ , $ AND $ ,
RESPECTIVELY. SEE "UNDERWRITERS."
------------------------
THE SHARES ARE OFFERED, SUBJECT TO PRIOR SALE, WHEN, AS AND IF ACCEPTED BY
THE UNDERWRITERS NAMED HEREIN AND SUBJECT TO APPROVAL OF CERTAIN LEGAL MATTERS
BY SIDLEY & AUSTIN, COUNSEL FOR THE UNDERWRITERS. IT IS EXPECTED THAT DELIVERY
OF THE SHARES WILL BE MADE ON OR ABOUT , 1996 AT THE OFFICES OF
MORGAN STANLEY & CO. INCORPORATED, NEW YORK, N.Y., AGAINST PAYMENT THEREFOR IN
IMMEDIATELY AVAILABLE FUNDS.
-------------------
MORGAN STANLEY & CO.
INCORPORATED
CS FIRST BOSTON
SCHRODER WERTHEIM & CO.
ROBERT W. BAIRD & CO. INCORPORATED
, 1996
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY
NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH
OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
PROSPECTUS (SUBJECT TO COMPLETION)
ISSUED NOVEMBER , 1996
SHARES
OMNIQUIP INTERNATIONAL, INC.
COMMON STOCK
-----------------
OF THE SHARES OF COMMON STOCK BEING OFFERED, SHARES ARE BEING OFFERED
INITIALLY OUTSIDE OF THE UNITED STATES AND CANADA BY THE INTERNATIONAL
UNDERWRITERS AND SHARES ARE BEING OFFERED INITIALLY IN THE UNITED
STATES AND CANADA BY THE U.S. UNDERWRITERS. SEE "UNDERWRITERS." ALL
OF THE SHARES OF COMMON STOCK BEING OFFERED HEREBY ARE BEING SOLD
BY THE COMPANY. PRIOR TO THIS OFFERING, THERE HAS BEEN NO PUBLIC
MARKET FOR THE COMMON STOCK OF THE COMPANY. IT IS
CURRENTLY ANTICIPATED THAT THE INITIAL PUBLIC OFFERING
PRICE PER SHARE WILL BE BETWEEN $ AND
$ . SEE "UNDERWRITERS" FOR A DISCUSSION OF
THE FACTORS CONSIDERED IN DETERMINING
THE INITIAL PUBLIC
OFFERING PRICE.
------------------------
THE COMMON STOCK HAS BEEN APPROVED FOR QUOTATION ON THE NASDAQ NATIONAL MARKET
UNDER THE SYMBOL "OMQP."
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
-------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
-------------------
PRICE $ A SHARE
-------------------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
------------------------ ------------------------ ------------------------
<S> <C> <C> <C>
PER SHARE.............................. $ $ $
TOTAL(3)............................... $ $ $
</TABLE>
- ---------
(1) THE COMPANY AND ITS MAJORITY STOCKHOLDER HAVE AGREED TO INDEMNIFY THE
UNDERWRITERS AGAINST CERTAIN LIABILITIES, INCLUDING LIABILITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED.
(2) BEFORE DEDUCTING EXPENSES PAYABLE BY THE COMPANY ESTIMATED AT $1,000,000.
(3) THE COMPANY'S MAJORITY STOCKHOLDER HAS GRANTED TO THE U.S. UNDERWRITERS AN
OPTION, EXERCISABLE FOR 30 DAYS FROM THE DATE HEREOF TO PURCHASE AN
AGGREGATE OF ADDITIONAL SHARES OF COMMON STOCK AT THE PRICE TO PUBLIC
LESS UNDERWRITING DISCOUNTS AND COMMISSIONS FOR THE PURPOSE OF COVERING
OVER-ALLOTMENTS, IF ANY. IF THE U.S. UNDERWRITERS EXERCISE SUCH OPTION IN
FULL, THE TOTAL PRICE TO PUBLIC, UNDERWRITING DISCOUNTS AND COMMISSIONS AND
PROCEEDS TO THE MAJORITY STOCKHOLDER WILL BE $ , $ AND $ ,
RESPECTIVELY. SEE "UNDERWRITERS."
------------------------
THE SHARES ARE OFFERED, SUBJECT TO PRIOR SALE, WHEN, AS AND IF ACCEPTED BY
THE UNDERWRITERS NAMED HEREIN AND SUBJECT TO APPROVAL OF CERTAIN LEGAL MATTERS
BY SIDLEY & AUSTIN, COUNSEL FOR THE UNDERWRITERS. IT IS EXPECTED THAT DELIVERY
OF THE SHARES WILL BE MADE ON OR ABOUT , 1996 AT THE OFFICES OF
MORGAN STANLEY & CO. INCORPORATED, NEW YORK, N.Y., AGAINST PAYMENT THEREFOR IN
IMMEDIATELY AVAILABLE FUNDS.
-------------------
MORGAN STANLEY & CO.
INTERNATIONAL
CS FIRST BOSTON
SCHRODERS
ROBERT W. BAIRD & CO. INCORPORATED
, 1996
<PAGE>
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN AS CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY UNDERWRITER.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY BY ANY PERSON IN ANY
JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER
ANY CIRCUMSTANCE CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
------------------------
UNTIL , 1996 (25 DAYS AFTER THE COMMENCEMENT OF THIS OFFERING), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
------------------------
For investors outside of the United States: No action has been or will be
taken in any jurisdiction by the Company or any Underwriter that would permit a
public offering of the Common Stock or possession or distribution of this
Prospectus in any jurisdiction where action for that purpose is required, other
than in the United States. Persons into whose possession this Prospectus comes
are required by the Company and the Underwriters to inform themselves about and
to observe any restrictions as to the offering of the Common Stock and the
distribution of this Prospectus.
------------------------
In this Prospectus references to "dollar" and "$" are to United States
dollars, and the term "United States" or "U.S." means the United States of
America, its states, its territories, its possessions and all areas subject to
its jurisdiction.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary............................. 3
Risk Factors................................... 6
Use of Proceeds................................ 11
Dividend Policy................................ 11
Capitalization................................. 12
Dilution....................................... 13
Selected Consolidated Financial Data........... 14
Management's Discussion and Analysis of Results
of Operations and Financial Condition........ 16
Pro Forma Financial Information................ 23
Management's Discussion and Analysis of Pro
Forma Results of Operations and Financial
Condition.................................... 25
<CAPTION>
PAGE
-----
<S> <C>
Business....................................... 30
Management..................................... 41
Security Ownership of Certain Beneficial Owners
and Management............................... 47
Certain Transactions........................... 48
Description of Capital Stock................... 52
Shares Eligible for Future Sale................ 54
Certain U.S. Federal Tax Considerations for
Non-U.S. Holders of Common Stock............. 56
Underwriters................................... 59
Legal Matters.................................. 62
Experts........................................ 62
Additional Information......................... 62
Index to Financial Statements.................. F-1
</TABLE>
------------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
DURING THIS OFFERING, CERTAIN PERSONS AFFILIATED WITH PERSONS PARTICIPATING IN
THE DISTRIBUTION MAY ENGAGE IN TRANSACTIONS FOR THEIR OWN ACCOUNTS OR FOR THE
ACCOUNTS OF OTHERS IN THE COMMON STOCK PURSUANT TO EXEMPTIONS FROM RULES 10b-6,
10b-7 AND 10b-8 UNDER THE SECURITIES EXCHANGE ACT OF 1934.
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY INFORMATION IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO, AND SHOULD BE READ IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND
FINANCIAL STATEMENTS AND THE NOTES THERETO INCLUDED ELSEWHERE IN THIS
PROSPECTUS. THE COMPANY OWNS THE TRADEMARKS SKY TRAK-REGISTERED TRADEMARK-, SCAT
TRAK-REGISTERED TRADEMARK-, TRAK INTERNATIONAL-REGISTERED TRADEMARK-,
LULL-REGISTERED TRADEMARK-, DYNA LUGGER-REGISTERED TRADEMARK- AND MILLENNIA-TM-.
OTHER TRADEMARKS APPEARING IN THIS PROSPECTUS ARE THE PROPERTY OF THEIR
RESPECTIVE HOLDERS. UNLESS OTHERWISE INDICATED, OR UNLESS THE CONTEXT OTHERWISE
REQUIRES, THE "COMPANY" OR "OMNIQUIP" AS USED IN THIS PROSPECTUS REFERS TO
OMNIQUIP INTERNATIONAL, INC., ITS PREDECESSORS AND SUBSIDIARIES, "INVESTMENTS
L.P." REFERS TO HARBOUR GROUP INVESTMENTS III, L.P., AND "UNIQUIP L.P." REFERS
TO UNIQUIP-HGI ASSOCIATES, L.P. UNLESS OTHERWISE INDICATED, ALL INFORMATION IN
THIS PROSPECTUS ASSUMES THAT THE UNDERWRITERS' OVER-ALLOTMENT OPTION IS NOT
EXERCISED.
THE COMPANY
The Company is the largest North American manufacturer of telescopic
material handlers, and also manufactures a line of skid steer loaders, as well
as a limited range of other material handling equipment. Omniquip's highly
versatile products are used in a wide variety of applications by commercial and
residential building contractors, as well as other construction, military,
industrial, municipal and agricultural end-users. The Company's telescopic
material handlers are marketed under the well recognized and highly regarded SKY
TRAK and LULL brand names. Based upon industry reports, the Company believes
that its North American market share of 1995 shipments of telescopic material
handlers was approximately 40%.
Telescopic material handlers are especially useful in rough terrain
environments and congested job sites, where their maneuverability and ability to
raise, extend and lower payloads provide significant advantages over more
traditional material handling equipment, such as cranes, straight-mast forklifts
and elevators. The Company's telescopic material handlers have a maximum lift
capacity of 5,000 pounds to 10,000 pounds and can position payloads from 28 feet
to 54 feet above the ground or 15 feet to 39 feet in front of the machine's
chassis. The versatility of these units allows users to lower overall costs by
substituting a single telescopic material handler for one or more other types of
material handling equipment, as well as for certain labor intensive material
handling tasks. The Company believes it manufactures the broadest product line
of telescopic material handlers in North America. Shipments of commercial
telescopic material handlers marketed under the SKY TRAK and LULL brand names
increased from approximately 950 units in calendar 1990 to approximately 2,250
units in 1995. In addition, Omniquip has been the principal supplier since 1988
of telescopic material handlers to the U.S. military, having delivered over
2,800 such units for use in loading and unloading containers and palletized
loads for ships, aircraft and trucks as well as for munitions handling and
reloading multiple rocket launchers. In 1995, the Company was awarded a contract
to supply the Army and related agencies with a new generation of telescopic
material handlers to support the logistics requirements of the Rapid Deployment
Forces. The Army has estimated that its requirements under the contract could
range up to a maximum of 1,200 vehicles, or a maximum contract value of $120
million. Shipments under the contract are expected to begin in fiscal year 1997.
The Company believes that this contract will enhance its ability to pursue sales
to other branches of the United States armed forces and foreign military
agencies. See "Risk Factors--ATLAS Contract."
The Company has experienced significant growth in sales of its skid steer
loaders, principally marketed under the SCAT TRAK brand name, with shipments of
approximately 120 units in calendar 1990, increasing to shipments of
approximately 1,250 units in 1995. Skid steer loaders are compact and versatile
machines used to dig, lift and handle bulk materials such as dirt, construction
materials, waste, farm produce and snow. The compact size, maneuverability and
ease of transport make skid steer loaders well-suited for a wide variety of
applications. The Company's skid steer loaders can lift and position maximum
payloads of 1,300 pounds to 1,750 pounds to a maximum lift height of 112 inches
to 121 inches.
3
<PAGE>
The Company competes principally in selected segments of the material
handling and construction equipment markets which utilize engines of less than
130 horsepower. The Company believes that these segments have typically
experienced a higher level of growth in recent years than general construction
equipment markets. North American shipments of construction and allied equipment
grew from $30.7 billion in 1990 to $38.9 billion in 1995, representing a nominal
compound annual growth rate of 4.8%. According to industry estimates, shipments
of telescopic material handlers in North America grew from approximately 2,400
units in 1990 to approximately 5,500 units in 1995, representing a real compound
annual growth rate of 18.0%, and sales of skid steer loaders in North America
grew from approximately 27,000 units in 1990 to approximately 40,000 units in
1995, representing a real compound annual growth rate of 8.2%. The Company
believes higher growth rates for telescopic material handlers and skid steer
loaders are attributable to a number of factors, including the following: high
product versatility, increased productivity provided by these products,
significant growth in demand for equipment rentals, and growth in demand for
these products for non-construction applications.
The Company's strategy is to grow within segments of the material handling
and construction equipment markets which typically are not dominated by
full-line construction equipment manufacturers, which are growing faster than
the construction industry generally, and which typically utilize local
independent dealers for distribution rather than regional distributorships
primarily dedicated to products made by a single manufacturer. The Company
intends to achieve its business strategy by providing superior products,
pursuing a multiple brand distribution strategy, acquiring complementary
businesses, achieving cost savings from the integration of acquired operations,
and leveraging its position as a leading North American manufacturer to expand
its penetration of global markets.
The Company was formed in 1995 by Investments L.P. in connection with the
acquisition of TRAK International, Inc. ("TRAK"), a manufacturer of telescopic
material handlers and skid steer loaders. TRAK was the first company to
introduce the arc boom forklift, the precursor to the telescopic material
handler, in 1956. In August 1996, the Company acquired the business and
substantially all of the assets of Lull Industries, Inc. ("Lull"), a
manufacturer of telescopic material handlers, with a small product line of skid
steer loaders, articulated forklifts and tenders, masonry tenders and motorized
wheelbarrows. Lull's business was founded in 1956.
The Company's principal executive offices are located at 369 West Western
Avenue, Port Washington, Wisconsin 53074, and its telephone number is (414)
284-5571.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered............ shares
U.S. offering................. shares
International offering........ shares
Common Stock to be outstanding
after the Offering............ shares
Use of proceeds................. To repay substantially all outstanding indebtedness and
for general corporate purposes. See "Use of Proceeds."
Nasdaq Symbol................... OMQP
Dividend Policy................. The Company expects to pay a quarterly cash dividend of
$0.01 per share. See "Dividend Policy."
</TABLE>
4
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
The following summary historical consolidated and unaudited pro forma
consolidated financial data were derived from the historical consolidated
financial statements of the Company or TRAK, as the predecessor to the Company,
and the pro forma financial information of the Company, included elsewhere
herein. The information contained in this table should be read in conjunction
with "Capitalization," "Selected Consolidated Financial Data," "Management's
Discussion and Analysis of Results of Operations and Financial Condition," "Pro
Forma Financial Information," "Management's Discussion and Analysis of Pro Forma
Results of Operations and Financial Condition," and the financial statements
included elsewhere herein.
<TABLE>
<CAPTION>
PREDECESSOR(1) COMPANY
------------------------------- -----------------------------------------------
FISCAL YEARS FISCAL PRO FORMA(2)
ENDED YEAR FISCAL YEAR
SEPT. 30, OCT. 1, 1994 AUG. 17, 1995 ENDED ENDED
---------------- THROUGH THROUGH SEPT. 30, SEPT. 30,
1993 1994 AUG. 16, 1995 SEPT. 30, 1995 1996 1996
------- ------- ------------- -------------- ---------- -------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales............. $50,068 $60,973 $75,401 $12,723 $124,861 $207,239
Cost of sales......... 39,183 47,208 57,707 9,787 92,688 158,567
------- ------- ------------- ------- ---------- -------------
Gross profit.......... 10,885 13,765 17,694 2,936 32,173 48,672
Selling, general and
administrative
expenses............ 8,290 9,502 10,903 1,670 16,311 24,573
Boom warranty
charge.............. -- -- -- -- -- 2,881(3)
------- ------- ------------- ------- ---------- -------------
Operating income...... 2,595 4,263 6,791 1,266 15,862 21,218
Interest expense...... 1,140 1,363 1,379 353 3,434 --
Other finance
charges............. 570 699 1,121 269 2,012 1,332
------- ------- ------------- ------- ---------- -------------
Income before income
taxes............... 885 2,201 4,291 644 10,416 19,886
Provision for income
taxes............... 368 876 1,762 262 4,060 7,753
------- ------- ------------- ------- ---------- -------------
Income before
extraordinary item
and change in
accounting
principles.......... 517 1,325 2,529 382 6,356 12,133
Cumulative effect of
change in accounting
principles.......... 199(4) -- (241)(5) -- -- --
Extraordinary loss.... -- -- -- -- (314)(6) --
------- ------- ------------- ------- ---------- -------------
Net income............ $ 716 $ 1,325 $ 2,288 $ 382 $ 6,042 $ 12,133
------- ------- ------------- ------- ---------- -------------
------- ------- ------------- ------- ---------- -------------
Earnings per share(7):
Income before
extraordinary
item.............. $ .04 $ .64
Net income.......... $ .04 $ .61
</TABLE>
<TABLE>
<CAPTION>
COMPANY
------------------------------
SEPTEMBER 30, 1996
------------------------------
AS
ACTUAL ADJUSTED(8)
-------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Working capital............... $ 13,393 $ 17,352
Total assets.................. 139,580 142,239
Short-term debt............... 3,875 --
Long-term debt................ 84,566 --
Stockholders' equity.......... 12,425 103,575
</TABLE>
- ----------------------------------
(1) The Company was organized in August 1995 for the purpose of acquiring TRAK,
the predecessor company.
(2) Amounts give effect to the pro forma transactions described under "Pro Forma
Financial Information," including the notes thereto.
(3) In the quarter ended December 31, 1995, Lull determined that a specific
warranty obligation had been incurred on certain boom units manufactured and
recorded a pre-tax charge to operations of $2,881.
(4) In October 1992, TRAK adopted Statement of Financial Accounting Standards,
No. 109, "Accounting for Income Taxes" (SFAS 109). The cumulative effect of
adopting SFAS 109 was to record a net tax benefit of $199.
(5) In October 1994, TRAK adopted Statement of Financial Accounting Standards,
No. 106, "Employer's Accounting for Postretirement Benefits Other Than
Pensions" (SFAS 106). The cumulative effect of adopting SFAS 106 was to
record a charge of $241, net of income tax benefits.
(6) In August 1996, the Company incurred an extraordinary loss of $314, net of
income tax benefits of $200, related to the write-off of deferred finance
charges in connection with the refinancing of debt.
(7) Given the historical organization and capital structure of TRAK, as
predecessor to the Company, earnings per share information is not considered
meaningful for the predecessor.
(8) Amounts give effect to the issuance and sale of Common Stock in the Offering
and the application of the net proceeds therefrom to the repayment of
indebtedness.
5
<PAGE>
RISK FACTORS
PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED HEREBY SHOULD CAREFULLY
CONSIDER THE FOLLOWING FACTORS, AS WELL AS THE OTHER INFORMATION CONTAINED IN
THIS PROSPECTUS.
ABSENCE OF CONSOLIDATED OPERATING HISTORY; RECENT ACQUISITION
The Company was formed in August 1995 in connection with the acquisition of
TRAK. Subsequently, the Company acquired the business and substantially all of
the assets of Lull in August 1996. There can be no assurance that the Company
will be successful in integrating the operations of Lull, that such integration
will not divert management resources or cause temporary disruptions in the
management of the business or that the Company will realize the contemplated
manufacturing, purchasing and other efficiencies from such integration. In
addition, there can be no assurance that the Company will not experience
unanticipated liabilities or other problems arising subsequent to the completion
of this acquisition, or that this acquisition and any subsequent integration
will not otherwise have an adverse effect on the Company. See "Business."
CYCLICALITY
The markets for the Company's products have historically been cyclical.
Because the Company's products are used primarily in the construction industry,
its sales, and therefore its results of operations, are significantly dependent
upon the general state of the economy, regional economic conditions, interest
rates and other factors affecting residential and commercial building
activities. During periods of expansion in construction activity, the Company
generally has benefited from increased demand for construction equipment.
Conversely, during recessionary times, the Company has been adversely affected
by declines in demand for such products, due not only to decreased sales but
also to increased losses under the Company's various guarantees pursuant to
dealer floor-plan and rental fleet financing arrangements. In addition, sales to
the equipment rental industry may be more cyclical than sales of construction
equipment generally. While the Company believes that increased sales of its
products to military, agricultural and industrial end-users may mitigate to some
extent the effects of cyclicality in the construction industry, there can be no
assurance that growth in the markets for the Company's products will occur or
that such growth will result in increased demand for the Company's products. See
"Management's Discussion and Analysis of Results of Operations and Financial
Condition," "Management's Discussion and Analysis of Pro Forma Results of
Operations and Financial Condition" and "Business."
ATLAS CONTRACT
In 1995, the Company was awarded a four year, fixed-price contract by the
United States Army, United States Army Reserve and National Guard (collectively,
the "Army") for the supply of the Army's requirements for the All-Terrain
Lifter, Army System ("ATLAS"), the next generation of the military version of
the Company's commercial telescopic material handler. The contract covers the
Army's requirements for ATLAS vehicles over the four year period ending May
1999. Such requirements have been estimated by the Army to range up to a maximum
of 1,200 vehicles, or a maximum contract value of $120 million, but such
estimates are not binding and actual purchase orders received from the Army
under the contract may be significantly less than the maximum estimated amounts.
The Army has the contract option to purchase up to an additional 300 units above
the 1,200 unit maximum. The Company has completed testing five prototype
vehicles and has received from the Army initial orders for 224 vehicles, none of
which can be shipped until the Army satisfactorily completes further testing of
a random sample of units. There can be no assurance that the Army will be
satisfied with either the prototypes or initial units manufactured, that
modifications required, if any, as a result of Army testing will not result in a
material increase in the cost to the Company to produce such units, that the
Army will place orders for any specified number of units, that the Army, if it
purchases units under the contract, will purchase additional units after
6
<PAGE>
the expiration of the contract, that the U.S. Congress will appropriate
necessary funds to permit the purchase of desired units or that the Army will
not take other actions, including termination of the contract, which could have
a material adverse effect on the Company. In addition, there can be no assurance
that any sales made by the Company under the contract will be profitable. See
"Business."
ACQUISITION STRATEGY
The Company expects to continue a strategy of identifying and acquiring
companies with complementary products or services which could be expected to
enhance the Company's operations and profitability. There can be no assurance
that the Company will continue to identify suitable new acquisition candidates,
obtain financing necessary to complete such acquisitions or acquire businesses
on satisfactory terms or that any business acquired by the Company will be
integrated successfully into the Company's operations or prove to be profitable.
The Company could incur substantial indebtedness in connection with its
acquisition strategy.
PRODUCT RECALL
From time to time, the Company discovers defects in product design for
existing products which require it to take steps to correct or retrofit, at the
Company's expense, previously sold products. Currently, the Company is in the
process of correcting a defect in its LULL brand of telescopic material
handlers. In 1995, prior to the acquisition by the Company, Lull established
reserves of approximately $2.9 million, on a pre-tax basis, for the cost of
retrofitting such telescopic material handlers. As of September 30, 1996, such
reserve was approximately $1.6 million. The Company also has established a
reserve of approximately $1.1 million as of September 30, 1996, on a pre-tax
basis, relating to corrective warranty work being undertaken with respect to two
models of skid steer loaders. There can be no assurance, however, that the
ultimate cost of correcting these defects will not exceed the amount of the
previously-established reserves, that the defects will not adversely affect the
Company's reputation or result in a decline in sales of the Company's products
or that action required to be taken to correct these defects will not result in
additional temporary disruptions in the Company's business. See "Management's
Discussion and Analysis of Pro Forma Results of Operations and Financial
Condition--Seasonality and Pro Forma Quarterly Results" and "Business--Product
Liability and Product Recall."
DEALER FINANCE ARRANGEMENTS
The Company assists its dealers in floor plan and rental fleet financing
arrangements. In connection therewith, the Company has undertaken certain
guarantee and repurchase obligations, generally subject to certain limitations.
Although the Company has not incurred any material losses pursuant to these
arrangements in recent years, there can be no assurance that the Company will
not incur such losses in the future. See "Management's Discussion and Analysis
of Results of Operations and Financial Condition-- Capital Resources and
Liquidity" and "Business--Marketing and Distribution--Financing."
DEPENDENCE ON CERTAIN SUPPLIERS
Certain of the components included in the Company's products are obtained
from a single supplier or a limited number of suppliers. Disruption or
termination of supplier relationships could have an adverse effect on the
Company's operations. The Company believes that alternative sources could be
obtained, if necessary, but the inability to obtain sufficient quantities of the
components or the need to develop alternative sources, if and as required in the
future, could result in delays or reductions in product shipments, or higher
purchasing costs, which in turn could have an adverse effect on the Company's
results of operations and customer relationships. See "Business--Manufacturing
and Raw Materials."
7
<PAGE>
PRODUCT LIABILITY
From time to time, the Company is the subject of product liability claims
relative to the Company's products, which, if successful, could have a material
adverse impact on the Company. Although the Company maintains liability
insurance coverage that it believes to be adequate, there can be no assurance
that the Company will be able to maintain such coverage or obtain alternate
coverage in the future at a reasonable cost, or that such coverage will be
sufficient to satisfy future claims, if any. See "Business-- Product Liability
and Product Recall."
TECHNOLOGICAL CHANGE
Certain of the Company's products are subject to changing technology which
could place the Company at a competitive disadvantage relative to alternative
products introduced by competitors. There can be no assurance that the Company
will be able to achieve the technological advances or introduce new products
that may be necessary to remain competitive.
COMPETITION
The markets for the Company's products are highly competitive and relatively
fragmented, with a large number of competitors. Many of the Company's
competitors are larger than the Company and have greater financial, marketing
and technical resources. In addition, the Company may encounter competition from
new market entrants. There can be no assurance that competitors will not take
actions, including developing new products, which could adversely affect the
Company's sales and operating results.
DEPENDENCE ON KEY PERSONNEL
The success of the Company's business is dependent upon the management and
leadership skills of P. Enoch Stiff, the Company's President and Chief Executive
Officer, and other members of the Company's senior management team. The Company
does not have employment agreements with, or "key man" life insurance on, Mr.
Stiff and other key executive officers. The loss of the services of Mr. Stiff or
other senior executives could have a material adverse effect on the Company's
business and results of operations. In addition, the future success of the
Company will depend, among other factors, on the Company's ability to continue
to attract and retain qualified personnel. See "Management."
DEPENDENCE ON PRINCIPAL FACILITIES
The Company's operations are conducted principally at two facilities.
Although the Company has not experienced any material disruption of operations
at its key facilities, in the event that operations at any of such facilities
were disrupted as a result of equipment failures, natural disasters, work
stoppages or other reasons, the Company's business and results of operations
could be adversely affected. The Company maintains property damage insurance
which it believes to be adequate to provide for reconstruction of its facilities
and equipment, as well as business interruption insurance to mitigate losses
resulting from any production shutdown caused by an insured loss. However, no
assurance can be given that such insurance will be adequate to cover losses that
may occur.
ENVIRONMENTAL MATTERS
The Company is subject to various federal, state and local environmental
laws and regulations which require compliance with increasingly stringent and
costly requirements. Pursuant to these laws and regulations, the Company may
also be required from time to time to remediate environmental contamination
associated with releases of hazardous substances. Although the costs of
compliance with these requirements have not been material to date, there can be
no assurance that the costs of future compliance will not be material. In
addition, although the Company ordinarily conducts "Phase I" environmental
testing in connection with acquisitions of acquired businesses and additional
testing if
8
<PAGE>
deemed appropriate under the circumstances in order to minimize the risks of
encountering material environmental problems resulting from such acquisitions,
there can be no assurance that the Company will not discover material
unanticipated environmental problems requiring significant expenditures for
corrective action or remediation following the completion of an acquisition. See
"Business-- Environmental and Safety Regulations."
CONTROL BY PRINCIPAL STOCKHOLDERS
Following the completion of the Offering, Uniquip L.P. and Investments L.P.
will own an aggregate % (or approximately % if the Underwriters exercise
in full the over-allotment option granted by Investments L.P.) of the
outstanding Common Stock. Uniquip L.P. and Investments L.P. are under the common
control of Sam Fox. As a result of their stock ownership, Uniquip L.P. and
Investments L.P., as a practical matter, are likely to be able to elect all the
directors of the Company and to control the Company's affairs. Affiliates of
Uniquip L.P. and Investments L.P. provide certain services to the Company which
may give rise to potential conflicts of interest. See "Security Ownership of
Certain Beneficial Owners and Management" and "Certain Transactions."
SHARES ELIGIBLE FOR FUTURE SALE
Immediately upon consummation of the Offering, the Company will have
outstanding shares of Common Stock, ( if the Underwriters
exercise in full their over-allotment option) of which will have been sold in
the Offering and will be freely transferable without restriction or further
registration under the Securities Act of 1933, as amended (the "Securities
Act"), except for any of those shares of Common Stock owned at any time by an
"affiliate" of the Company within the meaning of Rule 144 under the Securities
Act, which sales will be subject to the volume limitations and certain other
restrictions set forth in Rule 144. Commencing in August 1997, approximately
shares of Common Stock held by the Company's existing stockholders will
become eligible for sale in the public market subject to volume and other
restrictions pursuant to Rule 144. An additional shares of Common Stock
will become eligible for sale in the public market pursuant to Rule 144
commencing in . Uniquip L.P. and Investments L.P., as well as certain of
their transferees, will have certain rights to demand registration of Common
Stock owned by them and will have the right, subject to certain restrictions and
limitations, to participate in future registered sales of Common Stock by the
Company. The sale of any substantial number of shares of Common Stock following
the Offering could have a material adverse impact on the market price of the
Common Stock. See "Certain Transactions--Agreements with Existing Stockholders"
and "Shares Eligible for Future Sale."
DILUTION
Purchasers of the Common Stock offered hereby will suffer an immediate and
substantial dilution of the net tangible book value per share of the Common
Stock from the initial public offering price. See "Dilution."
DETERMINATION OF OFFERING PRICE AND ABSENCE OF PUBLIC MARKET
Prior to the Offering, there has been no public market for the Company's
Common Stock. Consequently, the initial public offering price will be determined
by negotiation between the Company and the representatives of the Underwriters
based upon factors described under the caption "Underwriters." Recently the
stock market has experienced and is likely to experience in the future
significant price and volume fluctuations which could adversely affect the
market price of the Common Stock without regard to the operating performance of
the Company. In addition, the Company believes that factors such as quarterly
fluctuations in the financial results of the Company or its competitors and
general conditions in the industry, the overall economy and the financial
markets could cause the price of the Common Stock to
9
<PAGE>
fluctuate substantially. There can be no assurance that an active trading market
in the Company's Common Stock will develop subsequent to the Offering or, if
developed, that it will be sustained.
ANTI-TAKEOVER PROVISIONS
Certain provisions in the Company's Restated Certificate of Incorporation
and By-Laws could have the effect of making more difficult or discouraging an
acquisition of the Company deemed undesirable by its Board of Directors. These
include: (i) a classified Board of Directors, (ii) the existence of authorized
but unissued Common Stock and (iii) the existence of authorized but unissued
preferred stock, which could be issued by the Company's Board of Directors
without stockholder approval, containing such terms as the Board of Directors
may approve. In addition, certain provisions of Delaware law applicable to the
Company, including Section 203 of the Delaware General Corporation Law, could
have the effect of delaying, deferring or preventing a change of control of the
Company.
FORWARD-LOOKING STATEMENTS
This Prospectus contains certain forward-looking statements concerning the
Company's operations, economic performance and financial condition, including in
particular, the integration of acquisitions into the Company's existing
operations. Such statements are subject to various risks and uncertainties.
Actual results could differ materially from those currently anticipated due to a
number of factors, including those identified under "Risk Factors" and elsewhere
in this Prospectus.
10
<PAGE>
USE OF PROCEEDS
The net proceeds to be received by the Company from its sale of shares of
Common Stock in the Offering (after deduction of estimated underwriting
discounts and commissions and expenses payable by the Company in connection with
the Offering) are estimated to be approximately $92.5 million and are expected
to be used to repay substantially all of the Company's outstanding indebtedness.
This indebtedness, including accrued interest, was incurred to finance the
acquisitions of TRAK and Lull. The indebtedness to be repaid includes: (i)
approximately $67.4 million in original principal amount of term and revolving
loans payable to senior bank lenders which bear interest at floating rates that,
as of September 30, 1996, equaled a weighted-average effective rate of 10.0% per
annum, and have a final maturity date of August 16, 2003; (ii) $5.0 million in
principal amount of subordinated notes payable to an institutional lender which
bear interest at a rate of 15.0% per annum payable quarterly and have a maturity
date of February 28, 2004; and (iii) $2.0 million in principal amount of junior
subordinated notes payable to Investments L.P., and $14.0 million in principal
amount of junior subordinated notes payable to a commercial bank lender and
guaranteed by Investments L.P., all of which bear interest at a rate of 15.0%
per annum payable at maturity on February 28, 2004. The Company will incur a
prepayment fee estimated to equal approximately $1.0 million upon the repayment
of its $5.0 million in principal amount of its subordinated notes. The balance
of the net proceeds from the Offering, if any, will be used for general
corporate purposes. Pending such uses, proceeds may be invested in high quality,
short-term investments. In conjunction with the repayment of substantially all
of the Company's outstanding indebtedness, the Company also expects to
restructure its revolving credit facility with one or more bank lenders to meet
the Company's ongoing working capital and other liquidity needs and to finance
further growth, including growth through acquisitions.
In the event the Underwriters exercise the over-allotment option granted to
them by Investments L.P., the Company will not receive any of the proceeds from
the sale of such shares.
DIVIDEND POLICY
The terms of the Company's existing credit facilities prohibit the payment
of dividends. After the Offering, the Company anticipates substantially all
indebtedness outstanding under the credit facilities will be repaid. See "Use of
Proceeds." In anticipation of, and conditioned upon, the Offering, the Company
expects to obtain waivers or otherwise renegotiate the terms of its revolving
credit facility to permit the payment of dividends, including the initial
quarterly dividend described below. Subject to the revised terms of the
revolving credit facility and approval by its Board of Directors, the Company
intends to commence paying dividends after the Offering. It is expected that an
initial quarterly dividend of $0.01 per share will be paid. All dividend
payments are subject to the terms of the Company's credit facilities and to the
Company's earnings, financial condition and capital requirements at the time of
declaration and will be paid only if, as and to the extent declared by the
Company's Board of Directors.
11
<PAGE>
CAPITALIZATION
The following table sets forth the short-term debt and capitalization of the
Company at September 30, 1996, as adjusted to reflect the issuance and sale of
shares of Common Stock by the Company in the Offering (after deduction of
the estimated underwriting discounts and commissions and expenses of the
Offering) and the application of the net proceeds therefrom to the repayment of
indebtedness. See "Use of Proceeds" and "Selected Consolidated Financial Data."
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
----------------------
ACTUAL AS ADJUSTED
--------- -----------
<S> <C> <C>
(IN THOUSANDS, EXCEPT
SHARE DATA)
Short-term debt:
Term loans........................................................................... $ 3,875 $ --
--------- -----------
Total short-term debt............................................................ $ 3,875 $ --
--------- -----------
--------- -----------
Long-term debt (net of current portion):
Term loans........................................................................... $ 56,125 $ --
Revolving credit facility............................................................ 7,441 --
Other subordinated notes payable..................................................... 19,000 --
Subordinated notes payable to Investments L.P........................................ 2,000 --
--------- -----------
Total long-term debt............................................................. 84,566 --
--------- -----------
Stockholders' equity:
Preferred stock, $.01 par value; authorized: 1,500,000 shares; issued and
outstanding: none.................................................................. -- --
Common stock, $.01 par value; authorized: 100,000,000 shares; issued and outstanding:
10,000,000 shares ( as adjusted).............................................. 100 100
Additional paid-in capital........................................................... 6,253 98,753
Stockholder notes receivable......................................................... (352) (352)
Retained earnings.................................................................... 6,424 5,074(1)
--------- -----------
Total stockholders' equity....................................................... 12,425 103,575
--------- -----------
Total capitalization........................................................... $ 96,991 $ 103,575
--------- -----------
--------- -----------
</TABLE>
- ------------------------
(1) Reduction in retained earnings represents effect of an extraordinary charge
to income for the write-off of deferred finance charges and for prepayment
penalties incurred in connection with the repayment of debt, net of related
tax benefits, of $1,350.
12
<PAGE>
DILUTION
Per share amounts set forth below are calculated on the basis of 10,000,000
shares of Common Stock outstanding as of September 30, 1996. The net tangible
book deficit of the Company at September 30, 1996 was ($53.1 million), or
($5.31) per share. Without taking into account any changes in net tangible book
value after September 30, 1996, other than to give effect to (i) the sale of
shares of Common Stock to be sold by the Company in the Offering at an
assumed public offering price of $ per share (reduced for estimated
underwriting discounts and commissions and expenses of the Offering to be paid
by the Company) and (ii) the application of the net proceeds therefrom, the net
tangible book value of the Company as of would have been $
million, or $ per share. This represents an immediate increase in net
tangible book value of per share to the existing stockholders and an
immediate dilution in net tangible book value to investors in the Offering of
$ per share. The following table illustrates the per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.......... $
Net tangible book deficit per share before the
Offering(1).......................................... ($ 5.31)
Increase in net tangible book value per share
attributable to price paid by investors in the
Offering.............................................
---------
Net tangible book value per share after the Offering.....
---------
Dilution in net tangible book value per share to
investors in the Offering(2)........................... $
---------
---------
</TABLE>
- ------------------------
(1) Net tangible book value (deficit) per share is determined by dividing the
net tangible book value (deficit) of the Company by the number of
outstanding shares of Common Stock. Net tangible book value (deficit) is
calculated as total assets, less goodwill, patents, trademarks and other
intangibles (net of amortization) and total liabilities.
(2) Dilution is determined by subtracting net tangible book value (deficit) per
share after giving effect to the Offering from the initial public offering
price paid by investors in the Offering.
The following table summarizes as of September 30, 1996 (based on the
assumptions set forth above regarding the Offering), the number of shares of
Common Stock purchased from the Company, the total consideration paid to the
Company (equal, in the case of the existing stockholders, to the original
consideration for the shares of Common Stock held by them plus additional
contributions made by them in respect of the Common Stock), and the average
price per share paid by the existing stockholders and by the investors
purchasing shares of Common Stock in the Offering (based on an assumed initial
public offering price of $ per share). See "Security Ownership of
Certain Beneficial Owners and Management" and "Certain Transactions -- Related
Party Transactions."
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------------- ------------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------------ ----------- ------------ ----------- ---------------
<S> <C> <C> <C> <C> <C>
Existing stockholders............................... 10,000,000 % $ 6,353,000 % $ 0.64
New investors(1)....................................
------------ ----- ------------ ----- -----
Total......................................... 100.0% 100.0%
------------ ----- ------------ ----- -----
------------ ----- ------------ ----- -----
</TABLE>
- ------------------------
(1) Investments L.P. has granted to the Underwriters an option to purchase up to
shares to cover over-allotments, if any. If such option is exercised
in full, such sales by Investments L.P. will reduce the number of shares
held by existing stockholders to , or approximately % of the total
number of shares of Common Stock to be outstanding after the Offering and
will increase the number of shares to be held by new investors to , or
approximately % of the total number of shares of Common Stock to be
outstanding after the Offering. See "Security Ownership of Certain
Beneficial Owners and Management."
13
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data presented below for the fiscal year
ended September 30, 1994, the period October 1, 1994 through August 16, 1995,
the period August 17, 1995 through September 30, 1995 and the fiscal year ended
September 30, 1996 are derived from the consolidated financial statements of the
Company or TRAK, as the predecessor to the Company, included herein which have
been audited by Price Waterhouse LLP, independent accountants. The data for the
fiscal years ended September 30, 1992 and 1993 are derived from the audited
financial statements of TRAK which are not included herein. The data set forth
below should be read in conjunction with the reports of the independent
accountants, the Consolidated Financial Statements and related Notes to the
Consolidated Financial Statements of the Company and TRAK, and "Management's
Discussion and Analysis of Results of Operations and Financial Condition," all
included elsewhere herein.
<TABLE>
<CAPTION>
PREDECESSOR(1) COMPANY
---------------------------------------- ------------------------
FISCAL
YEAR
FISCAL YEARS ENDED ENDED
SEPT. 30, OCT. 1, 1994 AUG. 17, 1995 SEPT.
------------------------- THROUGH THROUGH 30,
1992 1993 1994 AUG. 16, 1995 SEPT. 30, 1995 1996
------- ------- ------- ------------- -------------- -------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.................................... $66,575 $50,068 $60,973 $75,401 $12,723 $124,861
Cost of sales................................ 54,150 39,183 47,208 57,707 9,787 92,688
------- ------- ------- ------------- ------- -------
Gross profit................................. 12,425 10,885 13,765 17,694 2,936 32,173
Selling, general and administrative
expenses................................... 8,819 8,290 9,502 10,903 1,670 16,311
------- ------- ------- ------------- ------- -------
Operating income............................. 3,606 2,595 4,263 6,791 1,266 15,862
Interest expense............................. 1,368 1,140 1,363 1,379 353 3,434
Other finance charges........................ 972 570 699 1,121 269 2,012
------- ------- ------- ------------- ------- -------
Income before income taxes................... 1,266 885 2,201 4,291 644 10,416
Provision for income taxes................... 633 368 876 1,762 262 4,060
------- ------- ------- ------------- ------- -------
Income before extraordinary credit and change
in accounting principles................... 633 517 1,325 2,529 382 6,356
Extraordinary item, net(2)................... 573 -- -- -- -- (314 )
Cumulative effect of change in accounting
principles................................. -- 199(3) -- (241)(4) -- --
------- ------- ------- ------------- ------- -------
Net income................................... $ 1,206 $ 716 $ 1,325 $ 2,288 $ 382 $6,042
------- ------- ------- ------------- ------- -------
------- ------- ------- ------------- ------- -------
Earnings per share:(5)(6)
Income before extraordinary item........... $ .04 $ .64
Extraordinary item......................... -- (.03 )
------- -------
Net income................................. $ .04 $ .61
------- -------
------- -------
</TABLE>
- ------------------------------
(FOOTNOTES ON FOLLOWING PAGE)
14
<PAGE>
<TABLE>
<CAPTION>
PREDECESSOR
-------------------------
SEPT. 30,
-------------------------
1992 1993 1994(7)
------- ------- -------
<S> <C> <C> <C>
(DOLLARS IN THOUSANDS)
BALANCE SHEET DATA:
Working capital (deficit)......................... $ 484 $ 1,111 $ 260
Total assets...................................... 22,852 24,706 28,651
Short-term debt................................... 5,125 8,608 9,436
Long-term debt.................................... 4,644 4,721 2,966
Mandatorily redeemable preferred stock............ 3,000 3,000 3,262
Stockholders' equity (deficit).................... 564 1,019 1,783
<CAPTION>
COMPANY
--------------------
SEPT. 30,
--------------------
1995(7) 1996
--------- --------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit)......................... $10,699 $13,393
Total assets...................................... 48,332 139,580
Short-term debt................................... 540 3,875
Long-term debt.................................... 23,781 84,566
Mandatorily redeemable preferred stock............ -- --
Stockholders' equity (deficit).................... 6,383 12,425
</TABLE>
- ---------------------
(1) The Company was organized in August 1995 for the purpose of acquiring TRAK,
the predecessor company.
(2) Amount in 1992 reflects benefits relating to net operating loss
carryforwards utilized for financial reporting purposes. Amount in 1996
reflects the write-off of deferred finance charges, net of $200 of income
tax benefits, in connection with the refinancing of debt.
(3) In October 1992, TRAK adopted Statement of Financial Accounting Standards,
No. 109, "Accounting for Income Taxes" (SFAS 109). The cumulative effect of
adopting SFAS 109 was to record a net tax benefit of $199.
(4) In October 1994, TRAK adopted Statement of Financial Accounting Standards,
No. 106, "Employer's Accounting for Postretirement Benefits Other Than
Pensions" (SFAS 106). The cumulative effect of adopting SFAS 106 was to
record a charge of $241, net of income tax benefits.
(5) Earnings per share is based on weighted-average shares outstanding of
10,000,000.
(6) Given the historical organization and capital structure of TRAK, as
predecessor to the Company, earnings per share information is not considered
meaningful for the predecessor.
(7) The changes in the balances as of September 30, 1995 versus September 30,
1994 primarily reflect the acquisition of TRAK by the Company on August 16,
1995 and the related financing thereof.
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
OVERVIEW
The Company was formed for the purpose of acquiring TRAK in August 1995.
Subsequent thereto, the Company completed the acquisition of the business of
Lull in August 1996. Set forth below is certain information with respect to the
TRAK and Lull acquisitions:
<TABLE>
<CAPTION>
DATE OF
ACQUISITION ACQUISITION BUSINESS YEAR FOUNDED
- --------------------------------------- ----------------- --------------------------------------- ---------------
<S> <C> <C> <C>
TRAK................................... August 1995 Manufacturer of telescopic material 1954
handlers and skid steer loaders
Lull................................... August 1996 Manufacturer of telescopic material 1956
handlers
</TABLE>
The Company is accounting for each of these acquisitions under the purchase
method of accounting, with the purchase price allocated to the estimated fair
market value of the assets acquired and the liabilities assumed. The excess of
the purchase price over the estimated fair value of the net assets acquired has
been allocated to goodwill, resulting in approximately $65.6 million of goodwill
at September 30, 1996. The amortization of such goodwill over 40 years will
result in an annual noncash charge to future operations of approximately $1.6
million. The basis of presentation relating to the following discussion of the
statements of operations of the Company and of TRAK ("Predecessor") does not
reflect such increased amortization expense, as the full-year effect of the
acquisition of TRAK and the acquisition of Lull are not reflected therein. See
"Management's Discussion and Analysis of Pro Forma Results of Operations and
Financial Condition" for further discussion.
The Company operates in a single industry segment. The Company's principal
products consist of material handling and construction equipment utilizing
engines of less than 130 horsepower. In addition to specific factors affecting
the Company's results of operations as discussed below, certain factors
typically recur from period to period. For example, cost of sales is driven to a
large extent by the cost of purchased components and raw materials, which
typically comprise 80% of the total cost of sales. Other factors affecting cost
of sales are production volume and the resultant leveraging of fixed overhead,
as well as productivity of the labor force. In addition, selling, general and
administrative ("SG&A") expenses include costs related to developing, marketing
and selling the Company's products, as well as infrastructure costs for
management and systems. While certain SG&A costs vary with the level of net
sales, many are relatively fixed over fairly wide ranges of unit volume. It is
the Company's strategy to invest in infrastructure costs, in many cases in
advance of increased sales.
The Company sells its products to independent equipment dealers for sale and
rental and to national rental centers for rental. The Company offers its
independent equipment dealers conventional floor-plan and rental fleet financing
to assist in the purchase of its products. Under such financing arrangements,
dealers borrow money from independent lenders on a secured basis for up to five
years. The Company assists with such financing by providing the independent
lenders additional guarantees or other financial support with respect to the
obligations of its dealers. In conjunction with these floor-plan arrangements,
the Company also provides certain financing benefits to its dealers to support
both retail and rental purchases. Such costs are accounted for as other finance
charges and approximated $2.0 million for the Company for the fiscal year ended
September 30, 1996 and $1.6 million for the Company and its Predecessor on a
combined basis for the twelve months ended September 30, 1995. See "--Capital
Resources and Liquidity."
16
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated the percentage of
net sales represented by certain items reflected in the Company's or its
Predecessor's statement of operations:
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
--------------------------------------- --------------------------
PERIOD FROM PERIOD FROM
FISCAL YEAR FISCAL YEAR 10/1/94 8/17/95 FISCAL YEAR
ENDED ENDED THROUGH THROUGH ENDED
9/30/93 9/30/94 8/16/95 9/30/95 9/30/96
----------- ----------- ------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Net sales................................................. 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales............................................. 78.3 77.4 76.5 76.9 74.2
----- ----- ----- ----- -----
Gross profit.............................................. 21.7 22.6 23.5 23.1 25.8
Selling, general and administrative expenses.............. 16.6 15.6 14.5 13.1 13.1
----- ----- ----- ----- -----
Operating income.......................................... 5.1 7.0 9.0 10.0 12.7
Interest expense.......................................... 2.3 2.3 1.8 2.8 2.8
Other finance charges..................................... 1.1 1.1 1.5 2.1 1.6
----- ----- ----- ----- -----
Income before income taxes................................ 1.7 3.6 5.7 5.1 8.3
Provision for income taxes................................ 0.7 1.4 2.3 2.1 3.3
----- ----- ----- ----- -----
Income from continuing operations......................... 1.0% 2.2% 3.4% 3.0% 5.0%
----- ----- ----- ----- -----
----- ----- ----- ----- -----
</TABLE>
FISCAL YEAR ENDED SEPTEMBER 30, 1996 (NEW BASIS) COMPARED TO PERIOD FROM OCTOBER
1, 1994 THROUGH AUGUST 16, 1995 (PREDECESSOR BASIS)
Net sales for the fiscal year ended September 30, 1996 were $124.9 million,
an increase of $49.5 million, or 65.6%, over net sales of $75.4 million for the
ten and one-half month period from October 1, 1994 through August 16, 1995
("Stub Period 1995"). Sales of telescopic material handlers for the fiscal year
ended September 30, 1996 were $94.1 million, an increase of $42.2 million, or
81.4%, over Stub Period 1995. Sales of skid steer loaders for the fiscal year
ended September 30, 1996 were $18.0 million, an increase of $3.0 million, or
19.9%, over Stub Period 1995. Sales of parts and attachments for the fiscal year
ended September 30, 1996 were $12.8 million, an increase of $4.2 million, or
49.7%, over Stub Period 1995. The improvement in sales of telescopic material
handlers reflected continued strong market demand for such products and the
effects of the August 15, 1996 acquisition of Lull, which resulted in $12.7
million of incremental sales in the fiscal year ended September 30, 1996. Of the
81.4% increase in net sales of telescopic material handlers, 67.6 percentage
points were attributable to an increase in the number of units sold, including
the incremental effects of Lull, and the remainder was primarily attributable to
a shift in the TRAK product mix towards larger size units and price increases.
The Company believes the increased demand for telescopic material handlers is
attributable to the expansion of rental fleets, the substitution of telescopic
material handlers for other construction and material handling equipment and
relatively strong conditions in the construction equipment industry. The
increase in sales of skid steer loaders reflects an increase in unit sales, a
shift in product mix towards larger size units and a price increase effective in
early 1996. Skid steer loader sales for the fiscal year ended September 30, 1996
were adversely affected by a temporary reduction in the rate of production and
shipments during early calendar 1996 while the Company incorporated corrective
product modifications and upgrades to its skid steer product line. Skid steer
loader sales for fiscal 1997 may be adversely affected by reduced sales in
Europe as a result of the acquisition of the Company's European distributor by
another manufacturer of skid steer loaders. See "Business--Marketing and
Distribution." Parts sales continued to increase in support of the increased
population of the Company's units operating in the field, and sales of
attachments increased primarily as a result of new equipment sales.
17
<PAGE>
Gross profit for the fiscal year ended September 30, 1996 was $32.2 million,
an increase of $14.5 million, or 81.8%, over gross profit of $17.7 million for
Stub Period 1995. The increase in gross profit primarily reflected the increase
in net sales discussed above. The gross margin increased to 25.8% for the fiscal
year ended September 30, 1996 from 23.5% for Stub Period 1995. The increase in
gross margin reflects the favorable change in product mix toward higher-margin
telescopic material handlers, improved production efficiencies (in part due to
expanded use of robotics and a new paint system), as well as economies
associated with higher production volumes. Also contributing to the gross margin
improvement were purchasing programs that achieved price reductions for certain
components and materials.
SG&A expenses for the fiscal year ended September 30, 1996 were $16.3
million, an increase of $5.4 million, or 49.6%, over SG&A expenses of $10.9
million for Stub Period 1995. The increase in SG&A expenses for the fiscal year
ended September 30, 1996 reflected expenses associated with higher net sales in
1996, the incremental effect of SG&A expenses incurred by Lull subsequent to its
August 15, 1996 acquisition by the Company, approximately $0.7 million in
management fees paid to an affiliate of the Company's majority stockholder,
increased product development expenditures primarily related to telescopic
material handlers, systems consulting fees and amortization of goodwill in 1996
as a result of the application of purchase accounting beginning in August 1995
in connection with the acquisition of TRAK and in August 1996 in connection with
the acquisition of Lull. SG&A expenses as a percentage of net sales decreased to
13.1% for the fiscal year ended September 30, 1996 from 14.5% for Stub Period
1995. The decrease in the SG&A percentage continued to reflect the relatively
fixed nature of certain SG&A expenses as well as the Company's efforts to
control general and administrative costs.
Operating income for the fiscal year ended September 30, 1996 was $15.9
million, an increase of $9.1 million, or 133.6%, over operating income of $6.8
million for Stub Period 1995. Operating margins increased to 12.7% for the
fiscal year ended September 30, 1996 from 9.0% for Stub Period 1995. The
improvements in operating income and margins reflected the factors described
above.
Interest expense for the fiscal year ended September 30, 1996 was $3.4
million, an increase of $2.0 million, or 149.0%, over interest expense of $1.4
million for Stub Period 1995. Interest expense as a percentage of net sales
increased to 2.8% for the fiscal year ended September 30, 1996 from 1.8% for
Stub Period 1995. The increase in interest expense primarily reflected the
effects of debt incurred to finance the August 1995 acquisition of TRAK and the
August 1996 acquisition of Lull, and higher weighted-average interest rates in
1996.
Other finance charges, which are primarily comprised of dealer-related
finance charges, for the fiscal year ended September 30, 1996 were $2.0 million,
an increase of $0.9 million, or 79.5%, over other finance charges of $1.1
million for Stub Period 1995. Other finance charges as a percentage of net sales
increased to 1.6% from 1.5%. The increase in other finance charges primarily
resulted from the greater utilization of the floor plan financing program due to
the increases in net sales as well as greater usage by dealers.
Provision for income taxes for the fiscal year ended September 30, 1996 was
$4.1 million compared to $1.8 million for Stub Period 1995. The increase
primarily reflected the increase in income before provision for income taxes of
$6.1 million between these periods. The Company's effective tax rate was 39.0%
for the fiscal year ended September 30, 1996 and 41.1% for Stub Period 1995.
Income from continuing operations for the fiscal year ended September 30,
1996 was $6.4 million, an increase of $3.9 million, or 151.3% over income from
continuing operations of $2.5 million for Stub Period 1995 as a result of the
factors described above.
In August 1996, in connection with the refinancing of debt, the Company
incurred an extraordinary charge of $0.3 million, net of $0.2 million of income
tax benefits, related to the write-off of deferred financing charges.
In October 1994, the Predecessor adopted SFAS 106, the cumulative effect of
which on net income was a charge of $0.4 million, less applicable income tax
benefits of $0.2 million.
18
<PAGE>
PERIOD FROM AUGUST 17, 1995 THROUGH SEPTEMBER 30, 1995 (NEW BASIS)
Due to the relatively brief period involved, comprehensive comparative data
has not been presented or discussed below with respect to the period from August
17, 1995 through September 30, 1995 (the period from the date of acquisition of
TRAK and the application of purchase accounting through the date of the
Company's fiscal year end). However, see "Management's Discussion and Analysis
of Pro Forma Results of Operations and Financial Condition" for a discussion of
pro forma comparative data including this period.
Net sales for the period from August 17, 1995 through September 30, 1995
(the "September 1995 Stub Period") were $12.7 million. Gross margin of 23.1% was
relatively consistent with gross margin for the period from October 1, 1994
through August 16, 1995. SG&A expenses as a percentage of net sales decreased to
13.1% as the Company continued to realize the benefits of its efforts to monitor
and control general and administrative costs. Other finance charges as a
percentage of net sales were 2.1%, reflecting the growth in the Company's
business and the dealer-related finance charges incurred by the Company. The
Company's effective tax rate for the September 1995 Stub Period was 40.7%.
PERIOD OCTOBER 1, 1994 THROUGH AUGUST 16, 1995 COMPARED TO FISCAL YEAR ENDED
SEPTEMBER 30, 1994
(PREDECESSOR BASIS)
Net sales for Stub Period 1995 were $75.4 million, an increase of $14.4
million, or 23.7%, over net sales of $61.0 million for the full fiscal year
ended September 30, 1994, primarily as a result of increased unit sales. Demand
for both telescopic material handlers and skid steer loaders was strong
throughout Stub Period 1995. Sales of telescopic material handlers in Stub
Period 1995 were $51.9 million, an increase of $6.6 million, or 14.5%, over the
fiscal year ended September 30, 1994 due primarily to continued strong market
conditions. Sales of skid steer loaders in Stub Period 1995 were $15.0 million,
an increase of $4.3 million, or 40.2%, over the fiscal year ended September 30,
1994 reflecting primarily the continued expansion of the distributor base. Sales
of parts and attachments in Stub Period 1995 were $8.5 million, an increase of
$3.6 million, or 71.4%, over the fiscal year ended September 30, 1994.
Attachments sales increased primarily due to the introduction of new attachment
products for telescopic material handlers and skid steer loaders and due to the
strong growth in sales of skid steer loaders which typically have higher
associated sales of attachments. Parts sales increased due to the increased
population of the Company's units operating in the field.
Gross profit for Stub Period 1995 was $17.7 million, an increase of $3.9
million, or 28.5%, over gross profit of $13.8 million for the fiscal year ended
September 30, 1994. This increase primarily reflected the increases in net sales
described above. The gross margin increased to 23.5% in Stub Period 1995 from
22.6% in the fiscal year ended September 30, 1994, primarily reflecting
manufacturing efficiencies and productivity gains as well as the continuing
increases in sales volume.
SG&A expenses for Stub Period 1995 were $10.9 million, an increase of $1.4
million, or 14.7%, over SG&A expenses of $9.5 million for the fiscal year ended
September 30, 1994. This increase primarily reflected expenses associated with
increased sales as well as costs associated with upgrading information systems.
SG&A expenses as a percentage of net sales decreased to 14.5% in Stub Period
1995 from 15.6% in the fiscal year ended September 30, 1994. The decrease in
this percentage reflected ongoing efforts to control general and administrative
costs as the business expanded.
Operating income for Stub Period 1995 was $6.8 million, an increase of $2.5
million, or 59.3%, over operating income of $4.3 million for the fiscal year
ended September 30, 1994. Operating margins increased to 9.0% in Stub Period
1995 from 7.0% in the fiscal year ended September 30, 1994. These improvements
reflected the factors described above.
19
<PAGE>
Interest expense for Stub Period 1995 was $1.4 million, unchanged from the
fiscal year ended September 30, 1994. Interest expense as a percentage of net
sales decreased to 1.8% in Stub Period 1995 from 2.3% in the fiscal year ended
September 30, 1994.
Other finance charges, which are primarily comprised of dealer-related
finance charges, for Stub Period 1995 were $1.1 million, an increase of $0.4
million, or 60.4%, over other finance charges of $0.7 million for the fiscal
year ended September 30, 1994. Other finance charges as a percentage of net
sales increased to 1.5% in Stub Period 1995 from 1.1% in the fiscal year ended
September 30, 1994. The increase in other finance charges primarily resulted
from the greater utilization of the floor plan financing program due to the
increases in sales as well as greater usage by dealers.
Provision for income taxes for Stub Period 1995 was $1.8 million, an
increase of $0.9 million, or 101.1%, over $0.9 million in the fiscal year ended
September 30, 1994. The increase in the provision for income taxes primarily
resulted from the increase in income before provision for taxes of $2.1 million
in Stub Period 1995 compared to the fiscal year ended September 30, 1994. The
effective income tax rate for Stub Period 1995 was 41.1% versus 39.8% for the
fiscal year ended September 30, 1994.
Income from continuing operations for Stub Period 1995 was $2.5 million, an
increase of $1.2 million, or 90.9%, over income from continuing operations of
$1.3 million for the fiscal year ended September 30, 1994. Income from
continuing operations as a percentage of net sales increased to 3.4% in Stub
Period 1995 compared to 2.2% in the fiscal year ended September 30, 1994. The
increase in income from continuing operations primarily reflected the factors
discussed above.
In October 1994, the Predecessor adopted SFAS 106, the cumulative effect of
which on net income was a charge of $0.4 million, less applicable income tax
benefits of $0.2 million.
CAPITAL RESOURCES AND LIQUIDITY
Net cash provided by operating activities of the Company was $8.6 million
for the fiscal year ended September 30, 1996. Working capital (all references to
working capital in this section exclude the effects of changes in cash and
current portions of long-term debt) decreased by $1.4 million in that period,
excluding the effects of the Lull acquisition. Cash provided by operating
activities of the Company for the fiscal year ended September 30, 1996 was used
primarily to finance capital expenditures of $1.4 million and for repayments of
existing indebtedness.
Net cash provided by operating activities of the Company was $0.3 million
for the September 1995 Stub Period. Working capital increased by $0.2 million in
that period. Cash provided by operating activities of the Company for the
September 1995 Stub Period was used to finance capital expenditures of $0.2
million and net payments of $0.1 million on existing indebtedness.
Net cash provided by operating activities of the Predecessor was $0.5
million for Stub Period 1995. Working capital increased by $2.4 million in Stub
Period 1995. Capital expenditures and other investments of $3.4 million and
preferred stock dividends of $0.2 million in Stub Period 1995 were primarily
financed with cash flows from operations and $3.1 million of additional
borrowings during that period.
Net cash provided by operating activities of the Predecessor was $3.0
million for the fiscal year ended September 30, 1994. Working capital decreased
by approximately $0.2 million in that period. Cash provided by operating
activities for the fiscal year ended September 30, 1994 was used primarily to
finance capital expenditures and other investments of $1.6 million, repay
existing indebtedness of $0.9 million and pay preferred stock dividends of $0.4
million.
The aggregate purchase price paid by the Company for TRAK in August 1995
totaled $30.4 million, including assumed liabilities of $17.8 million. The
acquisition was financed through a $6.0 million equity contribution by
Investments L.P. and management, a $2.0 million junior subordinated note payable
to Investments L.P., a $5.0 million subordinated note payable to an
institutional lender and $17.4 million
20
<PAGE>
under credit agreements with certain financial institutions. The purchase price
will increase, by up to $2.0 million plus interest, based upon the volume of
orders received by the Company under contracts with the Army. In the fiscal year
ended September 30, 1996, $0.4 million of such additional purchase price payable
to TRAK's former shareholders was recorded. All debt outstanding, preferred
stock, stock warrants and stock options of the Predecessor at August 16, 1995
were extinguished in connection with the merger transaction.
The aggregate purchase price paid by the Company for Lull in August 1996
totaled approximately $69.0 million, plus assumed liabilities of $14.6 million.
The acquisition was financed with additional borrowings under the Company's
amended credit facilities with lending institutions as described below,
including $14.0 million of subordinated debt guaranteed by Investments L.P.
On August 16, 1996, and in conjunction with the acquisition of Lull, the
Company refinanced its then existing credit facilities. The new Loan and
Security Agreement provides for a revolving line of credit facility and two term
loans. The new revolving line of credit facility provides for borrowings of up
to the lesser of $25,000 or a borrowing base calculated based on a percentage of
eligible receivables and inventories. Borrowings under this line of credit are
due August 16, 2003 and bear interest either at the bank's corporate base rate
plus 1.5% (9.75% at September 30, 1996) or LIBOR plus 2.75% (8.20% at September
30, 1996). The Company may elect to convert outstanding line of credit balances
between interest types at its discretion. Amounts outstanding under this new
revolving line of credit facility totaled $7.4 million at September 30, 1996. In
addition, the Company had $0.3 million in outstanding letters of credit under
the revolving line of credit facility. At September 30, 1996, the Company had
unused borrowing capacity of $17.6 million under this facility.
Borrowings under the term loan provided by the new Loan and Security
Agreement are due in quarterly installments ranging from $0.5 million to $3.1
million, commencing in October 1996 with a final payment in August 2003. The
term loan bears interest either at the bank's corporate base rate plus 1.75%
(10% at September 30, 1996) or LIBOR plus 3% (8.5% at September 30, 1996). The
Company may elect to convert outstanding term loan balances between interest
types at its discretion.
On August 16, 1996 and in conjunction with the acquisition of Lull, the
Company issued a $14.0 million junior subordinated note payable to a financial
institution with principal and interest, at 15% per annum, due February 28,
2004.
The Company has financing arrangements with certain third-party financing
institutions to facilitate dealer purchases of equipment under floor plan and
rental fleet arrangements. The aggregate outstanding loan balance on a
consolidated basis under these agreements was $67.9 million at September 30,
1996. Under TRAK's agreements, TRAK either provides a back-up guarantee of a
dealer's credit or an undertaking to repurchase equipment at a discounted price
at specified times or under specified circumstances. The aggregate outstanding
loan balance under the TRAK agreements was $57.0 million at September 30, 1996.
TRAK's actual exposure under these financing arrangements is significantly less
than the nominal amount outstanding. Aggregate losses under substantially all of
the Company's guarantee obligations to third party lenders with respect to its
TRAK dealers in each of calendar years 1996 and 1997 are limited to the greater
of $1.5 million and 5% of the loan balance at the previous calendar year end
(approximately $2.0 million for 1996).
Lull is also a party to a retail finance agreement with a financing company,
which provides Lull distributors with financing for equipment purchases from
Lull. The financing company has also agreed to provide financing for
distributors' purchases of Lull-produced equipment used as rental inventory by
the distributors. Such contracts are arranged on an installment basis with a
balloon payment by the distributor for the residual balance at the end of the
term (typically due 48 months from date of shipment). In the event the
distributor does not elect to pay or refinance the balloon payment, Lull has
agreed to pay the residual amount if requested by the financing company. A
secured interest in the equipment financed is maintained by the finance company.
Aggregate outstanding loan balances under this agreement as of
21
<PAGE>
September 30, 1996 were approximately $10.9 million. This contingency would be
reduced by proceeds from the sales of the equipment financed.
Included in accrued liabilities at September 30, 1996 is approximately $1.6
million related to a specific warranty obligation which Lull incurred on certain
manfactured boom units. Such warranty obligations are expected to be
substantially completed by September 30, 1997.
Based on its ability to generate funds from operations and the availability
of funds under its existing and anticipated facilities with financial
institutions, the Company believes that it will have sufficient funds available
to meet its currently anticipated operating and capital expenditure requirements
for its existing operations.
See also "Management's Discussion and Analysis of Pro Forma Results of
Operations and Financial Condition."
BACKLOG
The Company's backlog as of September 30, 1996 was $79.2 million, of which
$22.4 million relates to the Atlas contract. It is expected that substantially
all of the September 30, 1996 backlog will be shipped before September 30, 1997.
EFFECTS OF INFLATION
Inflation has not had a material effect on the Company's business or results
of operations.
NEW ACCOUNTING STANDARDS
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123") which addresses accounting for stock option, purchase
and award plans. SFAS 123 specifies that companies utilize either the "fair
value based method" or the "intrinsic value based method" for valuing stock
options granted. For purposes of valuing any grants for any such plans adopted
in the future, the Company would expect to utilize the "intrinsic value based
method." The Company does not expect that the adoption of SFAS 123 will have a
material effect on the Company's financial position or results of operations.
22
<PAGE>
PRO FORMA FINANCIAL INFORMATION
The following pro forma unaudited consolidated statement of operations of
Omniquip for the year ended September 30, 1996 was prepared to illustrate the
estimated effects of (i) the acquisition of the business of Lull (as described
further below) and the financing thereof and (ii) the Offering contemplated
hereby (assuming the over-allotment option is not exercised) and the application
of the estimated net proceeds to the Company therefrom to prepay outstanding
indebtedness (collectively, the "Pro Forma Transactions"), as if the Pro Forma
Transactions had occurred at the beginning of the year.
On August 15, 1996, the Company completed the acquisition of substantially
all of the assets of Lull in a transaction accounted for under the purchase
method of accounting. The aggregate purchase price approximated $69.0 million,
plus assumed liabilities of approximately $14.6 million, and was financed
primarily with borrowings under the Company's restructured credit agreements
with certain financial institutions, including $14.0 million of subordinated
debt guaranteed by Investments L.P.
The purchase price for Lull was assigned to the assets acquired and
liabilities assumed based on their estimated fair values at the acquisition
date. Based on such allocations, the aggregate purchase price exceeded the
estimated fair value of the net assets acquired (goodwill) by approximately
$55.8 million, which is being amortized over 40 years and will result in an
annual amortization charge of $1.4 million.
The pro forma unaudited consolidated statement of operations does not
purport to represent (i) the actual results of operations, had the Pro Forma
Transactions occurred on the dates assumed, or (ii) the results of operations to
be expected in the future. It does not reflect any estimate of cost savings or
other efficiencies that may be achieved from the integration of TRAK and Lull.
Management believes that the assumptions used in preparing the pro forma
unaudited consolidated statement of operations provide a reasonable basis for
presenting all of the significant effects of the Pro Forma Transactions, that
the pro forma adjustments give appropriate effect to those assumptions, and that
the pro forma adjustments are properly applied in the pro forma unaudited
consolidated statement of operations.
The pro forma unaudited consolidated statement of operations and
accompanying notes should be read in conjunction with the historical financial
statements of the Company and Lull, including the notes thereto, and the other
financial information pertaining to the Company and Lull, including the
information set forth under "Capitalization," "Selected Consolidated Financial
Data," "Management's Discussion and Analysis of Results of Operations and
Financial Condition," and "Management's Discussion and Analysis of Pro Forma
Results of Operations and Financial Condition," included elsewhere herein.
23
<PAGE>
PRO FORMA INCOME STATEMENT
FISCAL YEAR ENDED SEPTEMBER 30, 1996
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
OMNIQUIP/
OMNIQUIP LULL(1) LULL PRO FORMA LULL OFFERING PRO FORMA
AS REPORTED AS REPORTED ADJUSTMENTS PRO FORMA ADJUSTMENTS AS ADJUSTED
----------- ----------- -------------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net sales.............................. $ 124,861 $ 82,378 $ $ 207,239 $ $ 207,239
Cost of sales.......................... 92,688 65,879 158,567 158,567
----------- ----------- ---------- -----------
Gross profit........................... 32,173 16,499 48,672 48,672
Selling, general and administrative
expenses............................. 16,311 7,547 65(4) 23,923 650(7) 24,573
Boom warranty charge................... 2,881(3) 2,881 2,881
----------- ----------- ------- ---------- ----------- -----------
Operating income....................... 15,862 6,071 (65) 21,868 (650) 21,218
Interest expense....................... 3,434 403 6,511(5) 10,348 (10,348)(7) --
Other finance charges.................. 2,012 (680) 1,332 1,332
----------- ----------- ------- ---------- ----------- -----------
Income before income taxes............. 10,416 6,348 (6,576) 10,188 9,698 19,886
Provision for income taxes............. 4,060 (89)(6) 3,971 3,782(6) 7,753
----------- ----------- ------- ---------- ----------- -----------
Income from continuing operations...... $ 6,356 $ 6,348 $ (6,487) $ 6,217 $ 5,916 $ 12,133
----------- ----------- ------- ---------- ----------- -----------
----------- ----------- ------- ---------- ----------- -----------
Earnings per share from continuing
operations........................... $ .64(2) $ .62(2) $
</TABLE>
- ------------------------------
(1) The Lull data is comprised of unaudited financial information for the period
October 1, 1995 through August 15, 1996 (date of acquisition).
(2) Earnings per share is based on weighted-average shares of 10,000,000.
(3) In the quarter ended December 31, 1995, Lull determined that a specific
warranty obligation had been incurred on certain boom units manufactured and
recorded a pre-tax charge of $2,881.
(4) Operating expenses for the fiscal year ended September 30, 1996 have been
adjusted for the following:
<TABLE>
<S> <C>
Amortization of goodwill (over a 40-year period)........................... $ 1,221
Elimination of non-recurring stock compensation expense relating to a
discontinued plan of the predecessor..................................... (876)
Elimination of seller transaction costs.................................... (280)
---------
$ 65
---------
---------
</TABLE>
(5) Interest expense for the fiscal year ended September 30, 1996 has been
adjusted for the following:
<TABLE>
<S> <C>
Interest (weighted-average interest rate of 11.2%) on acquisition debt of
$69,000.................................................................. $ 6,779
Additional interest on existing Omniquip debt due to restructured credit
facilities............................................................... 135
Historical interest expense on debt not assumed............................ (403)
---------
$ 6,511
---------
---------
</TABLE>
(6) Amounts reflect the estimated income tax effects of pro forma adjustments
and the effect of reflecting a previously non-taxable Subchapter
S-corporation (Lull) as taxable in the period.
(7) Reductions in interest expense reflect the application of the net proceeds
from the Offering to repay substantially all of the outstanding debt of the
Company. The increase in selling, general and administrative expenses
reflects the Company's estimate of the additional costs associated with
being a public company. Adjustments do not reflect the effects of the
writeoff of deferred finance charges or prepayment penalties incurred
related to the debt to be repaid with the net proceeds of the Offering. Such
effects, net of related tax benefits, of approximately $1,350 will be
presented as an extraordinary item in the statement of income in the period
in which the debt repayment occurs.
24
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF PRO FORMA RESULTS OF OPERATIONS AND FINANCIAL CONDITION
OVERVIEW
As discussed below, the Company was formed for the purpose of acquiring TRAK
in August 1995. Subsequent thereto, the Company completed the acquisition of the
business of Lull in August 1996. Due to the effects of the acquisitions and the
related application of purchase accounting, historical consolidated financial
data of the Company, TRAK, its Predecessor, and Lull for periods through
September 30, 1996 are not comparable. As a result, the following discussion of
pro forma results of operations and financial condition is presented.
On August 16, 1995, the Company completed the acquisition of the issued and
outstanding stock of TRAK in a transaction accounted for under the purchase
method of accounting. The aggregate purchase price approximated $30.4 million,
including assumed liabilities of $17.8 million. The purchase price will be
adjusted, up to a maximum of $2.0 million, together with interest, for orders
received from the Army under contracts for the delivery of telescopic material
handlers for a period of five years from August 17, 1995. In the fiscal year
ended September 30, 1996, approximately $0.4 million of such additional purchase
price payable to TRAK's former shareholders was recorded. The acquisition was
financed through a $6.0 million equity contribution from management and
Investments L.P., a $2.0 million junior subordinated note payable to Investments
L.P., a $5.0 million subordinated note payable to an institutional lender and
approximately $17.4 million under credit agreements with certain financial
institutions.
On August 15, 1996, the Company completed the acquisition of substantially
all of the assets of Lull in a transaction accounted for under the purchase
method of accounting. The aggregate purchase price approximated $69.0 million,
plus assumed liabilities of approximately $14.6 million, and was financed
primarily with borrowings under the Company's restructured credit agreements
with certain financial institutions, including $14.0 million of subordinated
debt guaranteed by Investments L.P.
The purchase prices for TRAK and Lull were assigned to the assets acquired
and liabilities assumed based on their estimated fair values at the respective
acquisition dates. Based on such allocations, the aggregate purchase prices
exceeded the estimated fair value of the net assets acquired (goodwill) by
approximately $65.6 million, which is being amortized over 40 years and will
result in an annual amortization charge of $1.6 million.
The derivation of certain of the pro forma financial information discussed
below is described in the preceding section, "Pro Forma Financial Information."
For purposes of the following discussion, the pro forma unaudited consolidated
statements of operations of Omniquip for the years ended September 30, 1996,
1995 and 1994, respectively, were prepared to illustrate the estimated effects
of the acquisitions of TRAK and Lull and the financing thereof as if the
acquisitions had occurred at the beginning of each respective period.
The pro forma unaudited consolidated statement of operations data do not
purport to represent (i) the actual results of operations or financial condition
of the Company had the TRAK and Lull acquisitions occurred on the dates assumed,
or (ii) the results of operations or financial position to be expected in the
future. They do not reflect any estimate of cost savings or other efficiencies
that may be achieved from the integration of TRAK and Lull. The following
discussion of results of operations does not reflect the effects of the Offering
or the application of the net proceeds therefrom.
This section should be read in conjunction with the historical financial
statements of the Company, TRAK and Lull, including the notes thereto, and the
other financial information pertaining to the Company, TRAK and Lull, including
the information set forth under "Capitalization," "Selected Consolidated
Financial Data," "Management's Discussion and Analysis of Results of Operations
and Financial Condition" and "Pro Forma Financial Information," included
elsewhere herein.
25
<PAGE>
PRO FORMA RESULTS OF OPERATIONS
The following table sets forth for the periods indicated certain components
of the Company's pro forma income statement, before giving effect to the
Offering and the application of the net proceeds therefrom, and the percentage
of net sales represented by such components:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30,
----------------------------------------------------------------
1994 1995 1996
-------------------- -------------------- --------------------
$ % $ % $ %
--------- --------- --------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net sales........................................ $ 94,512 100.0 $ 154,690 100.0 $ 207,239 100.0
Cost of sales.................................... 74,444 78.8 120,532 77.9 158,567 76.5
--------- --------- --------- --------- --------- ---------
Gross profit..................................... 20,068 21.2 34,158 22.1 48,672 23.5
Selling, general and administrative expenses..... 13,766 14.5 19,770 12.7 24,573 11.9
Boom warranty charge............................. -- -- -- -- 2,881 1.4
--------- --------- --------- --------- --------- ---------
Operating income................................. $ 6,302 6.6 $ 14,388 9.4 $ 21,218 10.2
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
</TABLE>
The above table presents an abbreviated pro forma income statement of the
Company for the noted periods through the "Operating income" line item. A full
income statement, including the effects of interest expense, other finance
charges and income taxes, has not been presented due to the following factors:
(i) since both companies have experienced substantial, rapid growth in recent
years, application of the pro forma effects of the debt financing of the
respective purchase prices paid for TRAK and Lull to the fiscal year ended
September 30, 1994 and 1995, respectively, when the companies were substantially
smaller, would result in a disproportionately greater amount of pro forma
interest expense (i.e., if the Company had acquired TRAK and Lull in these prior
periods, the purchase price and related amount of debt financing would
presumably have been substantially lower); and (ii) upon consummation of the
Offering, the proceeds therefrom are expected to be used to repay substantially
all outstanding debt of the Company.
PRO FORMA FISCAL YEAR ENDED SEPTEMBER 30, 1996 COMPARED TO PRO FORMA FISCAL YEAR
ENDED
SEPTEMBER 30, 1995
Pro forma net sales for the fiscal year ended September 30, 1996 were $207.2
million, an increase of $52.5 million, or 34.0%, over pro forma net sales of
$154.7 million for the fiscal year ended September 30, 1995. Pro forma net sales
of telescopic material handlers for the fiscal year ended September 30, 1996
were $170.0 million, an increase of $48.5 million, or 40.0%, over the fiscal
year ended September 30, 1995. Pro forma net sales of skid steer loaders for the
fiscal year ended September 30, 1996 were $18.0 million, an increase of $0.8
million, or 4.7%, over the fiscal year ended September 30, 1995. Pro forma net
sales of parts and attachments for the fiscal year ended September 30, 1996 were
$19.2 million, an increase of $3.2 million, or 19.9%, over the fiscal year ended
September 30, 1995. The improvement in pro forma net sales of telescopic
material handlers reflected continued strong market demand for such products. Of
the 40.0% increase in pro forma net sales of telescopic material handlers, 33.4
percentage points were attributable to an increase in the number of units sold
and the remainder was primarily attributable to a shift in product mix towards
larger size units and to price increases. The Company believes the increased
demand for telescopic material handlers is attributable to the expansion of
rental fleets, the substitution of telescopic material handlers for other
construction equipment and relatively strong conditions in the construction
equipment industry. The increase in sales of skid steer loaders reflects a shift
in product mix towards larger size units and a price increase effective early in
calendar 1996, which more than offset a 3.4% decline in unit sales. Skid steer
loader sales for the fiscal year ended September 30, 1996 were adversely
impacted by a temporary reduction in the rate of production and shipments in
early calendar 1996 to incorporate corrective product modifications and
upgrades. Skid steer loader sales for fiscal 1997 may be adversely affected by
reduced sales in Europe resulting from the acquisition of the Company's European
distributor
26
<PAGE>
by a another manufacturer of skid steer loaders. See "Business--Marketing and
Distribution." Pro forma net sales of parts continued to increase in support of
the rapidly expanding numbers of units operating in the field and new products
introduced by Lull, and pro forma net sales of attachments increased primarily
as a result of new equipment sales.
Pro forma gross profit for the fiscal year ended September 30, 1996 was
$48.7 million, an increase of $14.5 million, or 42.5%, over pro forma gross
profit of $34.2 million for the fiscal year ended September 30, 1995. The
increase in pro forma gross profit primarily reflected the increase in net sales
discussed above. Pro forma gross margin increased to 23.5% for the fiscal year
ended September 30, 1996, from 22.1% for the fiscal year ended September 30,
1995. The increase in pro forma gross margin reflects the favorable change in
product mix toward higher margin telescopic material handlers, improved
production efficiencies (in part due to expanded use of robotics and a new paint
system at the Port Washington, Wisconsin facility), as well as economies
associated with higher production volumes. Also contributing to the pro forma
gross margin improvement were purchasing programs implemented by Omniquip that
achieved price reductions for certain components and materials.
Pro forma SG&A expenses for the fiscal year ended September 30, 1996 were
$24.6 million, an increase of $4.8 million, or 24.2%, over pro forma SG&A
expenses of $19.8 million for the fiscal year ended September 30, 1995. This
increase primarily resulted from expenses associated with the increase in pro
forma net sales in 1996. Pro forma SG&A expenses as a percentage of pro forma
net sales decreased to 11.9% for the fiscal year ended September 30, 1996 from
12.7% for the fiscal year ended September 30, 1995. The decrease in the pro
forma SG&A percentage continued to reflect the relatively fixed nature of
certain components of SG&A expenses as well as the companies' efforts to control
general and administrative costs.
In the quarter ended December 31, 1995, Lull determined that it would be
required to incur costs under specific warranty obligations for certain of its
manufactured boom units. As a result, Lull recorded a nonrecurring charge to
operations of $2.9 million with respect to estimated warranty costs expected to
be incurred for such boom units. At September 30, 1996, the remaining reserve
approximated $1.6 million.
Pro forma operating income for the fiscal year ended September 30, 1996 was
$21.2 million, an increase of $6.8 million, or 47.4%, over pro forma operating
income of $14.4 million for the fiscal year ended September 30, 1995. Excluding
the boom warranty charge described above, pro forma operating income was $24.1
million, an increase of $9.7 million, or 67.4%, over 1995. Pro forma operating
margins, excluding boom warranty costs, increased to 11.6% for the fiscal year
ended September 30, 1996 from 9.4% for the fiscal year ended September 30, 1995.
The improvements in pro forma operating income and margins reflected the factors
described above.
PRO FORMA FISCAL YEAR ENDED SEPTEMBER 30, 1995 COMPARED TO PRO FORMA FISCAL YEAR
ENDED SEPTEMBER 30, 1994
Pro forma net sales for the fiscal year ended September 30, 1995 were $154.7
million, an increase of $60.2 million, or 63.7%, over pro forma net sales of
$94.5 million for the fiscal year ended September 30, 1994. Pro forma net sales
of telescopic material handlers in the fiscal year ended September 30, 1995 were
$121.5 million, an increase of $46.4 million, or 61.8%, over the fiscal year
ended September 30, 1994. Pro forma net sales of skid steer loaders in the
fiscal year ended September 30, 1995 were $17.2 million, an increase of $6.5
million, or 60.5%, over the prior year. The remaining $7.3 million increase in
pro forma net sales related to parts and attachments, which continue to reflect
the positive effects of a greater number of units operating in the field. The
increase in the pro forma net sales of telescopic material handlers is comprised
almost entirely of an increase in units sold, which reflected increased demand
and the addition of new dealers to the distribution network. Lull resumed
full-time operations effective January 1, 1994 after purchasing the assets of a
predecessor business out of bankruptcy in November 1993, and after the
completion of a plant and equipment reorganization in November and December
1993. As a
27
<PAGE>
result, pro forma net sales for the fiscal year ended September 30, 1994
included only nine months of Lull net sales. The increase in pro forma sales of
skid steer loaders also reflected increases in units sold due to increased
demand and the continued expansion of the distributor base.
Pro forma gross profit for the fiscal year ended September 30, 1995 was
$34.2 million, an increase of $14.1 million, or 70.2%, over pro forma gross
profit of $20.1 million for the fiscal year ended September 30, 1994. The
increase in pro forma gross profit primarily reflected the increase in pro forma
net sales discussed above. The pro forma gross margin increased to 22.1% in the
fiscal year ended September 30, 1995 from 21.2% in the fiscal year ended
September 30, 1994, which primarily reflected manufacturing efficiencies and
productivity gains as well as continuing increases in sales volume. Pro forma
gross margins in the fiscal year ended September 30, 1994 were also somewhat
adversely impacted by certain start-up related inefficiencies at Lull as it
resumed full-time operations on January 1, 1994.
Pro forma SG&A expenses for the fiscal year ended September 30, 1995 were
$19.8 million, an increase of $6.0 million, or 43.6%, over pro forma SG&A
expenses of $13.8 million for the fiscal year ended September 30, 1994. The
increase primarily resulted from expenses associated with increases in pro forma
net sales in the fiscal year ended September 30, 1995. Pro forma SG&A expenses
as a percentage of pro forma net sales decreased to 12.7% in the fiscal year
ended September 30, 1995 from 14.5% in the fiscal year ended September 30, 1994.
The decrease in the pro forma SG&A percentage reflected the successful results
of the companies' efforts to control general and administrative costs as the
businesses expanded. The pro forma SG&A percentage for the fiscal year ended
September 30, 1994 was also adversely impacted by certain start-up related
inefficiencies at Lull as it resumed full-time operations on January 1, 1994.
Pro forma operating income for the fiscal year ended September 30, 1995 was
$14.4 million, an increase of $8.1 million, or 128.3%, over pro forma operating
income of $6.3 million for the fiscal year ended September 30, 1994. Pro forma
operating margins increased to 9.4% in the fiscal year ended September 30, 1995
from 6.6% in the fiscal year ended September 30, 1994. The improvements in pro
forma operating income and operating margins reflect the factors described
above.
SEASONALITY AND PRO FORMA QUARTERLY RESULTS
The following table sets forth for the periods indicated the components of
the Company's quarterly pro forma statement of results:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED 9/30/95 FISCAL YEAR ENDED 9/30/96
--------------------------------------- ---------------------------------------
GROSS OPERATING GROSS OPERATING
NET SALES PROFIT INCOME NET SALES PROFIT INCOME
--------- ----------- --------------- --------- ----------- ---------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
First quarter.............. $ 30,118 $ 6,150 $ 1,674 $ 43,968 $ 9,985 $ 1,281
Second quarter............. 39,221 8,792 4,103 53,425 12,647 6,780
Third quarter.............. 43,142 9,920 4,762 54,377 12,609 6,293
Fourth quarter............. 42,209 9,296 3,849 55,469 13,431 6,864
--------- ----------- ------- --------- ----------- -------
$ 154,690 $ 34,158 $ 14,388 $ 207,239 $ 48,672 $ 21,218
--------- ----------- ------- --------- ----------- -------
--------- ----------- ------- --------- ----------- -------
</TABLE>
The Company's quarterly net sales are affected to some extent by the
seasonality of construction activities in North America, which tend to be
influenced by climate conditions. The second and third fiscal quarters (January
through June) are generally the strongest periods for material handling and
construction equipment sales, while the first and fourth fiscal quarters
typically experience weaker demand for the Company's products. The effects of
this seasonality on the Company's net sales have been mitigated in recent
quarters by the overall growth in sales volume.
Operating income in the first quarter of fiscal 1996 was adversely affected
by a $2.9 million pre-tax charge to operations for the previously noted boom
warranty matter. In addition, net sales of the LULL
28
<PAGE>
brand of telescopic material handlers declined 7.4% from the second quarter to
the third quarter of fiscal 1996 primarily as a result of disruptions caused by
efforts relating to boom warranty work. See "Risk Factors--Product Recall" and
"Business--Product Liability and Product Recall."
PRO FORMA CAPITAL RESOURCES AND LIQUIDITY
As described above, the Company, TRAK and Lull have experienced significant
growth in the past few years in both net sales and operating income. On a pro
forma basis, net sales and operating income have increased from $94.5 million
and $6.3 million, respectively, for the fiscal year ended September 30, 1994 to
$207.2 million and $24.1 million (excluding the nonrecurring boom warranty
charge incurred by Lull), respectively, for the fiscal year ended September 30,
1996. Correspondingly, pro forma operating cash flows have increased throughout
the period, a substantial portion of which were utilized to finance the
businesses' expansion, particularly with respect to increases in inventories and
accounts receivable, and capital expenditures. On a pro forma basis, capital
expenditures were $3.4 million, $4.7 million and $4.0 million for the fiscal
years ended September 30, 1996, 1995 and 1994, respectively. Capital
expenditures for the Company or TRAK in these periods have included plant
expansion for skid steer loader manufacturing, computer systems, a new paint
line and welding robotics. Capital expenditures for Lull in these periods have
included expenditures associated with the expansion of assembly capacity and
purchase of related machinery in 1995 and acquisition of Lull's primary
manufacturing facility in St. Paul, Minnesota and related machinery in 1994.
As noted previously, the net proceeds of the Offering are expected to be
utilized to repay substantially all outstanding debt of the Company and for
general corporate purposes. At that time, the Company intends to refinance its
credit facilities. Such refinanced facilities are expected to include a
revolving credit line of up to $25.0 million, based on eligible receivables and
inventories, and an acquisition-related line of credit. At the time of repayment
of the Company's debt, the Company expects to incur an extraordinary charge of
approximately $1.4 million, net of tax benefits, related to the writeoff of
deferred finance charges and for prepayment penalties incurred.
For additional information regarding capital resources and liquidity, see
"Management's Discussion and Analysis of Results of Operations and Financial
Condition--Capital Resources and Liquidity."
29
<PAGE>
BUSINESS
GENERAL
The Company is the largest North American manufacturer of telescopic
material handlers, and also manufactures a line of skid steer loaders, as well
as a limited range of other material handling equipment. Omniquip's highly
versatile products are used in a wide variety of applications by commercial and
residential building contractors, as well as other construction, military,
industrial, municipal and agricultural end-users. The Company's telescopic
material handlers are marketed under the well recognized and highly regarded SKY
TRAK and LULL brand names. Based upon industry reports, the Company believes
that its North American market share of 1995 shipments of telescopic material
handlers was approximately 40%.
Telescopic material handlers are especially useful in rough terrain
environments and congested job sites, where their maneuverability and ability to
raise, extend and lower payloads provide significant advantages over more
traditional material handling equipment, such as cranes, straight-mast forklifts
and elevators. The Company's telescopic material handlers have a maximum lift
capacity of 5,000 pounds to 10,000 pounds and can position payloads from 28 feet
to 54 feet above the ground or 15 feet to 39 feet in front of the machine's
chassis. The versatility of these units allows users to lower overall costs by
substituting a single telescopic material handler for one or more other types of
material handling equipment, as well as for certain labor intensive material
handling tasks. The Company believes it manufactures the broadest product line
of telescopic material handlers in North America. Shipments of commercial
telescopic material handlers marketed under the SKY TRAK and LULL brand names
increased from approximately 950 units in calendar 1990 to approximately 2,250
units in 1995. In addition, Omniquip has been the principal supplier since 1988
of telescopic material handlers to the U.S. military, having delivered over
2,800 such units for use in loading and unloading containers and palletized
loads for ships, aircraft and trucks as well as for munitions handling and
reloading multiple rocket launchers. In 1995, the Company was awarded a contract
to supply the Army with a new generation of telescopic material handlers to
support the logistics requirements of the Rapid Deployment Forces. The Army has
estimated that its requirements under the contract could range up to a maximum
of 1,200 ATLAS vehicles, or a maximum contract value of $120 million. Shipments
under the contract are expected to begin in fiscal year 1997. The Company
believes that this contract will enhance its ability to pursue sales to other
branches of the United States armed forces and to foreign military agencies. See
"Risk Factors--ATLAS Contract."
The Company has experienced significant growth in sales of skid steer
loaders, principally marketed under the SCAT TRAK brand name, with shipments of
approximately 120 units in calendar 1990, increasing to shipments of
approximately 1,250 units in 1995. Skid steer loaders are compact and versatile
machines used to dig, lift and handle bulk materials such as dirt, construction
materials, waste, farm produce and snow. The compact size, maneuverability and
ease of transport make skid steer loaders well-suited for a wide variety of
applications. The Company's skid steer loaders can lift and position maximum
payloads of 1,300 pounds to 1,750 pounds to a maximum lift height of 112 inches
to 121 inches.
Omniquip sells and distributes its products commercially through
approximately 175 independent equipment dealers and approximately 75 rental
companies, including national rental fleets, located in the United States and
Canada. Internationally, Omniquip markets and distributes its products through a
variety of arrangements with dealers and distributors in 24 countries. To
facilitate the sale of its products, Omniquip offers its independent equipment
dealers floor plan and rental fleet financing assistance in connection with the
purchase of the Company's products. Such assistance consists of limited, back-up
financing guarantees and repurchase agreements which benefit dealers by
providing them the opportunity to obtain attractive financing terms on the
Company's products, which in turn allows dealers to stock more units for sale or
rental.
30
<PAGE>
INDUSTRY OVERVIEW
Omniquip competes principally in selected segments of the material handling
and construction equipment markets which utilize engines of less than 130
horsepower. With limited exceptions, competitors with significant market shares
in these segments typically are not large full-line construction equipment
manufacturers.
North American shipments of construction and allied equipment grew from
$30.7 billion in 1990 to $38.9 billion in 1995, representing a nominal compound
annual growth rate of 4.8%. According to industry estimates, shipments of
telescopic material handlers in North America grew from approximately 2,400
units in 1990 to approximately 5,500 units in 1995, representing a real compound
annual growth rate of 18.0%, and sales of skid steer loaders in North America
grew from approximately 27,000 units in 1990 to approximately 40,000 units in
1995, representing a real compound annual growth rate of 8.2%. The Company
believes higher growth rates for telescopic material handlers and skid steer
loaders are attributable to a number of factors, including the following:
PRODUCT VERSATILITY. Telescopic material handlers are more versatile
than other material handling equipment such as cranes, straight mast
forklifts and elevators. Telescopic material handlers can unload, carry and
place materials up to five stories high in rough terrain work environments,
eliminating the need for multiple pieces of more specialized equipment and
reducing the labor required to handle materials at the work-site. In
addition, using one or more of the approximately 40 Company-approved
attachments, Omniquip's telescopic material handlers can be used in numerous
applications. Attachments include forks and carriages, grapples, buckets,
augers, concrete hoppers and truss booms. The numerous applications provided
by such attachments used in conjunction with the Company's telescopic
material handlers allow customers to decrease aggregate equipment costs and
increase utilization of their material handling equipment. Similarly, the
compact size, maneuverability, user-friendly controls, large number of
available attachments, ease of transport and labor and time saving
capability of skid steer loaders make them useful for a wide variety of
applications. Unlike larger construction equipment, skid steer loaders can
be used at small work-sites and easily transported.
INCREASED PRODUCTIVITY. Telescopic material handlers and skid steer
loaders enable users to increase labor productivity and improve asset
utilization, compared to other methods using alternative equipment or direct
labor. Productivity enhancements include a reduction in the number of
indirect personnel required for material handling support to load, transport
and place building materials and to operate certain other types of
construction equipment. In addition, telescopic material handlers provide
significant support on construction sites for labor-saving advanced material
handling techniques, such as efficient movement of palletized loads and use
of pre-fabricated building components. The versatility and variety of
attachments available for telescopic material handlers results in higher
utilization of the equipment and permits end users to increase inventory
turnover at job sites more rapidly by taking loads directly off delivery
trucks and placing them where they will be used.
GROWTH OF EQUIPMENT RENTALS. The equipment rental industry serves a
wide variety of industrial, manufacturing, construction and governmental
markets. The equipment rental industry, including rental centers, national
rental fleets and independent dealers who offer material handling equipment
for either sale or rental, has grown significantly. A survey conducted for
an industry trade association estimates that construction equipment rental
revenues were approximately $7.5 billion in 1990 and increased to
approximately $12.9 billion in 1993. The author of the survey further
estimates that such revenues increased to $15.0 billion in 1995. Increased
availability of rental construction equipment has substantially broadened
the group of potential end-users for the Company's products. Equipment
rentals provide end-users having limited needs or resources with the ability
to conveniently and economically rent material handling equipment, as well
as necessary attachments. Rental companies
31
<PAGE>
can fulfill significant, but temporary, needs of large end-users,
supplementing capacity during peak activity periods. Additionally, rental
companies can rent a single telescopic material handler or skid steer loader
to small contractors for short-term projects.
GROWTH OF NON-CONSTRUCTION APPLICATIONS. Historically, the primary
market for telescopic material handlers has been the construction market
while the principal markets for skid steer loaders have been the
construction and agricultural markets. In recent years, however,
applications for both product lines have emerged in other markets. For
example, since 1988, telescopic material handlers have been used by the Army
for munitions handling and, more recently, general logistics purposes.
Telescopic material handlers have also experienced increasing acceptance in
the industrial and agricultural markets where they are used, among other
applications, to transport and position bulk materials. The versatility of
skid steer loaders, which has long resulted in a wide variety of specific
applications in the construction and agricultural markets, has increasingly
given rise to a range of applications in the municipal, landscape and
industrial markets. Examples of these applications include transport of
recycling materials, snow removal and lifting and transporting raw materials
and inventory.
BUSINESS STRATEGY
The Company's strategy is to grow primarily within selected segments of the
material handling and construction equipment markets (i) which utilize engines
of less than 130 horsepower, (ii) which are not typically dominated by full-line
construction equipment manufacturers, (iii) which are growing faster than the
construction equipment industry generally, and (iv) which typically utilize
local independent dealers for distribution rather than regional distributorships
primarily dedicated to products made by a single manufacturer.
Key elements of the Company's business strategy include:
- PROVIDING SUPERIOR PRODUCTS. The Company focuses on developing innovative,
high performance products with low life-cycle cost. By introducing unique
product features and enhancements, the Company believes that it increases
demand for the Company's products. Examples include the pioneering
introduction in 1994 of a SKY TRAK model capable of lifting and
positioning materials up to five stories above ground, the proprietary
sliding telescopic booms developed by Lull which permit higher precision,
horizontal maneuvering of materials at various lift heights, and the tilt-
forward cab design of SCAT TRAK skid steer loaders which simplifies
maintenance. In addition, during the fourth fiscal quarter of 1997, the
Company expects to introduce the first model of a new range of telescopic
material handlers designed to be used for expanded applications in North
America and to be competitive with products currently used in
international markets. These innovations, along with the Company's focus
on product quality and low life-cycle cost, are important to the
acceptance of the Company's products.
- PURSUING A MULTIPLE BRAND DISTRIBUTION STRATEGY. The Company intends to
pursue a multiple brand strategy, maintaining essentially distinct
nationwide distribution channels for its brand name products. This
strategy provides more complete geographic coverage of the market place
and gives the Company the ability to selectively expand the number of
dealers carrying its products. At the same time this strategy affords the
Company the opportunity to realize economies of scale in providing parts
supply, attachments, dealer finance, component purchasing and
manufacturing. Omniquip's multiple brand distribution strategy is designed
to appeal to customers' differing price, performance and support needs.
- ACQUIRING COMPLEMENTARY BUSINESSES. A key component of the Company's
growth strategy is the identification and completion of complementary
acquisitions. The Company's acquisition of Lull in August 1996 reflects
the Company's strategy of acquiring businesses which utilize complementary
distribution channels or which manufacture and market products which
complement the products
32
<PAGE>
currently manufactured and sold by the Company. The Company has identified
numerous potential acquisition candidates in the relatively fragmented
material handling and general construction equipment industry.
- ACHIEVING COST SAVINGS FROM THE INTEGRATION OF ACQUIRED OPERATIONS. The
Company believes that substantial cost savings can result from the
integration of acquired operations. For example, the Company anticipates
that it can increase purchasing efficiencies for components and materials,
eliminate duplicative overhead costs, streamline production processes and
achieve other economies of scale in areas such as parts supply, product
design and development and dealer finance.
- LEVERAGING ITS POSITION AS A LEADING NORTH AMERICAN MANUFACTURER TO EXPAND
ITS PENETRATION OF GLOBAL MARKETS. While the Company is the largest North
American manufacturer of telescopic material handlers, its sales of such
products outside North America are relatively modest. The Company is in
the process of "globalizing" its products to increase their appeal in
international markets. For example, its new MILLENNIA line of telescopic
material handlers, a prototype of which is currently in testing,
incorporates improved tool handling capabilities, noise suppression
systems and ergonomics. In addition, the Company intends to improve its
distribution networks outside North America in order to increase the
availability of its products in selected markets in Europe, Latin America
and the Far East.
PRODUCTS
The Company designs, manufactures and markets telescopic material handlers
as its principal product line, as well as a line of skid steer loaders. In
addition, the Company manufactures and distributes a variety of other material
handling equipment and attachments and offers parts and service with respect to
the products it sells.
PRO FORMA NET SALES BY PRODUCT CATEGORY(1)
(IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEAR
ENDED SEPT. 30,
---------------------------------
1994 1995 1996
--------- ---------- ----------
<S> <C> <C> <C>
Telescopic material handlers................................................... $ 75,072 $ 121,464 $ 170,006
Skid steer loaders............................................................. 10,699 17,174 17,984(3)
Other(2)....................................................................... 8,741 16,052 19,249
--------- ---------- ----------
Total...................................................................... $ 94,512 $ 154,690 $ 207,239
--------- ---------- ----------
--------- ---------- ----------
</TABLE>
- ------------------------
(1) The information in the foregoing table reflects the pro forma net sales by
product category of TRAK and Lull for the applicable periods as if the
acquisitions of these companies had occurred on October 1, 1993. See "Pro
Forma Financial Information."
(2) Includes parts and service and other miscellaneous equipment lines and
attachments.
(3) Skid steer loader sales during this period were adversely affected by a
temporary reduction in the rate of production and shipments during early
calendar year 1996 while the Company incorporated corrective product
modifications and upgrades into its skid steer product line.
TELESCOPIC MATERIAL HANDLERS
Telescopic material handlers are rough terrain vehicles used to transport,
lift and position materials between ground locations, between vehicles and to
elevations up to five stories in height. This equipment is typically utilized in
North America by residential and non-residential building contractors to handle
a wide range of building materials and components, including bricks, concrete
blocks, open-wall panels, roof trusses, lumber, drywall sheets, structural steel
and roofing materials. In addition, by using one or more of
33
<PAGE>
the approximately 40 Company-approved attachments, the Company's telescopic
material handlers can also be used in nontraditional, specialized applications,
such as steel building construction or pole and post hole drilling. Available
attachments include forks and carriages, grapples, buckets, augers, concrete
hoppers and truss booms. End-users for the Company's telescopic material
handlers currently include the construction, military, agricultural, landscaping
and industrial markets.
The Company currently manufactures 15 models of telescopic material handlers
marketed under the SKY TRAK and LULL brand names. These models have rated load
capacities of 5,000, 6,000, 8,000 and 10,000 pounds and possess the capacity to
place loads 28, 36, 37, 42 and 54 feet above the ground (and up to 62 feet above
the ground with an optional mast extension). Suggested list prices for these
products range from approximately $60,000 to approximately $115,000 per unit.
Four additional product offerings for use in the logging and pipe handling
industries are marketed under the DYNA LUGGER brand name, which have rated load
capacities up to 30,000 pounds and list prices of up to $275,000.
Each of the Company's two brands of telescopic handlers has unique
characteristics, which have contributed to strong competitive positions in the
market. The success of the SKY TRAK brand has been built on a reputation for
strong product performance and design innovation, with emphasis on design
simplicity and serviceability. The LULL brand has a long tradition associated
with its patented transfer carriage technology, which facilitates the precision
placement of palletized loads. LULL brand products enjoy a premium reputation
for their ease of operation, durability, and high resale value. The Company
believes the combination of its well-known SKY TRAK and LULL brand names, its
ability to offer the industry's broadest product line, and its dual-brand
distribution strategy, provide Omniquip with competitive advantages in the
telescopic material handler market.
Since 1988, Omniquip has been the primary supplier of telescopic material
handlers to the U.S. military. Such products are used by the U.S. military for a
variety of logistics requirements, including loading certain types of rocket
launchers, loading and unloading military equipment, and for a variety of other
military materials handling tasks. The U.S. military exclusively used the
Company's telescopic material handlers in Operation Desert Storm. Substantially
all of the Company's sales to the U.S. military were made prior to fiscal 1994
pursuant to previous contracts. In May 1995, the Company was awarded a
fixed-price government contract to serve as sole supplier to the Army of the
ATLAS, the latest generation of the military version of the Company's rough
terrain telescopic material handler. ATLAS is designed as an integral component
of the Army's logistics support strategy for its Rapid Deployment Forces. The
contract provides for the supply of the Army's requirements over a period of
four years. The Army has estimated that its requirements for ATLAS vehicles over
this period could range up to a maximum of 1,200 units, or a maximum contract
value of $120 million, although the Army is not obligated to purchase any
specified number of ATLAS vehicles. The contract also affords the Army an option
to order an additional 300 units above the 1,200 unit maximum. The Company has
completed testing five prototype vehicles and has received from the Army initial
orders for 224 vehicles, none of which can be shipped until the Army
satisfactorily completes further testing of a random sample of units. The
Company believes that the award of the ATLAS contract also will provide
additional opportunities to market the ATLAS product directly and through the
Army to other branches of the United States armed forces and to foreign military
agencies. See "Risk Factors--ATLAS Contract."
SKID STEER LOADERS
Skid steer loaders are compact and versatile material handling machines used
to dig, lift and transport bulk materials such as dirt, construction materials,
waste, farm produce and snow. Unlike tractors, the left and right side wheels on
skid steer loaders turn independently, thus giving rise to their name and unique
steering mechanism, which provides a small turning radius. The versatility of
skid steer loaders is enhanced by the wide range of available attachments which
permit their use in a range of specialized applications. Approximately 50
Company-approved attachments are currently available, including buckets, forks,
34
<PAGE>
hydraulic breakers, augers, trenchers, brooms, backhoes and cold planers. The
Company's skid steer loaders are commonly used by construction, agricultural,
industrial, landscaping and municipal end-users.
The Company currently manufactures a line of five skid steer loaders
marketed under the brand name SCAT TRAK. The SCAT TRAK product line is offered
in various models with rated load capacities ranging from 1,300 pounds to 1,750
pounds. Suggested list prices for these products range from approximately
$18,000 to $26,000 per unit. The Company's production plans include the
introduction of a new line of skid steer loaders with greater rated load
capacities.
The SCAT TRAK models have been designed to offer competitive performance
advantages, such as superior axle torque and breakout force, and on specialized
models, a high flow hydraulic system for powering larger capacity attachments.
In addition, the tilt-forward cab feature provides superior serviceability. The
Company believes that product advantages such as these, as well as a reputation
for continuing innovation, a growing distribution network and attractive
financing programs, have been important factors in the growth of SCAT TRAK
sales.
OTHER
The Company manufactures and markets a limited range of masonry tenders and
buggies and articulated forklifts and loaders, all of which are used primarily
in the masonry industry, and markets a limited line of straight-mast forklifts.
The Company also provides product service support to its distribution networks,
and produces and sells through its distributors a wide range of service parts to
maintain the operational performance of its end products throughout their useful
lives. The sale of service parts provides an important source of revenue and
profitability, as such sales are historically less sensitive to industry cycles
and typically generate higher gross margins than sales of original equipment.
The Company seeks to provide a high level of parts availability and timely
shipments of orders to maintain the production availability of its products on
customer job sites.
MARKETING AND DISTRIBUTION
The Company sells its products to independent equipment dealers for retail
sale and rental and to equipment rental companies, including independent rental
centers and national rental fleets, for rental. The Company intends to pursue a
multiple brand strategy, maintaining distinct nationwide distribution channels
for its principal brand name products. This strategy provides more complete
geographic coverage of the marketplace and greater flexibility in expanding the
Company's dealer network, while affording the Company the opportunity to realize
economies of scale in providing parts supply, service, attachments, dealer
finance, component purchasing and manufacturing. Both SKY TRAK and LULL brand
telescopic material handlers are marketed to a mix of independent retail
dealers, rental centers and national rental fleets, with SKY TRAK more heavily
oriented towards independent retail dealers and LULL more heavily focused on
rental centers and national accounts. The Company's SCAT TRAK brand of skid
steer loaders is sold primarily to regional rental centers and independent
retail dealers.
Traditionally, independent dealers have focused their efforts on resale of
products to end users. In recent years, however, many independent dealers have
built their own rental fleets to augment their sales activities. Rental centers
are equipment rental dealers who focus exclusively on renting units on a daily,
weekly or monthly basis to customers whose needs do not require purchase and
full-time utilization of units, and national rental fleets are large equipment
rental companies which, through company-owned stores or franchises, carry out
rental activities nationwide.
The Company employs a sales force of approximately 25 field sales managers
and representatives. The Company supports the sales, service and rental
activities of its dealers with product advertising, sales literature, product
training and major trade show participation. Omniquip seeks to promote end-user
acceptance and continued satisfactory performance of its products worldwide. The
Company pursues this
35
<PAGE>
goal in cooperation with a network of distributors who, when properly trained
and equipped, provide for the maintenance and repair of all Omniquip products
for end-users. The Company promotes a high level of customer support through
programs which closely monitor the performance of its products with rental
fleets and with end-users. This level of product support is maintained by a
variety of programs and procedures, including: a toll-free technical assistance
program; on-site service representative visits; factory training programs;
organization of product assessment teams facilitated by the service department;
and continuing interaction among distributors, end-users and major vendors for
failure analysis of products both in and out of warranty. Service support is
provided by Omniquip distributors.
International sales represented approximately 5.6% and 5.1% of pro forma
consolidated net sales for the fiscal years ended September 30, 1995 and 1996,
respectively. All of the Company's products are marketed internationally to
independent retail dealers, except that the LULL brand of telescopic material
handlers is marketed internationally primarily through an exclusive distribution
agreement with a single United States exporter. Historically, the SCAT TRAK
product line has been marketed in Europe exclusively through a private-label
agreement with Fermec Holdings Limited ("Fermec"), which agreement has expired.
Although the Company continues to market products through Fermec, as a result of
the recent acquisition of Fermec by Case Corporation (which manufactures skid
steer loaders), the Company anticipates that future sales in Europe through
Fermec may be adversely affected. For the fiscal year ended September 30, 1996,
sales through Fermec accounted for less than 2% of the Company's pro forma
consolidated net sales.
FINANCING
The Company offers its independent dealers conventional floor plan financing
and rental fleet financing to assist in the purchase of its products. Under
these financing arrangements, dealers borrow money from independent lenders on a
secured basis for up to five years. Where dealer financing is provided directly
by independent lenders, the Company assists the financing by providing the
independent lenders either a back-up guarantee of a dealer's credit or an
undertaking to repurchase used equipment at a discounted price to market at
specified times or under specified circumstances.
At September 30, 1996, approximately $67.9 million of Company-assisted floor
plan and rental fleet financing arrangements were outstanding on a consolidated
basis. The Company's actual exposure under these financing arrangements is
significantly less than the nominal amount outstanding. With respect to TRAK's
dealers, who accounted for approximately $57.0 million of the consolidated $67.9
million in dealer financing outstanding at September 30, 1996, substantially all
of the Company's guarantee obligations for each of calendar years 1996 and 1997,
as well as losses incurred in connection with repurchase obligations described
below, are limited to the greater of $1.5 million and 5% of the portfolio
outstanding at the previous calendar year end (approximately $2.0 million for
1996). During calendar year 1995 such guarantee obligations were limited to 25%
of the portfolio outstanding at December 31, 1994. To the extent that
independent lenders providing financing for TRAK's dealers do not have (or do
not exercise) direct recourse against the Company under back-up guarantees, the
Company is committed to perform its repurchase undertaking to re-acquire
equipment sold to a defaulting dealer at a purchase price equal to amounts due
the independent lender. The Company's actual exposure under these repurchase
arrangements is reduced by underlying equipment values as well as careful
portfolio management, by both the Company and its lenders. At the present time,
an active resale market exists for such equipment. With respect to Lull's
dealers, who accounted for approximately $10.9 million of the combined $67.9
million in dealer financing outstanding at September 30, 1996, the Company's
guarantee obligations are limited to circumstances where the independent lender
is unable to enforce its lien against financed equipment (for example, if a
dealer has fraudulently sold the equipment out of trust to a bona fide purchaser
for value) or where a dealer defaults on its final, balloon installment payment
(typically due 48 months from shipment). At September 30, 1996, past due
principal and interest as a percentage of the total portfolio on a pro forma
consolidated basis was less than one tenth of one percent. The Company's worst
loss experience in recent
36
<PAGE>
years occurred in 1991 when TRAK sustained expenses of approximately $1.0
million as a result of its floor plan financing guarantees. Most of this loss
occurred as the result of dealer fraud, and the Company has taken steps designed
to mitigate future losses through better documentation and collection
techniques.
FACILITIES
The Company's headquarters are located in Port Washington, Wisconsin, and
the Company maintains manufacturing facilities in North Dakota and Minnesota.
Set forth below is certain information with respect to the Company's
manufacturing facilities.
<TABLE>
<CAPTION>
SQUARE OWNED/
LOCATION FOOTAGE LEASED ACTIVITIES AND PRODUCTS
- ------------------------------------- ------------- --------- ---------------------------------------------------
<S> <C> <C> <C>
(APPROXIMATE)
Port Washington, Wisconsin........... 150,000 Owned Telescopic material handlers, skid steer loaders,
research and development
St. Paul, Minnesota.................. 100,000 Owned Telescopic material handlers, research and
development
Oakes, North Dakota.................. 30,000 Leased Masonry tenders and buggies, articulated forklifts
and loaders, telescopic material handler component
parts
</TABLE>
The initial term under the lease agreement for the Company's manufacturing
facility in Oakes, North Dakota expires on April 1, 2000 (the "Initial Term").
Upon expiration of the Initial Term, the Company has the option to purchase the
facility or to extend the lease for an additional 30 months (the "Extended
Term"). If the Company chooses to extend the lease term, lease payments during
the Extended Term will be applied to the purchase of the facility. In the event
of the expiration, cancellation or termination of the lease for the Oakes, North
Dakota property, the Company anticipates no significant difficulty in connection
with leasing alternate space at reasonable rates. The Company believes that its
production facilities and planned expansions will be adequate to meet
anticipated manufacturing volumes, including production of ATLAS telescopic
material handlers, during the fiscal year ending September 30, 1997.
MANUFACTURING AND RAW MATERIALS
The Company fabricates, welds, machines and assembles the chassis,
telescopic booms, attachments and many component parts for its telescopic
material handlers and skid steer loaders. During the past three years, the
Company has made significant capital investments in its Port Washington,
Wisconsin facility to implement robotic welding and a five-station wash,
automatic prime and finish coat paint system and to complete a 25,000 sq. ft.
plant addition. In its St. Paul, Minnesota facility, the Company has invested in
machining centers and numerically controlled plasma punching capability. These
investments, along with numerous projects to improve production flow and
material handling, have provided the foundation for continuing productivity
improvements.
In 1995, the Company completed registration under ISO 9001 of its Port
Washington, Wisconsin quality systems, becoming the first telescopic material
handler manufacturer and the second skid steer loader manufacturer in North
America to achieve this recognition. Registration under ISO 9001 represents the
achievement of an internationally recognized standard of quality systems
implementation and is important for competing in markets with ISO requirements,
such as Europe. In addition, the United States Department of Defense has
mandated the use of ISO 9001 for new procurements, including the ATLAS contract.
The Company expects to implement similar quality system standards in the
recently acquired St. Paul, Minnesota and Oakes, North Dakota facilities.
The Company intends to pursue opportunities to reduce costs of purchased
components through consolidation of vendor sources, improvements in
manufacturing methods and integration of operations.
37
<PAGE>
The Company also believes that opportunities exist to achieve manufacturing
economies in the production of telescopic material handlers by combining the
production of certain key components.
The principal raw materials and components used in the manufacturing of the
Company's products are steel, engines, transmissions, axles, hydraulic systems,
wheels and tires and cabs. The Company procures its raw materials and components
from multiple vendors, although in the case of particular models it typically
purchases certain components from a single vendor. Although alternative
suppliers are available for all raw materials and components, the Company could
experience delays in obtaining components meeting the requisite specifications
from alternative suppliers in the event a principal supplier was unable to
supply a particular component. In the case of the ATLAS product supplied to the
Army, the governing contract specifies precisely the source of key component
parts utilized in the manufacture of the ATLAS product. In the event of
unavailability of any of these key components, the Company could be precluded
from completing production of ATLAS products in a timely fashion unless the Army
agreed to substitution of an alternative component. The Company seeks to manage
the risk of unavailability of key components and raw materials by dealing only
with substantial, financially responsible vendors and managing closely its
material requirements as well as it vendor relationships. To date, the Company
has not experienced a material delay in obtaining a satisfactory supply of key
components from vendors.
PRODUCT DEVELOPMENT AND ENGINEERING
The Company maintains an active program of product development and
engineering activities designed to upgrade existing product lines and develop
new products. The Company employs approximately 30 employees with experience in
the design of products. For the fiscal years ended September 30, 1995 and 1996,
the Company spent approximately $1.3 million and $2.5 million, respectively, on
product development and engineering activities. Since 1987, the Company has
invested in the computer systems and training of its engineering staff to
support the increasing use of computer-aided design. To decrease product
development time, reduce product development cost, and improve the quality of
its new products, the Company has further invested to implement finite element
analysis capability, three-dimensional solid design, and concurrent engineering.
The Company's product development and engineering efforts during future periods
are expected to emphasize continued product line expansion, design modifications
to expand the worldwide acceptance of its products, and the expanded sourcing of
attachments to improve access to more end-user markets.
WARRANTY AND SERVICE
Omniquip products are warranted for design, workmanship and material
quality. Warranty lengths vary depending on competitive standards within
individual markets. In general, warranties tend to be for one year and cover all
parts and labor for non-maintenance repairs, provided the repair was not
necessitated by operator abuse. Optional extended warranties, for one to two
years beyond the base period, are available for purchase. Warranty work is
performed only by authorized Omniquip distributors. Distributors submit claims
for warranty reimbursement to the Company and are credited for the cost of
repairs so long as the repairs meet Omniquip's prescribed standards. Warranty
expense is accrued at the time of sale based on historical experience.
TRADEMARKS AND PATENTS
The Company owns and maintains U.S. trademark registrations for all of its
principal trademarks. Registrations for these trademarks are owned and
maintained in other countries where a significant volume of its products are
sold and registration is considered necessary to protect the Company's
proprietary rights.
The Company applies for and maintains patents in the United States and
elsewhere where the Company believes such patents are necessary to maintain the
Company's interest in its inventions.
38
<PAGE>
Currently, the Company possesses patents on two-stage and three-stage telescopic
booms which expire in 1997 and 2007, respectively. The Company believes these
patents provide it with a competitive advantage in selected markets, but does
not believe that the expiration of either of these patents would have a material
adverse effect upon its business or ability to compete.
COMPETITION
The markets for the Company's products are highly competitive. The principal
competitive factors include distribution, price, design features, performance,
product reliability and the availability of financing.
In the market for telescopic material handlers, the Company is the largest
North American manufacturer, with an estimated share of 1995 shipments of
telescopic material handlers of approximately 40%, and its principal competitors
include Gradall Industries, Inc. and JCB International Co., Ltd. Other
competitors in the North American market include Gehl Company, Pettibone
Corporation, Traverse Lift, Ingersoll-Rand Company, Manitou S.A. and Caterpillar
Inc. Competitors in this market outside the United States include JCB
International Co., Ltd., Manitou S.A., Merlo S.p.A., the Matbro division of
Powerscreen International PLC, Sanderson, FDI/Sambron and Caterpillar Inc. The
Company's principal competitors in the global skid steer loader market include
Ingersoll-Rand Company, which is believed by the Company to have a market share
in excess of 40%, Case Corporation and New Holland N.V., a subsidiary of Fiat
S.p.A., all of which the Company believes maintain a larger market share than
the Company.
Many of the Company's competitors are larger than the Company and possess
significantly greater financial, marketing and technical resources. There can be
no assurance that the Company will not experience significant competition in the
future from large global construction equipment manufacturers and other
competitors or that existing competitors will not take actions which could
adversely affect the Company's operating results.
ENVIRONMENTAL AND SAFETY REGULATION
Omniquip is subject to federal, state and local environmental laws and
regulations that impose limitations on the discharge of pollutants into the
environment and establish standards for the treatment, storage and disposal of
toxic and hazardous wastes. The Company is also subject to the federal
Occupational Safety and Health Act and similar state statutes. The Company
believes it is in material compliance with all applicable environmental laws and
regulations. The Company does not expect any material impact on future recurring
operating costs of compliance with currently enacted environmental regulations.
Under federal, state and local laws, including the federal Comprehensive
Environmental Response, Compensation, and Liability Act, a current owner or
operator of real property may be held liable for the costs of cleaning up
certain hazardous materials on the property. Similarly, persons who have
arranged for the disposal of hazardous materials on properties owned by third
parties may be held liable for cleanup costs for such properties. In each case,
liability may be imposed without regard to whether the person knew of or took
reasonable acts to prevent the contamination. Liability under such laws is often
joint and several, that is, any single liable person may be required to bear the
entire costs of the environmental cleanup. That person, however, may usually
seek contribution from other responsible persons, if there are any; and it is
typical for groups of responsible parties to apportion liability among
themselves.
The Company regularly conducts an environmental assessment consistent with
recognized standards of due diligence on properties and businesses which it
acquires. To date, these assessments have not identified contamination in
respect of acquired properties that would be reasonably likely to result in a
material adverse effect on the Company's business, results of operations or
financial condition. As a general rule, the Company intends to use such
assessments as part of the evaluation of proposed
39
<PAGE>
acquisitions. However, there can be no assurance that environmental assessments
have identified, or will in the future identify, all material liabilities
relating to the Company's properties and businesses, that any indemnification
agreements that can be negotiated will cover all potential liabilities, or that
changes in cleanup requirements or subsequent events at the Company's properties
or at off-site locations will not result in significant costs to the Company.
PRODUCT LIABILITY AND PRODUCT RECALL
Product liability claims are asserted against the Company from time to time
for various injuries alleged to have resulted from defects in the manufacture
and/or design of the Company's products. At September 16, 1996, there were four
such claims pending. The Company does not believe that the resolution of such
claims, either individually or in the aggregate, will have a material adverse
effect on the Company's results of operations or financial condition. Product
liability claims are covered by the Company's comprehensive general liability
insurance policies, subject to certain deductible amounts. The Company has
established reserves for such deductible amounts, which it believes to be
adequate based on its previous claims experience. However, there can be no
assurance that resolution of product liability claims in the future will not
have a material adverse effect on the Company.
From time to time, the Company discovers defects in product design for
existing products which require it to take steps to correct or retrofit, at the
Company's expense, previously sold products. Currently, the Company is in the
process of correcting a defect in its LULL brand of telescopic material
handlers. In 1995, prior to the acquisition by the Company, Lull established
reserves of approximately $2.9 million, on a pre-tax basis, for the cost of
retrofitting such telescopic material handlers. As of September 30, 1996, such
reserve was approximately $1.6 million. The Company also has established a
reserve of approximately $1.1 million as of September 30, 1996, on a pre-tax
basis, relating to corrective warranty work being undertaken with respect to two
models of skid steer loaders. There can be no assurance, however, that the
ultimate cost of correcting these defects will not exceed the amount of the
previously-established reserve.
EMPLOYEES
At September 30, 1996, the Company employed approximately 700 persons.
Approximately 250 employees at the Company's Port Washington, Wisconsin facility
are covered under a collective bargaining agreement with the International
Association of Machinists and Aerospace Workers, which expires in 1998. This is
the only collective bargaining agreement to which the Company is a party.
Substantially all of the approximately 265 employees at the Company's St. Paul,
Minnesota facility are employed pursuant to a lease arrangement with CBM
Industries, Inc., d/b/a RJ Associates. Under the terms of such agreement, RJ
Associates (which is not an affiliate of the Company) leases employees to the
Company and pays the employees' salaries and benefits. The Company in turn pays
RJ Associates a management fee and reimburses RJ Associates for the employees'
salaries and benefits. The agreement can be terminated by either party upon
short notice. The Company is obligated to hire the leased employees if the
Company terminates the arrangement but continues conducting the operations in
which the employees are engaged. The Company does not anticipate any material
disruption in its business in the event of a termination of this agreement. The
Company has not experienced any work stoppage during the past five years and
considers its relations with employees to be good.
LEGAL PROCEEDINGS
From time to time, the Company is the subject of legal proceedings,
including proceedings other than product liability claims involving employee
matters and similar claims. There are no such claims currently pending which the
Company believes to be material. The Company maintains comprehensive general
liability insurance which it believes to be adequate for the continued operation
of its business.
40
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information about each of the persons
who serve as the Company's directors and executive officers:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH COMPANY
- ------------------------------------------ --- ---------------------------------------------------------------
<S> <C> <C>
P. Enoch Stiff............................ 49 Director, President and Chief Executive Officer
Philip G. Franklin........................ 44 Vice President--Finance and Chief Financial Officer
James H. Hook............................. 51 Vice President--Business Services
Curtis J. Laetz........................... 52 Vice President--Marketing and Development
Donald E. Nickelson....................... 63 Director and Chairman of the Board
Peter S. Finley........................... 41 Director
Jeffrey L. Fox............................ 36 Director
Samuel A. Hamacher........................ 44 Director
Paul W. Jones............................. 48 Director Nominee*
Jerry E. Ritter........................... 61 Director Nominee*
Joseph F. Shaughnessy..................... 60 Director Nominee*
Robert L. Virgil.......................... 62 Director Nominee*
</TABLE>
- ------------------------
* These individuals have consented to become directors of the Company upon
consummation of the Offering.
Mr. Stiff has been the President and Chief Executive Officer of the Company
since September 1996 and the President and Chief Executive Officer of TRAK since
August 1989. He previously served as the Chief Operating Officer of TRAK from
November 1987 to August 1989. Prior to joining TRAK, Mr. Stiff served from 1985
to 1987 as Vice President and General Counsel of Atwood & Morrill Co., Inc. (a
manufacturer of specialty valves for the utility industry) and as a division
counsel with AMCA International (predecessor to United Dominion Industries,
Inc., a diversified manufacturer) from 1983 to 1985.
Mr. Franklin has been the Vice President--Finance and Chief Financial
Officer of the Company since August 1996 and of TRAK since July 1996. Prior to
joining the Company, Mr. Franklin served as Chief Financial Officer for Monarch
Marking Systems, Inc. (a manufacturer of bar code printers) from 1994 to 1996
and as Vice President--Finance for Hill Refrigeration, Inc. (a manufacturer of
refrigerated display cases) from 1990 to 1994. From 1979 to 1990, he served in
various financial and general management positions with FMC Corporation (a
manufacturer of chemicals and machinery).
Mr. Hook has been the Vice President--Business Services of the Company since
September 1996 and of TRAK since July 1996 and previously served as Vice
President--Finance and Chief Financial Officer of TRAK from September 1992 to
July 1996. Mr. Hook previously served as Senior Vice President-- Operations for
Case Credit Corporation from 1988 to 1992 and as Senior Vice President of First
Interstate Bancorp from 1982 to 1988.
Mr. Laetz has been the Vice President--Marketing and Development of the
Company since September 1996 and has held a similar position with TRAK since
1990. Prior to joining TRAK, Mr. Laetz served as Vice President--Corporate
Planning for A.O. Smith Corp. (a manufacturer of automotive frames, water
heaters and electric motors) from 1988 to 1989 and as President of Dynapac Mfg.
Co. (a compaction equipment manufacturer) from 1986 to 1987. He also previously
served as Senior Vice President--Business Development for VME N.V. (a
manufacturer of wheel loaders, off-highway trucks and excavators) from 1985 to
1986.
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<PAGE>
Mr. Nickelson has been the Vice Chairman of Harbour Group Industries, Inc.
("Harbour Group") in St. Louis, Missouri (an affiliate of Investments L.P.)
since 1991. From 1988 to 1990, he served as President of Paine Webber Group (an
investment banking and brokerage firm). Mr. Nickelson currently serves as a
trustee of Corporate Property Associates 10 and Corporate Property Associates
11, two public real estate investment trusts located in New York, New York, and
Mainstay Mutual Funds, as a director of DT Industries, Inc., Allied Healthcare
Products, Inc., Sedgwick James of New York and Sugen Inc. and as a director and
Chairman of the Board of Greenfield Industries, Inc. Mr. Nickelson was elected a
director of the Company in September 1996.
Mr. Finley has been Senior Vice President--Corporate Development of Harbour
Group since 1990. From 1985 to 1990, he served as Vice President of Harbour
Group. In addition, Mr. Finley holds various officer positions with operating
companies owned by affiliates of Harbour Group. Mr. Finley currently serves as a
director of Greenfield Industries, Inc. Mr. Finley was elected a director of the
Company in August 1995.
Mr. Fox has been Group President of Harbour Group, Ltd. (an affiliate of
Harbour Group which provides operations management services to manufacturing
affiliates of Harbour Group), since 1995. Mr. Fox previously served as President
of Engineered Polymers Corporation (a manufacturer of plastic material handling
products) from 1992 to 1995 and as President of Size Control Company (a
manufacturer of precision gauges) from 1989 to 1992, both of which were
affiliates of Harbour Group. Mr. Fox was elected a director of the Company in
September 1996.
Mr. Hamacher has been the Executive Vice President of Harbour Group, in
charge of corporate development since January 1992. From January 1988 to January
1992, he was the Vice President--Finance of Harbour Group Ltd. Mr. Hamacher
currently serves as a director of DT Industries, Inc. and Allied Healthcare
Products, Inc. Mr. Hamacher was elected a director of the Company in August
1995.
Mr. Jones has been the President of Greenfield Industries, Inc. since
November 1989 and its Chief Executive Officer since May 1993. He has served as a
director of Greenfield Industries, Inc. since 1993. From 1988 to 1989, he served
as General Manager--Manufacturing for General Electric Transportation Systems.
Prior to that time, Mr. Jones was the General Manager of General Electric
Drives, Motor and Generator Operations.
Mr. Shaughnessy has been President, Chief Executive Officer and Chairman of
the Board of BSI Constructors Inc., a general contractor and construction
manager, since 1989, a company which he co-founded in 1972 and for which he
served as President from 1974 to 1989. Mr. Shaughnessy is a member of the
advisory board of Boatmen's Bank, Central Region, in St. Louis, Mo.
Mr. Ritter has been a consultant to Anheuser-Busch Companies, Inc. and
Chairman of the Board of Clark Enterprises, Inc., the general partner of the
Kiel Center and the St. Louis Blues Hockey Club, since July 1996. From March
1990 to June 1996, he served as Vice President and Chief Financial and
Administrative Officer for Anheuser-Busch Companies, Inc. Mr. Ritter currently
serves as a director of Boatmen's Bancorp., Earthgrains Co. and Brown Group,
Inc.
Mr. Virgil has been a principal of Edward Jones & Co., a retail investment
firm, since September 1993. He previously served as a professor of accounting at
the John M. Olin School of Business, Washington University, St. Louis, Missouri
from 1964 to September 1993 and was dean of the School of Business from 1978 to
1993 and Executive Vice Chancellor of University Relations from 1992 to 1993. He
is currently a member of the Board of Directors of CPI Corporation and General
American Life Insurance Company.
The Board of Directors is divided into three classes serving staggered terms
as follows: Class I, comprised of three persons and serving for a term expiring
at the 1997 Annual Meeting of Stockholders; Class II, comprised of three persons
and serving for a term expiring at the 1998 Annual Meeting of Stockholders; and
Class III, comprised of three persons and serving for a term expiring at the
1999 Annual
42
<PAGE>
Meeting of Stockholders. Mr. Stiff and Mr. Nickelson have been elected as Class
I directors, Mr. Finley and Mr. Fox have been elected as Class II directors, and
Mr. Hamacher has been elected as a Class III director. Following the expiration
of the initial term, directors will serve for three year terms. The executive
officers serve at the pleasure of the Board of Directors of the Company.
After the Offering, the Company anticipates that it will form and maintain
an Executive Committee, an Audit Committee, a Compensation and Options Committee
and a Nominating Committee.
EXECUTIVE COMPENSATION
The following table summarizes the compensation paid or accrued by the
Company for services rendered during the fiscal year ended September 30, 1996 to
the Company's chief executive officer and other executive officers whose total
salary and bonus exceeded $100,000 for the fiscal year ended September 30, 1996
(the "Named Executive Officers"). None of the Company's other executive officers
had total salary and bonus in excess of $100,000 during the fiscal year ended
September 30, 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
---------------------------------------------------------------
OTHER ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY(1) BONUS(2) COMPENSATION(3) COMPENSATION(4)
- ------------------------------------- --------- --------- --------- --------------- -------------
<S> <C> <C> <C> <C> <C>
P. Enoch Stiff
President and Chief Executive
Officer............................ 1996 $ 174,736 $ 106,504 $ 5,361 $ 34,000
Curtis J. Laetz
Vice President--Marketing and
Development........................ 1996 104,606 39,647 4,301 12,688
James H. Hook
Vice President--Business
Services........................... 1996 105,123 39,834 3,130 12,750
</TABLE>
- ------------------------
(1) Includes amounts deferred under the 401(k) feature of the Company's
retirement income savings plan.
(2) Includes amounts deferred under a deferred compensation plan which permitted
the senior management and directors to defer 25% of their annual bonus for a
period of three years. This arrangement was terminated in fiscal 1996.
(3) Reflects amounts contributed by the Company under the Company's retirement
income savings plan.
(4) Reflects amounts accrued under the Company's deferred compensation plan
described in note 2 above.
LONG-TERM INCENTIVE PLAN. In 1996, the Company established the 1996
Long-Term Incentive Plan (the "Long-Term Incentive Plan") pursuant to which
equity incentives covering up to 1,600,000 shares of Common Stock may be awarded
to key officers and employees of the Company. The Long-Term Incentive Plan is
intended to promote the interests of the Company and its stockholders by
attracting and retaining exceptional executive personnel and other key employees
of the Company and its subsidiaries, motivating such employees by means of stock
options and performance-related incentives to achieve long-range performance
goals, and enabling such employees to participate in the long-term growth and
financial success of the Company. The Long-Term Inventive Plan will be
administered by the Board of Directors prior to the Offering and thereafter by a
committee (the "Incentive Plan Committee") of the Board of Directors consisting
solely of two or more directors who are "non-employee directors" as defined in
Rule 16b-3 under the Exchange Act and "outside directors" as defined in Section
162(m) of the Internal Revenue Code of 1986 (the "Code").
43
<PAGE>
The Long-Term Incentive Plan provides for the granting of four types of
awards on a stand alone, combination, or tandem basis, including incentive stock
options, nonqualified stock options, restricted shares and performance stock
awards. The Long-Term Incentive Plan provides for the award of up to a total of
1,600,000 shares of Common Stock, provided that the total number of shares with
respect to which awards are granted in any one year may not exceed 100,000
shares to any individual employee and 400,000 shares in the aggregate, and the
total number of shares with respect to which grants of restricted and
performance stock awards are made in any year shall not exceed 50,000 shares to
any individual employee and 100,000 shares in the aggregate (subject, in each
case, to adjustment in the event of a stock split, stock dividend, combination
or exchange of shares, exchange for other securities, reclassification,
reorganization, redesignation, merger, consolidation, recapitalization, or other
such change). As of the date hereof, approximately employees are expected
to be eligible to participate in the Long-Term Incentive Plan. No payments or
contributions are required to be made by the employees who participate in the
Long-Term Incentive Plan other than the payment of any purchase price upon the
exercise of a stock option.
A stock option award grants the right to buy a specified number of shares of
Common Stock at a fixed exercise price during a specified time, and subject to
such other terms and conditions, all as the Incentive Plan Committee may
determine; provided that the exercise price of any stock option shall not be
less than 100% of the fair market value of the Common Stock on the date of grant
of the award. An incentive stock option award granted pursuant to the Long-Term
Incentive Plan is an award in the form of a stock option which complies with the
requirements of Section 422 of the Code or any successor provision as it may be
amended from time to time. All other stock option awards granted under the
Long-Term Incentive Plan are nonqualified stock options. The exercise price of
all stock option awards under the Long-Term Incentive Plan is payable, at the
Incentive Plan Committee's discretion, in cash, in shares of already owned
Common Stock of the Company, in any combination of cash and shares, or any other
method deemed appropriate by the Incentive Plan Committee. Each option grant may
be exercised in whole, at any time, or in part, from time to time, after the
grant becomes exercisable.
A grant of restricted shares pursuant to the Long-Term Incentive Plan is a
transfer of shares of Common Stock, subject to such restrictions, if any, on
transfer or other incidents of ownership, for such periods of time as the
Incentive Plan Committee may determine. The certificates representing the
restricted shares will be held by the Company as escrow agent until the end of
the applicable period of restriction, during which time the shares may not be
sold, transferred, gifted, bequeathed, pledged, assigned or otherwise alienated
or hypothecated, voluntarily or involuntarily, except as otherwise provided in
the Long-Term Incentive Plan. However, during the period of restriction, the
recipient of restricted shares will be entitled to vote the restricted shares
and to retain cash dividends paid thereon.
A performance stock award is a right granted to an employee to receive
restricted shares that are not issued to the employee until after the
satisfaction of the performance goals during a performance period. A performance
stock award is earned by the employee over a time period determined by the
Incentive Plan Committee on the basis of performance goals established by the
Incentive Plan Committee at the time of grant. Performance goals established by
the Incentive Plan Committee may be based on one or more of the following
criteria: earnings or earnings growth; earnings per share; return on equity,
assets, capital employed or investment; revenues or revenue growth; gross
profit; gross margin; operating profit; operating margin; operating cash flow;
stock price appreciation and total shareholder return. If the performance goals
set by the Incentive Plan Committee are not met, no restricted shares will be
issued pursuant to the performance stock award. To be entitled to receive a
performance stock award, an employee must remain in the employment of the
Company or its subsidiaries through the end of the performance period, but the
Incentive Plan Committee may provide for exceptions to this requirement as it
deems equitable in its sole discretion.
In the event of a change of control of the Company, the following may, in
the sole discretion of the Incentive Plan Committee, occur with respect to the
employee awards outstanding: (i) automatic lapse of
44
<PAGE>
all restrictions and acceleration of any time periods relating to the exercise
or vesting of stock options and restricted shares so that awards may be
immediately exercised or vested; and automatic satisfaction of performance goals
on a pro rata basis with respect to the number of restricted shares issuable
pursuant to a performance stock award so that such pro rata or other portion of
such restricted shares may be immediately vested; (ii) upon exercise of a stock
option during the 60-day period after the date of a change of control, the
participant exercising the stock option may, in lieu of the receipt of Common
Stock, elect by written notice to the Company to receive a cash amount equal to
the excess of the aggregate value of the shares of Common Stock covered by the
stock option, over the aggregate exercise price of the stock option; (iii)
following a change of control, if a participant's employment terminates for any
reason other than retirement or death, any stock options held by the participant
may be exercised until the earlier of three months after the termination of
employment or the expiration date of such stock option; and (iv) all awards
become non-cancelable.
Except as otherwise provided in the Long-Term Incentive Plan, the Board may
at any time terminate, and, from time to time, amend or modify the Long-Term
Incentive Plan. Any such action of the Board may be taken without the approval
of the Company's stockholders, but only to the extent that such stockholder
approval is not required by applicable law or regulation. Furthermore, no
amendment, modification, or termination of the Long-Term Incentive Plan shall
adversely affect any awards already granted to a participant without his or her
consent. No amendment or modification of the Long-Term Incentive Plan may change
any performance goal, or increase the benefits payable for the achievement of a
performance goal, once established for a performance stock award.
Pursuant to the Long-Term Incentive Plan, Messrs. Stiff, Franklin, Hook and
Laetz have been granted non-qualified options to purchase , ,
and shares of Common Stock, respectively, at the initial public offering
price. Options to purchase an aggregate additional shares have also been
granted to other officers and key employees at the initial public offering
price. Options granted to employees on the date of the Company's initial public
offering may not be exercised for a period of two years from the date of grant
and thereafter become exercisable on a cumulative basis in 25% increments
beginning on the second anniversary of the date of grant and concluding on the
fifth anniversary of the date of grant.
Except as set forth above, no awards have been granted under the Long-Term
Incentive Plan as of the date of this Prospectus, and no outstanding options are
presently exercisable.
EXECUTIVE STOCK OPTION PLAN. In 1996, the Company adopted the 1996
Executive Stock Option Plan, a description of which is contained in this
Prospectus under the caption "Certain Transactions--Agreements with Existing
Stockholders."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Prior to the Offering, the Company has not had a compensation committee and,
since the acquisition of TRAK, executive compensation has been determined by the
entire Board of Directors, which until September 30, 1996 consisted of Samuel A.
Hamacher, James C. Janning and Peter S. Finley. Prior to the acquisition of
TRAK, executive compensation was determined by TRAK's then-constituted Board of
Directors. Prior to the Offering, Messrs. Hamacher, Janning and Finley also
served as Executive Vice President, President and Vice President, respectively,
of the Company. Messrs. Hamacher, Janning and Finley have not been compensated
for their positions as directors or officers. Following the Offering, the
Company anticipates forming a Compensation and Options Committee, which is not
expected to include any executive officers of the Company.
COMPENSATION OF DIRECTORS
Each director who is not an employee of the Company is entitled to receive
an annual fee of $10,000 and additional fees of $750 for attendance at each
meeting of the full Board of Directors and $500 for
45
<PAGE>
attendance at each meeting of a committee of the Board of Directors. Directors
are also entitled to reimbursement for their expenses incurred in attending
meetings.
DIRECTORS STOCK OPTION PLAN. The Company maintains a 1996 Directors
Non-Qualified Stock Option Plan (the "Directors Stock Option Plan") which
provides for the granting of options to the Company's directors who are not
employees of the Company, for up to an aggregate 250,000 shares of Common Stock.
The Directors Stock Option Plan by its express terms provides for the grant
of options thereunder to each eligible director serving on the date of the
Company's initial public offering with respect to 10,000 shares of Common Stock,
and an additional option to the Chairman of the Board of Directors (provided he
is an eligible director) with respect to 5,000 shares of Common Stock, in each
case at the initial public offering price. In addition, the Directors Stock
Option Plan provides for the grant of options to each person first becoming an
eligible director subsequent to the date of the Company's initial public
offering with respect to 10,000 shares of Common Stock and the grant of an
additional option to each person first becoming Chairman of the Board subsequent
to such date (provided such person is an eligible director) with respect to
5,000 shares of Common Stock.
Options granted or to be granted under the Directors Stock Option Plan may
not be exercised for a period of two years from the date of grant and thereafter
become exercisable on a cumulative basis in 25% increments beginning on the
second anniversary of the date of grant and concluding on the fifth anniversary
of the date of grant. All options granted under the Directors Stock Option Plan
expire ten years from the date of grant.
Options granted or to be granted under the Directors Stock Option Plan are
nontransferable, and the exercise price must be equal to the fair market value
of the Common Stock on the date of grant as determined by the Directors Stock
Option Committee. Upon exercise, the exercise price must be paid in full in cash
or such other consideration as the Directors Stock Option Committee may permit.
Pursuant to the Directors Stock Option Plan, Messrs. Nickelson, Fox, Finley
and Hamacher will be granted options to purchase 15,000 shares, 10,000 shares,
10,000 shares and 10,000 shares of Common Stock, respectively, at the initial
public offering price and Messrs. Jones, Virgil, Shaughnessy and Ritter each
will be granted options to purchase 10,000 shares of Common Stock at the fair
market value per share on the date each is elected a director. Except as set
forth above, no options have been granted under the Directors Stock Option Plan,
and no outstanding options are presently exercisable.
INDEMNIFICATION AND LIMITATION OF LIABILITY
The Company's Restated Certificate of Incorporation limits the liability of
directors for monetary damages, and the Company's By-Laws provide for the
indemnification of the Company's directors and officers, to the full extent
permitted by the Delaware General Corporation Law. See "Description of Capital
Stock--Certain Certificate of Incorporation and By-Law Provisions."
46
<PAGE>
SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of October 31, 1996 and as adjusted to
reflect the Offering, certain information concerning the beneficial ownership of
Common Stock by (a) each stockholder who is known by the Company to own
beneficially in excess of 5% of the outstanding Common Stock, (b) each director
and director nominee of the Company, (c) each of the Named Executive Officers,
and (d) all directors and executive officers as a group. See "Underwriters."
Except as otherwise indicated, all persons listed below have sole voting and
investment power with respect to their shares of Common Stock. The Common Stock
constitutes the only class of equity securities outstanding. See "Description of
Capital Stock."
<TABLE>
<CAPTION>
OWNERSHIP PRIOR TO OWNERSHIP AFTER
THE OFFERING THE OFFERING
------------------------ ------------------------
SHARES OF SHARES OF
COMMON COMMON
NAME OF BENEFICIAL OWNER STOCK PERCENT STOCK PERCENT
- -------------------------------------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Investments L.P.(1)............................... 8,200,000 82.0% 8,200,000
Uniquip L.P.(2)................................... 1,000,000 10.0 1,000,000
P. Enoch Stiff.................................... 500,000 5.0 500,000
James H. Hook..................................... 75,000 * 75,000 *
Curtis J. Laetz................................... 75,000 * 75,000 *
Donald E. Nickelson(3)............................ -- -- -- --
Peter S. Finley(3)................................ -- -- -- --
Jeffrey L. Fox(3)................................. -- -- -- --
Samuel A. Hamacher(3)............................. -- -- -- --
Paul W. Jones..................................... -- -- -- --
Jerry E. Ritter................................... -- -- -- --
Joseph F. Shaughnessy............................. -- -- -- --
Robert L. Virgil.................................. -- -- -- --
----------- --- ----------- ---
Total............................................. 9,850,000 98.5% 9,850,000
----------- --- ----------- ---
----------- --- ----------- ---
All directors and executive officers as a group (8
persons)(3)..................................... 650,000 6.5% 650,000
----------- --- ----------- ---
----------- --- ----------- ---
</TABLE>
- ------------------------
* Less than 1.0%.
(1) Assumes no exercise of the over-allotment option. If the over-allotment
option is exercised in full, the total shares of Common Stock to be sold by
Investments L.P. would be shares, and its ownership after the Offering
would be shares of Common Stock, or % of the outstanding Common Stock.
Investments L.P. is a Delaware limited partnership whose address is 7701
Forsyth Boulevard, St. Louis, Missouri 63105. Its general partner is Harbour
Group III Management Co., L.P., a Delaware limited partnership whose general
partner is HGM III Co., a Delaware corporation controlled by Sam Fox.
Investments L.P. was organized to make subordinated debt and equity
investments in certain operating companies controlled by Harbour Group
Industries, Inc. and its affiliates. Its limited partners consist mainly of
institutional investors.
(2) Uniquip L.P. is a Delaware limited partnership whose address is 7701 Forsyth
Boulevard, St. Louis, Missouri 63105. Its general partner is Harbour Group
Industries, Inc., a Delaware corporation controlled by Sam Fox.
(3) Excludes shares owned by Uniquip L.P. and Investments L.P. Each of these
individuals is an officer and/or director of affiliates of Uniquip L.P.
and/or Investments L.P. and each such person disclaims beneficial ownership
of shares beneficially owned by Uniquip L.P. and Investments L.P.
47
<PAGE>
CERTAIN TRANSACTIONS
RELATED PARTY TRANSACTIONS
On August 16, 1995, Investments L.P., Uniquip L.P. and P. Enoch Stiff
purchased 8,200,000 shares, 1,000,000 shares and 300,000 shares, respectively,
of the Company's Common Stock for approximately $0.64 per share payable
$5,209,411.76 in cash, $600,000 in cash and $35,294.12 by a promissory note and
$190,588.24 in cash, respectively. On September 20, 1995, Mr. Stiff purchased an
additional 200,000 shares of the Company's Common Stock for approximately $0.64
per share payable $200 in cash and $126,859 by a promissory note. On September
20, 1995, James H. Hook, Curtis J. Laetz and two other officers of the Company
each purchased 75,000 shares of the Company's Common Stock for approximately
$0.64 per share payable $75 in cash and $47,572 by a promissory note.
Investments L.P. and Uniquip L.P., the beneficial owners of approximately %
of the Common Stock outstanding after the Offering, are under the common control
of Sam Fox. See "Security Ownership of Certain Beneficial Owners and
Management."
In connection with the acquisitions of TRAK and Lull, the Company incurred
junior subordinated indebtedness evidenced by subordinated notes (the
"Subordinated Notes") in the principal amounts of $2,000,000 and $14,000,000,
respectively. Investments L.P. holds the Subordinated Note in the principal
amount of $2,000,000 and has guaranteed the Company's obligations under the
Subordinated Note in the principal amount of $14,000,000 (the "Second
Subordinated Note"). Further, Investments L.P. has unconditionally agreed with
the existing holder of the Second Subordinated Note to purchase such obligation,
for a purchase price equal to the outstanding principal balance and all accrued
interest, on the earlier to occur of February 16, 1997 or the completion of the
Offering or other distribution of the Company's equity securities. Each of the
Subordinated Notes bears interest at the rate of 15.0% per annum and matures on
February 28, 2004. Each of the Subordinated Notes is payable only at maturity
and is subordinated to all senior debt of the Company and is subject to the
terms and provisions of a Subordinated Note Agreement (the "Subordinated Note
Agreements") between the Company and the holder of the Subordinated Note. The
Subordinated Note Agreements permit the prepayment of all or a portion of the
amounts outstanding thereunder. The Company expects to repay, without penalty or
premium, the entire balance of indebtedness outstanding under the Subordinated
Notes from the net proceeds received by the Company from its sale of shares of
Common Stock in the Offering. See "Use of Proceeds."
The Company engages Harbour Group Ltd. ("HGL") and Harbour Group, affiliates
of Investments L.P. and Uniquip L.P., to provide certain management consulting
services to the Company for which payments totaling $60,000 and $668,000 were
made by the Company to HGL for the fiscal years ended September 30, 1995 and
1996, respectively. In connection with the acquisitions of TRAK and Lull, the
Company paid fees to Harbour Group and affiliates of approximately $674,000 in
the aggregate for investment banking, corporate development and other services.
The Company has entered into an Operations Consulting and Advisory Services
Agreement (the "HGL Services Agreement") with HGL, pursuant to which HGL will
continue to provide management consulting services to the Company for a one year
term from September 30, 1996, which term will automatically renew from year to
year until terminated by the Company or HGL upon 30 days' notice. Under the HGL
Services Agreement, the Company will compensate HGL for management consulting
services at HGL's approximate costs incurred in performing such services. The
Company has also entered into a Corporate Development Consulting and Advisory
Services Agreement (the "HGI Services Agreement") with Harbour Group, an
affiliate of HGL, pursuant to which Harbour Group will continue to provide
corporate development services, previously provided by Harbour Group, to the
Company for a one year term from September 30, 1996, which term will
automatically renew from year to year until terminated by the Company or Harbour
Group upon 30 day's notice. Under the HGI Services Agreement, the Company will
compensate Harbour Group for corporate development services by paying an annual
fee equal to the greater of $100,000 or Harbour Group's approximate costs
incurred in performing such services, plus a transaction fee equal to an amount
48
<PAGE>
which ranges from two and one half percent of the first $1.0 million of the
purchase price to one half of one percent of the portion of the Purchase Price
in excess of $4.0 million for each completed acquisition or disposition by the
Company during the term of the HGI Services Agreement, subject to a minimum fee
per transaction of $125,000.
The Company is included in an insurance program maintained by HGL providing
workers compensation and employer's liability, general liability and automobile
liability and physical damage insurance coverage for all companies controlled by
Harbour Group or its affiliates. The insurance program includes a retrospective
rating plan and automatic premium adjustment plan, which provide for
calculations of the premiums for the insurance program based on the application
of rating formulae to actual incurred losses and reserves for future losses
which require adjustment of the premiums retrospectively. The Company has
entered into an Insurance Agreement with HGL pursuant to which it has agreed to
reimburse HGL, and HGL has agreed to reimburse the Company, for their respective
pro rata shares of any retrospective premium adjustment. The terms of the
Insurance Agreement provide that the Company will no longer be eligible for
inclusion in the Harbour Group insurance plan if affiliates of HGL own less than
50% of the outstanding Common Stock. Accordingly, the Company anticipates
entering into alternative insurance arrangements which will be effective
immediately following the Offering.
The Company believes that each of the related party transactions described
herein was on terms no less favorable to the Company than could have been
obtained from unaffiliated third parties.
AGREEMENTS WITH EXISTING STOCKHOLDERS
As described above, Mr. Stiff, on August 16, 1995, acquired 300,000 shares
of Common Stock for $190,588.24 in cash, a price determined by the Board of
Directors of the Company. In connection with the purchase of such shares of
Common Stock, Mr. Stiff entered into an Investment Agreement with Investments
L.P. and the Company (the "Investment Agreement") providing for, among other
things, restrictions on transfer of such shares, registration rights with
respect to such shares, the grant of an option to Investments L.P. to purchase
such shares in certain circumstances, a right of first refusal for Investments
L.P. in the event of certain offers to purchase such shares, "tag-along" and
"drag-along" rights in the event of certain sales of the Common Stock by
Investments L.P., a right to acquire additional securities of the Company in
order for Mr. Stiff to maintain his percentage of equity interest in the Company
under certain circumstances and a right to make additional investments in the
Company in accordance with his pro rata share of the issued Common Stock in
certain circumstances. In connection with the Investment Agreement, Mr. Stiff
entered into a Participation Agreement with Investments L.P., pursuant to which
Mr. Stiff purchased a 3% interest in $2.0 million in principal amount of junior
subordinated notes issued by TRAK and made payable to Investments L.P.
Also as described above, Mr. Stiff, together with Messrs. Hook, Laetz and
two other officers of the Company on September 20, 1995, acquired Common Stock
at prices determined by the Board of Directors of the Company, and the purchase
price therefor was paid partly in cash and partly by delivery of promissory
notes payable to the Company. The payment obligations of the stockholders under
their respective promissory notes are secured by all or some portion of the
purchased shares pursuant to stock pledge agreements entered into by each
stockholder and the Company. Such notes have a ten-year maturity, bear interest
at a fixed rate of interest of 6.56% per annum and are payable interest only
annually, with one principal payment at maturity. In connection with such
promissory notes, the Company agreed to pay annual bonuses to such stockholders
in amounts equal to the annual interest payments on the notes plus all federal
and state income taxes applicable to such payments. In connection with the
purchase of his shares of the Common Stock, each such stockholder entered into
an agreement with the Company (the "Stockholder Agreements") providing for,
among other things, restrictions on transfer of such shares of the Common Stock
owned by such stockholder, registration rights with respect to such shares, the
repurchase of such shares upon termination of the stockholder's employment at a
price based
49
<PAGE>
on a predetermined formula, a right of first refusal for the Company in the
event of certain offers to purchase such shares, a right to acquire additional
securities of the Company in order to maintain the stockholder's percentage of
equity interest in the Company in certain circumstances and "tag-along" and
"drag-along" rights in the event of certain sales of the Common Stock by
Investments L.P. The Stockholder Agreements also contain provisions concerning
noncompetition and confidentiality applicable to such stockholders and
provisions for payments to such stockholders, under certain circumstances,
following the termination of their employment with the Company.
The following directors and executive officers have promissory notes in
excess of $60,000 outstanding to the Company:
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT INTEREST
STOCKHOLDER POSITION OUTSTANDING RATE DUE DATE
- -------------------------------- -------------------------------- ----------- ----------- ----------------------
<S> <C> <C> <C> <C>
P. Enoch Stiff Director, President and Chief $ 126,859 6.56% September 20, 2005
Executive Officer
</TABLE>
The Company has also adopted the 1996 Executive Stock Option Plan (the "1996
Plan") pursuant to which options will be granted to Mr. Stiff, Mr. Hook and Mr.
Laetz to acquire 200,000, 75,000 and 75,000 shares, respectively, of the
Company's Common Stock, and to the other management stockholders to acquire an
aggregate 150,000 shares of the Company's Common Stock by tendering existing
Common Stock in payment therefor. The exercise price of all options will be the
current market price on the date of exercise and all options may be exercised
only by exchanging shares of previously owned Common Stock. The 1996 Plan was
created solely for the purpose of alleviating certain adverse securities laws
consequences to the plan participants. The grant and exercise of options under
the 1996 Plan will not result in any increase in the beneficial ownership of
Common Stock by the plan participants from the number of shares owned
immediately after the Offering. Under the terms of the 1996 Plan, the options
are exercisable immediately after the Offering and the shares of Common Stock
issued thereunder will become freely transferable, subject to the restrictions
of the Stockholder Agreements, on the last day of the sixth full month following
the Offering, provided a pro rata portion of the indebtedness originally
incurred to purchase the shares surrendered upon exercise of the options is
repaid. In connection with the issuance of options under the 1996 Plan, the
Company has agreed to amend certain of the promissory notes issued in connection
with purchases of Common Stock to permit partial prepayments. The provisions of
the Stockholder Agreements, which are subject to modification or waiver by the
Company, generally permit the sale of 25% of such shares one year after the
Offering, 50% of such shares two years after the Offering, 75% of such shares
three years after the Offering, and all of such shares four years after the
Offering. Such options expire on the tenth anniversary of the Offering.
The Company anticipates filing a registration statement on Form S-8
immediately after the Offering for the purpose of registering the Company's
shares issuable upon exercise of options granted under the 1996 Plan.
REGISTRATION RIGHTS
Pursuant to a registration rights agreement among the Company and
Investments L.P. and Uniquip L.P. (the "Registration Rights Agreement"),
Investments L.P. and Uniquip L.P. and such of their respective permitted
transferees as may be deemed to be affiliates of the Company have rights to
demand registration under the Securities Act of its or their shares of the
Company's Common Stock. In addition, in the event the Company proposes to
register any of its securities under the Securities Act, such persons (or their
permitted transferees) will have rights, subject to certain exceptions and
limitations, to have the shares of the Company's capital stock then owned by
them included in such registration statement. The Company has agreed that, in
the event of any registration of securities owned by such persons (or a
permitted transferee) in accordance with the provisions thereof, it will
indemnify such person, and certain related
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persons, against liabilities incurred in connection with such registration,
including liabilities arising under the Securities Act. Pursuant thereto, the
Company and Investments L.P. have entered into an Indemnification Agreement
providing for indemnification against certain potential liabilities arising in
connection with the Offering, including liabilities under the Securities Act.
In addition, as described above under "Certain Transactions--Agreements with
Existing Stockholders," other existing stockholders also have registration
rights, subject to certain exceptions and limitations, to have shares of the
Company's capital stock owned by them to be included in registration statements
filed by the Company under the Securities Act.
The registration rights described above are subject to certain limitations
intended to prevent undue interference with the Company's ability to distribute
securities, including the provision that demand registration rights may not be
exercised within 90 days after the effective date of the Company's most recent
registration statement. Such registration rights are also subject to agreements
between the Company, Investments L.P., Uniquip L.P. and certain other persons
providing that no sales of the Company's Common Stock may be made by such
entities or persons for a period of 180 days following the Offering without the
prior written consent of the Underwriters.
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
GENERAL
The Restated Certificate of Incorporation of the Company (the "Certificate")
authorizes 1,500,000 shares of Preferred Stock, $.01 par value, of which no
shares are outstanding and 100,000,000 shares of Common Stock, $.01 par value,
of which 10,000,000 shares are currently outstanding and 2,350,000 shares are
reserved for issuance pursuant to the Company's stock option plans. Following
the Offering, shares will be outstanding.
COMMON STOCK
Subject to the rights, if any, of holders of Preferred Stock, holders of
Common Stock are entitled to receive dividends out of funds legally available
therefor when, as and if declared by the Board of Directors of the Company and
to receive pro rata the net assets of the Company legally available for
distribution upon liquidation or dissolution.
Holders of Common Stock are entitled to one vote for each share of Common
Stock held on each matter submitted to a vote of stockholders, including the
election of directors. Holders of Common Stock are not entitled to cumulative
voting, which means that the holders of more than 50% of the outstanding Common
Stock can elect all of the directors if they choose to do so. All shares of
outstanding Common Stock of the Company are, and the shares to be issued by the
Company pursuant to this Prospectus will be, fully paid and nonassessable.
Prior to the Offering, there are seven holders of record of the Common
Stock.
PREFERRED STOCK
The Board of Directors of the Company is authorized to fix the number of
shares and determine the designation of any series of the authorized shares of
the Company's Preferred Stock and to determine or alter the rights, preferences,
privileges and restrictions granted to or imposed upon any unissued series of
Preferred Stock. As of the date of this Prospectus, the Company has not issued
any Preferred Stock.
CERTAIN CERTIFICATE OF INCORPORATION AND BY-LAW PROVISIONS
The Certificate provides that the Company's directors are not liable to the
Company or its stockholders for monetary damages for breach of their fiduciary
duties, except under certain circumstances, including breach of the director's
duty of loyalty, acts or omissions not in good faith or involving intentional
misconduct or a knowing violation of law or any transaction from which the
director derived improper personal benefit. The inclusion of this provision in
the Certificate may have the effect of reducing the likelihood of derivative
litigation against directors and may discourage or deter stockholders or
management from bringing a lawsuit against directors for breach of their duty of
care.
The Certificate provides for the Board of Directors to be divided into three
classes of directors serving staggered three-year terms. As a result,
approximately one-third of the Board of Directors will be elected each year.
Classification of the Board of Directors expands the time required to change the
composition of a majority of directors. This provision, in addition to the
existence of authorized but unissued capital stock, may have the effect, either
alone or in combination with each other, of discouraging an acquisition of the
Company even if such an acquisition is desired by certain stockholders of the
Company.
CERTAIN EFFECTS OF AUTHORIZED BUT UNISSUED STOCK
Upon consummation of the Offering, there will be shares of Common
Stock and 1,500,000 shares of Preferred Stock available for future issuance
without stockholder approval. These additional shares may be utilized for a
variety of corporate purposes, including future public offerings to raise
52
<PAGE>
additional capital or to facilitate corporate acquisitions. The Company does not
currently have any plans to issue additional shares of capital stock, other than
shares of Common Stock which may be issued upon the exercise of options. See
"Management" and "Certain Transactions."
One of the effects of the existence of unissued and unreserved Common Stock
and undesignated Preferred Stock may be to enable the Board of Directors of the
Company to issue shares to persons friendly to current management which could
render more difficult or discourage an attempt to obtain control of the Company
by means of a merger, tender offer, proxy contest or otherwise, and thereby
protect the continuity of the Company's management. The Board of Directors of
the Company can issue Preferred Stock with rights which could adversely affect
the voting power or other rights of holders of Common Stock.
DELAWARE TAKEOVER STATUTE
Section 203 of the Delaware General Corporation Law, as amended ("Section
203") provides that, subject to certain exceptions specified therein, an
"interested stockholder" of a Delaware corporation shall not engage in any
business combination, including mergers or consolidations or acquisitions of
additional shares of the corporation with the corporation for a three-year
period following the date that such stockholder becomes an "interested
stockholder" unless (i) prior to such date, the board of directors of the
corporation approved either the business combination or the transaction which
resulted in the stockholder becoming an "interested stockholder," (ii) upon
consummation of the transaction which resulted in the stockholder becoming an
"interested stockholder," the interested stockholder owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced (excluding certain shares), or (iii) on or subsequent to such date,
the business combination is approved by the board of directors of the
corporation and authorized at an annual or special meeting of stockholders by
the affirmative vote of at least 66 2/3% of the outstanding voting stock which
is not owned by the "interested stockholder." Except as otherwise specified in
Section 203, an "interested stockholder" is defined to include (x) any person
that is the owner of 15% or more of the outstanding voting stock of the
corporation, or is an affiliate or associate of the corporation and was the
owner of 15% or more of the outstanding voting stock of the corporation at any
time within three years immediately prior to the relevant date and (y) the
affiliates and associates of any such person.
These provisions could have the effect of delaying, deferring or preventing
a change of control of the Company. The Company's stockholders, by adopting an
amendment to its Certificate or By-laws, may elect not to be governed by Section
203, effective twelve months after adoption. Neither the Certificate nor the
By-laws presently exclude the Company from the restrictions imposed by Section
203.
REGISTRAR AND TRANSFER AGENT
Boatmen's Trust Company is the Registrar and Transfer Agent for the
Company's Common Stock.
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<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Immediately upon consummation of the Offering, the Company will have
outstanding shares of Common Stock, of which will have been sold in
the Offering by the Company and will be freely transferable without restriction
or further registration under the Securities Act, except for any of those shares
of Common Stock owned at any time by an "affiliate" of the Company within the
meaning of Rule 144 under the Securities Act (which sales will be subject to the
volume limitations and certain other restrictions described below). Of the
remaining shares, of the shares held by Investments L.P. are subject
to the over-allotment option.
The remaining shares which are not sold pursuant to the over-allotment
option are deemed "restricted" securities under Rule 144 in that they were
originally issued and sold by the Company in private transactions in reliance
upon exemptions from the registration requirements of the Securities Act. It is
anticipated that commencing August 16, 1997, all shares owned by
Investments L.P. and Uniquip L.P. (or shares if the over-allotment option
is exercised in full) will become eligible for sale in the public market subject
to the volume and other restrictions of Rule 144 described below. See "Certain
Transactions--Registration Rights."
Immediately after the Offering, 500,000 shares owned by certain management
stockholders may be exchanged for a like number of shares pursuant to the
Company's 1996 Plan, and if so exchanged may thereafter be sold pursuant to Rule
144, subject to the volume and other restrictions thereof, commencing six months
after the date on which options under the 1996 Plan have been exercised,
provided a pro rata portion of the indebtedness originally incurred to purchase
the shares surrendered upon exercise of options is repaid and subject to the
provisions of the applicable Stockholder Agreements. The provisions of the
Stockholder Agreements, which are subject to modification or waiver by the
Company, generally permit the sale of 25% of such shares one year after the
Offering, 50% of such shares two years after the Offering, 75% of such shares
three years after the Offering, and all of such shares four years after the
Offering. Any such shares not exchanged by the management stockholders pursuant
to the 1996 Plan, will be "restricted" securities within the meaning of Rule 144
and may be resold thereunder, subject to the terms of the applicable Stockholder
Agreement, and subject to the volume and other restrictions of Rule 144,
commencing on the second anniversary of the date on which the indebtedness
incurred to purchase such shares is repaid. An additional 300,000 shares of
Common Stock owned by Mr. Stiff will be "restricted" securities within the
meaning of Rule 144 and may be resold thereunder, subject to the volume and
other restrictions thereof, commencing August 16, 1997. Under the terms of the
Investment Agreement, which is subject to modification or waiver by the Company
and Investments L.P., Mr. Stiff is generally permitted to sell 25% of such
shares six months after the Offering, 50% of such shares one year after the
Offering, 75% of such shares eighteen months after the Offering, and all of such
shares two years after the Offering.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned "restricted" securities
for at least two years is entitled to sell in "brokers" transactions or directly
to market makers, within any three-month period, a number of those shares that
does not exceed the greater of 1% of the shares of the Common Stock then
outstanding or the average weekly trading volume of the Common Stock on any
national securities exchange and/or the over-the-counter market during the four
calendar weeks immediately preceding the filing of the notice required by Rule
144 or, if no such notice is required, during the four calendar weeks preceding
the date of receipt by a broker of the order to execute the transaction or the
date of execution of such transaction directly with a market maker. Sales under
Rule 144 are also subject to other requirements, including the Company's
obligation to file all required periodic reports on a timely basis.
Restricted shares of Common Stock may be sold pursuant to Rule 144 subject
to the limitations described in the preceding paragraph. Restricted shares of
Common Stock held for at least three years and not then held by affiliates of
the Company, or persons who were affiliates at any time within three months
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<PAGE>
prior thereto, may be sold without regard to the volume limitations or method of
sale restrictions under Rule 144. The foregoing summary of Rule 144 is not
intended to be a complete description thereof.
Following the Offering, each of Investments L.P. and Uniquip L.P. may
distribute all of their shares to their partners. In the event of such a
distribution, commencing August 16, 1997 all such shares will be eligible for
sale by the recipients thereof pursuant to Rule 144, subject to the volume and
other restrictions thereof.
The Company intends to file a registration statement on Form S-8 under the
Securities Act to register all shares of Common Stock issuable under the 1996
Plan. The registration statement is expected to be filed as soon as practicable
after the date of the Offering and is expected to become effective immediately
upon filing. Subject to the terms of the 1996 Plan, the applicable Stockholder
Agreements and Rule 144 volume limitations applicable to affiliates, shares
covered by the registration statement will be eligible for sale in the public
market. See "Certain Transactions--Agreements with Existing Stockholders."
Certain of the Company's existing stockholders and their permitted
transferees also are entitled to demand registration of shares by the Company.
See "Certain Transactions--Registration Rights."
The Company and its existing stockholders have agreed not to offer, sell,
contract to sell or otherwise dispose of shares of common stock for a period of
180 days after the date hereof without the prior written consent of the
representatives of the Underwriters.
Prior to the Offering, there has been no public market for the Common Stock
and no prediction can be made as to the effect, if any, that future sales, or
availability of shares for future sale will have on the market price prevailing
from time to time. Sales of substantial amounts of Common Stock, or the
perception that such sales could occur, could adversely affect prevailing market
prices. The Common Stock has been approved for quotation on the Nasdaq National
Market under the symbol "OMQP."
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<PAGE>
CERTAIN U.S. FEDERAL TAX CONSIDERATIONS
FOR NON-U.S. HOLDERS OF COMMON STOCK
The following is a general discussion of certain United States federal
income and estate tax consequences of the ownership and disposition of Common
Stock applicable to "Non-United States Holders." Subject to the discussion below
under "Estate Tax," a "Non-United States Holder" is any beneficial owner of
Common Stock that, for United States federal income tax purposes is a
non-resident alien individual, a foreign corporation, a foreign partnership or a
foreign estate or trust as such terms are defined in the Internal Revenue Code
of 1986, as amended (the "Code"). This discussion is based on the Code,
existing, proposed and temporary regulations promulgated thereunder, and
administrative and judicial interpretations as of the date hereof, all of which
are subject to change either retroactively or prospectively. This discussion
does not address all aspects of United States federal income and estate taxation
that may be relevant to Non-United States Holders in light of their particular
circumstances and does not address any tax consequences arising under the laws
of any state, local or foreign taxing jurisdiction or the application of a
particular tax treaty. Prospective investors are urged to consult their tax
advisors regarding the United States federal, state and local income and other
tax consequences, and the non-United States tax consequences, of owning and
disposing of Common Stock.
Proposed United States Treasury Regulations were issued on April 15, 1996
(the "Proposed Regulations") which, if adopted, could affect the United States
taxation of dividends on Common Stock paid to a Non-United States Holder. The
Proposed Regulations are generally proposed to be effective with respect to
dividends paid after December 31, 1997, subject to certain transition rules. It
cannot be predicted at this time whether the Proposed Regulations will be
adopted as proposed or what modifications, if any, may be made to them. The
discussion below is not intended to include a complete discussion of the
provisions of the Proposed Regulations, and prospective investors are urged to
consult their tax advisors with respect to the effect the Proposed Regulations
may have if adopted.
DIVIDENDS
Subject to the discussion below, any dividend paid to a Non-United States
Holder generally will be subject to United States withholding tax either at a
rate of 30% of the gross amount of the dividend or such lower rate as may be
specified by an applicable tax treaty. For purposes of determining whether tax
is to be withheld at a 30% rate or at a reduced rate as specified by an
applicable tax treaty, under current United States Treasury Regulations the
Company ordinarily will presume that dividends paid to a holder with an address
in a foreign country are paid to a resident of such country absent knowledge
that such presumption is not warranted. Under such Regulations, dividends paid
to a holder with an address within the United States generally will be presumed
to be paid to a holder who is not a Non-United States Holder and will not be
subject to the 30% withholding tax, unless the Company has actual knowledge that
the holder is a Non-United States Holder.
The Proposed Regulations would provide for certain presumptions (which
differ from those described above) upon which the Company may generally rely to
determine whether, in the absence of certain documentation, a holder should be
treated as a Non-United States Holder for purposes of the 30% withholding tax
described above. The presumptions would not apply for purposes of granting a
reduced rate of withholding under a treaty. Under the Proposed Regulations, to
obtain a reduced rate of withholding under a treaty a Non-United States Holder
would generally be required to provide an Internal Revenue Service Form W-8
certifying such Non-United States Holder's entitlement to benefits under a
treaty. The Proposed Regulations also would provide special rules to determine
whether, for purposes of determining the applicability of a tax treaty and for
purposes of the 30% withholding tax described above, dividends paid to a
Non-United States Holder that is an entity should be treated as paid to the
entity or those holding an interest in that entity.
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Dividends received by a Non-United States Holder that are effectively
connected with a United States trade or business conducted by such Non-United
States Holder are exempt from withholding tax. However, such effectively
connected dividends are subject to regular United States income tax in the same
manner as if the Non-United States Holder were a United States person for
federal income tax purposes. A Non-United States Holder may claim exemption from
withholding under the effectively connected income exception by filing Internal
Revenue Service Form 4224 (Exemption From Withholding of Tax on Income
Effectively Connected With the Conduct of a Trade or Business in the United
States) each year with the Company or its paying agent prior to the payment of
the dividends for such year. The Proposed Regulations would replace Form 4224
with Form W-8. Effectively connected dividends received by a corporate
Non-United States Holder may be subject to an additional "branch profits tax" at
a rate of 30% (or such lower rate as may be specified by an applicable tax
treaty) of such corporate Non-United States Holder's effectively connected
earnings and profits, subject to certain adjustments.
A Non-United States Holder eligible for a reduced rate of United States
withholding tax pursuant to a tax treaty may obtain a refund of any excess
amounts currently withheld by filing an appropriate claim for refund with the
United States Internal Revenue Service ("IRS").
GAIN ON DISPOSITION OF COMMON STOCK
A Non-United States Holder generally will not be subject to United States
federal income tax with respect to gain realized upon the sale or other
disposition of Common Stock unless (i) such gain is effectively connected with a
United States trade or business of the Non-United States Holder; (ii) the Non-
United States Holder is an individual who holds the Common Stock as a capital
asset, is present in the United States for a period or periods aggregating 183
days or more during the taxable year in which such sale or disposition occurs,
and certain other conditions are met; or (iii) the Company is or has been a
"United States real property holding corporation" for federal income tax
purposes at any time within the shorter of the five-year period preceding such
disposition or such holder's holding period and certain other conditions are
met. The Company has determined that it is not and has never been, and the
Company does not believe that it will become, a "United States real property
holding corporation" for federal income tax purposes. Non-United States Holders
should consult applicable tax treaties, which might result in United States
federal income tax treatment on the sale or other disposition of Common Stock
different than as described above.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Generally, the Company must report to the IRS the amount of dividends paid,
the name and address of the recipient, and the amount, if any, of tax withheld.
A similar report is sent to the holder. Pursuant to tax treaties or other
agreements, the IRS may make its reports available to tax authorities in the
recipient's country of residence.
Unless the Company has actual knowledge that a holder is a Non-United States
Holder, dividends paid to a holder at an address within the United States may be
subject to backup withholding at a rate of 31% if the holder is not an "exempt
recipient" as defined in Treasury Regulations (which includes corporations) and
fails to provide a correct taxpayer identification number and other information
to the Company. Backup withholding will generally not apply to dividends paid to
holders at an address outside the United States (unless the Company has
knowledge that the holder is a United States person).
Proceeds from the disposition of Common Stock by a Non-United States Holder
effected by or through a United States office of a broker will be subject to
information reporting and to backup withholding at a rate of 31% of the gross
proceeds unless such Non-United States Holder certifies under penalties of
perjury as to, among other things, its name, address and status as a Non-United
States Holder or otherwise establishes an exemption. Generally, United States
information reporting and backup withholding will not apply to a payment of
disposition proceeds if the transaction is effected outside the
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United States by or through a non-United States office of a broker. However, if
such broker is, for United States federal income tax purposes, a United States
person, a "controlled foreign corporation," or a foreign person which derives
50% or more of its gross income for certain periods from the conduct of a United
States trade or business, information reporting (but not backup withholding)
will apply unless (i) such broker has documentary evidence in its files that the
holder is a Non-United States Holder and certain other conditions are met, or
(ii) the holder otherwise establishes an exemption.
The Proposed Regulations would, if adopted, alter the foregoing rules in
certain respects. Among other things, the Proposed Regulations would provide
certain presumptions and other rules under which Non-United States Holders may
be subject to backup withholding in the absence of required certifications and
would modify the definition of an "exempt recipient" in the case of a
corporation.
Backup withholding is not an additional tax. Rather, the tax liability of
persons subject to backup withholding will be reduced by the amount of tax
withheld. If backup withholding results in an overpayment of United States
income taxes, a refund may be obtained, provided the required documents are
filed with the IRS.
ESTATE TAX
An individual Non-United States Holder who is treated as the owner of Common
Stock at the time of such individual's death or has made certain lifetime
transfers of an interest in Common Stock will be required to include the value
of such Common Stock in such individual's gross estate for United States federal
estate tax purposes and may be subject to United States federal estate tax,
unless an applicable tax treaty provides otherwise. For United States federal
estate tax purposes, a "Non-United States Holder" is an individual who is
neither a citizen nor a domiciliary of the United States. Whether an individual
is considered a "domiciliary" of the United States for estate tax purposes is
generally determined on the basis of all of the facts and circumstances.
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UNDERWRITERS
Under the terms and subject to the conditions contained in an Underwriting
Agreement dated the date hereof, the U.S. Underwriters named below, for whom
Morgan Stanley & Co. Incorporated, CS First Boston Corporation, Schroder
Wertheim & Co. Incorporated and Robert W. Baird & Co. Incorporated are serving
as U.S. Representatives, have severally agreed to purchase, and the Company has
agreed to sell, and the International Underwriters named below, for whom Morgan
Stanley & Co. International Limited, CS First Boston Limited, J. Henry Schroder
& Co. Limited and Robert W. Baird & Co. Incorporated are serving as
International Representatives (collectively with the U.S. Representatives, the
"Representatives"), have severally agreed to purchase, and the Company has
agreed to sell, the respective number of shares set forth opposite the names of
such Underwriters below.
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
- ----------------------------------------------------------------------------------- -----------
<S> <C>
U.S. Underwriters:
Morgan Stanley & Co. Incorporated..............................................
CS First Boston Corporation....................................................
Schroder Wertheim & Co. Incorporated...........................................
Robert W. Baird & Co. Incorporated.............................................
-----------
Subtotal.....................................................................
-----------
International Underwriters:
Morgan Stanley & Co. International Limited.....................................
CS First Boston Limited........................................................
J. Henry Schroder & Co. Limited................................................
Robert W. Baird & Co. Incorporated.............................................
-----------
Subtotal.....................................................................
-----------
Total........................................................................
-----------
-----------
</TABLE>
The U.S. Underwriters and the International Underwriters are collectively
referred to as the "Underwriters." The Underwriting Agreement provides that the
obligations of the several Underwriters to pay for and accept delivery of the
shares of Common Stock offered hereby are subject to the approval of certain
legal matters by counsel and to certain other conditions, including the
conditions that no stop order suspending the effectiveness of the Registration
Statement is in effect and no proceedings for such purpose are pending before or
threatened by the Securities and Exchange Commission and that there has been no
material adverse change or any development involving a prospective material
adverse change in the business, financial condition or results of operations of
the Company and its subsidiaries, taken as a whole, from that set forth in such
Registration Statement. The Underwriters are obligated to take and pay for all
of the shares of Common Stock offered hereby (other than those covered by the
over-allotment option described below) if any are taken.
Pursuant to the Agreement between U.S. and International Underwriters, each
U.S. Underwriter has represented and agreed that, with certain exceptions: (i)
it is not purchasing any U.S. Shares (as defined below) for the account of
anyone other than a United States or Canadian Person (as defined below) and (ii)
it has not offered or sold, and will not offer or sell, directly or indirectly,
any U.S. Shares or distribute this Prospectus outside the United States or
Canada or to anyone other than a United States or Canadian Person. Pursuant to
the Agreement Between U.S. and International Underwriters, each International
Underwriter has represented and agreed that, with certain exceptions: (i) it is
not purchasing any International Shares (as defined below) for the account of
any United States or Canadian Person and (ii) it has not offered or sold, and
will not offer or sell, directly or indirectly, any International Shares or
distribute this Prospectus within the United States or Canada or to any United
States or Canadian Person. The foregoing limitations do not apply to
stabilization transactions or to certain other transactions
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specified in the Agreement Between U.S. and International Underwriters. As used
herein, "United States or Canadian Person" means any national or resident of the
United States or Canada, or any corporation, pension, profit-sharing or other
trust or other entity organized under the laws of the United States or Canada or
of any political subdivision thereof (other than a branch located outside the
United States or Canada of any United States or Canadian Person) and includes
any United States or Canadian branch of a person who is otherwise not a United
States or Canadian Person. All shares of Common Stock to be purchased by the
U.S. Underwriters and the International Underwriters are referred to herein as
the "U.S. Shares" and the "International Shares," respectively.
Pursuant to the Agreement Between U.S. and International Underwriters, sales
may be made between the U.S. Underwriters and International Underwriters of any
number of shares of Common Stock to be purchased pursuant to the Underwriting
Agreement as may be mutually agreed. The per share price and currency settlement
of any shares of Common Stock so sold shall be the price range set forth on the
cover page hereof, in United States dollars, less an amount not greater than the
per share amount of the concession to dealers set forth below.
Pursuant to the Agreement Between U.S. and International Underwriters, each
U.S. Underwriter has represented that it has not offered or sold, and has agreed
not to offer or sell, any shares of Common Stock, directly or indirectly, in
Canada in contravention of the securities laws of Canada or province or
territory thereof and has represented that any offer or sale of Common Stock in
Canada will be made only pursuant to an exemption from the requirement to file a
prospectus in the province or territory of Canada in which such offer is made.
Each U.S. Underwriter has further agreed to send to any dealer who purchases
from it any shares of Common Stock a notice stating in substance, by purchasing
such Common Stock, such dealer represents and agrees that it has not offered or
sold, and will not offer or sell, directly or indirectly, any of such Common
Stock in Canada or to, or for the benefit of, any resident of any province or
territory of Canada in contravention of the securities laws thereof and that any
offer of shares of Common Stock in Canada will be made only pursuant to an
exemption from the requirement to file a prospectus in the province or territory
of Canada in which such offer or sale is made, and that such dealer will deliver
to any other dealer to whom it sells any of such Common Stock a notice to the
foregoing effect.
Pursuant to the Agreement Between U.S. and International Underwriters, each
International Underwriter has represented and agreed that: (i) it has not
offered or sold and will not offer or sell any shares of Common Stock to persons
in the United Kingdom except to persons whose ordinary activities involve them
in acquiring, holding, managing or disposing of investments (as principal or
agent) for the purposes of their businesses or otherwise in circumstances which
have not resulted and will not result in an offer to the public in the United
Kingdom within the meaning of the Public Offers of Securities Regulations 1995
(the "Regulations"); (ii) it has complied and will comply with all applicable
provisions of the Financial Services Act 1986 and the Regulations with respect
to anything done by it in relation to the shares of Common Stock offered hereby
in, from or otherwise involving the United Kingdom; and (iii) it has only issued
or passed on and will only issue or pass on to any person in the United Kingdom
any document received by it in connection with the issue of the shares of Common
Stock if that person is of a kind described in Article 11(3) of the Financial
Services Act 1986 (Investment Advertisements) (Exemptions) Order 1995 or is a
person to whom such document may otherwise lawfully be issued or passed on.
Pursuant to the Agreement Between U.S. and International Underwriters, each
International Underwriter has represented and agreed that it has not offered or
sold, and will not offer or sell, directly or indirectly, in Japan or to or for
the account of any resident thereof, any shares of Common Stock acquired in
connection with the Offering, except for offers or sales of Japanese
International Underwriters or dealers and except pursuant to any exemption from
the registration requirements of the Securities and Exchange Law of Japan. Each
International Underwriter has further agreed to send to any dealer who purchases
from it any of such shares of Common Stock a notice stating in substance that
such dealer may not offer or sell any of such shares, directly or indirectly, in
Japan or to or for the account of any resident
60
<PAGE>
thereof, except pursuant to any exemption from the registration requirements of
the Securities and Exchange Law of Japan, and that such dealer will send to any
other dealer to whom it sells any of such shares a notice to the foregoing
effect.
The Underwriters propose to offer part of the shares of Common Stock offered
hereby directly to the public at the public offering price set forth on the
cover page hereof and part to certain dealers at a price that represents a
concession not in excess of $ per share under the public offering price.
The Underwriters may allow, and such dealers may re-allow, a concession not in
excess of $ per share to other Underwriters or to certain other dealers.
After the initial offering of the shares of Common Stock, the offering price and
other selling terms may from time to time be varied by the Representatives.
Pursuant to the Underwriting Agreement, Investments L.P. has granted to the
U.S. Underwriters an option, exercisable for 30 days from the date of this
Prospectus, to purchase up to an additional shares of Common Stock at the
public offering price set forth on the cover page hereof, less underwriting
discounts and commissions. The U.S. Underwriters may exercise such option to
purchase solely for the purpose of covering over-allotments, if any, incurred in
the sale of the shares of Common Stock offered hereby. To the extent such option
is exercised, each U.S. Underwriter will become obligated, subject to certain
conditions, to purchase approximately the same percentage of such additional
shares as the number set forth next to such Underwriter's name in the preceding
table bears to the total number of shares of Common Stock offered hereby to the
U.S. Underwriters.
The Representatives have informed the Company that they do not intend sales
to any accounts over which they have discretionary authority to exceed five
percent of the total number of shares of Common Stock offered hereby.
The Company and Investments L.P., on the one hand, and the Underwriters, on
the other hand, have agreed to indemnify each other against certain liabilities,
including liabilities arising under the Securities Act. In addition, the Company
and Investments L.P. have agreed to indemnify each other against certain
liabilities, including liabilities arising under the Securities Act.
The Company and all of the current stockholders of the Company have agreed
that they will not, without the prior written consent of Morgan Stanley & Co.
Incorporated, offer, pledge, sell, contract to sell, sell any option or contract
to purchase, purchase any option or contract to sell, grant any option, right or
warrant to purchase, or otherwise transfer or dispose of, directly or
indirectly, any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock or enter into any swap or other
arrangement that transfers to another, in whole or in part, any of the economic
consequences of ownership of the Common Stock, for a period of 180 days after
the date of this Prospectus, except under certain circumstances.
At the request of the Company, the Underwriters have reserved up to
shares of Common Stock offered hereby for sale at the public offering
price to certain directors, officers and employees of the Company, its
affiliates, and certain persons doing business with the Company. The number of
shares of Common Stock available for sale to the general public will be reduced
to the extent such persons purchase such reserved shares. Any reserved shares
not so purchased will be offered by the Underwriters to the general public on
the same basis as the other shares offered hereby. All purchasers of the shares
of Common Stock reserved pursuant to this paragraph who are also directors or
senior officers of the Company will be required to enter into agreements
identical to those described in the immediately preceding paragraph restricting
the transferability of such shares for a period of 180 days after the date of
this Prospectus.
Certain of the Underwriters and their affiliates have from time to time
performed, and continue to perform, various investment banking and commercial
banking services for the Company or Harbour Group and their affiliates on a
fee-for-services basis.
61
<PAGE>
PRICING OF THE OFFERING
Prior to the Offering, there has been no public market for the Common Stock.
The initial public offering price was determined by negotiation among the
Company, Investments L.P. and the Representatives. Among the factors considered
in determining the initial public offering price were the earnings and certain
other financial and operating information of the Company in recent periods, the
future prospects of the Company and its industry in general, the general
condition of the securities market at the time of the Offering, and the market
prices of securities and certain financial and operating information of
companies engaged in activities similar to those of the Company.
LEGAL MATTERS
Certain legal matters with respect to the validity of the issuance of the
Common Stock offered hereby have been passed upon for the Company by Dickstein
Shapiro Morin & Oshinsky LLP, Washington, D.C. Dickstein Shapiro Morin &
Oshinsky LLP has in the past represented, and continues to represent, Uniquip
L.P., Investments L.P. and their respective affiliates with respect to various
matters unrelated to the Company as well as in connection with their ownership
of capital stock of the Company. Certain legal matters in connection with the
Offering will be passed upon for the Underwriters by Sidley & Austin, Chicago,
Illinois.
EXPERTS
The consolidated financial statements of the Company as of September 30,
1995 and 1996 and for the periods August 17, 1995 through September 30, 1995 and
for the fiscal year ended September 30, 1996; the financial statements of TRAK,
as predecessor of the Company, as of and for the fiscal year ended September 30,
1994 and for the period October 1, 1994 through August 16, 1995; and the
financial statements of Lull for the year ended December 31, 1994, as of and for
the year ended December 31, 1995 and as of and for the period from January 1,
1996 through August 15, 1996, included in the Prospectus have been so included
in reliance on the reports of Price Waterhouse LLP, independent accountants,
given on the authority of said firm as experts in auditing and accounting.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 (the "Registration
Statement," which term shall include all amendments, exhibits and schedules
thereto), pursuant to the Securities Act and the rules and regulations
promulgated thereunder, with respect to the Common Stock offered hereby. The
Prospectus, which constitutes a part of the Registration Statement, does not
contain all the information set forth in the Registration Statement, certain
parts of which are omitted from the Prospectus in accordance with the rules and
regulations of the Commission, and to which reference is hereby made.
After consummation of this Offering, the Company will be subject to the
information and reporting requirements of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), and, in accordance therewith, will be required
to file proxy statements, reports and other information with the Commission. The
Registration Statement, as well as any such report, proxy statement and other
information filed by the Company with the Commission, may be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the regional offices of the Commission located at 7 World Trade Center, 13th
Floor, New York, New York 10048 and Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such material can be obtained
from the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. The Commission maintains a web site
(http:\\www.sec.gov) that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission.
62
<PAGE>
Statements made in this Prospectus concerning the provisions of any
contract, agreement or other document referred to herein are not necessarily
complete. With respect to each such statement concerning a contract, agreement
or other document filed as an exhibit to the Registration Statement or otherwise
filed with the Commission, reference is made to such exhibit or other filing for
a more complete description of the matter involved, and each such statement is
qualified in its entirety by such reference.
The Company intends to furnish stockholders with annual reports containing
audited consolidated financial information and will furnish unaudited financial
information for the first three quarters of each fiscal year.
63
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
OMNIQUIP INTERNATIONAL, INC.
Report of Independent Accountants....................................................................... F-2
Consolidated Balance Sheet as of September 30, 1996 and 1995............................................ F-3
Consolidated Statement of Income for the period from August 17, 1995 (inception) to September 30, 1995 F-4
and for the fiscal year ended September 30, 1996......................................................
Consolidated Statement of Changes in Stockholders' Equity for the period from August 17, 1995 F-5
(inception) to September 30, 1995 and for the fiscal year ended September 30, 1996....................
Consolidated Statement of Cash Flows for the period from August 17, 1995 (inception) to September 30, F-6
1995 and for the fiscal year ended September 30, 1996.................................................
Notes to Consolidated Financial Statements.............................................................. F-7
TRAK INTERNATIONAL, INC.
Report of Independent Accountants....................................................................... F-22
Balance Sheet as of September 30, 1994.................................................................. F-23
Statement of Income for the period from October 1, 1994 to June 30, 1995 (unaudited), for the period F-24
from October 1, 1994 to August 16, 1995 and for the fiscal year ended September 30, 1994..............
Statement of Changes in Stockholders' Equity for the period from October 1, 1994 to August 16, 1995 and F-25
for the fiscal year ended September 30, 1994..........................................................
Statement of Cash Flows for the period from October 1, 1994 to June 30, 1995 (unaudited), for the period F-26
from October 1, 1994 to August 16, 1995 and for the fiscal year ended September 30, 1994..............
Notes to Financial Statements........................................................................... F-27
LULL INDUSTRIES, INC.
Report of Independent Accountants....................................................................... F-39
Balance Sheet as of August 15, 1996 and December 31, 1995............................................... F-40
Statement of Income for the period from January 1, 1996 through August 15, 1996, for the six months F-41
ended June 30, 1995 (unaudited) and for the fiscal years ended December 31, 1995 and 1994.............
Statement of Changes in Stockholders' Equity for the period from January 1, 1996 through August 15, F-42
1996, and for the fiscal years ended December 31, 1995 and 1994.......................................
Statement of Cash Flows for the period from January 1, 1996 through August 15, 1996, for the six months F-43
ended June 30, 1995 (unaudited) and for the fiscal years ended December 31, 1995 and 1994.............
Notes to Financial Statements........................................................................... F-44
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Stockholders of
Omniquip International, Inc.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, of changes in stockholders' equity and of
cash flows present fairly, in all material respects, the financial position of
Omniquip International, Inc. and its wholly-owned subsidiaries at September 30,
1995 and 1996, and the results of their operations and their cash flows for the
period August 17, 1995 (date of inception) through September 30, 1995 and for
the fiscal year ended September 30, 1996, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
Price Waterhouse LLP
St. Louis, Missouri
November 1, 1996
F-2
<PAGE>
OMNIQUIP INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
SEPTEMBER SEPTEMBER
30, 30,
1995 1996
----------- -----------
(DOLLARS IN THOUSANDS
EXCEPT PER SHARE DATA)
<S> <C> <C>
ASSETS
Current assets:
Cash............................................................. $ 1 $ 53
Accounts receivable, net......................................... 12,842 21,678
Inventories...................................................... 12,680 27,540
Prepaid expenses and other current assets........................ 2,284 5,534
----------- -----------
Total current assets......................................... 27,807 54,805
Property, plant and equipment, net................................. 9,211 16,490
Goodwill........................................................... 9,596 65,571
Other assets, net.................................................. 1,718 2,714
----------- -----------
$ 48,332 $ 139,580
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt................................ $ 540 $ 3,875
Accounts payable................................................. 11,105 20,895
Accrued liabilities.............................................. 5,463 16,642
----------- -----------
Total current liabilities.................................... 17,108 41,412
----------- -----------
Long-term debt..................................................... 16,781 77,566
----------- -----------
Long-term debt-related parties..................................... 7,000 7,000
----------- -----------
Other noncurrent liabilities, net.................................. 617 422
----------- -----------
Deferred income taxes.............................................. 443 755
----------- -----------
Commitments and contingencies
(Notes 2, 5, 6, 12 and 14)
Stockholders' equity:
Preferred stock, $.01 par value, 1,500,000 shares authorized; no
shares issued and outstanding..................................
Common stock, $.01 par value, 100,000,000 shares authorized;
10,000,000 shares issued and outstanding....................... 100 100
Additional paid-in capital....................................... 6,253 6,253
Notes receivable from stockholders............................... (352) (352)
Retained earnings................................................ 382 6,424
----------- -----------
Total stockholders' equity................................... 6,383 12,425
----------- -----------
$ 48,332 $ 139,580
----------- -----------
----------- -----------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-3
<PAGE>
OMNIQUIP INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM AUGUST 17, FOR THE
1995 (DATE OF FISCAL YEAR
INCEPTION) ENDED
TO SEPTEMBER 30, SEPTEMBER
1995 30, 1996
------------------- ------------
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE DATA)
<S> <C> <C>
Net sales.................................................. $ 12,723 $ 124,861
Cost of sales.............................................. 9,787 92,688
------- ------------
Gross profit............................................... 2,936 32,173
Selling, general and administrative expenses............... 1,670 16,311
------- ------------
Operating income........................................... 1,266 15,862
------- ------------
Other expenses:
Interest on indebtedness................................. 226 2,384
Interest on indebtedness--related parties................ 127 1,050
Other finance charges.................................... 240 1,981
Other, net............................................... 29 31
------- ------------
622 5,446
------- ------------
Income before income taxes and extraordinary item.......... 644 10,416
Provision for income taxes................................. 262 4,060
------- ------------
Income before extraordinary item........................... 382 6,356
Extraordinary item--loss on refinancing of long-term debt,
net of income tax benefit of $200........................ -- (314)
------- ------------
Net income................................................. $ 382 $ 6,042
------- ------------
------- ------------
Earnings per share:
Income before extraordinary item......................... $ .04 $ .64
Extraordinary item....................................... (.03)
------- ------------
Net income............................................... $ .04 $ .61
------- ------------
------- ------------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-4
<PAGE>
OMNIQUIP INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM AUGUST 17, 1995 (DATE OF INCEPTION) TO SEPTEMBER 30, 1995
AND FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
NOTES
ADDITIONAL RECEIVABLE
COMMON PAID-IN FROM RETAINED
STOCK CAPITAL STOCKHOLDERS EARNINGS TOTAL
----------- ----------- ----------- ----------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balance, August 17, 1995..................... $ 100 $ 6,253 ($ 352) $ -- $ 6,001
Net income................................... -- -- -- 382 382
----- ----------- ----- ----------- ---------
Balance, September 30, 1995.................. 100 6,253 (352) 382 6,383
Net income................................... -- -- -- 6,042 6,042
----- ----------- ----- ----------- ---------
Balance, September 30, 1996.................. $ 100 $ 6,253 ($ 352) $ 6,424 $ 12,425
----- ----------- ----- ----------- ---------
----- ----------- ----- ----------- ---------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-5
<PAGE>
OMNIQUIP INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM AUGUST 17,
1995
(DATE OF INCEPTION) FOR THE FISCAL YEAR
TO SEPTEMBER 30, ENDED
1995 SEPTEMBER 30, 1996
------------------- -------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Cash flows from operating activities:
Net income.......................................... $ 382 $ 6,042
Adjustments to reconcile net income to net cash
provided by operating activities, excluding the
effect of an acquisition:
Depreciation...................................... 80 1,175
Amortization...................................... 45 571
Deferred income tax provision (benefit)........... 42 (712)
Loss on refinancing of long-term debt............. -- 514
(Increase) decrease in current assets:
Accounts receivable, net........................ (1,063) (1,264)
Inventories..................................... 949 (3,628)
Prepaid expenses and other current assets....... 90 (39)
Increase (decrease) in current liabilities:
Accounts payable................................ (162) 2,397
Other current liabilities....................... (42) 3,946
Other............................................. (16) (433)
------ --------
Net cash provided by operating activities............. 305 8,569
------ --------
Cash flows from investing activities:
Acquisition of net assets of Lull Industries,
Inc............................................... -- (69,007)
Capital expenditures, net........................... (188) (1,404)
Payments to former TRAK shareholders for ATLAS
program........................................... -- (446)
Other............................................... -- (133)
------ --------
Net cash used in investing activities................. (188) (70,990)
------ --------
Cash flows from financing activities:
Proceeds from issuance of long-term debt............ -- 74,000
Net payments on revolver............................ (117) (3,542)
Payments on long-term debt.......................... -- (6,500)
Financing costs incurred............................ -- (1,485)
------ --------
Net cash (used in) provided by financing activities... (117) 62,473
------ --------
Net change in cash.................................... -- 52
Cash at beginning of period........................... 1 1
------ --------
Cash at end of period................................. $ 1 $ 53
------ --------
------ --------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest on indebtedness............................ $ 278 $ 2,619
------ --------
------ --------
Income taxes........................................ $ -- $ 3,672
------ --------
------ --------
</TABLE>
See accompanying Notes to Consolidated Statements.
F-6
<PAGE>
OMNIQUIP INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
1. ORGANIZATION
Omniquip International, Inc. (Omniquip or the Company), a Delaware
corporation, is an 92% owned investee company of Harbour Group Investments III,
L.P. (HGI III, L.P.) and an affiliate. At September 30, 1996, Omniquip owned
100% of the outstanding common stock of its subsidiaries, TRAK International,
Inc. (TRAK) and Lull Lift Corporation (Lull Lift), and had no other investments
or operations.
On September 30, 1996, Omniquip's Board of Directors authorized Omniquip to
split its shares of common stock at a rate of 10 to 1, thereby increasing issued
and outstanding shares from 1,000,000 to 10,000,000. All shares and per share
amounts in the accompanying consolidated financial statements and notes have
been adjusted to give retroactive effect to the stock split.
2. ACQUISITIONS
On August 16, 1995, Omniquip acquired the issued and outstanding stock of
TRAK. The transaction was accounted for under the purchase method of accounting.
The aggregate merger consideration (purchase price) paid by Omniquip totaled
approximately $30,400, including assumed liabilities of $17,800. The acquisition
was financed through a $6,000 equity contribution by HGI III, L.P., a $2,000
subordinated note payable to HGI III, L.P., a $5,000 senior subordinated note
payable to an insurance company, and approximately $17,400 under credit
agreements with certain financial institutions.
All preacquisition debt outstanding, preferred stock, stock warrants, and
stock options at August 16, 1995 were settled or paid in connection with the
merger transaction.
The purchase price was assigned to the net assets acquired based on their
estimated fair market value at the acquisition date. Based upon the allocation,
the purchase price exceeded the estimated value of net assets acquired by
approximately $9,600. Such excess purchase price (goodwill) is being amortized
over forty years.
The purchase price under the acquisition agreement will be increased, up to
a maximum of $2,000, together with interest, for orders received from the U.S.
Army under contracts for the delivery of rough terrain fork lifts (the ATLAS
Program) for a period of five years from August 17, 1995. Amounts paid to TRAK's
former owners will be reflected as additional goodwill. As of September 30,
1996, 224 ATLAS Program sales orders have been received, in addition to the
original five prototypes, and, accordingly, $446 in additional purchase price
has been reflected in the accompanying financial statements.
F-7
<PAGE>
OMNIQUIP INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
2. ACQUISITIONS (CONTINUED)
The purchase price for TRAK was allocated as follows:
<TABLE>
<S> <C>
Accounts receivable, net........................................... $ 11,800
Inventories........................................................ 13,600
Prepaid expenses and other current assets.......................... 2,400
Property, plant and equipment...................................... 9,100
Other assets....................................................... 1,700
Goodwill........................................................... 10,046
Accounts payable................................................... (11,300)
Accrued liabilities................................................ (5,500)
Other liabilities.................................................. (600)
Deferred income taxes.............................................. (400)
---------
$ 30,846
---------
---------
</TABLE>
On August 15, 1996, Omniquip acquired certain net assets and assumed certain
liabilities of Lull Industries, Inc. (Lull) through its subsidiary, Lull Lift.
The transaction was accounted for under the purchase method of accounting.
Results of operations for Lull Lift are included in Omniquip's consolidated
financial statements from the date of acquisition.
The aggregate merger consideration (purchase price) paid by Omniquip totaled
approximately $69,007, plus assumed liabilities of $14,625. The acquisition was
financed with additional borrowings under the Company's amended credit
facilities with lending institutions, including $14,000 of subordinated debt
guaranteed by HGI III, L.P.
The purchase price has been preliminarily assigned to the net assets
acquired based on their estimated fair market value at the acquisition date.
Based upon the allocation, the purchase price exceeded the estimated value of
net assets acquired by approximately $55,841. Such excess purchase price
(goodwill) is being amortized over forty years.
The purchase price for Lull has been preliminarily allocated as follows:
<TABLE>
<S> <C>
Accounts receivable, net................................................. $ 7,572
Inventories.............................................................. 11,232
Prepaid expenses and other current assets................................ 1,937
Property, plant and equipment............................................ 7,050
Goodwill................................................................. 55,841
Accounts payable......................................................... (7,392)
Accrued liabilities...................................................... (7,233)
---------
$ 69,007
---------
---------
</TABLE>
F-8
<PAGE>
OMNIQUIP INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
2. ACQUISITIONS (CONTINUED)
The following table sets forth the pro forma information for Omniquip as if
the acquisition of Lull had occurred on October 1, 1995. This information is
unaudited and does not purport to represent actual net sales or net income had
the acquisition actually occurred on October 1, 1995.
<TABLE>
<CAPTION>
PRO FORMA INFORMATION (UNAUDITED)
FOR THE FISCAL YEAR ENDED SEPTEMBER 30,
1996
----------------------------------------
<S> <C>
Net sales........................................... $ 207,239
Net income.......................................... $ 6,217
</TABLE>
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting policies utilized by Omniquip require management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual amounts could differ
from those estimates. The significant accounting policies followed by Omniquip
are described below and are in conformity with generally accepted accounting
principles.
BUSINESS
The Company is principally engaged in the manufacture and sale of rough
terrain telescopic material handlers and skid steer loaders to commercial
customers, national rental fleets and the U.S. Government.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Omniquip and
its wholly-owned subsidiaries. All significant intercompany transactions and
balances have been eliminated.
U.S. ARMY CONTRACT
The Company was awarded a contract to serve as the sole supplier of ATLAS, a
telescopic material handler, for the U.S. Army and related entities. The Company
expects shipments under the contract to commence in fiscal 1997. As discussed in
Note 2, the purchase price for TRAK will be adjusted for orders received under
the contract for a period of five years from August 17, 1995.
REVENUE RECOGNITION
Revenue is recognized upon shipment to the customer. Costs and related
expenses to manufacture the products are recorded as costs of sales when the
related revenue is recognized.
CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company considers all
highly liquid investments with an original maturity of three months or less to
be cash equivalents. Overdrafts on the Company's disbursement accounts totaling
approximately $1,789 and $2,868 at September 30, 1995 and 1996, respectively,
are included in accounts payable.
F-9
<PAGE>
OMNIQUIP INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RELATIONSHIPS WITH SUPPLIERS
The Company purchases several of its key component parts primarily from
specific suppliers. The Company believes that the supply of these components and
the number of alternative suppliers are adequate.
INVENTORIES
Inventories are stated at the lower of cost, determined using the first-in,
first-out (FIFO) method, or market. Obsolete or unsalable inventories are
reflected at their estimated realizable values.
Inventories relating to the U.S. Army contract are stated at actual
production costs, including manufacturing overhead and direct engineering and
tooling costs. The contract costs reimbursed by the U.S. Army are considered
progress payments and have been offset against inventories. Title to all
inventories related to the U.S. Army contract for which progress payments have
been received vests with the U.S. Army. General and administrative expenses
allocated to the U.S. Army contract for the fiscal year ended September 30, 1996
were $109.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment was recorded at estimated fair market value
under the purchase method of accounting as of the acquisition dates for TRAK and
Lull as described in Note 2. Additions to property, plant and equipment
subsequent to the acquisition dates are recorded at cost. Depreciation is
provided using the straight-line method over the estimated useful lives of the
assets which range from three to thirty-nine years.
Expenditures for repairs, maintenance and minor renewals are charged to
income as incurred. Expenditures which improve an asset or extend its estimated
useful life are capitalized. When properties are retired or otherwise disposed
of, the related cost and accumulated depreciation are removed from the accounts
and any gain or loss is included in income.
GOODWILL
Goodwill resulting from the acquisitions described in Note 2 is stated at
cost and is being amortized on a straight-line basis over 40 years. Accumulated
amortization totaled $27 and $442 at September 30, 1995, and 1996, respectively.
The Company assesses the carrying value of goodwill for impairment whenever
events or changes in circumstances indicate that the carrying amount may not be
recoverable based on an analysis of future expected cash flows from the
underlying operations of the Company. Management believes that there has been no
impairment at September 30, 1996.
OTHER NONCURRENT ASSETS
Other noncurrent assets include two 50% equity investments in dealers of the
Company's products. In accordance with Accounting Principles Board Opinion (APB)
No. 18, "The Equity Method of Accounting for Investments in Common Stock," the
carrying amount of the investments is adjusted to recognize the Company's share
of the earnings and losses of the investee. In the determination of the
Company's share of earnings or losses, all significant intercompany profit in
inventory on hand at these unconsolidated
F-10
<PAGE>
OMNIQUIP INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
subsidiaries is eliminated. The carrying value of these equity investments
totaled approximately $393 at September 30, 1995, and 1996, respectively. Equity
earnings were immaterial for the period from August 17, 1995 to September 30,
1995 and for the fiscal year ended September 30, 1996, respectively. The Company
is currently finalizing an agreement to sell its investment in one of these
dealers and expects to fully realize the recorded carrying value.
Expenses associated with the issuance of debt instruments are capitalized by
the Company and amortized over the respective terms of the debt instruments. Net
deferred financing costs included in other assets at September 30, 1995 and 1996
were $413 and $1,454, respectively.
RESEARCH AND DEVELOPMENT COSTS
Research and development costs are expensed as incurred and included in
selling, general and administrative expenses in the accompanying consolidated
statement of income. Such costs incurred in the development of new products or
significant improvements to existing products totaled approximately $72 for the
period from August 17, 1995 through September 30, 1995 and $1,572 for the fiscal
year ended September 30, 1996.
WARRANTY COSTS
The Company provides, by a current charge to income, an amount it estimates
will be necessary to cover future warranty obligations for products sold during
the year. The Company also provides for specific warranty obligations as
necessary and appropriate.
INCOME TAXES
The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards No. 109 (SFAS 109), "Accounting for Income
Taxes," requiring the use of the liability method of accounting for income
taxes. The current or deferred tax consequences of a transaction are measured by
applying the provisions of enacted tax laws to determine the amount of taxes
payable currently or in future years. Deferred income taxes are provided for
temporary differences between the income tax bases of assets and liabilities,
and their carrying amounts for financial reporting purposes.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company records all financial instruments, including cash and cash
equivalents, accounts receivable, accounts payable, other accruals and notes
payable, at cost which approximates fair value.
FISCAL YEAR
Omniquip's fiscal year end is September 30.
EARNINGS PER SHARE INFORMATION
Earnings per share is computed by dividing net income available to
stockholders by the weighted average number of common shares outstanding during
the period. For the periods presented, the weighted average number of shares
outstanding was 10,000,000.
F-11
<PAGE>
OMNIQUIP INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
4. FINANCING
Long-term debt consists of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1995 1996
------------- -------------
<S> <C> <C>
UNSUBORDINATED DEBT:
REVOLVING LINE OF CREDIT--principal due August 15, 2001; interest due monthly at the
bank's prime rate plus .50%, or LIBOR plus 2.50%, in some cases; secured by
substantially all assets of the Company; repaid in 1996........................... $ 10,821 $ 0
REVOLVING LINE OF CREDIT--principal due August 16, 2003; interest due monthly at
either LIBOR plus 2.75% or the bank's corporate base rate plus 1.5%; secured by
substantially all assets of the Company........................................... 7,441
INSTALLMENT NOTES PAYABLE--principal plus interest due in monthly installments at
the bank's prime rate plus .50% or LIBOR plus 2.50%, in some cases; secured by
substantially all assets of the Company; repaid in 1996........................... 6,500
TERM LOAN--principal due in installments commencing October 1, 1996, with the final
payment due August 16, 2003; interest due monthly at either LIBOR plus 3% or the
bank's corporate base rate plus 1.75%; secured by substantially all assets of the
Company........................................................................... 60,000
SUBORDINATED DEBT:
NOTE PAYABLE TO AN INSURANCE COMPANY--principal due in installments commencing
August 31, 2001, with the final payment due August 31, 2003; interest due at 15%
per annum......................................................................... 5,000 5,000
NOTE PAYABLE TO A FINANCIAL INSTITUTION--principal payment due in a lump sum payment
on February 28, 2004; interest due at 15% per annum............................... 14,000
NOTE PAYABLE TO HGI III, L.P.--principal payment due in a lump sum payment on August
31, 2003; interest due semi-annually at 15% per annum............................. 2,000 2,000
------------- -------------
24,321 88,441
LESS--Current portion of long-term debt............................................. 540 3,875
------------- -------------
$ 23,781 $ 84,566
------------- -------------
------------- -------------
</TABLE>
On August 16, 1996, and in conjunction with the acquisition of Lull, the
Company refinanced its existing Loan and Security Agreement. Such agreements had
provided a revolving credit facility and two installment notes. The prior
revolving credit facility provided for borrowings of up to the lesser of $20,000
or a borrowing base calculated using a formula set forth in the agreements.
Amounts outstanding under the prior revolving credit facility totaled $10,821 at
September 30, 1995. In addition, the Company had $187 in outstanding letters of
credit under this revolving line of credit facility at September 30, 1995. The
Company also had borrowings under one installment note payable under the Loan
and Security Agreement which was refinanced. There were no borrowings under the
second installment note, which provided for asset acquisitions, prior to
refinancing.
F-12
<PAGE>
OMNIQUIP INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
4. FINANCING (CONTINUED)
The new Loan and Security Agreement provides for a revolving line of credit
facility and two term loans. The new revolving line of credit facility provides
for borrowings of up to the lesser of $25,000 or a borrowing base calculated
based on percentages of eligible receivables and inventories. Borrowings under
this line of credit are due August 16, 2003 and bear interest either at the
bank's corporate base rate plus 1.5% (9.75% at September 30, 1996) or LIBOR plus
2.75% (8.20% at September 30, 1996). The Company may elect to convert
outstanding line of credit balances between interest types at its discretion.
Amounts outstanding under this new revolving line of credit facility totaled
$7,441 at September 30, 1996. In addition, the Company had $307 in outstanding
letters of credit under this revolving line of credit facility. At September 30,
1996, the Company had unused borrowing capacity of $17,559 under this facility.
Borrowings under the term loan provided by the new Loan and Security
Agreement are due in quarterly installments ranging from $500 to $3,125,
commencing in October 1996 with a final payment in August 2003. The term loan
bears interest either at the bank's corporate base rate plus 1.75% (10% at
September 30, 1996) or LIBOR plus 3% (8.5% at September 30, 1996). The Company
may elect to convert outstanding term loan balances between interest types at
its discretion.
On August 16, 1995, the Company issued a $5,000 senior subordinated note
payable to an insurance company and due August 31, 2003. Principal payments are
due in varying amounts, commencing August 31, 2001. Interest, at a rate of 15%,
is due quarterly.
On August 16, 1996 and in conjunction with the acquisition of Lull, the
Company issued a $14,000 junior subordinated note payable to a financial
institution with principal and interest, at 15% per annum, due February 28,
2004. The note payable is subordinated to both the Loan and Security Agreements
with certain financial institutions and the note payable to an insurance
company.
The Company entered into an agreement in conjunction with the acquisition of
TRAK (see Note 2) for the issuance of a $2,000 note payable to HGI III, L.P. The
HGI III, L.P. note payable is subordinated to the Loan and Security Agreement
with certain financial institutions and the subordinated notes payable described
above.
Interest expense on the above-noted subordinated debt payable to related
parties (the insurance company and HGI III, L.P.) approximated $127 and $1,050
for the periods ended September 30, 1995 and 1996, respectively.
The Company's borrowing agreements contain restrictions and requirements,
including limitations on dividends, lease rentals, capital expenditures and
investments, new indebtedness, achievement of certain earnings levels, and
maintenance of a minimum tangible net worth and specified working capital
amounts, among others. At September 30, 1996, the Company was in compliance with
such covenants.
The Company has entered into two interest rate swap agreements to reduce the
impact of changes in interest rates on its floating rate debt. At September 30,
1996, the interest rate swap agreements had a total notional principal amount of
$10,000. These agreements fix the Company's interest rate on $4,000 and $6,000
of its unsubordinated debt at 8.71% and 6.00%, respectively. These agreements
mature at October 10, 1998.
F-13
<PAGE>
OMNIQUIP INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
4. FINANCING (CONTINUED)
Maturities of long-term debt for subsequent fiscal years are as follows:
<TABLE>
<S> <C>
1997............................................................... $ 3,875
1998............................................................... 8,625
1999............................................................... 10,000
2000............................................................... 10,750
2001............................................................... 11,750
Thereafter......................................................... 43,441
---------
$ 88,441
---------
---------
</TABLE>
5. BOOM WARRANTY PROGRAM
During 1995, prior to its acquisition by the Company, Lull had determined
that a specific warranty obligation had been incurred on certain manufactured
boom units. At the acquisition date, the estimated cost to complete the boom
warranty program amounted to $2,000. A reserve for this amount was recorded in
purchase accounting by the Company. At September 30, 1996, a corresponding
liability of $1,557 is reflected as a component of other current liabilities in
the accompanying consolidated balance sheet.
6. LEASE COMMITMENTS
The Company leases certain of its equipment and automobiles under
noncancelable lease agreements. These leases have been accounted for as
operating leases.
Minimum lease payments for subsequent fiscal years under long-term operating
leases in effect at September 30, 1996 are as follows:
<TABLE>
<S> <C>
1997................................................................. $ 440
1998................................................................. 248
1999................................................................. 128
2000................................................................. 14
---------
Total minimum lease payments......................................... $ 830
---------
---------
</TABLE>
Rent expense under all operating leases for the periods ended September 30,
1995 and 1996 was approximately $52 and $513, respectively.
F-14
<PAGE>
OMNIQUIP INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
7. INCOME TAXES
The provision for income taxes is summarized as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM AUGUST 17,
1995 (DATE OF FOR THE FISCAL
INCEPTION) YEAR ENDED
TO SEPTEMBER 30, 1995 SEPTEMBER 30, 1996
----------------------- -------------------
<S> <C> <C>
Current:
Federal......................................... $ 184 $ 3,890
State........................................... 36 682
----- ------
Total current............................... 220 4,572
----- ------
Deferred:
Federal......................................... 35 (661)
State........................................... 7 (51)
----- ------
Total deferred.............................. 42 (712)
----- ------
Provision for income taxes........................ $ 262 $ 3,860
----- ------
----- ------
</TABLE>
Deferred taxes are comprised of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1995 1996
------------- -------------
<S> <C> <C>
Deferred tax assets:
Accruals and other reserves................................... $ 1,663 $ 4,376
Inventories................................................... 488 1,078
Other......................................................... 78 70
------------- -------------
Gross deferred tax assets................................. 2,229 5,524
------------- -------------
Deferred tax liabilities:
Property, plant and equipment................................. (805) (890)
Other......................................................... (198) (101)
------------- -------------
Gross deferred tax liabilities............................ (1,003) (991)
------------- -------------
Net deferred tax asset.......................................... $ 1,226 $ 4,093
------------- -------------
------------- -------------
Current deferred tax asset...................................... $ 1,669 $ 4,848
Long-term deferred tax liability................................ (443) (755)
------------- -------------
Net deferred tax asset.......................................... $ 1,226 $ 4,093
------------- -------------
------------- -------------
</TABLE>
F-15
<PAGE>
OMNIQUIP INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
7. INCOME TAXES (CONTINUED)
The income tax provision differs from the amount of expense determined by
applying the applicable U.S. statutory federal income tax rate to pre-tax
results as a result of the following differences for the periods ended:
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1995 1996
--------------- -------------
<S> <C> <C>
Statutory rate.................................................. $ 219 $ 3,445
Non-temporary differences:
State tax provision, net...................................... 24 169
Other......................................................... 19 246
----- ------
Total provision................................................. $ 262 $ 3,860
----- ------
----- ------
</TABLE>
8. RETIREMENT PLANS AND RELATED MATTERS
The Company offers all full-time non-union employees who have completed six
months of service a retirement savings plan under Section 401(k) of the Internal
Revenue Code. The Company also offers all union employees who have completed 30
days of service a retirement savings plan under Section 401(k) of the Internal
Revenue Code. For the periods ended September 30, 1995 and 1996, Company
contributions totaled $154 and $310, respectively.
The Company offers an incentive program to all salaried employees of its
TRAK subsidiary based upon a formula related to TRAK's operating results and an
incentive program to union employees based upon a formula related to
productivity improvements. Prior to October 1996, certain participants in the
salaried program were allowed to defer a portion of their award. At September
30, 1995 and 1996, the Company had accrued $839 and $1,029, respectively, for
the incentive program, of which $209 was recorded as a long-term deferred
liability in the accompanying balance sheet at September 30, 1995. In October
1996, the Company discontinued the deferral of awards, at which time $274 was
paid to certain salaried employees in full settlement of all deferred amounts.
At September 30, 1996, this balance is included as an other current liability in
the accompanying consolidated balance sheet. For the periods ended September 30,
1995 and 1996, expenses relating to these plans were $67 and $875, respectively.
9. STOCK OPTION PLANS
In September 1996, Omniquip established the 1996 Long-Term Incentive Plan
pursuant to which equity incentives, covering up to 1,600,000 shares, may be
awarded to key officers and employees, and a Directors Non-Qualified Stock
Option Plan which provides for the granting of options to the Omniquip directors
who are not employees, for up to an aggregate 250,000 shares of common stock. No
options under either of these plans have been granted through September 30,
1996.
In September 1996, Omniquip also established the Executive Stock Option Plan
pursuant to which options will be granted to certain executives and other
management stockholders to acquire an aggregate 500,000 shares of Omniquip
common stock. The exercise price of such options will be the current market
price on the date of exercise and all options may be exercised only by
exchanging shares of previously owned common stock. No options under this plan
have been granted through September 30, 1996.
F-16
<PAGE>
OMNIQUIP INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
9. STOCK OPTION PLANS (CONTINUED)
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123 "Accounting for Stock-Based
Compensation" (FAS 123) which addresses accounting for stock option, purchase
and award plans. FAS 123 specifies that companies utilize either the "fair value
based method" or the "intrinsic value based method" for valuing stock options
granted. At September 30, 1996, the Company has not granted any options pursuant
to plans established in September 1996. However, for any such options granted in
the future, the Company would expect to utilize the "intrinsic value based
method" for valuing stock options granted.
10. POSTRETIREMENT BENEFITS
The Company has adopted the provisions of Statement of Financial Accounting
Standards No. 106, "Employer's Accounting for Postretirement Benefits Other Than
Pensions" (OPEB or SFAS 106). This standard requires recognition of the cost of
providing postretirement benefits during an employee's period of service.
The Company provides health care and life insurance benefits for certain
employees who retired prior to November 13, 1987 (less than 100 retirees at
September 30, 1996). Management plans to fund the premiums as incurred, net of
reimbursements received by plan participants. At September 30, 1995 and 1996,
respectively, the Company had a $408 and $423 accrued postretirement benefit
obligation, which is included in "other noncurrent liabilities, net" in the
accompanying financial statements. There are no plan assets. For measurement
purposes, a 10.5% and 9.5% annual rate of increase in health care premiums was
assumed for 1995 and 1996, respectively; this rate was assumed to decrease 1%
per year to 5.5% in 2000 and remain at that level thereafter. The weighted
average discount rate used to determine the accumulated postretirement benefit
obligation was 7.5% and 8.0% at September 30, 1995 and 1996, respectively. The
obligation was calculated utilizing the 1983 group annuity mortality tables.
The annual periodic postretirement benefit cost for the plan years beginning
July 1, 1995 and July 1, 1996 approximates $29 and $23, respectively.
11. RELATED PARTIES
Harbour Group, Ltd., an affiliate of HGI III, L.P., charges the Company for
services of Harbour Group personnel engaged in line or staff functions relating
specifically to the operations of the Company; such charges are to be paid by
the Company based on actual, direct costs for such services. Charges of $60 and
$668 were recorded by the Company during the periods ended September 30, 1995
and 1996, respectively.
Omniquip has paid fees totaling $446 and $228, respectively, to affiliates
of HGI III, L.P. in consideration of services provided in identifying,
negotiating and consummating the acquisitions of TRAK and Lull (as described in
Note 2); such amount has been capitalized as acquisition costs and is included
in goodwill.
Certain members of management have purchased shares of Omniquip's stock at
prices determined by the Board of Directors. The purchase price of the shares
has been financed by recourse promissory notes payable to Omniquip with the
shares pledged as security.
The insurance company which holds $5,000 of the Company's senior
subordinated debt is a limited partner of HGI III, L.P.
F-17
<PAGE>
OMNIQUIP INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
12. CUSTOMER FINANCING ARRANGEMENTS
TRAK has financing arrangements with certain third-party financing
institutions to facilitate dealer purchases of equipment under a floor plan
arrangement. TRAK is obligated to repurchase the outstanding loan balance of a
dealer in the event of default by the dealer which is not cured by such dealer
within a 90 day period. A security interest in the equipment financed is
maintained by the finance companies. Aggregate outstanding loan balances under
these agreements at September 30, 1995 and September 30, 1996 approximated
$39,466 and $57,033, respectively. Aggregate losses under one of the
arrangements for calendar year 1995 are limited to 25% of the outstanding loan
balance at December 31, 1994. The outstanding loan balance at December 31, 1994
under this arrangement approximated $24,841. Aggregate losses under the same
arrangement for calendar year 1996 are limited to the greater of $1,500 or 5% of
the outstanding loan balance at December 31, 1995. The outstanding loan balance
at December 31, 1995 under this arrangement approximated $40,659.
TRAK maintains a reserve for potential repurchases of loans in default under
the floor plan arrangements described above. This reserve is included in other
current liabilities and totaled approximately $391 and $570 at September 30,
1995 and September 30, 1996, respectively. Historically, losses under the
repurchase provisions of the floor plan arrangements have not been material and
have been within management's expectations. The related provision charged to
operations totaled approximately $31 and $200 for the periods ended September
30, 1995 and 1996, respectively.
In conjunction with these floor plan arrangements, TRAK incurs
dealer-related financing charges at varying rates for a maximum period of six
months. The financing charges incurred by TRAK for the periods ended September
30, 1995 and 1996 for all outstanding customer financing arrangements totaled
$240 and $1,981, respectively.
Lull Lift is also a party to a retail finance agreement with a financing
company, which provides Lull Lift distributors with financing for equipment
purchases from Lull Lift. The financing company has also agreed to provide
financing for distributors' purchases of Lull Lift produced equipment used as
rental inventory by the distributors. Such contracts are arranged on an
instalment basis with a balloon payment by the distributor for the residual
balance at the end of the term (typically due 48 months from date of shipment).
In the event the distributor does not elect to pay or refinance the balloon
payment, Lull Lift has agreed to pay the residual amount if requested by the
financing company. A secured interest in the equipment financed is maintained by
the finance company. Aggregate outstanding loan balances under this agreement as
of September 30, 1996 were approximately $10,887. This contingency would be
reduced by proceeds from the sales of related equipment. Management believes
that any such liability under this arrangement, if incurred, would not have a
material impact on the results of operations or financial condition of the
Company.
F-18
<PAGE>
OMNIQUIP INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
13. CONCENTRATIONS OF CREDIT
The Company principally sells its products through a distribution network.
The Company performs ongoing credit evaluations of its distributors. The Company
maintains reserves for potential credit losses and historically such losses have
been within management's expectations. At September 30, 1995 and 1996, the
Company's five largest distributors represented approximately 29% and 10%,
respectively, of trade receivables. In addition, sales to such distributors for
the periods ended September 30, 1995 and 1996 approximated 30% and 21%,
respectively, of the Company's net sales. No individual distributor accounted
for more than 10% of net sales for the periods ended September 30, 1995 and
1996.
14. CONTINGENCIES
The Company is included in various litigation consisting almost entirely of
product and general liability claims arising in the normal course of business.
The Company maintains insurance policies relative to product and general
liability claims and has provided reserves for the estimated cost of the
self-insured retention; accordingly, these actions, when ultimately concluded,
are not expected to have a material adverse effect on the financial position or
results of operations of the Company.
F-19
<PAGE>
OMNIQUIP INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
15. SUPPLEMENTAL BALANCE SHEET INFORMATION
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1995 1996
------------- -------------
<S> <C> <C>
ACCOUNTS RECEIVABLE:
Trade receivables................................................................. $ 12,854 $ 20,631
Less allowance for doubtful accounts.............................................. (173) (351)
Other receivables................................................................. 161 1,398
------------- -------------
$ 12,842 $ 21,678
------------- -------------
------------- -------------
INVENTORIES:
Finished goods.................................................................... $ 3,844 $ 7,094
Work in process................................................................... 2,175 4,032
Raw materials..................................................................... 6,661 15,614
Unbilled government contract costs................................................ -- 530
------------- -------------
$ 12,680 $ 27,540
------------- -------------
------------- -------------
PREPAID EXPENSES AND OTHER CURRENT ASSETS:
Deferred income taxes............................................................. $ 1,669 $ 4,848
Other............................................................................. 615 686
------------- -------------
$ 2,284 $ 5,534
------------- -------------
------------- -------------
PROPERTY, PLANT AND EQUIPMENT:
Machinery and equipment........................................................... $ 4,248 $ 8,707
Buildings and building improvements............................................... 4,133 7,494
Land and land improvements........................................................ 396 840
Construction in progress.......................................................... 513 704
------------- -------------
Total property, plant and equipment, at cost...................................... 9,290 17,745
Less: accumulated depreciation.................................................... (79) (1,255)
------------- -------------
$ 9,211 $ 16,490
------------- -------------
------------- -------------
ACCRUED LIABILITIES:
Accrued employee compensation and benefits, including taxes....................... $ 1,180 $ 2,460
Accrued customer rebates.......................................................... -- 2,634
Accrued boom warranty............................................................. -- 1,557
Other accrued warranty............................................................ 1,279 2,526
Accrued incentive compensation.................................................... 630 906
Product liability reserves........................................................ 564 998
Accrued income taxes.............................................................. 250 1,312
Other............................................................................. 1,560 4,249
------------- -------------
$ 5,463 $ 16,642
------------- -------------
------------- -------------
</TABLE>
F-20
<PAGE>
OMNIQUIP INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
16. QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data for the fiscal year ended September 30,
1996 appears below:
<TABLE>
<CAPTION>
GROSS
NET SALES PROFIT NET INCOME
---------- ----------- -----------
<S> <C> <C> <C>
First quarter.............................................................. $ 23,487 $ 6,156 $ 963
Second quarter............................................................. 27,578 7,234 1,352
Third quarter.............................................................. 30,449 7,745 1,573
Fourth quarter............................................................. 43,347 11,038 2,154
---------- ----------- -----------
$ 124,861 $ 32,173 $ 6,042
---------- ----------- -----------
---------- ----------- -----------
</TABLE>
17. SUBSEQUENT EVENT
On October 1, 1996, the Company filed a Registration Statement on Form S-1
for the purpose of making an initial public offering of previously unissued
common stock. The net proceeds from the sales of such shares are intended to be
used to retire substantially all of the outstanding debt of the Company and for
general corporate purposes. In conjunction with the retirement of the Company's
debt, the Company expects to incur prepayment penalties and write off related
deferred financing costs. The Company estimates that charges of approximately
$1.4 million, net of related tax benefits, will be presented as an extraordinary
item in the statement of income in the period in which the debt repayment
occurs.
F-21
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Stockholders of Omniquip International, Inc.
In our opinion, the accompanying balance sheet and the related statements of
income, of changes in stockholders' equity and of cash flows present fairly, in
all material respects, the financial position of TRAK International, Inc. at
September 30, 1994 and the results of its operations and its cash flows for the
fiscal year ended September 30, 1994, and for the period October 1, 1994 to
August 16, 1995, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
As explained in Note 9, the Company changed its method of accounting for
postretirement benefits other than pensions in the period ended August 16, 1995.
As explained in Note 1, on August 16, 1995, Omniquip International, Inc.
acquired the issued and outstanding common stock of TRAK International, Inc.
Price Waterhouse LLP
St. Louis, Missouri
July 15, 1996
F-22
<PAGE>
TRAK INTERNATIONAL, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
SEPTEMBER 30,
1994
-----------------
(DOLLARS IN
THOUSANDS,
EXCEPT PER SHARE
DATA)
<S> <C>
ASSETS
Current assets:
Cash.................................................................... $ 17
Accounts receivable, net................................................ 10,360
Inventories............................................................. 8,704
Prepaid expenses and other current assets............................... 1,343
-------
Total current assets.................................................. 20,424
Property, plant and equipment, net........................................ 6,197
Other assets, net......................................................... 2,030
-------
$ 28,651
-------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt....................................... $ 7,986
Current portion of long-term debt--related parties...................... 1,450
Accounts payable........................................................ 8,109
Accrued liabilities..................................................... 2,619
-------
Total current liabilities............................................. 20,164
Long-term debt............................................................ 1,616
Long-term debt--related parties........................................... 1,350
Retiree healthcare obligation............................................. --
Accrued incentive compensation............................................ 37
Deferred income taxes..................................................... 439
-------
Total liabilities..................................................... 23,606
-------
Commitments and contingencies (Notes 4, 11 and 13)
Class B mandatorily redeemable preferred stock, $1,000 par value, 3,000
shares authorized; 3,000 shares issued and outstanding.................. 3,262
-------
Stockholders' equity:
Class A preferred stock, $500 par value, 2,000 shares authorized; 1,408
shares issued and outstanding......................................... 704
Class C preferred stock, $1,000 par value, 5,000 shares authorized;
1,110 shares issued and outstanding................................... 1,110
Common stock, $1 par value, 20,000 shares authorized; 5,450 shares
issued and outstanding................................................ 6
Additional paid-in capital.............................................. 50
Retained earnings....................................................... 346
Less treasury stock at cost, 1,595 shares............................... (433)
-------
Total stockholders' equity............................................ 1,783
-------
$ 28,651
-------
-------
</TABLE>
See accompanying Notes to Financial Statements.
F-23
<PAGE>
TRAK INTERNATIONAL, INC.
STATEMENT OF INCOME
<TABLE>
<CAPTION>
FOR THE FOR THE
PERIOD FROM PERIOD FROM
FOR THE FISCAL OCTOBER 1, OCTOBER 1,
YEAR ENDED 1994 TO 1994 TO
SEPTEMBER 30, AUGUST 16, JUNE 30,
1994 1995 1995
--------------- ----------- -----------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Net sales.............................................. $ 60,973 $ 75,401 $ 64,964
Cost of sales.......................................... 47,208 57,707 49,782
------- ----------- -----------
Gross profit........................................... 13,765 17,694 15,182
Selling, general and administrative expenses........... 9,502 10,903 9,168
------- ----------- -----------
Operating income....................................... 4,263 6,791 6,014
------- ----------- -----------
Other (income) expenses:
Interest on indebtedness............................. 994 1,121 871
Interest on indebtedness-related parties............. 369 258 229
Other finance charges................................ 864 1,320 1,000
Other, net........................................... (165) (199) --
------- ----------- -----------
2,062 2,500 2,100
------- ----------- -----------
Income before provision for income taxes and cumulative
effect of change in accounting principle............. 2,201 4,291 3,914
Provision for income taxes............................. 876 1,762 1,566
------- ----------- -----------
Income before cumulative effect of change in accounting
principle............................................ 1,325 2,529 2,348
Cumulative effect of change in accounting principles,
net of income tax benefit of $167 (Note 9) in 1995... -- (241) (241)
------- ----------- -----------
Net income............................................. $ 1,325 $ 2,288 $ 2,107
------- ----------- -----------
------- ----------- -----------
</TABLE>
See accompanying Notes to Financial Statements
F-24
<PAGE>
TRAK INTERNATIONAL, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR FISCAL YEAR ENDED SEPTEMBER 30, 1994 AND
FOR THE PERIOD FROM OCTOBER 1, 1994 TO AUGUST 16, 1995
<TABLE>
<CAPTION>
(ACCUMULATED
CLASS A CLASS C ADDITIONAL DEFICIT)/
PREFERRED PREFERRED COMMON PAID-IN RETAINED TREASURY
STOCK STOCK STOCK CAPITAL EARNINGS STOCK TOTAL
--------- --------- ------ ---------- ------------ -------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Balance, September 30, 1993....................... $704 $1,110 $6 $ 50 $ (470) $(380) $1,020
Nonmonetary exchange for Class A preferred stock
(Note 8)........................................ (50) (50)
Repurchase of Class A preferred stock (Note 8).... (3) (3)
Dividends on Class B and Class C preferred
stock........................................... (247) (247)
Accretion to Class B preferred stock.............. (262) (262)
Net income........................................ -- -- -- -- 1,325 -- 1,325
--------- --------- ------ ---------- ------ -------- ------
Balance, September 30, 1994....................... 704 1,110 6 50 346 (433) 1,783
Dividends on Class B and Class C preferred
stock........................................... (191) (191)
Redemption of convertible notes
(Notes 3 and 8)................................. 1 997 998
Accretion to Class B preferred stock.............. (530) (530)
Net income........................................ -- -- -- -- 2,288 -- 2,288
--------- --------- ------ ---------- ------ -------- ------
Balance, August 16, 1995.......................... $704 $1,110 $7 $1,047 $1,913 $(433) $4,348
--------- --------- ------ ---------- ------ -------- ------
--------- --------- ------ ---------- ------ -------- ------
</TABLE>
See accompanying Notes to Financial Statements.
F-25
<PAGE>
TRAK INTERNATIONAL, INC.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE FOR THE
FOR THE PERIOD FROM PERIOD FROM
FISCAL OCTOBER 1, OCTOBER 1,
YEAR ENDED 1994 TO 1994 TO
SEPTEMBER 30, AUGUST 16, JUNE 30,
1994 1995 1995
------------- ----------- -----------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income.................................................... $ 1,325 $ 2,288 $ 2,107
Adjustments to reconcile net income to net cash (used in)
provided by operating activities:
Depreciation................................................ 666 726 621
Amortization................................................ 230 226 194
Deferred income tax provision............................... 139 (835) (887)
Accrued incentive compensation.............................. 37 166
Retiree healthcare obligation............................... 408 408
Other....................................................... (98) 63 (110)
(Increase) decrease in current assets:
Accounts receivable, net.................................. (4,283) (1,419) (4,464)
Inventories............................................... 881 (5,348) (4,025)
Prepaid expenses and other current assets................. (140) (294) (20)
Increase (decrease) in current liabilities:
Accounts payable.......................................... 3,116 3,158 3,879
Accrued liabilities....................................... 615 1,520 2,255
(Increase) decrease in notes receivable..................... 509 (125) --
------ ----------- -----------
Net cash (used in) provided by operating activities............. 2,997 534 (42)
------ ----------- -----------
Cash flows from investing activities:
Capital expenditures, net..................................... (1,400) (3,030) (2,725)
Investment in other assets.................................... (251) (437) (239)
------ ----------- -----------
Net cash used in investing activities........................... (1,651) (3,467) (2,964)
------ ----------- -----------
Cash flows from financing activities:
Net proceeds from revolving line of credit.................... 28 2,819 2,795
Proceeds from issuance of long-term debt...................... 450 3,200 3,200
Payments on long-term debt.................................... (1,405) (2,911) (2,814)
Payment of preferred stock dividends.......................... (415) (191) (191)
------ ----------- -----------
Net cash provided by (used in) financing activities............. (1,342) 2,917 2,990
------ ----------- -----------
Net increase (decrease) in cash................................. 4 (16) (16)
Cash at beginning of period..................................... 13 17 17
------ ----------- -----------
Cash at end of period........................................... $ 17 $ 1 $ 1
------ ----------- -----------
------ ----------- -----------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest on indebtedness.................................... $ 1,019 $ 1,487
------ -----------
Income taxes................................................ $ 531 $ 2,864
------ -----------
Supplemental schedule of noncash investing and financing
activities:
Redemption of convertible notes (Notes 3 and 8)............... $ -- $ 998
------ -----------
Receipt of Class A preferred stock in exchange for accounts
receivable (Note 8)......................................... $ 53 $ --
------ -----------
</TABLE>
See accompanying Notes to Financial Statements.
F-26
<PAGE>
TRAK INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
1. MERGER
On August 16, 1995, Omniquip International, Inc. (Omniquip), a Delaware
corporation and a 92% owned investee company of Harbour Group Investments III,
L.P. (HGI III L.P.), acquired the issued and outstanding stock of TRAK
International, Inc. (the Company).
The aggregate consideration (purchase price) paid by Omniquip for the
Company totaled approximately $30,400, including assumed liabilities of $17,800.
The acquisition was financed through a $6,000 equity contribution by HGI III
L.P., a $2,000 subordinated note payable to HGI III L.P., a $5,000 senior
subordinated note payable to an insurance company and approximately $17,400
under credit agreements with certain financial institutions. All preacquisition
debt outstanding, preferred stock, stock warrants and stock options of the
Company at August 16, 1995 were settled or paid in connection with the
acquisition. The acquisition agreement also provides for contingent
consideration to be paid to the former common stockholders of the Company by
Omniquip should certain future requirements be met.
The accompanying financial statements of the Company have been prepared on a
preacquisition basis of accounting and do not reflect the effects of the
acquisition by Omniquip or the related financing.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting policies utilized by the Company require management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual amounts could differ
from these estimates. The significant accounting policies followed by the
Company are described below and are in conformity with generally accepted
accounting principles:
BUSINESS
The Company is principally engaged in the manufacture and sale of telescopic
material handlers and skid steer loaders to commercial customers and the U.S.
Army.
REVENUE RECOGNITION
Revenue is recognized upon shipment to the customer. Costs and related
expenses to manufacture the products are recorded as costs of sales when the
related revenue is recognized.
CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company considers all
highly liquid investments with an original maturity of three months or less to
be cash equivalents. Overdrafts on the Company's disbursement accounts totaling
approximately $1,108 at September 30, 1994 are included in accounts payable.
RELATIONSHIP WITH SUPPLIERS
The Company purchases several of its key component parts primarily from
specific suppliers. The Company believes that the supply of these components and
the number of alternative suppliers are adequate.
F-27
<PAGE>
TRAK INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INVENTORIES
Inventories are stated at the lower of cost, determined using the first-in,
first-out (FIFO) method, or market. Obsolete or unsalable inventories are
reflected at their estimated realizable values.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is recorded at cost and is depreciated using
the straight-line method over the estimated useful lives of the assets which
range from 3 to 29 years.
Expenditures for repairs, maintenance and minor renewals are charged to
income as incurred. Expenditures which improve an asset or extend its estimated
useful life are capitalized. When properties are retired or otherwise disposed
of, the related cost and accumulated depreciation are removed from the accounts
and any gain or loss is included in income.
OTHER NONCURRENT ASSETS
Other noncurrent assets include net notes receivable outstanding due from
related parties of $397 at September 30, 1994. These notes bear interest at
rates ranging from approximately 7.5% to 8.0%.
Other noncurrent assets include two 50% equity investments in dealers of the
Company's products. In accordance with Accounting Principles Board Opinion (APB)
No. 18, "The Equity Method of Accounting for Investments in Common Stock," the
carrying amount of the investments is adjusted to recognize the Company's share
of the earnings or losses of the investee. In the determination of the Company's
share of earnings or losses, all significant intercompany profit in inventory on
hand at these unconsolidated subsidiaries is eliminated. The carrying value of
the equity investments totaled $711 at September 30, 1994. Equity earnings from
these investments totaled $148 and $0 for the periods ended September 30, 1994
and August 16, 1995, respectively. Such equity earnings are presented in other
non-operating income in the accompanying financial statements.
Other noncurrent assets also include intangible assets, primarily consisting
of tradename and drawings, which are stated at cost of $922 at September 30,
1994 and which are being amortized on a straight-line basis over varying lives
from five to twenty-five years.
RESEARCH AND DEVELOPMENT COSTS
Research and development costs are expensed as incurred. Such costs incurred
in the development of new products or significant improvements to existing
products totaled approximately $364 and $416 for the periods ended September 30,
1994 and August 16, 1995, respectively.
WARRANTY COSTS
The Company provides, by a current charge to income, an amount it estimates
will be necessary to cover future warranty obligations for products sold during
the year. The Company also provides for specific warranty obligations as
necessary and appropriate.
F-28
<PAGE>
TRAK INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES
Effective October 1, 1992, the Company adopted Statement of Financial
Accounting Standards No. 109 (SFAS 109), "Accounting for Income Taxes." The
adoption of SFAS 109 changed the Company's method of accounting for income taxes
from the deferred method (APB No. 11) to an asset and liability approach. The
asset and liability approach requires that deferred income taxes be provided for
temporary differences between the income tax bases of assets and liabilities,
and their carrying amounts for financial reporting purposes.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company records all financial instruments, including cash and cash
equivalents, accounts receivable, accounts payable, other accruals and notes
payable, at cost which approximates fair value.
REPORTING PERIODS
The Company's fiscal year ends on September 30 of each year. Fiscal year
1995 represents the period from October 1, 1994 through August 16, 1995 (the
date immediately preceding the merger described in Note 1).
EARNINGS PER SHARE INFORMATION
Given the historical organization and capital structure of the Company,
earnings per share information is not considered meaningful or relevant and has
not been presented in the accompanying financial statements or the notes
thereto.
UNAUDITED INFORMATION
The accompanying income statement and cash flow data for the period October
1, 1994 to June 30, 1995 and the quarterly income statement data (Note 15) are
unaudited. However, in the opinion of management, such information has been
prepared on a basis consistent with the audited financial statements and
includes all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of the results of operations presented. The
quarterly results are not necessarily indicative of results for any future
period.
F-29
<PAGE>
TRAK INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) (CONTINUED)
3. FINANCING
Long-term debt consists of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
1994
-------------
<S> <C>
UNSUBORDINATED DEBT:
REVOLVING LINE OF CREDIT--demand note, interest due monthly at the bank's prime
rate plus 1.15%- 2.15% based on components of the borrowing base (8.75% to
9.75% per annum at September 30, 1994), secured by certain accounts
receivable and inventories................................................... $ 7,335
INSTALLMENT NOTES PAYABLE--principal in the aggregate of $54, plus interest,
due in monthly installments as defined in the notes; secured by certain
machinery, equipment, and real estate........................................ 2,267
SUBORDINATED DEBT:
CONVERTIBLE NOTE PAYABLE--principal due August 9, 1995; interest due quarterly
at 15% per annum; converted to common stock on August 9, 1995................ 250
CONVERTIBLE NOTE PAYABLE--principal due August 9, 1995; interest due quarterly
at 15% per annum; converted to common stock on August 9, 1995................ 750
NOTE PAYABLE--remainder due in 4 equal annual installments commencing November,
1994, interest due quarterly at 9% per annum................................. 1,200
NOTE PAYABLE--remainder due in 4 equal annual installments commencing June,
1995, due quarterly at 11 3/8% per annum..................................... 600
-------------
12,402
Less--Current portion of long-term debt........................................ 9,436
-------------
$ 2,966
-------------
-------------
</TABLE>
The Company maintained a Loan and Security Agreement with a bank which
provided for a revolving line of credit facility and installment notes. The
revolving line of credit facility provided for borrowings of up to the lesser of
$12,000 or a borrowing base formula defined as, 85% of eligible receivables plus
the lesser of (a) $5,500, or (b) 70% of qualified finished goods inventory plus
50% of qualified raw materials, components and service parts inventory as
defined in the agreement. Borrowings under this line of credit were evidenced by
demand instruments and bore interest at the bank's prime rate plus 1.15% except
for advances based upon amounts due from customers with installment payment or
consignment like terms, which bore interest at the bank's prime rate plus 2.15%
(no such advances were outstanding at September 30, 1994). Amounts outstanding
thereunder totaled $7,335 at September 30, 1994. The Company had $187 in
outstanding letters of credit at September 30, 1994.
Effective April 4, 1995, the Company entered into three amended and restated
installment notes payable in the amounts of $1,400, $1,530, and $270 which
replaced the existing installment notes. With respect to the $1,530 note
described above, $600 of such note will not be funded until certain requirements
have been met related to the Company's expansion at its facility in Port
Washington, Wisconsin. The amended and restated notes bore interest at the
bank's prime rate plus 1.15% and were due in equal
F-30
<PAGE>
TRAK INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) (CONTINUED)
3. FINANCING (CONTINUED)
monthly principal payments of $93, $64, and $11, respectively, which commenced
May 1, 1995. Effective July 10, 1995, the Company entered into a fourth
installment note payable in the amount of $574 under the Loan and Security
Agreement. This note also bore interest at the bank's prime rate plus 1.15% and
was due in equal monthly principal payments of $10, which commenced August 1,
1995.
The Company's borrowing agreements contained restrictions and requirements,
including limitations on capital expenditures, new indebtedness, achievement of
certain earning levels, maintenance of working capital amounts, and limitations
on dividend payments, among others.
Under the terms of the convertible notes payable agreements, such debt
effectively was converted to common stock of the Company prior to August 16,
1995. See Note 8 for further discussion. All remaining outstanding debt was
repaid on August 16, 1995 as a part of the acquisition described in Note 1 with
the proceeds of new borrowings.
Maturities of long-term debt for each of the fiscal years subsequent to
September 30, 1994 under terms in existence at September 30, 1994 (as noted
above, all outstanding debt was repaid on August 16, 1995 in connection with the
acquisition described in Note 1).
<TABLE>
<S> <C>
1995............................................................... $ 9,436
1996............................................................... 1,101
1997............................................................... 1,101
1998............................................................... 764
---------
$ 12,402
---------
---------
</TABLE>
4. LEASE COMMITMENTS
The Company leases certain of its equipment and automobiles under
noncancelable lease agreements. These leases have been accounted for as
operating leases.
Minimum lease payments under long-term operating leases in effect at August
16, 1995 are as follows:
<TABLE>
<S> <C>
1996............................................................... $ 298
1997............................................................... 95
1998............................................................... 24
---------
Total minimum lease payments....................................... $ 417
---------
---------
</TABLE>
Rent expense under all operating leases for the periods ended September 30,
1994 and August 16, 1995 was approximately $318 and $301, respectively.
F-31
<PAGE>
TRAK INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) (CONTINUED)
5. INCOME TAXES
The provision for income taxes is summarized as follows for the periods
ended:
<TABLE>
<CAPTION>
SEPTEMBER 30, AUGUST 16,
1994 1995
--------------- -----------
<S> <C> <C>
Current tax expense:
Federal.............................................................................. $ 565 $ 2,056
State................................................................................ 172 374
----- -----------
Total current...................................................................... 737 2,430
----- -----------
Deferred tax expense (benefit):
Federal.............................................................................. 111 (703)
State................................................................................ 28 (132)
----- -----------
Total deferred..................................................................... 139 (835)
----- -----------
Provision for income taxes............................................................. $ 876 $ 1,595
----- -----------
----- -----------
</TABLE>
Deferred taxes are comprised of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
1994
---------------
<S> <C>
Deferred tax assets:
Accruals and other reserves.................................................. $ 706
Inventories.................................................................. 276
Other........................................................................ 86
-----
Gross deferred tax assets.................................................. 1,068
-----
Deferred tax liabilities:
Property, plant and equipment................................................ 552
Other........................................................................ 78
-----
Gross deferred tax liabilities................................................. 630
-----
Net deferred tax asset......................................................... $ 438
-----
-----
Current deferred tax asset..................................................... $ 877
Long-term deferred tax liability............................................... (439)
-----
Net deferred tax asset......................................................... $ 438
-----
-----
</TABLE>
F-32
<PAGE>
TRAK INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) (CONTINUED)
5. INCOME TAXES (CONTINUED)
The income tax provision differs from the amount of expense determined by
applying the applicable U.S. statutory federal income tax rate to pre-tax
results as a result of the following differences for the periods ended:
<TABLE>
<CAPTION>
SEPTEMBER 30, AUGUST 16,
1994 1995
----------------- -------------
<S> <C> <C>
Statutory rate......................................................................... 34.0% 34.0%
Non-temporary differences:
State tax provision, net............................................................. 6.0 3.7
Other................................................................................ (0.2) 3.4
--- ---
Total provision.................................................................... 39.8% 41.1%
--- ---
--- ---
</TABLE>
6. RETIREMENT PLANS
The Company offers all full-time non-union employees who have completed six
months of service a retirement savings plan under Section 401(k) of the Internal
Revenue Code. The Company also offers all union employees who have completed 30
days of service a retirement savings plan under Section 401(k) of the Internal
Revenue Code. On December 13, 1994, the Board of Directors approved a
non-elective Company contribution of 1% of the compensation paid during fiscal
1994 to each active participant (union and non-union) who was employed by the
Company as of August 31, 1994. For the periods ended September 30, 1994 and
August 16, 1995, Company contributions totaled $726 and $822, respectively.
7. CLASS B MANDATORILY REDEEMABLE PREFERRED STOCK
The mandatorily redeemable preferred stock carries a 6% cumulative dividend
rate, payable quarterly based upon the liquidation value of such stock.
Liquidation value is defined as $1,000 per share plus any dividends in arrears.
Under the original terms of the Class B mandatorily redeemable preferred
stock, the Company is required to redeem all Class B preferred shares at October
31, 1995 at a price per share equal to the liquidation value plus twenty percent
of the Company's cumulative net income divided by 3,000. The Company is
accreting these shares to their currently estimated redemption price, using the
effective interest method over the period to the date of redemption. For the
periods ended September 30, 1994 and August 16, 1995, such accretion charged to
retained earnings approximated $262 and $530, respectively. The holder of this
preferred stock is also entitled to convert, at any time, each share into 1.829
shares of common stock. The holder of the Class B preferred stock is entitled to
one vote per common share which would be issuable upon conversion of the
preferred stock. The Company may force conversion at the time of a public
offering by the Company of its common stock. The Class B mandatorily redeemable
preferred stock has priority over Class A preferred stock and common stock upon
liquidation of the Company, to the extent of liquidation value. In addition,
Class B mandatorily redeemable preferred stock has preference over Class C
convertible redeemable preferred stock, up to an amount equal to 63% of the
liquidation value of the outstanding Class B shares.
The Company had reserved 5,487 shares of common stock for issuance upon
conversion. The mandatorily redeemable preferred stock was settled in connection
with the merger described in Note 1.
F-33
<PAGE>
TRAK INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) (CONTINUED)
8. SHAREHOLDERS' EQUITY
CLASS A PREFERRED STOCK--The holders of this preferred stock are entitled to
convert, at any time, their shares into shares of common stock on a one-for-one
basis. The Company may force conversion at the time of a public offering by the
Company of its common stock. The Class A preferred stock has priority over
common stock upon liquidation of the Company, to the extent of liquidation
value. Each share of Class A preferred stock is entitled to one vote.
The Company had reserved 1,408 shares of common stock for issuance upon
conversion.
CLASS C CONVERTIBLE PREFERRED STOCK--The convertible preferred stock carries
a 6% cumulative dividend rate, payable quarterly based upon the liquidation
value of the stock. Liquidation value is defined as $1,000 per share plus any
dividends in arrears.
The holders of the Class C preferred stock are entitled to convert at any
time prior to September 15, 1995, each share into 1.11 shares of common stock.
The holder of this Class C preferred stock is entitled to one vote per common
share which would be issuable upon conversion of the preferred stock. On or
after September 15, 1995, the Company has the option to redeem the Class C
preferred shares, in whole or in part, at a price per share equal to the
liquidation value. The Class C convertible preferred stock has priority over
Class A preferred stock and common stock upon liquidation of the Company, to the
extent of liquidation value.
The Company had reserved 1,234 shares of common stock for issuance upon
conversion.
COMMON STOCK--Each share of common stock is entitled to one vote. On August
9, 1995, the Company's convertible notes payable were converted to 1,110 shares
of Common Stock.
ADDITIONAL PAID-IN CAPITAL--On August 9, 1995, the Company's convertible
notes payable were converted, based on the terms of their respective agreements,
at $900 per share into 1,110 shares of common stock and $997 of additional
paid-in capital.
TREASURY STOCK--During the period ended September 30, 1994, the Company
repurchased 5 shares of its Class A preferred stock for cash and took receipt of
100 shares of its Class A preferred stock in exchange for forgiveness of
outstanding past due receivable amounts from a customer.
STOCK WARRANTS--The holders of the convertible subordinated notes
outstanding at September 30, 1994 (see Note 3) also hold warrants to purchase an
aggregate total of 320 shares of the Company's common stock at a price of $940
per share. These warrants are exercisable any time and expire on the earlier of
a) the date no further amounts remain outstanding under the convertible
subordinated notes payable or b) the closing of a registered offering of Company
common stock.
STOCK OPTIONS--Certain of the Company's officers have been granted options
to purchase an aggregate total of 600 shares of the Company's common stock at a
price between $750 and $940 per share as set forth in the respective common
stock option agreements. These options are exercisable immediately and terminate
between 2001 and 2003.
At September 30, 1994, no options were exercised.
All the above described preferred stock, stock warrants and stock options
were settled in connection with the merger described in Note 1.
F-34
<PAGE>
TRAK INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) (CONTINUED)
9. POSTRETIREMENT BENEFITS
The Company adopted the provisions of Statement of Financial Accounting
Standards No. 106, "Employer's Accounting for Postretirement Benefits Other Than
Pensions" (OPEB or SFAS 106) at October 1, 1994. This standard requires
recognition of the cost of providing postretirement benefits during an
employee's period of service.
The Company provides health care and life insurance benefits for certain
employees who retired prior to November 13, 1987 (less than 100 retirees at
September 30, 1994). Management plans to fund the premiums as incurred, net of
reimbursements received by plan participants.
In the period ended August 16, 1995, the Company recorded a $408 accrued
postretirement benefit obligation, which represents a change in accounting
principle. There are no plan assets. For measurement purposes, a 10.5% annual
rate of increase in health care premiums was assumed for 1995; this rate was
assumed to decrease 1% per year to 5.5% in 2000 and remain at that level
thereafter. The weighted average discount rate used to determine the accumulated
postretirement benefit obligation was 7.5% at August 16, 1995. The obligation
was calculated utilizing the 1983 group annuity mortality tables for males and
females. The annual periodic postretirement benefit cost for the plan year
beginning July 1, 1995 will approximate $29.
10. RELATED PARTIES
Several of the Company's shareholders are dealers in the Company's
equipment. Sales of equipment to these dealers approximated $13,672 and $17,303
for the periods ended September 30, 1994 and August 16, 1995, respectively. One
of the Company's shareholders supplies inventory to the Company. Purchases of
inventory from this shareholder amounted to $2,479 and $4,166 for the periods
ended September 30, 1994 and August 16, 1995, respectively. Management believes
these transactions to be at arms-length.
The Company had trade receivables from related parties of $2,235 at
September 30, 1994. The Company also had trade payables to related parties of
$294 at September 30, 1994.
The holders of the Company's convertible notes payable described in Note 3
also own the Company's Class B mandatorily redeemable preferred stock and hold
stock warrants. The holders of the Company's other subordinated notes payable
own the Company's Class C preferred stock.
See also discussion of other noncurrent assets in Note 2.
11. CUSTOMER FINANCING ARRANGEMENTS
The Company has financing arrangements with certain third-party financing
institutions to facilitate dealer purchases of equipment under a floor plan
arrangement. The Company is obligated to repurchase the outstanding loan balance
of a dealer in the event of default by the dealer which is not cured by such
dealer within a 90 day period. A security interest in the equipment financed is
maintained by the finance companies. Aggregate outstanding loan balances under
these agreements at September 30, 1994 approximated $22,390. Aggregate losses
under one of the arrangements for calendar year 1995 are limited to 25% of the
outstanding loan balance at December 31, 1994. The outstanding loan balance at
December 31, 1994 under this arrangement approximated $24,841.
F-35
<PAGE>
TRAK INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) (CONTINUED)
11. CUSTOMER FINANCING ARRANGEMENTS (CONTINUED)
The Company maintains a reserve for potential repurchases of loans in
default under the floor plan arrangements described above. This reserve is
included in other current liabilities and totaled approximately $47 and $177 at
September 30, 1994 and August 16, 1995, respectively. The related provision
charged to operations totaled approximately $148 and $151 for the periods ended
September 30, 1994 and August 16, 1995, respectively.
In conjunction with these floor plan arrangements the Company incurs
dealer-related finance charges at varying rates up to a maximum of six months.
The finance charges incurred by the Company for the periods ended September 30,
1994 and August 16, 1995 for all outstanding customer financing arrangements
totaled $864 and $1,320, respectively.
12. CONCENTRATIONS OF CREDIT
The Company principally sells its products through a distribution network
and performs ongoing credit evaluations of its dealers and distributors. The
Company maintains reserves for potential credit losses and historically such
losses have been within management's expectations. At September 30, 1994 the
Company's five largest dealers and distributors represented approximately 21% of
trade receivables. In addition, sales to such dealers and distributors for the
periods ended September 30, 1994 and August 16, 1995 approximated 23% and 22%,
respectively, of the Company's net sales.
13. CONTINGENCIES
The Company is included in various litigation consisting almost entirely of
product and general liability claims arising in the normal course of business.
The Company maintains insurance policies relative to product and general
liability claims and has provided reserves for the estimated cost of the
self-insured retention; accordingly, these actions, when ultimately concluded,
are not expected to have a material adverse effect on the financial position or
results of operations of the Company.
F-36
<PAGE>
TRAK INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) (CONTINUED)
14. SUPPLEMENTAL BALANCE SHEET INFORMATION
<TABLE>
<CAPTION>
SEPTEMBER 30, 1994
------------------
<S> <C>
ACCOUNTS RECEIVABLE, NET:
Trade receivables....................................................... $ 10,385
Less allowance for doubtful accounts.................................... (162)
Other receivables....................................................... 137
-------
$ 10,360
-------
-------
INVENTORIES:
Finished goods.......................................................... $ 4,267
Work in process......................................................... 1,751
Raw materials........................................................... 2,686
-------
$ 8,704
-------
-------
PREPAID EXPENSES AND OTHER CURRENT ASSETS:
Deferred income taxes................................................... $ 877
Other................................................................... 466
-------
$ 1,343
-------
-------
PROPERTY, PLANT AND EQUIPMENT, NET:
Machinery and equipment................................................. $ 5,775
Buildings and building improvements..................................... 3,095
Land and land improvements.............................................. 263
Construction in progress................................................ 201
-------
Total property, plant and equipment, at cost............................ 9,334
Less: accumulated depreciation.......................................... (3,137)
-------
$ 6,197
-------
-------
ACCRUED LIABILITIES:
Accrued employee compensation and benefits, including taxes............. $ 880
Accrued warranty........................................................ 638
Accrued compensation.................................................... 389
Product liability reserves.............................................. 264
Other................................................................... 448
-------
$ 2,619
-------
-------
</TABLE>
F-37
<PAGE>
TRAK INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) (CONTINUED)
15. QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data for fiscal 1994 and 1995 appears below:
<TABLE>
<CAPTION>
NET INCOME (LOSS)
NET SALES GROSS PROFIT
-------------------- -------------------- --------------------
1994 1995(1) 1994 1995(1) 1994 1995(1)
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
First quarter................................ $ 10,210 $ 17,821 $ 1,692 $ 4,223 $ (888) $ 38(2)
Second quarter............................... 15,628 22,914 3,606 5,288 876 867
Third quarter................................ 18,676 24,229 4,599 5,671 758 850
Fourth quarter............................... 16,459 10,437 3,868 2,512 579 533
--------- --------- --------- --------- --------- ---------
$ 60,973 $ 75,401 $ 13,765 $ 17,694 $ 1,325 $ 2,288
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
</TABLE>
- ------------------------
(1) Amounts are for the period from October 1, 1994 through August 16, 1995, the
period preceding the acquisition described in Note 1.
(2) In October 1994, TRAK adopted Statement of Financial Accounting Standards
No. 106, "Employer's Accounting for Postretirement Benefits Other Than
Pensions" (SFAS 106). The cumulative effect of adopting SFAS 106 was to
record a charge of $408, less applicable income tax benefits of $167.
F-38
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
of Omniquip International, Inc.
In our opinion, the accompanying balance sheet and related statements of
income, of changes in stockholders' equity and of cash flows present fairly, in
all material respects, the financial position of Lull Industries, Inc. at
December 31, 1995 and August 15, 1996, and the results of its operations and its
cash flows for the fiscal years ended December 31, 1994 and 1995, and for the
period January 1, 1996 through August 15, 1996, respectively, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
As explained in Note 1, effective August 15, 1996, Omniquip International,
Inc. purchased substantially all of the assets and assumed certain liabilities
of Lull Industries, Inc.
Price Waterhouse LLP
St. Louis, Missouri
November 1, 1996
F-39
<PAGE>
LULL INDUSTRIES, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER
31, AUGUST 15,
1995 1996
----------- -----------
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE DATA)
<S> <C> <C>
ASSETS
Current assets:
Cash.............................................................. $ 520 $ 3,959
Accounts receivable, net.......................................... 5,106 6,231
Inventories....................................................... 10,422 11,762
Rental equipment, less accumulated depreciation of $52 and $0,
respectively.................................................... 997
Prepaid expenses and other current assets......................... 147 121
----------- -----------
Total current assets.......................................... 17,192 22,073
Property, plant and equipment, net.................................. 6,350 7,051
Other assets, net................................................... 541 514
----------- -----------
$ 24,083 $ 29,638
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt................................. $ 986 $ 79
Current portion of long-term debt-related party................... 500 500
Accounts payable.................................................. 4,255 7,667
Accrued liabilities............................................... 7,107 12,338
----------- -----------
Total current liabilities..................................... 12,848 20,584
Long-term debt...................................................... 898 851
Long-term debt-related parties...................................... 3,000 3,000
----------- -----------
Total liabilities............................................. 16,746 24,435
----------- -----------
Commitments and contingencies (Notes 4 and 9)
Stockholders' equity:
Class A voting common stock; no par value, stated at $100 per share;
authorized 1,000,000 shares; issued 21,400 and 23,150 shares,
respectively........................................................ 2,140 2,315
Class B nonvoting common stock; authorized 1,000,000 shares; no shares
issued..............................................................
Additional paid-in capital............................................ 238 728
Retained earnings..................................................... 5,040 2,398
----------- -----------
7,418 5,441
Less notes receivable from stockholders (Note 5)...................... (81) (238)
----------- -----------
Total stockholders' equity............................................ 7,337 5,203
----------- -----------
$ 24,083 $ 29,638
----------- -----------
----------- -----------
</TABLE>
See accompanying Notes to Financial Statements.
F-40
<PAGE>
LULL INDUSTRIES, INC.
STATEMENT OF INCOME
<TABLE>
<CAPTION>
FOR THE
PERIOD
FOR THE FISCAL YEAR JANUARY 1,
ENDED 1996 FOR THE SIX
DECEMBER 31, THROUGH MONTHS
-------------------- AUGUST 15, ENDED
1994 1995 1996 JUNE 30, 1995
--------- --------- ------------- ---------------
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<S> <C> <C> <C> <C>
Net sales.................................... $ 45,838 $ 74,747 $ 61,898 $ 35,220
Cost of sales................................ 37,669 59,318 49,212 27,468
--------- --------- ------------- -------
Gross profit................................. 8,169 15,429 12,686 7,752
Selling, general and administrative
expenses................................... 3,565 5,987 4,823 2,593
Boom warranty charge (Note 4)................ 2,881
Stock compensation expense (Note 5).......... 234 504 750 252
--------- --------- ------------- -------
Operating income............................. 4,370 6,057 7,113 4,907
Other (income) expense:
Interest expense, net...................... 169 86 110 36
Interest expense-related parties........... 240 243 176 120
Other, net................................. 510 (424) (256) (48)
--------- --------- ------------- -------
Net income................................... $ 3,451 $ 6,152 $ 7,083 $ 4,799
--------- --------- ------------- -------
--------- --------- ------------- -------
</TABLE>
See accompanying Notes to Financial Statements.
F-41
<PAGE>
LULL INDUSTRIES, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE FISCAL YEARS ENDED DECEMBER 31, 1994 AND
DECEMBER 31, 1995 AND FOR THE PERIOD JANUARY 1, 1996 THROUGH AUGUST 15, 1996
<TABLE>
<CAPTION>
COMMON SHARES
OUTSTANDING RETAINED NOTES
--------------- ADDITIONAL EARNINGS RECEIVABLE
CLASS A CLASS A PAID-IN (ACCUMULATED FROM
VOTING VOTING CAPITAL DEFICIT) SHAREHOLDERS TOTAL
--------------- --------- ----------- ------------- ------------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1994............ 20 $ 2,000 $ -- $ (386) $ -- $ 1,614
Net income........................ 3,451 3,451
Distribution to stockholders...... -- -- -- (392) -- (392)
------ --------- ----- ------ ----- ---------
Balance, December 31, 1994.......... 20 2,000 -- 2,673 -- 4,673
Net income........................ 6,152 6,152
Distribution to stockholders...... (3,716) (3,716)
Exercise of employee stock options
(Note 5)........................ 1 140 238
Interest on stockholder notes
receivable...................... (6) (6)
Distributions to stockholders
applied to notes receivable..... -- -- -- (69) 69 --
------ --------- ----- ------ ----- ---------
Balance, December 31, 1995.......... 21 2,140 238 5,040 (81) 7,337
Net income........................ 7,083 7,083
Distribution to stockholders...... (9,697) (9,697)
Exercise of employee stock options
(Note 5)........................ 2 175 490 -- (180) 485
Interest on stockholder notes
receivable...................... (5) (5)
Distributions to stockholders
applied to notes receivable..... (28) 28
------ --------- ----- ------ ----- ---------
Balance, August 15, 1996............ 23 $ 2,315 $ 728 $ 2,398 $ (238) $ 5,203
------ --------- ----- ------ ----- ---------
------ --------- ----- ------ ----- ---------
</TABLE>
See accompanying Notes to Financial Statements.
F-42
<PAGE>
LULL INDUSTRIES, INC.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE FISCAL YEARS
ENDED FOR THE PERIOD
DECEMBER 31, JANUARY 1, 1996 FOR THE SIX
-------------------- THROUGH MONTHS ENDED
1994 1995 AUGUST 15, 1996 JUNE 30, 1995
--------- --------- ----------------- ---------------
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income...................................................... $ 3,451 $ 6,152 $ 7,083 $ 4,799
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization................................. 504 627 493 217
Interest on stockholder notes receivable...................... (6) (5) --
Donations of equipment (Note 10).............................. 432
(Increase) decrease in current assets:
Accounts receivable, net.................................... (590) (2,810) (1,124) (2,313)
Inventories................................................. (1,908) (5,494) (1,340) (2,392)
Prepaid expenses and other current assets................... 63 (33) 26 (111)
Rental equipment............................................ (339) (657) 852 339
Increase (decrease) in current liabilities:
Accounts payable............................................ 2,723 1,106 3,412 1,339
Accrued liabilities......................................... 492 5,388 (83) (67)
--------- --------- ------ ------
Net cash provided by operating activities................. 4,828 4,273 9,314 1,811
--------- --------- ------ ------
Cash flows from investing activities:
Capital expenditures, net....................................... (2,670) (2,191) (1,023) (914)
Purchase of Mahto Industries, Inc. (Note 11).................... -- (500) -- (500)
--------- --------- ------ ------
Net cash used in investing activities..................... (2,670) (2,691) (1,023) (1,414)
--------- --------- ------ ------
Cash flows from financing activities:
Distributions to stockholders................................... (392) (3,716) (3,897) (2,682)
Net proceeds (payments) on debt under
revolving credit facility..................................... (2,905) (100) -- 2,500
Proceeds from long-term debt.................................... 1,994 250
Principal payments on long-term debt............................ (110) (955) (103)
Borrowings from stockholders.................................... 1,000
Principal payments on stockholder notes payable................. (500) -- -- --
--------- --------- ------ ------
Net cash used in financing activities..................... (2,797) (1,932) (4,852) (35)
--------- --------- ------ ------
Net increase (decrease) in cash........................... (639) (350) 3,439 362
Cash at beginning of period....................................... 1,509 870 520 870
--------- --------- ------ ------
Cash at end of period............................................. $ 870 $ 520 $ 3,959 $ 1,232
--------- --------- ------ ------
--------- --------- ------ ------
</TABLE>
<TABLE>
<CAPTION>
FOR THE FISCAL YEARS
ENDED FOR THE PERIOD
DECEMBER 31, JANUARY 1,
-------------------- 1996 THROUGH
1994 1995 AUGUST 15, 1996
--------- --------- -----------------
(IN THOUSANDS)
<S> <C> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash payments for interest............................... $ 446 $ 370 $ 218
--------- --------- ------
--------- --------- ------
Supplemental schedule of noncash investing and financing
activities:
Stockholder notes receivable issued for stock.......... $ -- $ 144 $ 180
--------- --------- ------
--------- --------- ------
Compensation expense recorded as additional paid-in
capital on stock issuance............................ $ -- $ 234 $ 485
--------- --------- ------
--------- --------- ------
Distributions to stockholders applied to notes
receivable........................................... $ -- $ 69 $ 28
--------- --------- ------
--------- --------- ------
Dividends declared but not paid........................ $ -- $ -- $ 5,800
--------- --------- ------
--------- --------- ------
</TABLE>
See accompanying Notes to Financial Statements.
F-43
<PAGE>
LULL INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
1. ACQUISITION OF THE COMPANY'S ASSETS AND ASSUMPTION OF CERTAIN LIABILITIES
On August 15, 1996, Omniquip International, Inc. (Omniquip) purchased
substantially all of the assets of Lull Industries, Inc. (the Company),
excluding cash, certain accounts receivable and rental equipment, and assumed
certain liabilities of the Company. The purchase price paid to the Company for
the assets totaled approximately $69,000, subject to certain adjustments, and
assumed liabilities totaled approximately $14,600. The acquisition was financed
through additional borrowings. In conjunction with the purchase of substantially
all of the assets and assumption of certain liabilities of the Company by
Omniquip, the Company's board of directors initiated and approved changes to the
Company's stock option plan, declared a special dividend and approved a special
payment related to the negotiation of the asset acquisition. The accompanying
financial statements have been prepared on a preacquisition basis of accounting
and do not reflect the effects of the acquisition of the net assets of the
Company by Omniquip International, Inc. and the related transactions described
in the preceding sentence.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting policies utilized by the Company require management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual amounts could differ
from these estimates. The significant accounting policies followed by the
Company are described below and are in conformity with generally accepted
accounting principles.
BUSINESS
The Company commenced full-time operations effective January 1, 1994 after
purchasing the assets of a predecessor business out of bankruptcy in November
1993, and after the completion of a plant and equipment reorganization in
November and December 1993. As a result thereof, a statement of operations for
the period November 1993 through December 31, 1993 is not presented in the
financial statements. The accumulated deficit at December 31, 1993 of ($386)
reflects the net start-up costs of the Company. The acquisition in November 1993
was accounted for under the purchase method of accounting and the purchase price
of approximately $7,000 was assigned to the net assets acquired based on their
fair market value at the acquisition date.
The Company is principally engaged in the manufacture and sale of rough
terrain telescopic material handlers to customers in the United States with a
primary focus on national rental fleets.
REVENUE RECOGNITION
Revenue is recognized upon shipment to the customer. Costs and related
expenses to manufacture the products are recorded as costs of sales when the
related revenue is recognized.
CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company considers all
highly liquid investments with an original maturity of three months or less to
be cash equivalents. The Company maintains its cash in bank deposit accounts
which may at times exceed federally insured limits. The Company has not
experienced any losses due to exceeding these limits.
F-44
<PAGE>
LULL INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RELATIONSHIPS WITH SUPPLIERS
The Company purchases several of its key component parts primarily from
specific suppliers. The Company believes that the supply of these components and
the number of alternative suppliers are adequate.
INVENTORIES
Inventories are stated at the lower of cost, determined using the first-in,
first-out (FIFO) method, or market. Obsolete, excess or unsaleable inventories
are reflected at their estimated realizable values.
RENTAL EQUIPMENT
Rental equipment consists of machines leased to the Company's largest
customer based on agreements which have expired in 1996. The rental equipment
had been depreciated on a straight-line basis over the estimated life of the
equipment. In 1996, these machines were sold to the customer, with gross profit
of $232 recognized for the excess of the sales price of $1,084 over the carrying
value of the machines.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is recorded at cost and is depreciated using
the straight-line method over the estimated useful lives of the assets which
range from five to thirty-nine years.
Expenditures for repairs, maintenance and minor renewals are charged to
income as incurred. Expenditures which improve an asset or extend its estimated
useful life are capitalized. When properties are retired or otherwise disposed
of, the related cost and accumulated depreciation are removed from the accounts
and any gain or loss is included in income.
WARRANTY COSTS
The Company provides, by a current charge to income, an amount it estimates
will be necessary to cover future warranty obligations for products sold during
the year. As further discussed in Note 4, the Company also provides for specific
warranty obligations as necessary and appropriate.
CUSTOMER REBATES
The Company offers its customers the opportunity to earn rebates based upon
volume of sales during the fiscal year. The Company provides, by a current
charge to income, an amount it estimates will ultimately be paid as rebates to
those customers based upon current sales levels and anticipated sales trends.
INCOME TAXES
The Company has elected to be taxed as a subchapter S Corporation under
sections of the federal and state income tax laws which provide that, in lieu of
corporate income taxes, the Company's stockholders include in their individual
income tax returns their pro rata share of the Corporation's taxable income.
Therefore, these statements do not include any provision for corporate income
taxes.
F-45
<PAGE>
LULL INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company records all financial instruments, including cash and cash
equivalents, accounts receivable, accounts payable, other accruals and notes
payable, at cost which approximates fair value.
FISCAL YEAR
The Company's fiscal year end is December 31.
EARNINGS PER SHARE INFORMATION
Given the historical organization and capital structure of the Company,
earnings per share information is not considered meaningful or relevant and has
not been presented in the accompanying financial statements or the notes
thereto.
UNAUDITED INFORMATION
The income statement and cash flow data for the six months ended June 30,
1995 are unaudited. However, in the opinion of management, such information has
been prepared on a basis consistent with the audited financial statements and
includes all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of the results of operations presented.
F-46
<PAGE>
LULL INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
3. FINANCING
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, AUGUST 15,
1995 1996
------------- -----------
<S> <C> <C>
Stockholder note payable--principal due November 23, 1998; interest due annually at 8%;
subordinated to bank debt; secured by all assets of the Company...................... $ 3,000 $ 3,000
Stockholder note payable--principal due January 31, 1996 and in arrears; interest due
monthly at the prime rate plus .5% (8.75% at August 15, 1996); secured by land and
buildings............................................................................ 500 500
Term note payable to City of Eagan, MN--principal plus interest at 4% due in monthly
installments of $2,531 with a final payment due in April 2005; secured by certain
equipment and personal guarantees of the Company's stockholders...................... 236 222
Term notes payable to financing company--principal plus interest at 9.5% due in monthly
installments of $87,205, with the final payment made in August 1996; secured by
certain rental equipment............................................................. 915
Mortgage note payable to bank--principal due in monthly installments of $4,167, plus
interest at the prime rate (8.25% at August 15, 1996), through August 1998, with
remaining balance due September 1998; secured by building............................ 733 708
Revolving credit agreement............................................................. -- --
------ -----------
5,384 4,430
Less--current portion of long-term debt................................................ 1,486 579
------ -----------
$ 3,898 $ 3,851
------ -----------
------ -----------
</TABLE>
The Company maintains a revolving credit agreement with a bank. This
agreement provides for borrowings of up to the lesser of $4,000 or a borrowing
base formula determined by eligible receivables and inventories. Borrowings
under this line of credit are due April 30, 1997 and bear interest at the prime
rate (8.25% at August 15, 1996). Borrowings outstanding under the agreement were
$100, $0 and $0 at December 31, 1994 and 1995, and August 15, 1996,
respectively. At August 15, 1996, the Company had unused borrowing capacity of
$4,000 under this facility. Substantially all of the Company's assets are
pledged as security under the credit agreement. In addition, the Company's two
primary stockholders have personally guaranteed any borrowings thereunder up to
$500 in total, and have pledged their shares of the Company's common stock as
collateral. The loan requires maintenance of minimum working capital, net worth,
and other financial ratios and contains other covenants limiting borrowings,
cash dividends or distributions, and equipment purchases. The Company has
obtained a waiver from the bank for any covenant violations.
Interest expense relative to stockholder notes payable approximated $240,
$243 and $176 for the fiscal years ended December 31, 1994 and 1995 and for the
period January 1, 1996 through August 15, 1996, respectively.
F-47
<PAGE>
LULL INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
3. FINANCING (CONTINUED)
Maturities of long-term debt for the period and fiscal years subsequent to
August 15, 1996 are as follows:
<TABLE>
<S> <C>
August 15--December 31, 1996........................................ $ 527
1997................................................................ 72
1998................................................................ 3,661
1999................................................................ 24
2000................................................................ 25
Thereafter.......................................................... 121
---------
$ 4,430
---------
---------
</TABLE>
All of the Company's outstanding debt was repaid in conjunction with the
purchase of the Company's assets by Omniquip, as described in Note 1.
4. BOOM WARRANTY CHARGE
During 1995, the Company determined that a specific warranty obligation had
been incurred on certain manufactured boom units. The Company completed its
initial assessment of the magnitude of the potential warranty claims and
recorded a charge to operations of $2,881 for the fiscal year ended December 31,
1995. This amount represents the Company's estimate of the total costs
associated with this warranty obligation. At December 31, 1995 and August 15,
1996, a corresponding liability of $2,881 and $2,600, respectively, is reflected
as a component of accrued liabilities in the accompanying balance sheet.
5. STOCK COMPENSATION EXPENSE
The Company has a stock option plan for certain key employees whereby the
Company granted options on January 5, 1994 to purchase 9,114 shares of the
Company's Class A common stock at exercise prices ranging from $100 to $110 per
share. Fair value of the common stock was determined by the Board of Directors
to be $100 per share at the grant date. These options are exercisable over five
years from date of grant based upon individual vesting provisions and Company
profitability. Additionally, the options contain a repurchase provision whereby
the Company may buy back the stock at some future date, based on a per share
price equal to 110% of the Company's net book value. During 1995 and 1996,
options to acquire 1,400 and 1,750 common shares, respectively, were exercised
in accordance with the terms of the agreement. Approximately $144 and $180,
respectively, in interest-bearing notes were issued to the employees to finance
the exercise of the stock options, which have carrying values of $81 and $238 at
December 31, 1995 and August 15, 1996, respectively. The options and any related
stock purchases may be canceled if income levels are not achieved over the
five-year period or in the event of termination of employment of the key
employees.
During the fiscal years ended December 31, 1994 and 1995, and in the period
January 1, 1996 through August 15, 1996, stock compensation expense in the
amount of $234, $504 and $750, respectively, has been recorded and charged to
operations in relation to this plan. Such compensation expense was determined
based on the difference between the exercise price at the date of grant and the
formula price to be paid by the Company upon repurchase.
F-48
<PAGE>
LULL INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
6. RETIREMENT PLANS
Effective August 1, 1995, the Company adopted a 401(k) profit sharing plan
which covers substantially all eligible employees who meet certain service and
age requirements. Commencing January 1, 1996, the Company has provided a
matching contribution equal to 100% of each eligible participant's contributions
to the plan at a rate of between 1% and 5% of the employee's salary, depending
on the employee's years of service, as defined. In addition, the Company may
make discretionary contributions to the plan. During the period January 1, 1996
through August 15, 1996, the Company contributed $66 to the plan.
7. CUSTOMER FINANCING ARRANGEMENTS
The Company is a party to a retail finance agreement with a financing
company, which provides the Company's distributors with financing for equipment
purchases from the Company. The financing company has also agreed to provide
financing for distributors' purchases of Company-produced equipment used as
rental inventory by the distributors. Such contracts are arranged on an
instalment basis with a balloon payment by the distributor for the residual
balance at the end of the term (typically due 48 months from date of shipment).
In the event the distributor does not elect to pay or refinance the balloon
payment, the Company has agreed to pay the residual amount if requested by the
financing company. A secured interest in the equipment financed is maintained by
the finance company. Aggregate outstanding loan balances under this agreement as
of December 31, 1995 and August 15, 1996 were approximately $2,600 and $10,887,
respectively. This contingency would be reduced by proceeds from the sales of
related equipment. Management believes that any such liability under this
arrangement, if incurred, would not have a material impact on the results of
operations or financial condition of the Company.
8. CONCENTRATIONS OF CREDIT
Sales are made throughout the United States primarily on credit terms
established on an individual customer basis. The Company performs ongoing credit
evaluations of its customers. The Company maintains reserves for potential
credit losses and historically such losses have been within management's
expectations. Sales to the Company's five largest customers during the fiscal
years ended December 31, 1994 and 1995 and the period January 1, 1996 through
August 15, 1996 were 49%, 48% and 42% of net sales, respectively. Receivables
from these customers approximated 13% and 43% of trade accounts receivable at
December 31, 1995 and August 15, 1996, respectively.
9. CONTINGENCIES
The Company is included in various litigation consisting almost entirely of
product and general liability claims arising in the normal course of business.
The Company maintains insurance policies relative to product and general
liability claims and has provided reserves for the estimated cost of the
self-insured retention; accordingly, these actions, when ultimately concluded,
are not expected to have a material adverse effect on the financial position or
results of operations of the Company.
10. DONATIONS OF EQUIPMENT
The Company donated certain equipment with a net book value of $432 to
various nonprofit organizations in 1994. These items were originally acquired by
the Company in 1993 in connection with the acquisition and formation of the
business. This type of donation is not expected to occur in the future and
accordingly, management has classified the associated expense as nonoperating.
F-49
<PAGE>
LULL INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
11. ACQUISITION OF MAHTO INDUSTRIES, INC.
In April 1995, the Company purchased the inventory and production equipment
of Mahto Industries, Inc., a manufacturer of light-duty construction equipment
for $500. The acquisition has been accounted for as a purchase, and results of
operations since the date of acquisition are included in the statement of
income. The fair value of the net assets acquired exceeded the purchase price by
approximately $200, which was applied to reduce the carrying value of the
production equipment. The pro forma impact of this acquisition on the Company's
operating results was immaterial.
12. SUPPLEMENTAL BALANCE SHEET INFORMATION
<TABLE>
<CAPTION>
AUGUST
DECEMBER 31, 15,
1995 1996
------------ ---------
<S> <C> <C>
ACCOUNTS RECEIVABLE, NET:
Trade receivables...................................................................... $ 4,906 $ 6,378
Less allowance for doubtful accounts................................................... (100) (149)
Other receivables...................................................................... 300 7
------------ ---------
$ 5,106 $ 6,231
------------ ---------
------------ ---------
INVENTORIES:
Finished goods......................................................................... $ 1,958 $ 6,669
Work in process........................................................................ 743 1,598
Raw materials.......................................................................... 7,721 3,495
------------ ---------
$ 10,422 $ 11,762
------------ ---------
------------ ---------
PROPERTY, PLANT AND EQUIPMENT, NET:
Machinery and equipment................................................................ $ 3,451 $ 4,460
Buildings and building improvements.................................................... 2,785 2,865
Land and land improvements............................................................. 414 414
Furniture and fixtures................................................................. 796 840
------------ ---------
Total property, plant and equipment, at cost........................................... 7,446 8,579
Less: accumulated depreciation......................................................... (1,096) (1,528)
------------ ---------
$ 6,350 $ 7,051
------------ ---------
------------ ---------
ACCRUED LIABILITIES:
Accrued customer rebates............................................................... $ 2,532 $ 2,097
Accrued salaries and employee benefits................................................. 422 580
Accrued stock compensation expense..................................................... 504 769
Dividends declared and payable......................................................... -- 5,800
Accrued boom warranty.................................................................. 2,881 2,000
Other accrued warranty................................................................. 346 537
Other.................................................................................. 422 555
------------ ---------
$ 7,107 $ 12,338
------------ ---------
------------ ---------
</TABLE>
F-50
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses in connection with the Offering (other than the
underwriting discounts and commissions) are set forth in the following table
(all amounts except the SEC registration fee, the NASD filing fee and the NASDAQ
listing fee are estimated):
<TABLE>
<CAPTION>
PAYABLE BY
COMPANY
------------
<S> <C>
Securities and Exchange Commission registration fee............................. $ 34,849
NASD filing fee................................................................. 12,000
Accounting fees and expenses.................................................... 375,000
Legal fees and expenses......................................................... 375,000
Printing........................................................................ 125,000
NASDAQ listing fee.............................................................. 50,000
Miscellaneous................................................................... 28,151
------------
Total....................................................................... 1,000,000
------------
------------
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of the State of Delaware permits
the Company, subject to the standards set forth therein, to indemnify any person
in connection with any action, suit or proceeding brought or threatened by
reason of the fact that such person is or was a director, officer, employee or
agent of the Company or is or was serving as such with respect to another
corporation or entity at the request of the Company. Article VII, Section 8 of
the Company's By-laws provides for full indemnification of its officers,
directors and employees to the extent permitted by Section 145.
Pursuant to the Underwriting Agreement filed hereto as Exhibit No. 1, the
Underwriters will agree to indemnify the Company's officers, directors and
controlling persons against, or contribute to, certain liabilities which might
arise under the Securities Act of 1933, as amended.
The agreement of limited partnership of Investments L.P. provides for the
indemnification by Investments L.P. of the Company (as an affiliate of the
general partner of Investments L.P.) and its directors, officers and employees
against certain liabilities which might arise under the Securities Act of 1933,
as amended.
Pursuant to an Indemnification Agreement between the Company and Investments
L.P. filed as an exhibit hereto, the Company will agree to indemnify Investments
L.P. against certain liabilities which might arise under the Securities Act of
1933, as amended.
Directors and officers of the Company will be insured against certain
liabilities, including liabilities arising under the Securities Act of 1993, as
amended.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
The following securities of the Company were sold by the Company within the
past three years without registration:
On August 16, 1995, Uniquip Corporation sold 820,000 shares of Common Stock
to Harbour Group Investments III, L.P. for $5,209,411.76 payable in cash.
II-1
<PAGE>
On August 16, 1995, Uniquip Corporation sold 100,000 shares of Common Stock
to Uniquip-HGI Associates, L.P. for $635,294.12 payable $600,000 in cash and the
balance by a promissory note.
On August 16, 1995, Uniquip Corporation sold 30,000 shares of Common Stock
to P. Enoch Stiff for $190,588.24 payable in cash.
On September 20, 1995, Uniquip Corporation sold 20,000 shares of Common
Stock to P. Enoch Stiff for $127,059 payable $200 in cash and the balance by a
promissory note.
On September 20, 1995, Uniquip Corporation sold 7,500 shares of Common Stock
to James H. Hook for $47,647 payable $75 in cash and the balance by a promissory
note.
On September 20, 1995, Uniquip Corporation sold 7,500 shares of Common Stock
to Curtis J. Laetz for $47,647 payable $75 in cash and the balance by a
promissory note.
On September 20, 1995, Uniquip Corporation sold 7,500 shares of Common Stock
to Robert D. Melin for $47,647 payable $75 in cash and the balance by a
promissory note.
On September 20, 1995, Uniquip Corporation sold 7,500 shares of Common Stock
to Paul D. Roblee for $47,647 payable $75 in cash and the balance by a
promissory note.
All such transactions were effected in reliance on the exemption from
registration provided by Section 4(2) of the Securities Act of 1933.
On September 30, 1996, Uniquip Corporation changed its name to Omniquip
International, Inc. and effected a 10 for 1 stock split.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<C> <S>
1 Form of Underwriting Agreement
**3.1 Restated Certificate of Incorporation of the Registrant
**3.2 Amended By-laws of the Registrant
*5 Opinion of Dickstein Shapiro Morin & Oshinsky LLP re: legality of Common Stock
being registered
**10.1 Purchase and Stockholder Agreement, dated September 20, 1995, by and between
Uniquip Corporation and P. Enoch Stiff
**10.2 Stock Pledge Agreement, dated September 20, 1995, by and between P. Enoch Stiff and
Uniquip Corporation
**10.3 $126,859 Promissory Note, dated September 20, 1995, by P. Enoch Stiff to Uniquip
Corporation
**10.4 Letter Agreement, dated September 20, 1995, by and between P. Enoch Stiff and
Uniquip Corporation
**10.5 Amendment to Promissory Note and Stock Pledge Agreement, dated September 30, 1996,
by and between Omniquip International, Inc. and P. Enoch Stiff
**10.6 Investment Agreement, dated August 16, 1995, by and between P. Enoch Stiff and
Harbour Group Investments III, L.P.
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S>
**10.7 Participation Agreement, dated August 16, 1995, by and between P. Enoch Stiff and
Harbour Group Investments III, L.P.
**10.8 Purchase and Stockholder Agreement, dated September 20, 1995, by and between
Uniquip Corporation and James H. Hook
**10.9 Stock Pledge Agreement, dated September 20, 1995, by and between James H. Hook and
Uniquip Corporation
**10.10 $47,572 Promissory Note, dated September 20, 1995, by James H. Hook to Uniquip
Corporation
**10.11 Letter Agreement, dated September 20, 1995, by and between James H. Hook and
Uniquip Corporation
**10.12 Amendment to Promissory Note and Stock Pledge Agreement, dated September 30, 1996,
by and between Omniquip International, Inc. and James H. Hook
**10.13 Purchase and Stockholder Agreement, dated September 20, 1995, by and between
Uniquip Corporation and Curtis J. Laetz
**10.14 Stock Pledge Agreement, dated September 20, 1995, by and between Curtis J. Laetz
and Uniquip Corporation
**10.15 $47,572 Promissory Note, dated September 20, 1995, by Curtis J. Laetz to Uniquip
Corporation
**10.16 Letter Agreement, dated September 20, 1995, by and between Curtis J. Laetz and
Uniquip Corporation
**10.17 Amendment to Promissory Note and Stock Pledge Agreement, dated September 30, 1996,
by and between Omniquip International, Inc. and Curtis J. Laetz
**10.18 Purchase and Stockholder Agreement, dated September 20, 1995, by and between
Uniquip Corporation and Robert D. Melin
**10.19 Stock Pledge Agreement, dated September 20, 1995, by and between Robert D. Melin
and Uniquip Corporation
**10.20 $47,572 Promissory Note, dated September 20, 1995, by Robert D. Melin to Uniquip
Corporation
**10.21 Letter Agreement, dated September 20, 1995, by and between Robert D. Melin and
Uniquip Corporation
**10.22 Amendment to Promissory Note and Stock Pledge Agreement, dated September 30, 1996,
by and between Omniquip International, Inc. and Robert D. Melin
**10.23 Purchase and Stockholder Agreement, dated September 20, 1995, by and between
Uniquip Corporation and Paul D. Roblee
**10.24 Stock Pledge Agreement, dated September 20, 1995, by and between Paul D. Roblee and
Uniquip Corporation
**10.25 $47,572 Promissory Note, dated September 20, 1995, by Paul D. Roblee to Uniquip
Corporation
**10.26 Letter Agreement, dated September 20, 1995, by and between Paul D. Roblee and
Uniquip Corporation
</TABLE>
II-3
<PAGE>
<TABLE>
<C> <S>
**10.27 Amendment to Promissory Note and Stock Pledge Agreement, dated September 30, 1996,
by and between Omniquip International, Inc. and Paul D. Roblee
**10.28 Omniquip International, Inc. 1996 Executive Stock Option Plan
**10.29 Form of Option Agreement pursuant to the Omniquip International, Inc. 1996
Executive Stock Option Plan
**10.30 Omniquip International, Inc. 1996 Long-Term Incentive Plan
**10.31 Omniquip International, Inc. 1996 Directors Non-Qualified Stock Option Plan
**10.32 Form of Option Agreement pursuant to the Omniquip International, Inc. 1996
Directors Non-Qualified Stock Option Plan
**10.33 Amended and Restated Subordinated Note Agreement, dated August 16, 1996, by and
between TRAK International, Inc. and Harbour Group Investments III, L.P.
**10.34 Subordinated Note Agreement, dated August 16, 1996, by and between Uniquip
Corporation and The Boatmen's National Bank of St. Louis
10.35 Loan Agreement, dated August 16, 1996, by and among The Boatmen's National Bank of
St. Louis, as agent, The Boatmen's National Bank of St. Louis and the other lenders
named therein, as lenders, TRAK International, Inc. and Lull Lift Corporation
10.36 Note Purchase Agreement, dated August 16, 1995, by and between TRAK International,
Inc. and The Minnesota Mutual Life Insurance Company
10.37 First Amendment to Note Agreements, dated as of July 18, 1996, by and between TRAK
International, Inc. and The Minnesota Mutual Life Insurance Company
10.38 Second Amendment to Note Agreements, dated August 16, 1996, by and between TRAK
International, Inc. and The Minnesota Mutual Life Insurance Company
**10.39 Insurance Agreement, dated September 27, 1996, by and between Harbour Group Ltd.
and Uniquip Corporation
10.40 Corporate Development Consulting and Advisory Services Letter Agreement, dated
September 30, 1996, by and between Omniquip International, Inc. and Harbour Group
Industries, Inc.
10.41 Operations Consulting and Advisory Services Letter Agreement, dated September 30,
1996, by and between Omniquip International, Inc. and Harbour Group Ltd.
*10.42 Registration Rights Agreement, dated September 30, 1996, by and among Omniquip
International, Inc., Uniquip-HGI Associates, L.P. and Harbour Group Investments
III, L.P.
**10.43 Stock Option Agreement, dated September 20, 1995, by and between Uniquip
Corporation and Harbour Group Investments III, L.P.
**10.44 Termination of Option Agreement, dated September 30, 1996, by and between Omniquip
International, Inc. and Harbour Group Investments III, L.P.
**10.45 Agreement and Plan of Merger, dated July 19, 1995, by and among TRK Acquisition
Corporation, TRAK International, Inc. and the major stockholders of TRAK
International, Inc. listed therein
**10.46 Indemnification and Escrow Agreement, dated August 16, 1995, by and among TRAK
International, Inc., the stockholders of TRAK International, Inc. listed therein
and The Boatmen's Trust Company, as Escrow Agent
</TABLE>
II-4
<PAGE>
<TABLE>
<C> <S>
**10.47 Asset Purchase Agreement, dated August 15, 1996, by and among Lull Lift
Corporation, Lull Industries, Inc. and the stockholders of Lull Industries, Inc.
listed therein
**10.48 Collective Bargaining Agreement, effective from November 1, 1994 to October 31,
1998, by and between TRAK International, Inc. and Local 1430, District No. 10
International Association of Machinists and Aerospace Workers
*10.49 Contract No. DAAE07-95-D-R012 between TRAK International, Inc. and U.S. Army Tank--
Automotive Command
*10.50 Floor Plan Repurchase Agreement, dated October 2, 1990, by and between TRAK
International, Inc. and Deutsche Financial Services
*10.51 Letter Agreement, dated September 24, 1996, by and between TRAK International, Inc.
and Deutsche Financial Services
*10.52 TRAK International, Inc. Deferred Compensation Arrangement for management
executives and directors
**10.53 Agreement, dated January 19, 1995, between CBM Industries, Inc., d/b/a RJ
Associates and Lull Industries, Inc.
**10.54 Industrial Park Lease, dated April 1, 1995, by and between the City of Oakes and
Lull Industries, Inc.
10.55 Retail Finance Agreement, effective July 14, 1994, between Lull Industries, Inc.
and Deere Credit, Inc.
*10.56 Form of Indemnification Agreement by and between Omniquip International, Inc. and
Harbour Group Investments III, L.P.
**21.0 Subsidiaries of the Registrant
23.1 Consents of Price Waterhouse LLP
*23.2 Consent of Dickstein Shapiro Morin & Oshinsky LLP (contained in Exhibit 5)
**23.3 Consent to serve as a director of Omniquip International, Inc. of Paul W. Jones
23.4 Consent to serve as a director of Omniquip International, Inc. of Jerry E. Ritter
**23.5 Consent to serve as a director of Omniquip International, Inc. of Joseph F.
Shaughnessy
**23.6 Consent to serve as a director of Omniquip International, Inc. of Robert L. Virgil
**24.0 Powers of Attorney
27.0 Financial Data Schedule
</TABLE>
- ------------------------
* To be filed by amendment.
** Previously filed.
II-5
<PAGE>
(b) Financial Statement Schedules
Schedule VII-- Omniquip International, Inc. Valuation and Qualifying
Accounts and Reserves for the period August 17, 1995 to
September 30, 1995 and the fiscal year ended September 30,
1996.
-- TRAK International, Inc. Valuation and Qualifying Accounts and
Reserves for the period October 1, 1994 to August 16, 1995 and
the fiscal year ended September 30, 1994.
Other Financial Statement Schedules are either not applicable, or the
information is included elsewhere in the Consolidated Financial Statements.
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Port Washington, State of
Wisconsin, on November 12, 1996.
OMNIQUIP INTERNATIONAL, INC.
(Registrant)
By: /s/ PHILIP G. FRANKLIN
-----------------------------------
Philip G. Franklin
VICE PRESIDENT--FINANCE AND
CHIEF FINANCIAL OFFICER
Pursuant to the Securities Act of 1933, this registration statement has been
signed by the following persons in the capacities indicated on November 12,
1996.
<TABLE>
<C> <S>
* President, Chief Executive Officer and
- ------------------------------------------- Director
P. Enoch Stiff (Principal executive officer)
/s/ PHILIP G. FRANKLIN Vice President--Finance and Chief Financial
- ------------------------------------------- Officer (Principal financial and accounting
Philip G. Franklin officer)
* Director and Chairman of the Board
- -------------------------------------------
Donald E. Nickelson
* Director
- -------------------------------------------
Peter S. Finley
* Director
- -------------------------------------------
Jeffrey L. Fox
* Director
- -------------------------------------------
Samuel A. Hamacher
</TABLE>
*By: /s/ PHILIP G. FRANKLIN
-------------------------
Philip G. Franklin
ATTORNEY-IN-FACT
- ------------------------
* Such signature has been affixed pursuant to the following Power of Attorney:
II-7
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each officer or director of Omniquip
International, Inc. (the "Corporation") whose signature appears below
constitutes and appoints P. Enoch Stiff and Philip G. Franklin, and each of
them, his true and lawful attorney-in-fact and agent, with full power of
substitution, for him and in his name, place and stead, in any and all
capacities, to sign the Corporation's Registration Statement on Form S-1
relating to the proposed public offering of the Corporation's Common Stock and
to sign any and all amendments (including post-effective amendments and any
registration statement or amendments thereto filed pursuant to Rule 462 as
promulgated under the Securities Act of 1933, as amended) and supplements
thereto, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agent full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and agent
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
II-8
<PAGE>
SCHEDULE VII
OMNIQUIP INTERNATIONAL, INC.
RULE 12-09 VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- ------------------------------------------ ----------- ------------------------ ----------- -----------
ADDITIONS
------------------------
BALANCE AT
BEGINNING CHARGED TO CHARGED BALANCE AT
VALUATION AND OF COSTS AND TO OTHER END OF
RESERVE ACCOUNTS PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
- ------------------------------------------ ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Accounts receivable reserve............... $ 173 $ 52 $ 145(1) $ 19 $ 351
----------- ----- ----------- ----- -----------
----------- ----- ----------- ----- -----------
Excess and obsolete
inventory reserves...................... $ 1,355 $ -- $ 1,500 $ 373 $ 2,482
----------- ----- ----------- ----- -----------
----------- ----- ----------- ----- -----------
</TABLE>
- ------------------------
(1) Reflects the acquisition of the net assets of Lull Industries, Inc.
S-1
<PAGE>
SCHEDULE VII
OMNIQUIP INTERNATIONAL, INC.
RULE 12-09 VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE PERIOD AUGUST 17, 1995 TO SEPTEMBER 30, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- ------------------------------------------ ----------- ------------------------ ----------- -----------
ADDITIONS
------------------------
BALANCE AT
BEGINNING CHARGED TO CHARGED BALANCE AT
VALUATION AND OF COSTS AND TO OTHER END OF
RESERVE ACCOUNTS PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
------------------ ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Accounts receivable reserve............... $ 173 $ -- $ -- $ -- $ 173
----------- ----- ----- ----- -----------
----------- ----- ----- ----- -----------
Excess and obsolete inventory reserves.... $ 1,218 $ 165 $ -- $ 28 $ 1,355
----------- ----- ----- ----- -----------
----------- ----- ----- ----- -----------
</TABLE>
S-2
<PAGE>
SCHEDULE VII
TRAK INTERNATIONAL, INC.
RULE 12-09 VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE PERIOD OCTOBER 1, 1994 TO AUGUST 16, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- ---------------------------------------------------- --------------- -------------------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
ADDITIONS
--------------------------
<CAPTION>
BALANCE AT CHARGED TO CHARGED BALANCE AT
VALUATION AND BEGINNING OF COSTS AND TO OTHER END OF
RESERVE ACCOUNTS PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
------------------ --------------- ------------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Accounts receivable reserve......................... $ 162 $ 11 $ -- $ -- $ 173
----- ----- --- --- -----
----- ----- --- --- -----
Excess and obsolete inventory reserves.............. $ 559 $ 115 $ -- $ 97 $ 577
----- ----- --- --- -----
----- ----- --- --- -----
</TABLE>
S-3
<PAGE>
SCHEDULE VII
TRAK INTERNATIONAL, INC.
RULE 12-09 VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- ---------------------------------------------------- --------------- -------------------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
ADDITIONS
--------------------------
<CAPTION>
BALANCE AT CHARGED TO CHARGED BALANCE AT
VALUATION AND BEGINNING OF COSTS AND TO OTHER END OF
RESERVE ACCOUNTS PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
------------------ --------------- ------------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Accounts receivable reserve......................... $ 171 $ 35 $ -- $ 44 $ 162
----- ----- --- ----- -----
----- ----- --- ----- -----
Excess and obsolete inventory reserves.............. $ 572 $ 120 $ -- $ 133 $ 559
----- ----- --- ----- -----
----- ----- --- ----- -----
</TABLE>
S-4
<PAGE>
________________ Shares
OMNIQUIP INTERNATIONAL. INC.
(Common Stock, $.01 par value)
UNDERWRITING AGREEMENT
___________, 1996
<PAGE>
___________, 1996
Morgan Stanley & Co. Incorporated
CS First Boston Corporation
Schroder Wertheim & Co. Incorporated
Robert W. Baird & Co. Incorporated
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Morgan Stanley & Co. International Limited
CS First Boston Limited
J. Henry Schroder & Co. Limited
Robert Baird & Co. Incorporated
c/o Morgan Stanley & Co. International Limited
25 Cabot Square
Canary Wharf
London E14 4QA
England
Dear Sirs and Mesdames:
Omniquip International, Inc., a Delaware corporation (the "Company"),
proposes to issue and sell to the several Underwriters (as defined below)
________ shares of its Common Stock, par value $.01 (the "Firm Shares"). As
part of the offering contemplated by this Agreement, Morgan Stanley & Co.
Incorporated ("Morgan Stanley") has agreed to reserve out of the Shares set
forth opposite its name on Schedule I to this Agreement, up to _____________
shares, for sale to the Company's employees, officers, and directors
(collectively, "Participants"), as set forth in the Prospectus under the heading
"Underwriting" (the "Directed Share Program"). The Shares to be sold by Morgan
Stanley pursuant to the Directed Share Program (the "Directed Shares") will be
sold by Morgan Stanley pursuant to this Agreement at the public offering price.
Any Directed Shares not orally confirmed for purchase by any Participants by the
end of the first business day after the date on which this Agreement is executed
will be offered to the public by Morgan Stanley as set forth in the Prospectus.
It is understood that, subject to the conditions hereinafter stated,
________ Firm Shares (the "U.S. Firm Shares") will be sold to the several U.S.
Underwriters named in Schedule I hereto (the "U.S. Underwriters") in connection
with
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the offering and sale of such U.S. Firm Shares in the United States and Canada
to United States and Canadian Persons (as such terms are defined in the
Agreement Between U.S. and International Underwriters of even date herewith),
and _________ Firm Shares (the "International Shares") will be sold to the
several International Underwriters named in Schedule II hereto (the
"International Underwriters") in connection with the offering and sale of such
International Shares outside the United States and Canada to persons other than
United States and Canadian Persons. Morgan Stanley & Co. Incorporated, CS First
Boston Corporation, J. Henry Schroder & Co. Limited and Robert W. Baird & Co.
Incorporated shall act as representatives (the "U.S. Representatives") of the
several U.S. Underwriters, and Morgan Stanley & Co. International Limited, CS
First Boston Limited, J. Henry Schroder & Co. Limited and Robert W. Baird & Co.
Incorporated shall act as representatives (the "International Representatives")
of the several International Underwriters. The U.S. Underwriters and the
International Underwriters are hereinafter collectively referred to as the
Underwriters.
Harbour Group Investments III, L.P. (the "Selling Shareholder") also
proposes to sell to the several U.S. Underwriters not more than an additional
___________ shares of the Company's Common Stock, par value $.01 (the
"Additional Shares") if and to the extent that U.S. Representatives, shall
have determined to exercise, on behalf of the U.S. Underwriters, the right to
purchase such shares of common stock granted to the Underwriters in Section 3
hereof. The Firm Shares and the Additional Shares are hereinafter
collectively referred to as the "Shares." The shares of Common Stock, par
value $.01, of the Company to be outstanding after giving effect to the sales
contemplated hereby are hereinafter referred to as the "Common Stock." The
Company and the Selling Shareholder are hereinafter sometimes collectively
referred to as the "Sellers."
The Company has filed with the Securities and Exchange Commission
(the "Commission") a registration statement, relating to the Shares. The
registration statement contains two prospectuses to be used in connection
with the offering and sale of the Shares: the U.S. prospectus, to be used in
connection with the offering and sale of Shares in the United States and
Canada to United States and Canadian Persons, and the international
prospectus, to be used in connection with the offering and sale of Shares
outside the United States and Canada to persons other than United States and
Canadian Persons. The international prospectus is identical to the U.S.
prospectus except for the outside front cover page. The registration
statement as amended at the time it becomes effective, including the
information (if any) deemed to be part of the registration statement at the
time of effectiveness pursuant to Rule 430A under the Securities Act of 1933,
as amended (the "Securities Act"), is hereinafter referred to as the
"Registration Statement"; the U.S. prospectus and the international
prospectus in the respective forms first used to confirm sales of Shares are
hereinafter collectively referred to as the "Prospectus." If the Company has
filed an abbreviated
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registration statement to register additional shares of Common Stock pursuant to
Rule 462(b) under the Securities Act (the "Rule 462 Registration Statement"),
then any reference herein to the term "Registration Statement" shall be deemed
to include such Rule 462 Registration Statement.
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to and agrees with each of the Underwriters that:
(a) The Registration Statement has become effective; no stop order
suspending the effectiveness of the Registration Statement is in effect,
and no proceedings for such purpose are pending before or, to the Company's
knowledge, threatened by the Commission.
(b) (i) The Registration Statement, when it became effective, did
not contain and, as amended or supplemented, if applicable, will not
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading, (ii) the Registration Statement and the Prospectus
comply and, as amended or supplemented, if applicable, will comply in all
material respects with the Securities Act and the applicable rules and
regulations of the Commission thereunder and (iii) the Prospectus does not
contain and, as amended or supplemented, if applicable, will not contain
any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, except that the representations
and warranties set forth in this paragraph 1(b) do not apply to statements
or omissions in the Registration Statement or the Prospectus based upon
information relating to any Underwriter furnished to the Company in writing
by such Underwriter through you expressly for use therein.
(c) The Company has been duly incorporated, is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, has the corporate power and authority to own its property
and to conduct its business as described in the Prospectus and is duly
qualified to transact business and is in good standing in each jurisdiction
in which the conduct of its business or its ownership or leasing of
property requires such qualification, except to the extent that the failure
to be so qualified or be in good standing would not have a material adverse
effect on the Company and its subsidiaries, taken as a whole.
(d) Each subsidiary of the Company has been duly incorporated, is
validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has the corporate power and authority to
own its property and to conduct its business as described in the Prospectus
and is duly
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qualified to transact business and is in good standing in each jurisdiction
in which the conduct of its business or its ownership or leasing of
property requires such qualification, except to the extent that the failure
to be so qualified or be in good standing would not have a material adverse
effect on the Company and its subsidiaries, taken as a whole.
(e) This Agreement has been duly authorized, executed and delivered
by the Company.
(f) The authorized capital stock of the Company conforms as to legal
matters to the description thereof contained in the Prospectus.
(g) The shares of Common Stock (including the Additional Shares to be
sold by the Selling Shareholder) outstanding prior to the issuance of the
Shares to be sold by the Company have been duly authorized and are validly
issued, fully paid and non-assessable.
(h) The Shares to be sold by the Company have been duly authorized
and, when issued and delivered in accordance with the terms of this
Agreement, will be validly issued, fully paid and non-assessable, and the
issuance of such Shares will not be subject to any preemptive or similar
rights.
(i) The execution and delivery by the Company of, and the performance
by the Company of its obligations under, this Agreement will not contravene
any provision of applicable law or the certificate of incorporation or
by-laws of the Company or any agreement or other instrument binding upon
the Company or any of its subsidiaries that is material to the Company and
its subsidiaries, taken as a whole, or any judgment, order or decree of any
governmental body, agency or court having jurisdiction over the Company or
any subsidiary, and no consent, approval, authorization or order of, or
qualification with, any governmental body or agency is required for the
performance by the Company of its obligations under this Agreement, except
such as may be required by the securities or Blue Sky laws of the various
states or the securities laws of non-U.S. jurisdictions in connection with
the offer and sale of the Shares.
(j) There has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the
condition, financial or otherwise, or in the earnings, business or
operations of the Company and its subsidiaries, taken as a whole, from that
set forth in the Prospectus (exclusive of any amendments or supplements
thereto subsequent to the date of this Agreement). Subsequent to the
respective dates as of which information is given in the Registration
Statement and the Prospectus, (1) the Company and its
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subsidiaries have not incurred any material liability or obligation, direct
or contingent, nor entered into any material transaction not in the
ordinary course of business; (2) the Company has not purchased any of its
outstanding capital stock, nor declared, paid or otherwise made any
dividend or distribution of any kind on its capital stock other than
ordinary and customary dividends; and (3) there has not been any material
change in the capital stock, short-term debt or long-term debt of the
Company and its consolidated subsidiaries, except in each case as described
in or contemplated by the Prospectus.
(k) There are no legal or governmental proceedings pending or
threatened to which the Company or any of its subsidiaries is a party or to
which any of the properties of the Company or any of its subsidiaries is
subject that are required to be described in the Registration Statement or
the Prospectus and are not so described or any statutes, regulations,
contracts or other documents that are required to be described in the
Registration Statement or the Prospectus or to be filed as exhibits to the
Registration Statement that are not described or filed as required.
(l) Each preliminary prospectus filed as part of the registration
statement as originally filed or as part of any amendment thereto, or filed
pursuant to Rule 424 under the Securities Act, complied when so filed in
all material respects with the Securities Act and the applicable rules and
regulations of the Commission thereunder.
(m) The Company is not and, after giving effect to the offering and
sale of the Shares and the application of the proceeds as described in the
Prospectus, will not be an "investment company," as such term is defined in
the Investment Company Act of 1940, as amended.
(n) The Company and its subsidiaries (i) are in compliance with any
and all applicable foreign, federal, state and local laws and regulations
relating to the protection of human health and safety (including
occupational health and safety), the environment or hazardous or toxic
substances or wastes, pollutants or contaminants (collectively,
"Environmental Laws"), (ii) have received all permits, licenses or other
approvals required of them under applicable Environmental Laws to conduct
their respective businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval, except where such
noncompliance with Environmental Laws, failure to receive required permits,
licenses or other approvals or failure to comply with the terms and
conditions of such permits, licenses or approvals would not, singly or in
the aggregate, have a material adverse effect on the Company and its
subsidiaries, taken as a whole.
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(o) There are no costs or liabilities associated with Environmental
Laws (including, without limitation, any capital or operating expenditures
required for clean-up, closure of properties or compliance with
Environmental Laws or any permit, license or approval, any related
constraints on operating activities and any potential liabilities to third
parties) which would, singly or in the aggregate, have a material adverse
effect on the condition, financial or otherwise, or on the earnings,
business, prospects or operations of the Company and its subsidiaries,
taken as a whole.
(p) Except as described in the Prospectus, there are no contracts,
agreements or understandings between the Company and any person granting
such person the right to require the Company to file a registration
statement under the Securities Act with respect to any securities of the
Company or to require the Company to include such securities with the
Shares registered pursuant to the Registration Statement.
(q) The Company and its subsidiaries have good and marketable title
in fee simple to all real property and good and marketable title to all
personal property owned by them which is material to the business of the
Company and its subsidiaries, in each case free and clear of all liens,
encumbrances and defects except such as are described in the Prospectus or
such as do not materially affect the value of such property and do not
interfere with the use made and proposed to be made of such property by the
Company and its subsidiaries; and any real property and buildings held
under lease by the Company and its subsidiaries are held by them under
valid, subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed to be made of
such property and buildings by the Company and its subsidiaries, in each
case except as described in or contemplated by the Prospectus.
(r) The Company and its subsidiaries own or possess, or can acquire
on reasonable terms, all material patents, patent rights, licenses,
inventions, copyrights, know-how (including trade secrets and other
unpatented and/or unpatentable proprietary or confidential information,
systems or procedures), trademarks, service marks and trade names currently
employed by them in connection with the business now operated by them, and
neither the Company nor any of its subsidiaries has received any notice of
infringement of or conflict with asserted rights of others with respect to
any of the foregoing which, singly or in the aggregate, if the subject of
an unfavorable decision, ruling or finding, would result in any material
adverse change in the condition, financial or otherwise, or in the
earnings, business or operations of the Company and its subsidiaries, taken
as a whole.
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(s) No material labor dispute with the employees of the Company or
any of its subsidiaries exists, except as described in or contemplated by
the Prospectus, or, to the knowledge of the Company, is imminent; and the
Company is not aware of any existing, threatened or imminent labor
disturbance by the employees of any of its principal suppliers,
manufacturers or contractors that could result in any material adverse
change in the condition, financial or otherwise, or in the earnings,
business or operations of the Company and its subsidiaries, taken as a
whole.
(t) The Company and each of its subsidiaries are insured by insurers
of recognized financial responsibility against such losses and risks and in
such amounts as are prudent and customary in the businesses in which they
are engaged; neither the Company nor any such subsidiary (but with respect
to any period prior to the time such subsidiary become a subsidiary of the
Company, only to the knowledge of the Company) has been refused any
insurance coverage sought or applied for; and neither the Company nor any
such subsidiary has any reason to believe that it will not be able to renew
its existing insurance coverage as and when such coverage expires or to
obtain similar coverage from similar insurers as may be necessary to
continue its business at a cost that would not materially and adversely
affect the condition, financial or otherwise, or the earnings, business or
operations of the Company and its subsidiaries, taken as a whole, except as
described in or contemplated by the Prospectus.
(u) The Company and its subsidiaries possess all certificates,
authorizations and permits issued by the appropriate federal, state or
foreign regulatory authorities necessary to conduct their respective
businesses, and neither the Company nor any such subsidiary has received
any notice of proceedings relating to the revocation or modification of any
such certificate, authorization or permit, except for failures to possess
and proceedings which, singly and in the aggregate would not have a
material adverse change in the condition, financial or otherwise, or in the
earnings, business or operations of the Company and its subsidiaries, taken
as a whole.
(v) The Company and each of its subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable assurance
that (1) transactions are executed in accordance with management's general
or specific authorizations; (2) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability; (3)
access to assets is permitted only in accordance with management's general
or specific authorization; and (4) the recorded accountability for assets
is compared with the existing assets at
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reasonable intervals and appropriate action is taken with respect to any
differences.
(w) The Company has complied with all provisions of Section 517.075,
Florida Statutes relating to doing business with the Government of Cuba or
with any person or affiliate located in Cuba.
Furthermore, the Company represents and warrants to Morgan Stanley
that (i) the Registration Statement, the Prospectus and any preliminary
prospectus comply, and any further amendments or supplements thereto will
comply, with any applicable laws or regulations of foreign jurisdictions in
which the Prospectus or any preliminary prospectus, as amended or supplemented,
if applicable, are distributed in connection with the Directed Share Program,
and that (ii) no authorization, approval, consent, license, order, registration
or qualification of or with any government, governmental instrumentality or
court, other than such as have been obtained, is necessary under the securities
laws and regulations of foreign jurisdictions in which the Directed Shares are
offered outside the United States.
2. REPRESENTATIONS AND WARRANTIES OF THE SELLING SHAREHOLDER. The
Selling Shareholder represents and warrants to and agrees with each of the
Underwriters that:
(a) This Agreement has been duly authorized, executed and delivered
by or on behalf of the Selling Shareholder.
(b) The execution and delivery by the Selling Shareholder of, and the
performance by the Selling Shareholder of its obligations under, this
Agreement, will not contravene any provision of applicable law, or the
agreement or certificate of limited partnership of the Selling Shareholder;
or any agreement or other instrument binding upon such Selling Shareholder
or any judgment, order or decree of any governmental body, agency or court
having jurisdiction over such Selling Shareholder, and no consent,
approval, authorization or order of, or qualification with, any
governmental body or agency is required for the performance by such Selling
Shareholder of its obligations under this Agreement, except such as may be
required by the securities or Blue Sky laws of the various states or the
securities laws of non-U.S. jurisdictions in connection with the offer and
sale of the Shares.
(c) The Selling Shareholder has, and on the Closing Date will have,
valid title to the Shares to be sold by the Selling Shareholder and the
legal right and power, and all authorization and approval required by law,
to enter into this Agreement and to sell, transfer and deliver the Shares
to be sold by the Selling Shareholder.
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(d) The Shares to be sold by the Selling Shareholder pursuant to this
Agreement have been duly authorized and are validly issued, fully paid and
non-assessable.
(e) Delivery of the Shares to be sold by the Selling Shareholder
pursuant to this Agreement will pass title to such Shares free and clear of
any security interests, claims, liens, equities and other encumbrances.
(f) All information furnished by or on behalf of the Selling
Shareholder for use in the Registration Statement and Prospectus is , and
on the Closing Date and on the Option Closing Date will be, true, correct,
and complete, and does not, and on the Closing Date and on the Option
Closing Date will not, contain any untrue statement of a material fact or
omit to state any material fact necessary to make such information not
misleading.
3. AGREEMENTS TO SELL AND PURCHASE. The Company hereby agrees to
sell to the several Underwriters, and each Underwriter, upon the basis of the
representations and warranties herein contained, but subject to the
conditions hereinafter stated, agrees, severally and not jointly, to purchase
from the Company at U.S. $________ a share (the "Purchase Price") the
respective numbers of Firm Shares set forth in Schedules I and II hereto
opposite their names.
On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, the Selling Shareholder
agrees to sell to the U.S. Underwriters the Additional Shares, and the
Underwriters shall have a one-time right to purchase, severally and not jointly,
up to _________ Additional Shares at the Purchase Price. If the U.S.
Representatives, on behalf of the U.S. Underwriters, elect to exercise such
option, the U.S. Representatives, shall so notify the Company in writing not
later than 30 days after the date of this Agreement, which notice shall specify
the number of Additional Shares to be purchased by the U.S. Underwriters and the
date on which such shares are to be purchased. Such date may be the same as the
Closing Date (as defined below) but not earlier than the Closing Date nor later
than ten business days after the date of such notice. Additional Shares may be
purchased as provided in Section 5 hereof solely for the purpose of covering
over allotments made in connection with the offering of the Firm Shares. If any
Additional Shares are to be purchased, each U.S. Underwriter agrees, severally
and not jointly, to purchase the number of Additional Shares (subject to such
adjustments to eliminate fractional shares as the U.S. Representatives may
determine) that bears the same proportion to the total number of Additional
Shares to be purchased as the number of Firm Shares set forth in Schedule I
hereto opposite the name of such U.S. Underwriter bears to the total number of
U.S. Firm Shares. The Additional Shares to be purchased by the U.S.
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Underwriters and the U.S. Firm Shares are hereinafter collectively referred to
as the U.S. Shares.
Each Seller hereby agrees that, without the prior written consent of
Morgan Stanley & Co. Incorporated on behalf of the Underwriters, it will not,
during the period ending 180 days after the date of the Prospectus, (i) offer,
pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase or otherwise transfer or dispose of, directly or indirectly, any shares
of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock or (ii) enter into any swap or other arrangement
that transfers to another, in whole or in part, any of the economic consequences
of ownership of the Common Stock, whether any such transaction described in
clause (i) or (ii) above is to be settled by delivery of Common Stock or such
other securities, in cash or otherwise. The foregoing sentence shall not apply
to (A) the Shares to be sold hereunder or (B) the issuance by the Company of
shares of Common Stock upon the exercise of an option or warrant or the
conversion of a security outstanding on the date hereof of which the
Underwriters have been advised in writing. In addition, the Selling Shareholder
agrees that, without the prior written consent of Morgan Stanley & Co.
Incorporated on behalf of the Underwriters, it will not, during the period
ending 180 days after the date of the Prospectus, make any demand for, or
exercise any right with respect to, the registration of any shares of Common
Stock or any security convertible into or exercisable or exchangeable for Common
Stock.
4. TERMS OF PUBLIC OFFERING. The Sellers are advised by you that
the Underwriters propose to make a public offering of their respective
portions of the Shares as soon after the Registration Statement and this
Agreement have become effective as in your judgment is advisable. The
Sellers are further advised by you that the Shares are to be offered to the
public initially at U.S. $__________ a share (the "Public Offering Price")
and to certain dealers selected by you at a price that represents a
concession not in excess of U.S. $ __________ a share under the Public
Offering Price, and that any Underwriter may allow, and such dealers may
reallow, a concession, not in excess of U.S. $______ a share, to any
Underwriter or to certain other dealers.
Each U.S. Underwriter hereby makes to and with the Company the
representations and agreements of such U.S. Underwriter contained in the fifth
and sixth paragraphs of Article III of the Agreement Between U.S. and
International Underwriters of even date herewith. Each International
Underwriter hereby makes to and with the Company the representations and
agreements of such International Underwriter contained in the seventh, eighth,
ninth and tenth paragraphs of Article III of such Agreement.
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5. PAYMENT AND DELIVERY. Payment for the Firm Shares shall be made
to the Company in Federal or other funds immediately available in Chicago,
Illinois, against delivery of the Firm Shares for the respective accounts of the
several Underwriters at the office of Sidley & Austin, One First National Plaza,
Chicago, Illinois 60603 at 9:00 a.m., local time, on ________________, 1996, or
at such other time on the same or such other date, not later than _______, 1996,
as shall be designated in writing by you. The time and date of such payment are
hereinafter referred to as the "Closing Date."
Payment for any Additional Shares shall be made to the Selling
Shareholder in Federal or other funds immediately available in Chicago, Illinois
against delivery of the Additional Shares for the respective accounts of the
several U.S. Underwriters at the office of Sidley & Austin at 9:00 a.m., local
time, on the date specified in the notice described in Section 3 or on such
other date, in any event not later than _______, 1996, as shall be designated in
writing by the U.S. Representatives, on behalf of the U.S. Underwriters. The
time and date of such payment are hereinafter referred to as the "Option Closing
Date."
Certificates for the Firm Shares and Additional Shares shall be in
definitive form and registered in such names and in such denominations as you
shall request in writing not later than one full business day prior to the
Closing Date or the Option Closing Date, as the case may be. The certificates
evidencing the Firm Shares and Additional Shares shall be delivered to you on
the Closing Date or the Option Closing Date, as the case may be, for the
respective accounts of the several Underwriters, with any transfer taxes
payable in connection with the transfer of the Shares to the Underwriters duly
paid, against payment of the Purchase Price therefor.
6. CONDITIONS TO THE UNDERWRITERS' OBLIGATIONS. The obligations of
the Sellers to sell the Shares to the Underwriters and the several obligations
of the Underwriters to purchase and pay for the Shares on the Closing Date are
subject to the condition that the Registration Statement shall have become
effective not later than 3:00 p.m. (New York time) on the date hereof.
The several obligations of the Underwriters are subject to the
following further conditions:
(a) Subsequent to the execution and delivery of this Agreement and
prior to the Closing Date:
(i) there shall not have occurred any downgrading, nor shall any
notice have been given of any intended or potential downgrading or of
any review for a possible change that does not indicate the direction
of the possible change, in the rating accorded any of the Company's
securities by any "nationally recognized statistical rating
organization," as
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such term is defined for purposes of Rule 436(g)(2) under the
Securities Act; and
(ii) there shall not have occurred any change, or any development
involving a prospective change, in the condition, financial or
otherwise, or in the earnings, business or operations of the Company
and its subsidiaries, taken as a whole, from that set forth in the
Prospectus (exclusive of any amendments or supplements thereto
subsequent to the date of this Agreement) that, in your judgment, is
material and adverse and that makes it, in your judgment,
impracticable to market the Shares on the terms and in the manner
contemplated in the Prospectus.
(b) The Underwriters shall have received on the Closing Date a
certificate, dated the Closing Date and signed by an executive officer of
the Company, to the effect set forth in clause (a)(i) above and to the
effect that the representations and warranties of the Company contained in
this Agreement are true and correct as of the Closing Date and that the
Company has complied with all of the agreements and satisfied all of the
conditions on its part to be performed or satisfied hereunder on or before
the Closing Date.
The officer signing and delivering such certificate may rely upon the
best of his or her knowledge as to proceedings threatened.
(c) The Underwriters shall have received on the Closing Date an
opinion of Dickstein Shapiro Morin & Oshinsky LLP, outside counsel for the
Company, dated the Closing Date, to the effect that:
(i) the Company has been duly incorporated, is validly existing
as a corporation in good standing under the laws of the jurisdiction
of its incorporation, has the corporate power and authority to own its
property and to conduct its business as described in the Prospectus
and is duly qualified to transact business and is in good standing in
each jurisdiction in which the conduct of its business or its
ownership or leasing of property requires such qualification, except
to the extent that the failure to be so qualified or be in good
standing would not have a material adverse effect on the Company and
its subsidiaries, taken as a whole;
(ii) each subsidiary of the Company has been duly incorporated,
is validly existing as a corporation in good standing under the laws
of the jurisdiction of its incorporation, has the corporate power and
authority to own its property and to conduct its business as described
in the Prospectus and is duly qualified to transact business and is in
good standing in each jurisdiction in which the conduct of its
business or its
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ownership or leasing of property requires such qualification, except
to the extent that the failure to be so qualified or be in good
standing would not have a material adverse effect on the Company and
its subsidiaries, taken as a whole;
(iii) the authorized capital stock of the Company conforms as
to legal matters to the description thereof contained in the
Prospectus;
(iv) the shares of Common Stock (including the Additional Shares
to be sold by the Selling Shareholder) outstanding prior to the
issuance of the Shares to be sold by the Company have been duly
authorized and are validly issued, fully paid and non-assessable;
(v) the Shares to be sold by the Company have been duly
authorized and, when issued and delivered in accordance with the terms
of this Agreement, will be validly issued, fully paid and
non-assessable, and the issuance of such Shares will not be subject to
any preemptive or similar rights;
(vi) this Agreement has been duly authorized, executed and
delivered by the Company;
(vii) the execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement
will not contravene any provision of applicable law or the certificate
of incorporation or by-laws of the Company or, to the best of such
counsel's knowledge, any agreement or other instrument binding upon
the Company or any of its subsidiaries that is material to the Company
and its subsidiaries, taken as a whole, or, to the best of such
counsel's knowledge, any judgment, order or decree of any governmental
body, agency or court having jurisdiction over the Company or any
subsidiary, and no consent, approval, authorization or order of, or
qualification with, any governmental body or agency is required for
the performance by the Company of its obligations under this
Agreement, except such as may be required by the securities or Blue
Sky laws of the various states or the securities laws of non-U.S.
jurisdictions in connection with the offer and sale of the Shares;
(viii) the statements (A) in the Prospectus under the captions
"Management," "Security Ownership of Certain Beneficial Owners and
Management," "Certain Transactions," "Description of Capital Stock"
and "Underwriters" (only with respect to this Agreement) and (B) in
the Registration Statement in Items 14 and 15, in each case insofar as
such
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statements constitute summaries of the legal matters, documents or
proceedings referred to therein, fairly present the information called
for with respect to such legal matters, documents and proceedings and
fairly summarize the matters referred to therein;
(ix) after due inquiry, such counsel does not know of any legal
or governmental proceedings pending or threatened to which the Company
or any of its subsidiaries is a party or to which any of the
properties of the Company or any of its subsidiaries is subject that
are required to be described in the Registration Statement or the
Prospectus and are not so described or of any statutes, regulations,
contracts or other documents that are required to be described in the
Registration Statement or the Prospectus or to be filed as exhibits to
the Registration Statement that are not described or filed as
required;
(x) the Company is not an "investment company," as such term is
defined in the Investment Company Act of 1940, as amended;
(xi) Nothing has come to such counsel's attention that the
Company or any its subsidiaries (A) are not in compliance with any and
all applicable Environmental Laws, (B) have not received all permits,
licenses or other approvals required of any of them under applicable
Environmental Laws to conduct their respective businesses and (C) are
not in compliance with all terms and conditions of any such permit,
license or approval, except where such noncompliance with
Environmental Laws, failure to receive required permits, licenses or
other approvals or failure to comply with the terms and conditions of
such permits, licenses or approvals would not, singly or in the
aggregate, have a material adverse effect on the Company and its
subsidiaries, taken as a whole; and
(xii) such counsel (A) is of the opinion that the
Registration Statement and Prospectus (except for financial statements
and schedules and other financial and statistical data included
therein as to which such counsel need not express any opinion) comply
as to form in all material respects with the Securities Act and the
applicable rules and regulations of the Commission thereunder, (B) has
no reason to believe that (except for financial statements and
schedules and other financial and statistical data as to which such
counsel need not express any belief) the Registration Statement and
the prospectus included therein at the time the Registration Statement
became effective contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary to make the statements therein not
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misleading and (C) has no reason to believe that (except for financial
statements and schedules and other financial and statistical data as
to which such counsel need not express any belief) the Prospectus
contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not
misleading.
(d) The Underwriters shall have received on the Closing Date an
opinion of Dickstein Shapiro Morin & Oshinsky LLP, counsel for the Selling
Shareholder, dated the Closing Date, to the effect that:
(i) this Agreement has been duly authorized, executed and
delivered by or on behalf of the Selling Shareholder;
(ii) the execution and delivery by the Selling Shareholder of,
and the performance by the Selling Shareholder of its obligations
under, this Agreement will not contravene any provision of applicable
law, or the certificate or agreement of limited partnership of the
Selling Shareholder, or, to the best of such counsel's knowledge, any
agreement or other instrument binding upon the Selling Shareholder or,
to the best of such counsel's knowledge, any judgment, order or decree
of any governmental body, agency or court having jurisdiction over
such Selling Shareholder, and no consent, approval, authorization or
order of, or qualification with, any governmental body or agency is
required for the performance by such Selling Shareholder of its
obligations under this Agreement, except such as may be required by
the securities or Blue Sky laws of the various states in connection
with offer and sale of the Shares;
(iii) the Selling Shareholder has the legal right and power,
and all authorization and approval required by law, to enter into this
Agreement and to sell, transfer and deliver the Shares to be sold by
the Selling Shareholder;
(iv) the Selling Shareholder has record ownership and, to such
counsel's knowledge, beneficial ownership of the Shares to be sold by
it to the Underwriters pursuant to the Underwriting Agreement, and,
assuming that the Underwriters are "bona fide purchasers" (as defined
under Section 8-302 of the New York Uniform Commercial Code), upon
delivery of the certificates for any Shares to be sold by the Selling
Shareholder against payment therefor on the Option Closing Date the
Underwriters will acquire valid title to such Shares, free and clear
of any security interest or
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"adverse claims" within the meaning of section 8-302 of the New York
Uniform Commercial Code.
(v) such counsel (A) is of the opinion that the Registration
Statement and Prospectus (except for financial statements and
schedules and other financial and statistical data included therein as
to which such counsel need not express any opinion) comply as to form
in all material respects with the Securities Act and the applicable
rules and regulations of the Commission thereunder, (B) has no reason
to believe that (except for financial statements and schedules and
other financial and statistical data as to which such counsel need not
express any belief) the Registration Statement and the prospectus
included therein at the time the Registration Statement became
effective contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary to
make the statements therein not misleading and (C) has no reason to
believe that (except for financial statements and schedules and other
financial and statistical data as to which such counsel need not
express any belief) the Prospectus contains any untrue statement of a
material fact or omits to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading.
(e) The Underwriters shall have received on the Closing Date an
opinion of Sidley & Austin, counsel for the Underwriters, dated the Closing
Date, covering the matters referred to in subparagraphs (v), (vi), (viii)
(but only as to the statements in the Prospectus under "Description of
Capital Stock" and "Underwriters") and (xii) of paragraph (c) above.
With respect to subparagraph (xii) of paragraph (c) and subparagraph
(u) of paragraph (d) above, Dickstein Shapiro Morin & Oshinsky LLP and
Sidley & Austin may state that their opinion and belief are based upon
their participation in the preparation of the Registration Statement and
Prospectus and any amendments or supplements thereto and review and
discussion of the contents thereof, but are without independent check or
verification, except as specified. With respect to paragraph (d) above,
Dickstein Shapiro Morin & Oshinsky LLP may rely upon, with respect to
factual matters and to the extent such counsel deems appropriate, upon the
representations of the Selling Shareholder contained herein.
The opinions of Dickstein Shapiro Morin & Oshinsky LLP described in
paragraphs (c) and (d) above shall be rendered to the Underwriters at the
request of the Company or the Selling Shareholder, as the case may be, and
shall so state therein.
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(f) The Underwriters shall have received, on each of the date hereof
and the Closing Date, a letter dated the date hereof or the Closing Date,
as the case may be, in form and substance satisfactory to the Underwriters,
from Price Waterhouse LLP, independent public accountants, containing
statements and information of the type ordinarily included in accountants'
"comfort letters" to underwriters with respect to the financial statements
and certain financial information contained in the Registration Statement
and the Prospectus; provided that the letter delivered on the Closing Date
shall use a "cut-off date" not earlier than the date hereof.
(g) The "lock-up" agreements, each substantially in the form of
Exhibit A hereto, between you and certain shareholders, officers and
directors of the Company relating to sales and certain other dispositions
of shares of Common Stock or certain other securities, delivered to you on
or before the date hereof, shall be in full force and effect on the Closing
Date.
The several obligations of the U.S. Underwriters to purchase
Additional Shares hereunder are subject to the delivery to the U.S.
Representatives on the Option Closing Date of such documents as you may
reasonably request with respect to the good standing of the Company, the due
authorization and issuance of the Additional Shares and other matters related to
the issuance of the Additional Shares.
7. COVENANTS OF THE COMPANY. In further consideration of the
agreements of the Underwriters herein contained, the Company covenants with each
Underwriter as follows:
(a) To furnish to you, without charge, five signed copies of the
Registration Statement (including exhibits thereto) and for delivery to
each other Underwriter a conformed copy of the Registration Statement
(without exhibits thereto) and to furnish to you in New York City, without
charge, prior to 10:00 A.M. local time on the business day next succeeding
the date of this Agreement and during the period mentioned in paragraph (c)
below, as many copies of the Prospectus and any supplements and amendments
thereto or to the Registration Statement as you may reasonably request.
(b) Before amending or supplementing the Registration Statement or
the Prospectus, to furnish to you a copy of each such proposed amendment or
supplement and not to file any such proposed amendment or supplement to
which you reasonably object, and to file with the Commission within the
applicable period specified in Rule 424(b) under the Securities Act any
prospectus required to be filed pursuant to such Rule.
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(c) If, during such period after the first date of the public
offering of the Shares as in the opinion of counsel for the Underwriters
the Prospectus is required by law to be delivered in connection with sales
by an Underwriter or dealer, any event shall occur or condition exist as a
result of which it is necessary to amend or supplement the Prospectus in
order to make the statements therein, in the light of the circumstances
when the Prospectus is delivered to a purchaser, not misleading, or if, in
the opinion of counsel for the Underwriters, it is necessary to amend or
supplement the Prospectus to comply with applicable law, forthwith to
prepare, file with the Commission and furnish, at its own expense, to the
Underwriters and to the dealers (whose names and addresses you will furnish
to the Company) to which Shares may have been sold by you on behalf of the
Underwriters and to any other dealers upon request, either amendments or
supplements to the Prospectus so that the statements in the Prospectus as
so amended or supplemented will not, in the light of the circumstances when
the Prospectus is delivered to a purchaser, be misleading or so that the
Prospectus, as amended or supplemented, will comply with law.
(d) To endeavor to qualify the Shares for offer and sale under the
securities or Blue Sky laws of such jurisdictions as you shall reasonably
request.
(e) To make generally available to the Company's security holders and
to you as soon as practicable an earning statement covering the
twelve-month period ending ______________, 1997, that satisfies the
provisions of Section 11(a) of the Securities Act and the rules and
regulations of the Commission thereunder.
(f) Whether or not the transactions contemplated in this Agreement
are consummated or this Agreement is terminated, to pay or cause to be paid
all expenses incident to the performance of its obligations under this
Agreement, including: (i) the fees, disbursements and expenses of the
Company's counsel and the Company's accountants in connection with the
registration and delivery of the Shares under the Securities Act and all
other fees or expenses in connection with the preparation and filing of the
Registration Statement, any preliminary prospectus, the Prospectus and
amendments and supplements to any of the foregoing, including all printing
costs associated therewith, and the mailing and delivering of copies
thereof to the Underwriters and dealers, in the quantities hereinabove
specified, (ii) all costs and expenses related to the transfer and delivery
of the Shares to the Underwriters, including any transfer or other taxes
payable thereon, (iii) the cost of printing or producing any Blue Sky
memorandum in connection with the offer and sale of the Shares under state
securities laws and all expenses in connection with the qualification of
the Shares for offer and sale under state securities laws as provided in
Section 7(d) hereof, including filing fees and the reasonable fees and
disbursements of
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counsel for the Underwriters in connection with such qualification and in
connection with the Blue Sky, (iv) all filing fees and disbursements of
counsel to the Underwriters incurred in connection with the review and
qualification of the offering of the Shares by the National Association of
Securities Dealers, Inc., (v) all fees and expenses in connection with the
preparation and filing of the registration statement on Form 8-A relating
to the Common Stock and all costs and expenses incident to listing the
Shares on the Nasdaq National Market (vi) the cost of printing certificates
representing the Shares, (vii) the costs and charges of any transfer agent,
registrar or depositary, (viii) the costs and expenses of the Company
relating to investor presentations on any "road show" undertaken in
connection with the marketing of the offering of the Shares, including,
without limitation, expenses associated with the production of road show
slides and graphics, fees and expenses of any consultants engaged in
connection with the road show presentations with the prior approval of the
Company, travel and lodging expenses of the representatives and officers of
the Company and any such consultants, and the cost of any aircraft
chartered in connection with the road show, and (ix) all other costs and
expenses incident to the performance of the obligations of the Company
hereunder for which provision is not otherwise made in this Section. It is
understood, however, that except as provided in this Section, Section 9
entitled "Indemnity and Contribution", and the last paragraph of Section 11
below, the Underwriters will pay all of their costs and expenses, including
fees and disbursements of their counsel, stock transfer taxes payable on
resale of any of the Shares by them and any advertising expenses connected
with any offers they may make.
(g) In connection with the Directed Share Program, the Company will
ensure that the Directed Shares will be restricted to the extent required
by the National Association of Securities Dealers, Inc. (the "NASD") or
the NASD rules from sale, transfer, assignment, pledge or hypothecation for
a period of three months following the date of the effectiveness of the
Registration Statement. Morgan Stanley will notify the Company as to which
Participants will need to be so restricted. At the request of Morgan
Stanley, the Company will direct the transfer agent to place stop transfer
restrictions upon such securities for such period of time.
(h) To pay all fees and disbursements of counsel incurred by the
Underwriters in connection with the Directed Share Program and stamp
duties, similar taxes or duties or other taxes, if any, incurred by the
Underwriters in connection with the Directed Share Program.
Furthermore, the Company covenants with Morgan Stanley that the
Company will comply with all applicable securities and other applicable laws,
rules and
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regulations in each foreign jurisdiction in which the Directed Shares are
offered in connection with the Directed Share program.
8. EXPENSES OF SELLING SHAREHOLDERS. To the extent not paid by the
Company, the Selling Shareholder agrees to pay or cause to be paid (i) all
taxes, if any, on the transfer and sale of the Shares being sold by the Selling
Shareholder and (ii) the Selling Shareholder's pro rata share (determined by
dividing the number of Shares sold by such Selling Shareholder by the total
number of Shares sold by all Sellers) of all costs and expenses incident to the
performance of the obligations of the Selling Shareholder and the Company under
this Agreement, including, but not limited to, all expenses enumerated in
Section 7(f) above and the fees, disbursements and expenses of counsel for the
Selling Shareholder.
9. INDEMNITY AND CONTRIBUTION. (a) The Company agrees to indemnify
and hold harmless each Underwriter and each person, if any, who controls
any Underwriter within the meaning of either Section 15 of the Securities
Act or Section 20 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), from and against any and all losses, claims, damages and
liabilities (including, without limitation, any legal or other expenses
reasonably incurred in connection with defending or investigating any such
action or claim) caused by any untrue statement or alleged untrue statement
of a material fact contained in the Registration Statement or any amendment
thereof, any preliminary prospectus or the Prospectus (as amended or
supplemented if the Company shall have furnished any amendments or
supplements thereto), or caused by any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, except insofar as such losses,
claims, damages or liabilities are caused by any such untrue statement or
omission or alleged untrue statement or omission based upon information
relating to any Underwriter furnished to the Company in writing by such
Underwriter through you expressly for use therein.
(b) The Company agrees to indemnify and hold harmless Morgan Stanley
and each person, if any, who controls Morgan Stanley within the meaning of
either Section 15 of the Securities Act or Section 20 of the Exchange Act
("Morgan Stanley Entities"), from and against any and all losses, claims,
damages and Liabilities (including, without limitation, any legal or other
expenses reasonably incurred in connection with defending or investigating
any such action or claim) (i) caused by any untrue statement or alleged
untrue statement of a material fact contained in the prospectus wrapper
material prepared by or with the consent of the Company for distribution in
foreign jurisdictions in connection with the Directed Share Program
attached to the Prospectus or any preliminary prospectus, or caused by any
omission or alleged omission to state therein a material fact required to
be stated therein or
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necessary to make the statement therein, when considered in conjunction
with the Prospectus or any applicable preliminary prospectus, not
misleading; (ii) caused by the failure of any Participant to pay for and
accept delivery of the shares which, immediately following the
effectiveness of the Registration Statement, were subject to a properly
confirmed agreement to purchase; or (iii) related to, arising out of, or in
connection with the Directed Share Program, provided that, the Company
shall not be responsible under this subparagraph (iii) for any losses,
claim, damages or liabilities (or expenses relating thereto) that are
finally judicially determined to have resulted from the bad faith or gross
negligence of Morgan Stanley Entities.
(c) The Selling Shareholder agrees to indemnify and hold harmless
each Underwriter and each person, if any, who controls any Underwriter
within the meaning of either Section 15 of the Securities Act or Section 20
of the Exchange Act and the Company, its directors, its officers who sign
the Registration Statement and each person, if any, who controls the
Company within the meaning of either such Section, from and against any and
all losses, claims, damages and liabilities (including, without limitation,
any legal or other expenses reasonably incurred in connection with
defending or investigating any such action or claim) caused by any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement or any amendment thereof, any preliminary prospectus
or the Prospectus (as amended or supplemented if the Company shall have
furnished any amendments or supplements thereto), or caused by any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, but
only with reference to information relating to such Selling Shareholder
furnished in writing by or on behalf of such Selling Shareholder expressly
for use in the Registration Statement, any preliminary prospectus, the
Prospectus or any amendments or supplements thereto.
(d) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Company, the Selling Shareholder, the directors of
the Company, the officers of the Company who sign the Registration
Statement and each person, if any, who controls the Company or the Selling
Shareholder within the meaning of either Section 15 of the Securities Act
or Section 20 of the Exchange Act from and against any and all losses,
claims, damages and liabilities (including, without limitation, any legal
or other expenses reasonably incurred in connection with defending or
investigating any such action or claim) caused by any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement or any amendment thereof, any preliminary prospectus or the
Prospectus (as amended or supplemented if the Company shall have furnished
any amendments or supplements thereto), or
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caused by any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein
not misleading, but only with reference to information relating to such
Underwriter furnished to the Company in writing by such Underwriter through
you expressly for use in the Registration Statement, any preliminary
prospectus, the Prospectus or any amendments or supplements thereto.
(e) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may
be sought pursuant to paragraph (a), (b), (c) or (d) of this Section 9,
such person (the "indemnified party") shall promptly notify the person
against whom such indemnity may be sough (the "indemnifying party") in
writing and the indemnifying party, upon request of the indemnified party,
shall retain counsel reasonably satisfactory to the indemnified party to
represent the indemnified party and any others the indemnifying party may
designate in such proceeding and shall pay the fees and disbursements of
such counsel related to such proceeding. In any such proceeding, any
indemnified party shall have the right to retain its own counsel, but the
fees and expenses of such counsel shall be at the expense of such
indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii)
the named parties to any such proceeding (including any impleaded parties)
include both the indemnifying party and the indemnified party and
representation of both parties by the same counsel would be inappropriate
due to actual or potential differing interests between them. It is
understood that the indemnifying party shall not, in respect of the legal
expenses of any indemnified party in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the fees and
expenses of more than one separate firm (in addition to any local counsel)
for (i) all Underwriters and all persons, if any, who control any
Underwriter within the meaning of either Section 15 of the Securities Act
or Section 20 of the Exchange Act, (ii) the Company, its directors, its
officers who sign the Registration Statement and each person, if any, who
controls the Company within the meaning of either such Section and (iii)
the Selling Shareholder and all persons, if any, who control the Selling
Shareholder within the meaning of either such Section, and that all such
fees and expenses shall be reimbursed as they are incurred. In the case of
any such separate firm for the Underwriters and such control persons of the
Underwriters, such firm shall be designated in writing by Morgan Stanley.
In the case of any such separate firm for the Company, and such directors,
officers and control persons of the Company, such firm shall be designated
in writing by the Company. In the case of any such separate firm for the
Selling Shareholder and such controlling persons of the Selling
Shareholder, such firm shall be designated in writing by the Selling
Shareholder. The indemnifying party shall not be liable for any settlement
of any proceeding effected without its written consent, but if settled
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with such consent or if there be a final judgment for the plaintiff, the
indemnifying party agrees to indemnify the indemnified party from and
against any loss or liability by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an indemnified party
shall have requested an indemnifying party to reimburse the indemnified
party for fees and expenses of counsel as contemplated by the second and
third sentences of this paragraph, the indemnifying party agrees that it
shall be liable for any settlement of any proceeding effected without its
written consent if (i) such settlement is entered into more than 30 days
after receipt by such indemnifying party of the aforesaid request and (ii)
such indemnifying party shall not have reimbursed the indemnified party in
accordance with such request prior to the date of such settlement. No
indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened
proceeding in respect of which any indemnified party is or could have been
a party and indemnity could have been sought hereunder by such indemnified
party, unless such settlement includes an unconditional release of such
indemnified party from all liability on claims that are the subject matter
of such proceeding. Notwithstanding anything contained herein to the
contrary, if indemnity may be sought pursuant to Section 9(b) hereof in
respect of such action or proceeding, then in addition to such separate
firm for the indemnified parties, the indemnifying party shall be liable
for the reasonable fees and expenses of not more than one separate firm (in
addition to any local counsel) for Morgan Stanley for the defense of any
losses, claims, damages and liabilities arising out of the Directed Share
Program, and all persons, if any, who control Morgan Stanley within the
meaning of either Section 15 of the Act or Section 20 of the Exchange Act.
(f) To the extent the indemnification provided for in paragraph (a),
(b), (c) or (d) of this Section 9 is unavailable to an indemnified party or
insufficient in respect of any losses, claims, damages or liabilities
referred to therein, then each indemnifying party under such paragraph, in
lieu of indemnifying such indemnified party thereunder, shall contribute to
the amount paid or payable by such indemnified party as a result of such
losses, claims, damages or liabilities (i) in such proportion as is
appropriate to reflect the relative benefits received by the indemnifying
party or parties on the one hand and the indemnified party or parties on
the other hand from the offering of the Shares or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the
indemnifying party or parties on the one hand and of the indemnified party
or parties on the other hand in connection with the statements or omissions
that resulted in such losses, claims, damages or liabilities, as well as
any other relevant equitable considerations. The relative benefits
received by the Sellers on the one hand and the
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Underwriters on the other hand in connection with the offering of the
Shares shall be deemed to be in the same respective proportions as the net
proceeds from the offering of the Shares (before deducting expenses)
received by each Sellers and the total underwriting discounts and
commissions received by the Underwriters, in each case as set forth in the
table (and footnotes thereto) on the cover of the Prospectus, bear to the
aggregate Public Offering Price of the Shares. The relative fault of the
Sellers on the one hand and the Underwriters on the other hand shall be
determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relate to information supplied by the
Sellers or by the Underwriters and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement
or omission. The Underwriters' respective obligations to contribute
pursuant to this Section 9 are several in proportion to the respective
number of Shares they have purchased hereunder, and not joint.
(g) The Sellers and the Underwriters agree that it would not be just
or equitable if contribution pursuant to this Section 9 were determined by
PRO RATA allocation (even if the Underwriters were treated as one entity
for such purpose) or by any other method of allocation that does not take
account of the equitable considerations referred to in paragraph (e) of
this Section 9. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages and liabilities referred to in the
immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or
defending any such action or claim. Notwithstanding the provisions of this
Section 9, no Underwriter shall be required to contribute any amount in
excess of the amount by which the total price at which the Shares
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages that such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities
Act) shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation. The remedies provided for in this
Section 9 are not exclusive and shall not limit any rights or remedies
which may otherwise be available to any indemnified party at law or in
equity.
(h) The indemnity and contribution provisions contained in this
Section 9 and the representations, warranties and other statements of the
Company and the Selling Shareholder contained in this Agreement shall
remain operative and in full force and effect regardless of (i) any
termination of this Agreement, (ii) any investigation made by or on behalf
of any Underwriter or any person controlling any Underwriter, the Selling
Shareholder or any person controlling the Selling
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Shareholder, or the Company, its officers or directors or any person
controlling the Company and (iii) acceptance of and payment for any of the
Shares.
10. TERMINATION. This Agreement shall be subject to termination by
notice given by you to the Company, if (a) after the execution and delivery of
this Agreement and prior to the Closing Date (i) trading generally shall have
been suspended or materially limited on or by, as the case may be, any of the
New York Stock Exchange, the American Stock Exchange, the National Association
of Securities Dealers, Inc., the Chicago Board of Options Exchange, the Chicago
Mercantile Exchange or the Chicago Board of Trade, (ii) trading of any
securities of the Company shall have been suspended on any exchange or in any
over-the-counter market, (iii) a general moratorium on commercial banking
activities in New York shall have been declared by either Federal or New York
State authorities or (iv) there shall have occurred any outbreak or escalation
of hostilities or any change in financial markets or any calamity or crisis
that, in your judgment, is material and adverse and (b) in the case of any of
the events specified in clauses (a)(i) through (iv), such event, singly or
together with any other such event, makes it, in your judgment, impracticable to
market the Shares on the terms and in the manner contemplated in the Prospectus.
11. EFFECTIVENESS; DEFAULTING UNDERWRITERS. This Agreement shall
become effective upon the execution and delivery hereof by the parties hereto.
If, on the Closing Date or the Option Closing Date, as the case may
be, any one or more of the Underwriters shall fail or refuse to purchase Shares
that it has or they have agreed to purchase hereunder on such date, and the
aggregate number of Shares which such defaulting Underwriter or Underwriters
agreed but failed or refused to purchase is not more than one-tenth of the
aggregate number of the Shares to be purchased on such date, the other
Underwriters shall be obligated severally in the proportions that the number of
Firm Shares set forth opposite their respective names in Schedule I or Schedule
II bears to the aggregate number of Firm Shares set forth opposite the names of
all such non-defaulting Underwriters, or in such other proportions as you may
specify, to purchase the Shares which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase on such date; provided
that in no event shall the number of Shares that any Underwriter has agreed to
purchase pursuant to this Agreement be increased pursuant to this Section 11 by
an amount in excess of one-ninth of such number of Shares without the written
consent of such Underwriter. If, on the Closing Date, any Underwriter or
Underwriters shall fail or refuse to purchase Firm Shares and the aggregate
number of Firm Shares with respect to which such default occurs is more than
one-tenth of the aggregate number of Firm Shares to be purchased, and
arrangements satisfactory to you, the Company and the Selling Shareholder for
the purchase of such Firm Shares are not made within 36 hours after such
default, this Agreement shall terminate without liability on the part of any
non-defaulting Underwriter, the Company or the Selling Shareholder. In any
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<PAGE>
such case either you or the relevant Sellers shall have the right to postpone
the Closing Date, but in no event for longer than seven days, in order that the
required changes, if any, in the Registration Statement and in the Prospectus or
in any other documents or arrangements may be effected. If, on the Option
Closing Date, any Underwriter or Underwriters shall fail or refuse to purchase
Additional Shares and the aggregate number of Additional Shares with respect to
which such default occurs is more than one-tenth of the aggregate number of
Additional Shares to be purchased, the non-defaulting Underwriters shall have
the option to (i) terminate their obligation hereunder to purchase Additional
Shares or (ii) purchase not less than the number of Additional Shares that such
non-defaulting Underwriters would have been obligated to purchase in the absence
of such default. Any action taken under this paragraph shall not relieve any
defaulting Underwriter from liability in respect of any default of such
Underwriter under this Agreement.
If this Agreement shall be terminated by the Underwriters, or any of
them, because of any failure or refusal on the part of any Seller to comply with
the terms or to fulfill any of the conditions of this Agreement, or if for any
reason any Seller shall be unable to perform its obligations under this
Agreement, the Sellers will reimburse the Underwriters or such Underwriters as
have so terminated this Agreement with respect to themselves, severally, for all
out-of-pocket expenses (including the fees and disbursements of their counsel)
reasonably incurred by such Underwriters in connection with this Agreement or
the offering contemplated hereunder.
12. COUNTERPARTS. This Agreement may be signed in two or more
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
13. APPLICABLE LAW. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York.
14. HEADINGS. The headings of the sections of this Agreement have
been inserted for convenience of reference only and shall not be deemed a part
of this Agreement.
27
<PAGE>
Very truly yours,
OMNIQUIP INTERNATIONAL, INC.
By _____________________________
Name:
Title:
HARBOUR GROUP INVESTMENTS III, L.P.
By ___________________________,
its general partner
By _____________________________
Name:
Title:
28<PAGE>
<PAGE>
Accepted as of the date hereof
Morgan Stanley & Co. Incorporated
CS First Boston Corporation
Schroder Wertheim & Co. Incorporated
Robert W. Baird & Co. Incorporated
Acting severally on behalf
of themselves and the
several U.S. Underwriters
named herein.
By Morgan Stanley & Co.
Incorporated
By _____________________
Name:
Title:
Morgan Stanley & Co. International Limited
CS First Boston Limited
J. Henry Schroder & Co. Limited
Robert W. Baird Incorporated
Acting severally on behalf
of themselves and the
several International
Underwriters named herein.
By Morgan Stanley & Co.
International Limited
By __________________________
Name:
Title:
29
<PAGE>
SCHEDULE I
U.S. UNDERWRITERS
<TABLE>
<CAPTION>
NUMBER OF
FIRM SHARES
U.S. UNDERWRITER TO BE PURCHASED
<S> <C>
Morgan Stanley & Co. Incorporated. . . . .
CS First Boston Corporation. . . . . . . .
Schroder Wertheim & Co. Incorporated . . .
Robert W. Baird & Co. Incorporated . . . .
[NAMES OF OTHER U.S. UNDERWRITERS]
-------------------
Total U.S. Firm Shares....... -------------------
-------------------
</TABLE>
30<PAGE>
<PAGE>
SCHEDULE II
INTERNATIONAL UNDERWRITERS
<TABLE>
<CAPTION>
NUMBER OF
FIRM SHARES
INTERNATIONAL UNDERWRITER TO BE PURCHASED
<S> <C>
Morgan Stanley & Co. International
Limited. . . . . . . . . . . . . . . . .
CS First Boston Limited. . . . . . . . . .
J. Henry Schroder & Co. Limited. . . . . .
Robert W. Baird & Co. Incorporated . . . .
[NAMES OF OTHER INTERNATIONAL
UNDERWRITERS]
-------------------
Total International Firm Shares....... -------------------
-------------------
</TABLE>
31
<PAGE>
EXHIBIT A
______________, 1996
Morgan Stanley & Co. Incorporated
CS First Boston Corporation
J. Henry Schroder & Co. Limited
Robert W. Baird & Co. Incorporated
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, NY 10036
Morgan Stanley & Co. International Limited
CS First Boston Limited
J. Henry Schroder & Co. Limited
Robert W. Baird & Co. Incorporated
c/o Morgan Stanley & Co. International Limited
25 Cabot Square
Canary Wharf
London E14 4QA
England
Dear Sirs:
The undersigned understands that Morgan Stanley & Co. Incorporated
("Morgan Stanley"), as a Representative of the several U.S. Underwriters, and
Morgan Stanley & Co. International Limited, as a Representative of the
International Underwriters, propose to enter into an Underwriting Agreement (the
"Underwriting Agreement") with Omniquip International, Inc., a Delaware
corporation (the "Company"), providing for the public offering (the "Public
Offering") by the several U.S. Underwriters and International Underwriters,
including Morgan Stanley (collectively, the "Underwriters"), of _____________
shares (the "Shares") of the Common Stock, $.01 par value of the Company (the
"Common Stock").
32
<PAGE>
To induce the Underwriters that may participate in the Public Offering
to continue their efforts in connection with the Public Offering, the
undersigned hereby agrees that, without the prior written consent of Morgan
Stanley on behalf of the Underwriters, it will not, during the period
commencing on the date hereof and ending 180 days after the date of the final
prospectus relating to the Public Offering (the "Prospectus"), (1) offer,
pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase, or otherwise transfer or dispose of, directly or indirectly, any
shares of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock (provided that such shares or securities are
either now owned by the undersigned or are hereafter acquired prior to or in
connection with the Public Offering), or (2) enter into any swap or other
arrangement that transfers to another, in whole or in part, any of the economic
consequences of ownership of such shares of Common Stock, whether any such
transaction described in clause (1) or (2) above is to be settled by delivery of
Common Stock or such other securities, in cash or otherwise. The foregoing
sentence shall not apply to the sale of any Shares to the Underwriters pursuant
to the Underwriting Agreement. In addition, the undersigned agrees that,
without the prior written consent of Morgan Stanley on behalf of the
Underwrites, it will not, during the period commencing on the date hereof and
ending 180 days after the date of the Prospectus, make any demand for or
exercise any right with respect to, the registration of any shares of Common
Stock or any security convertible into or exercisable or exchangeable for Common
Stock.
Whether or not the Public Offering actually occurs depends on a number
of factors, including market conditions. Any Public Offering will only be made
pursuant to an Underwriting Agreement, the terms of which are subject to
agreement between the Company and the Underwriters.
------------------------------------
(Name)
------------------------------------
(Address)
237216.03
33
LOAN AGREEMENT
among
THE BOATMEN'S NATIONAL BANK OF ST. LOUIS
as Agent ("Agent");
and
THE BOATMEN'S NATIONAL BANK OF ST. LOUIS,
and
THE OTHER "LENDERS"
as "Lenders"
and
TRAK INTERNATIONAL, INC.
and
LULL LIFT CORPORATION
collectively and individually as "Borrower"
DATED AS OF AUGUST 16, 1996
<PAGE>
LOAN AGREEMENT
This is an agreement (this "Agreement") among Trak International,
Inc., a Delaware corporation ("Trak") and Lull Lift Corporation, a
Delaware corporation ("Lull"; Lull and Trak are referred to herein both
collectively and individually as "Borrower"), The Boatmen's National Bank
of St. Louis, as agent for itself and the other Lenders (in its individual
capacity, "Boatmen's"; and as agent, the "Agent"), and the Lenders.
AGREEMENT
In consideration of the mutual agreements herein and other
sufficient consideration, the receipt of which is hereby acknowledged,
Borrower, Agent, and each of the Lenders agree as follows:
1. EFFECTIVE DATE. This Agreement shall become effective on August
16, 1996 (the "Effective Date").
2. DEFINITIONS AND RULES OF CONSTRUCTION.
2.1. LISTED DEFINITIONS. Capitalized terms defined in the Glossary
and Index of Defined Terms attached hereto as Exhibit shall have such defined
meanings wherever used in this Agreement and the other Loan Documents.
2.2. OTHER DEFINITIONS. If a capitalized term used in this Agreement
is not defined in the Glossary and Index of Defined Terms, it shall have such
meaning as defined elsewhere herein, or if not defined elsewhere herein, the
meaning defined in the UCC.
2.3. REFERENCES TO COVERED PERSON. The term "Covered Person" means
each Borrower, each Guarantor (including Holdings), and if any of the
foregoing has or acquires any Subsidiaries, each of such Subsidiaries. The
words "a Covered Person", "any Covered Person", "each Covered Person" and
"every Covered Person" refer to each Borrower, each Guarantor (including
Holdings), and their respective Subsidiaries, separately.
2.4. REFERENCES TO REQUIRED LENDERS. The term "Required Lenders"
means any one or more Lenders whose shares of the Lenders' Exposure at the
relevant time aggregate at least 66 2/3%.
2.5. ACCOUNTING TERMS; CONSOLIDATED BASIS. Unless the context
otherwise requires, accounting terms herein that are not defined herein
shall be calculated under GAAP. All financial measurements herein respecting
"Borrower" shall be made and calculated for Holdings and all of its
Subsidiaries, including each Borrower, unless otherwise expressly provided
otherwise herein, on a consolidated basis in accordance with GAAP.
2.6. "SATISFACTORY"; "SATISFACTION". Wherever herein a document,
matter, or condition is required to be satisfactory or completed to the
satisfaction of either the Agent, the Required Lenders, a Lender, all the
Lenders, or the Letter of Credit Issuer, unless expressly stated otherwise
such document must be satisfactory to Agent, the Required Lenders, such
Lender, the Lenders, or such Letter of Credit Issuer (as applicable) in both
form and substance, and unless expressly stated otherwise they shall have
the absolute discretion to determine whether the document or matter is
satisfactory or whether the condition has been satisfied.
2.7. COMPUTATION OF TIME PERIODS. In the computation of periods of
time from a specified date to a later specified date, the word "from" shall
mean "from and including" and the words "to" and "until" shall each mean "to
but excluding." Periods of days referred to in this Agreement shall be
counted in
1
<PAGE>
calendar days unless Business Days are expressly prescribed, and references
in this Agreement to months and years shall be to calendar months and
calendar years unless otherwise specified.
2.8. GENERAL. Unless the context of this Agreement clearly requires
otherwise: (i) references to the plural include the singular and vice versa;
(ii) references to any Person include such Person's successors and assigns
but, if applicable, only if such successors and assigns are permitted by
this Agreement; (iii) references to one gender include all genders; (iv)
"including" is not limiting; (v) "or" has the inclusive meaning represented
by the phrase "and/or"; (vi) the words "hereof", "herein", "hereby",
"hereunder" and similar terms in this Agreement refer to this Agreement as a
whole, including its Exhibits, and not to any particular provision of this
Agreement; (vii) the word SECTION or SECTION and PAGE or PAGE refer to a
section or page, respectively, and the word "Exhibit" refers to an Exhibit
to this Agreement unless it expressly refers to something else; (viii)
reference to any agreement (including this Agreement), document or
instrument means such agreement, document or instrument as amended or
modified and in effect from time to time in accordance with the terms
thereof and, if applicable, the terms hereof; and (ix) general and specific
references to any Law means such Law as amended, modified, codified or
reenacted, in whole or in part, and in effect from time to time. Section
captions and the Table of Contents are for convenience only and shall not
affect the interpretation or construction of this Agreement or the other
Loan Documents.
3. LENDERS' COMMITMENTS. Subject to the terms and conditions hereof,
and in reliance upon the representations and warranties of Borrower herein,
Lenders make the following commitments to Borrower:
3.1. REVOLVING COMMITMENTS.
3.1.1. REVOLVING ADVANCES. Subject to the limitations in Section
and elsewhere herein, each of the Lenders commits to make available for
advances to Borrower (each a "Revolving Advance") from time to time
during the period commencing on the Effective Date and ending at the
close of business on August 16, 2002 (the "Revolver Maturity Date") such
Lender's prorata share of the Aggregate Revolving Commitment as listed
on Exhibit hereto, which such obligation shall be several upon each
Lender and not joint and several. The "Aggregate Revolving Commitment"
on any date shall be $25,000,000, or such lesser or greater Dollar
amount to which it may have been changed as provided herein. Each
Lender's "Revolving Commitment" is its prorata share of the Aggregate
Revolving Commitment as listed on Exhibit hereto. The obligation of
Borrower to repay each Lender's Revolving Loan shall be evidenced by a
promissory note payable to the order of such Lender in a maximum
principal amount equal to such Lender's Revolving Commitment (as
amended, modified, restated, or replaced from time to time, individually
a "Revolving Note" and collectively the "Revolving Notes") reasonably
satisfactory to such Lender. Subject to the limitations in Section and
elsewhere herein, amounts applied to reduce the Aggregate Revolving Loan
may be reborrowed as Revolving Advances. Upon the occurrence of an Event
of Default and at any time thereafter so long as any Unwaived Event of
Default exists, the Aggregate Revolving Commitment may be canceled as
provided in Section.
3.1.2. LIMITATION ON REVOLVING ADVANCES. No Revolving Advance
will be made which would result in the Aggregate Revolving Loan
exceeding the Maximum Available Amount and no Revolving Advance will be
made on or after the Revolver Maturity Date. Lenders may, however, in
their absolute discretion make such Revolving Advances, but shall not be
deemed by doing so to have increased the Maximum Available Amount and
shall not be obligated to make any such Revolving Advances thereafter.
The "Maximum Available Amount" on any date for any Revolving Advance
shall be a Dollar amount equal to (i) the lesser of the Aggregate
Revolving Commitment or the Borrowing Base on such date, MINUS (ii) the
sum of (a) 100% of the Lenders' Letter of Credit Exposure (except to the
extent that such Revolving Advance will be used immediately to reimburse
2
<PAGE>
the Letter of Credit Issuer for unreimbursed draws on a Letter of Credit)
and (b) the Swingline Loan.
3.1.3. BORROWING BASE. The "Borrowing Base" on any date for
any Revolving Advance or any Swingline Advance shall be the sum of:
3.1.3.1. eighty-five percent (85%) of the total
outstanding principal balance of Eligible Accounts as of the
close of business on such date, or as certified in the Borrowing
Base Certificate most recently furnished to Agent as required in
Section , whichever is less; PLUS
3.1.3.2. seventy percent (70%) of
(i) the value of all Eligible Inventory which
constitutes Finished Goods as of the close of
business on such date, or as certified in the
Borrowing Base Certificate most recently furnished
to Agent as required in Section , whichever is
less;
MINUS
(ii) the total of all customer advances and
deposits related to such Eligible Inventory, as
such amount would be shown in Borrower's Financial
Statements; PLUS
3.1.3.3. fifty percent (50%) of
(i) the value of all Eligible Inventory other than
that which constitutes Finished Goods as of the
close of business on such date, or as certified in
the Borrowing Base Certificate most recently
furnished to Agent as required in Section ,
whichever is less;
MINUS
(ii) the total of all customer advances and
deposits related to such Eligible Inventory, as
such amount would be shown in Borrower's Financial
Statements.
All Inventory shall be valued at the lower of cost or market on a
irst-in-first-out basis. The defined term "Finished Goods" shall have
its meaning and shall be determined under GAAP.
3.2. SWINGLINE COMMITMENT.
3.2.1. SWINGLINE ADVANCES. In order to reduce the frequency of
the transfer of funds from Lenders to Agent for making Revolving
Advances, but subject to the limitations in Section and elsewhere
herein, Boatmen's may in its absolute discretion make advances (each a
"Swingline Advance") to Borrower from time to time during the period
commencing on the Effective Date and ending at the close of business on
the Revolver Maturity Date (the "Swingline Commitment"). (The from time
to time outstanding principal balance of all Swingline Advances from
Boatmen's is referred to herein as the "Swingline Loan".) The obligation
of Borrower to repay the Swingline Loan shall be evidenced by a
promissory note payable to the order of Boatmen's in a maximum principal
amount equal to $3,000,000 (the "Swingline Note") reasonably
satisfactory to Boatmen's. Subject to the limitations in Section and
elsewhere herein, amounts applied
3
<PAGE>
to reduce the Swingline Loan may be reborrowed as Swingline Advances. Boatmen's
may terminate the Swingline Commitment at any time in its absolute discretion.
3.2.2. LIMITATIONS ON SWINGLINE ADVANCES. Boatmen's shall not be
obligated to make any particular Swingline Advance, the making of any
particular Swingline Advance at any particular time being absolutely
discretionary. In any event, no Swingline Advance will be made on or
after the Revolver Maturity Date, and no Swingline Advance will be made
which would result in the Swingline Loan exceeding the Maximum Swingline
Amount. Boatmen's may, however, in its absolute discretion make such
Swingline Advances, but shall not be deemed by doing so to have
increased the Maximum Swingline Amount and shall not be obligated to
make any such Swingline Advance thereafter. The "Maximum Swingline
Amount" on any date for any Swingline Advance shall be a Dollar amount
equal to the lesser of (i) $3,000,000, or (ii) any excess of the Maximum
Available Amount (determined prior to the making of such Swingline
Advance) over the Aggregate Revolving Loan as of such date.
3.3. TERM 1 COMMITMENT. Each Lender commits to make a term loan to
Borrower (its "Term 1 Commitment") in the amount of its prorata share of
$54,000,000 (the "Aggregate Term 1 Commitment") as listed on Exhibit hereto in a
single advance by each Lender (the aggregate of all such advances being referred
to herein as the "Term 1 Advance"), which obligation shall be several upon each
Lender and not joint and several. No Term 1 Advance will be made which would
result in the Aggregate Term 1 Loan exceeding the Aggregate Term 1 Commitment.
The obligation of Borrower to repay each Lender's prorata share of the Aggregate
Term 1 Loan shall be evidenced by a promissory note payable to the order of such
Lender in a principal amount equal to such Lender's prorata share of the
Aggregate Term 1 Commitment (as amended, modified, restated or replaced from
time to time, individually a "Term 1 Note" and collectively the "Term 1 Notes")
reasonably satisfactory to such Lender. Amounts applied to reduce the Aggregate
Term 1 Loan may not be reborrowed.
3.4. TERM 2 COMMITMENT. Each Lender commits to make a term loan to
Borrower (its "Term 2 Commitment") in the amount of its prorata share of
$6,000,000 (the "Aggregate Term 2 Commitment") as listed on Exhibit hereto in a
single advance by each Lender (the aggregate of all such advances being referred
to herein as the "Term 2 Advance"), which such obligation shall be several upon
each Lender and not joint and several. No Term 2 Advance will be made which
would result in the Aggregate Term 2 Loan exceeding the Aggregate Term 2
Commitment. The obligation of Borrower to repay each Lender's prorata share of
the Aggregate Term 2 Loan shall be evidenced by a promissory note payable to the
order of such Lender in a principal amount equal to such Lender's prorata share
of the Aggregate Term 2 Commitment (as amended, modified, restated or replaced
from time to time, individually a "Term 2 Note" and collectively the "Term 2
Notes") reasonably satisfactory to such Lender. Amounts applied to reduce the
Aggregate Term 2 Loan may not be reborrowed.
3.5. LETTER OF CREDIT COMMITMENT. Letter of Credit Issuer commits to
issue Standby Letters of Credit and Commercial Letters of Credit for the account
of Borrower from time to time during the period commencing on the Effective Date
and ending on the Revolver Maturity Date, but only in connection with
transactions satisfactory to Agent and only if the Letter of Credit Exposure
will not as a result of such issuance exceed the lesser of (a) $2,000,000 and
(b) any excess of the Maximum Available Amount (determined prior to issuing such
Letter of Credit) over the Aggregate Revolving Loan (the "Letter of Credit
Commitment"). Unless the Letter of Credit Issuer agrees otherwise, which
agreement will not be unreasonably withheld, the expiration date of any Letter
of Credit will not be more than one year after its issuance date and in no event
will be later than the Revolver Maturity Date. Immediately upon the issuance by
the Letter of Credit Issuer of a Letter of Credit in accordance with the terms
and conditions of this Agreement, the Letter of Credit Issuer shall be deemed to
have sold and transferred to each other Lender,
4
<PAGE>
and each such other Lender shall be deemed to have purchased and received from
the Letter of Credit Issuer, a prorata undivided interest and participation in
such Letter of Credit, the reimbursement obligation of Borrower with respect
thereto, and any guaranty thereof or collateral therefor. Such other Lender's
prorata undivided interest shall be the same as such other Lender's prorata
share of the Aggregate Revolving Commitment.
4. INTEREST.
4.1. RATES.
4.1.1. INTEREST ON REVOLVING ADVANCES. Each Revolving Advance
shall bear interest at a rate per annum that is either the Revolver
Adjusted LIBO Rate or the Revolver Adjusted CBR, as designated by
Borrower as provided herein. Each Revolving LIBOR Advance shall bear
interest at the Revolver Adjusted LIBO Rate throughout the Interest
Period for such Revolving LIBOR Advance.
4.1.1.1. DEFINITION OF THE REVOLVER ADJUSTED LIBO RATE.
The "Revolver Adjusted LIBO Rate" shall mean the LIBO Rate plus
(a) 2.75% per annum if the Interest Rate Ratio is greater than or
equal to 2.50, or (b) 2.25% per annum if the Interest Rate Ratio
is less than 2.50. The applicable percentage set forth in (a) and
(b) in the preceding sentence is hereinafter referred to as the
"Revolver LIBO Spread".
4.1.1.2. DEFINITION OF THE REVOLVER ADJUSTED CBR. The
"Revolver Adjusted CBR" shall mean CBR plus (a) 1.50% per annum
if the Interest Rate Ratio is greater than or equal to 2.50, or
(b) 1.00% per annum if the Interest Rate Ratio is less than 2.50.
The applicable percentage set forth in (a) and (b) in the
preceding sentence is hereinafter referred to as the "Revolver
CBR Spread".
4.1.2. INTEREST ON TERM 1 AND TERM 2 ADVANCES. Each Term 1
Advance and each Term 2 Advance shall bear interest at a rate per annum
that is either the Term Loan Adjusted LIBO Rate or the Term Loan
Adjusted CBR, as designated by Borrower as provided herein. Each Term 1
Loan LIBOR Advance and each Term 2 Loan LIBOR Advance shall bear
interest at the Term Loan Adjusted LIBO Rate throughout the Interest
Period for such Term 1 Loan LIBOR Advance or Term 2 Loan LIBOR Advance,
as the case may be.
4.1.2.1. DEFINITION OF THE TERM LOAN ADJUSTED LIBO RATE.
The "Term Loan Adjusted LIBO Rate" shall mean the LIBO Rate plus
(a) 3.00% per annum if the Interest Rate Ratio is greater than or
equal to 2.50, or (b) 2.50% per annum if the Interest Rate Ratio
is less than 2.50. The applicable percentage set forth in (a) and
(b) in the preceding sentence is hereinafter referred to as the
"Term Loan LIBO Spread".
4.1.2.2. DEFINITION OF THE TERM LOAN ADJUSTED CBR. The
"Term Loan Adjusted CBR" shall mean CBR plus (a) 1.75% per annum
if the Interest Rate Ratio is greater than or equal to 2.50, or
(b) 1.25% per annum if the Interest Rate Ratio is less than 2.50.
The applicable percentage set forth in (a) and (b) in the
preceding sentence is hereinafter referred to as the "Term Loan
CBR Spread".
4.1.3. INTEREST ON SWINGLINE ADVANCES. Each Swingline Advance
shall bear interest at a rate per annum equal to the Revolver Adjusted
CBR.
4.1.4. INTEREST ON UNREIMBURSED LETTER OF CREDIT DRAWS. Each
unreimbursed draw on a Letter of Credit shall bear interest at a rate
per annum equal to the Revolver Adjusted CBR.
5
<PAGE>
4.1.5. CALCULATING INTEREST SPREADS.
4.1.5.1. The Interest Rate Ratio and, in connection
therewith, the Revolver LIBO Spread, the Term Loan LIBO Spread,
the Revolver CBR Spread, and the Term Loan CBR Spread shall first
be determined by Agent on the Effective Date and thereafter
within ten Business Days after Agent receives Borrower's
Financial Statements for the last month of a Fiscal Quarter as
required under Section .
4.1.5.2. Whenever a Revolver CBR Spread and a Term Loan
CBR Spread are determined hereunder, each such CBR Spread shall
become effective immediately upon such determination for all
existing CBR Advances and shall apply to all CBR Advances made
thereafter until changed pursuant to the terms of Section (or any
of the subsections thereunder).
4.1.5.3. Whenever a Revolver LIBO Spread and a Term Loan
LIBO Spread are determined hereunder, each such LIBO Spread shall
apply to all LIBOR Advances made thereafter until changed
pursuant to the terms of Section (or any of the subsections
thereunder), but shall not be effective as to any existing LIBOR
Advance until and unless such existing LIBOR Advance is renewed
as a LIBOR Advance (it being understood that the Revolver LIBO
Spread or Term Loan LIBO Spread in effect when such LIBOR Advance
was made shall continue to apply to such LIBOR Advance until it
is renewed as a LIBOR Advance or converted to a CBR Advance).
4.1.5.4. As used in Section , the capitalized term
"Interest Rate Ratio" shall mean a ratio calculated by dividing
(a) Consolidated Total Funded Debt by (b) (i) Adjusted Operating
Cash Flow LESS (ii) Adjusted Capital
Expenditures.
4.1.5.5. As used in the calculation of the Interest
Rate Ratio:
(a) the capitalized term "Consolidated" shall
have the meaning given it in Section ;
(b) the capitalized term "Total Funded Debt"
shall the meaning given it in Section ;
(c) the capitalized term "Adjusted Capital
Expenditures" shall mean (i) the amount of Consolidated
Capital Expenditures (as defined in Section ) for the
twelve month period ending on the last day of any Fiscal
Quarter for which the Interest Rate Ratio is calculated
(in each case, an "Interest Rate Ratio Calculation Date"),
PLUS (ii) the aggregate amount of all Capital Expenditures
made by any Target Company during the period commencing
twelve months immediately prior to the Interest Rate Ratio
Calculation Date and ending on the date any Consented
Acquisition applicable to such Target Company is
consummated, provided, however, that if said Consented
Acquisition is consummated more that twelve months prior
to the Interest Rate Ratio Calculation Date, this
subsection (ii) shall not be applicable; and
(d) the capitalized term "Adjusted Operating Cash
Flow" shall mean (i) the amount of Consolidated Operating
Cash Flow (as defined in Section ) for the twelve month
period ending of the last day of an Interest Rate Ratio
Calculation Date, PLUS (ii) the aggregate amount of any
Target Company's
6
<PAGE>
Operating Cash Flow during the period commencing twelve months immediately prior
to the Interest Rate Ratio Calculation Date and ending on the date any Consented
Acquisition applicable to such Target Company is consummated, provided, however,
that if said Consented Acquisition is consummated more that twelve months prior
to the Interest Rate Ratio Calculation Date, this subsection (ii) shall not be
applicable.
4.1.5.6. If Borrower does not deliver its Financial
Statements for any month to Agent within the period required by
Section , until such time as such Financial Statements are
delivered to Agent (a) the highest possible Revolver LIBO Spread
shall become applicable as of the last day of the Fiscal Quarter
for all Revolving LIBOR Advances, (b) the highest possible
Revolver CBR Spread shall become applicable as of the last day of
such Fiscal Quarter for all Revolving CBR Advances, (c) the
highest possible Term Loan LIBO Spread shall become applicable as
of the last day of such Fiscal Quarter for all Term 1 Loan LIBOR
Advances and Term 2 Loan LIBOR Advances, and (d) the highest
possible Term Loan CBR Spread shall become applicable as of the
last day of such Fiscal Quarter for all Term 1 Loan CBR Advances
and Term 2 Loan CBR Advances.
4.2. INTEREST PERIODS FOR LIBOR ADVANCES. For each Advance that Borrower
designates to be a LIBOR Advance, Borrower shall select an interest period (each
an "Interest Period") to be applicable to such LIBOR Advance. The Interest
Period for a LIBOR Advance shall be either a one-, two-, three-, or six-month
period; provided, however, that:
(i) every such Interest Period for a LIBOR Advance shall commence on the
date of the LIBOR Advance;
(ii) if any Interest Period would otherwise expire on a day of a
calendar month which is not a Business Day, then such Interest Period
shall expire on the next succeeding Business Day in that calendar month;
provided, however, that if the next succeeding Business Day would be in
the following calendar month, it shall expire on the first preceding
Business Day;
(iii) any Interest Period that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall end on the last Business Day of a calendar month; and
(iv) no Interest Period for a Revolving LIBOR Advance shall extend
beyond the Revolver Maturity Date, and no Interest Period for a Term 1
Loan LIBOR Advance or a Term 2 Loan LIBOR Advance shall extend beyond
the Term Maturity Date.
4.3. CONVERSION OF ADVANCES. Borrower may at any time (a) convert all or
any portion of a Revolving Advance of one bearing interest type into a Revolving
Advance of another type, (b) convert all or any portion of a Term 1 Advance into
a Term 1 Advance bearing interest of another type, (c) convert all or any
portion of the Term 2 Advance into a Term 2 Advance bearing interest of another
type, or (d) at the end of any Interest Period for a LIBOR Advance, continue
such LIBOR Advance for an additional Interest Period; provided, however, that a
LIBOR Advance may only be so converted or continued on the last day of its
Interest Period; and provided, further, that the Swingline Loan may not be
converted into a LIBOR Advance. To cause a conversion or continuation, Borrower
shall give Agent, prior to 11:00 a.m. (St. Louis, Missouri time), three (3)
Business Days prior to the date the conversion or continuation is to be
effective (the "Conversion Date"), a written request in the form attached hereto
as Exhibit (a "Notice of Conversion/Continuation"), which such Notice of
Conversion/Continuation may be mailed, personally delivered or telecopied as
provided in Section (i) identifying the Advance to be converted or continued,
(ii) specifying whether a conversion or continuation is requested, (iii) in the
case of a conversion,
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specifying whether the Advance is to become a Revolving LIBOR Advance, a Term 1
Loan LIBOR Advance, a Term 2 Loan LIBOR Advance, a Revolving CBR Advance, a Term
1 Loan CBR Advance, or a Term 2 Loan CBR Advance, and (iv) in the case of
conversion to or continuation of a LIBOR Advance, specifying the Interest Period
therefor. If a Notice of Conversion/Continuation is not received by Agent by
11:00 a.m. (St. Louis, Missouri time) on the last day of the Interest Period for
a LIBOR Advance, then Borrower shall be deemed to have timely given a Notice of
Conversion/Continuation to Agent requesting to convert such LIBOR Advance to a
Term 1 Loan CBR Advance if such LIBOR Advance is a Term 1 Loan LIBOR Advance, or
to a Term 2 Loan CBR Advance if such LIBOR Advance is a Term 2 Loan LIBOR
Advance, or to a Revolving CBR Advance if such LIBOR Advance is a Revolving
LIBOR Advance.
4.4. TIME OF ACCRUAL. Subject to Section interest shall accrue on all
principal amounts outstanding from and including the date when first outstanding
to but excluding the date when no longer outstanding. Amounts shall be deemed
outstanding until payments are applied thereto as provided in Section or
otherwise in accordance with the Loan Documents.
4.5. COMPUTATION. Interest shall be computed for the actual days elapsed
over a year deemed to consist of 360 days. Interest rates that are based on the
CBR shall change simultaneously with any change in the CBR and such rates shall
be effective for the entire day on which such CBR change becomes effective.
4.6. RATE AFTER MATURITY. Notwithstanding any terms or provisions in
this Agreement or any of the other Loan Documents to the contrary, Borrower
shall pay interest on each Loan after its Maturity, and (at the option of
Lenders) upon all of the Loans, Advances and the other Loan Obligations so long
as any Unwaived Event of Default exists, at a rate per annum of 2% in excess of
the rate which would otherwise apply hereunder to each such Loans, Advances or
other Loan Obligation as of the date of such Maturity or as of the first day any
such Unwaived Event of Default exists, as the case may be.
4.7. TAXES.
4.7.1. NET PAYMENTS. If any Tax is required to be withheld or
deducted from, or is otherwise payable by Borrower in connection with,
any payment due to Agent or any Lender under the Loan Documents,
Borrower (i) shall, if required, withhold or deduct the amount of such
Tax from such payment and, in any case, pay such Tax to the appropriate
taxing authority in accordance with applicable Law and (ii) shall pay to
Agent or such Lender, as applicable, (a) such additional amounts as may
be necessary so that the net amount received by Agent or such Lender
with respect to such payment, after withholding or deducting all Taxes
required to be withheld or deducted, is equal to the full amount payable
under the Loan Documents and (b) an amount equal to all Taxes payable by
Agent or such Lender as a result of payments made by Borrower (whether
to a taxing authority or to Agent or such Lender) pursuant to this
Section. If any Tax is withheld or deducted from, or is otherwise
payable by Borrower in connection with, any payment due to Agent or any
Lender under the Loan Documents, Borrower shall, within 30 days after
the date of such payment, furnish to Agent or such Lender, as
applicable, the original or a certified copy of a receipt for such Tax
from the applicable taxing authority. If any payment due to Agent or any
Lender under the Loan Documents is or is expected to be made without
withholding or deducting therefrom, or otherwise paying in connection
therewith, any Tax payable to any taxing authority under circumstances
that would lead Agent or such Lender to reasonably believe such
withholding or deduction is required, Borrower shall, within 30 days
after any request from Agent or such Lender, as applicable, furnish to
Agent or such Lender a certificate from such taxing authority, or an
opinion of counsel acceptable to Agent or such Lender, in either case
stating that no Tax payable to such taxing authority was or is, as the
case may be, required to be withheld or deducted from, or otherwise paid
by Borrower in connection with, such payment. For purposes
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of this Section only, the term "Tax" shall not be deemed to include any tax
based upon net income, such as but not limited to the tax on net income imposed
under the Internal Revenue Code of 1986, as amended, and similar state income
taxes.
4.7.2. EXEMPTION FORMS. Each Lender that is not a United States
person (as such term is defined in Section 7701(a)(30) of the Code)
agrees to deliver to Borrower and Agent on or prior to the Effective
Date, or in the case of a Lender that is an assignee or transferee of an
interest under this Agreement pursuant to Section , on the date of such
assignment or transfer to such Lender, (i) two accurate and complete
original signed copies of Internal Revenue Service Form 4224 or 1001 (or
successor forms) certifying to such Lender's entitlement to a complete
exemption from United States withholding tax with respect to payments to
be made under this Agreement and under any Note, or (ii) if the Lender
is not a "bank" within the meaning of Section 881(c)(3)(A) of the Code
(a "Non-bank Lender") and cannot deliver either Internal Revenue Service
Form 1001 or 4224, (x) a certificate substantially in the form of
Exhibit (each an "Exemption Certificate") and (y) two accurate and
complete original signed copies of Internal Revenue Service Form W-8 (or
successor form) certifying to such Lender's entitlement to a complete
exemption from United States withholding tax with respect to payments of
interest to be made under this Agreement and under any Note. In
addition, each Lender agrees that from time to time after the Effective
Date, when a lapse in time or change in circumstances renders the
previous certification obsolete or inaccurate in any material respect,
it will deliver to Borrower and Agent two new accurate and complete
original signed copies of Internal Revenue Service Form 4224 or 1001, or
Form W-8 and an Exemption Certificate, as the case may be, and such
other forms as may be required in order to confirm or establish the
entitlement of such Lender to a continued exemption from or reduction in
United States withholding tax with respect to payments under this
Agreement and any Note, or it shall immediately notify Borrower and
Agent of its inability to deliver any such Form or Certificate.
4.7.3. EXCLUSIONS FROM GROSS-UP OBLIGATIONS. Notwithstanding
anything to the contrary contained in Section , but subject to the
immediately succeeding sentence, (i) Borrower shall be entitled, to the
extent it is required to do so by law, to deduct or withhold income or
similar Taxes imposed by the United States (or any political subdivision
or taxing authority thereof or therein) from interest, fees or other
amounts payable hereunder for the account of any Lender which is not a
United States person (as such term is defined in Section 7701(a)(30) of
the Code) for U.S. Federal income tax purposes to the extent that such
Lender has not provided to Borrower U.S. Internal Revenue Service Forms
that establish a complete exemption from such deduction or withholding
and (ii) Borrower shall not be obligated pursuant to Section hereof to
gross-up payments to be made to a Lender in respect of income or similar
Taxes imposed by the United States if (A) such Lender has not provided
to Borrower the Internal Revenue Service Forms required to be provided
to Borrower pursuant to Section or (B) in the case of a payment, other
than interest, to a Non-bank Lender, to the extent that such forms do
not establish a complete exemption from withholding of such Taxes.
Notwithstanding anything to the contrary contained in the preceding
sentence or elsewhere in this Section , Borrower agrees to pay
additional amounts and to indemnify each Lender in the manner set forth
in Section (without regard to the identity of the jurisdiction requiring
the deduction or withholding) in respect of any amounts deducted or
withheld by it as described in the immediately preceding sentence as a
result of any changes after the Effective Date in any applicable law,
treaty, governmental rule, regulation, guideline or order, or in the
interpretation thereof, relating to the deducting or withholding of
income or similar Taxes.
4.8. COMPENSATION FOR INCREASE IN LIBOR ADVANCE COSTS. If after the
Execution Date there is any change in any Law or in any rule, order, or
guideline of any Governmental Authority (whether or not
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having the force of law and whether or not failure to comply therewith would be
unlawful, and including but not limited to any imposition or increase of reserve
requirements) and as a result thereof or as a result of compliance therewith by
a Lender or its parent holding company:0
(i) such Lender is subject to any tax, duty or other charge with
respect to its LIBOR Advances or its obligation to make Advances
that are LIBOR Advances, or the basis of taxation of payments to
such Lender of the principal of or interest on its LIBOR
Advances, or its obligation to make the same, change (except for
changes in the rate of tax on the overall net income of such
Lender imposed by the United States or other jurisdiction in
which such Lender's principal executive office is located); or
(ii) any reserve (including, without limitation, any imposed by the
FRB), special deposit, compulsory loan, assessment, or similar
requirement against assets of, deposits with or for the account
of, or credit extended by, such Lender is imposed or deemed
applicable or any other condition affecting its LIBOR Advances or
its obligation to make them is imposed on such Lender or the
London Interbank Market;
and as a result thereof there is any increase in the cost to such Lender of
agreeing to make or making an Advance that is a LIBOR Advance or maintaining its
LIBOR Advances (except to the extent already included in the determination of
the applicable LIBO Rate), or there is a reduction in the amount received or
receivable by such Lender, then Borrower shall from time to time, upon written
notice from and demand by such Lender (with a copy of such notice and demand to
Agent), pay to such Lender, within five Business Days after the date specified
in such notice and demand, additional amounts sufficient to compensate such
Lender in the amount of such increased cost. If such Lender claims compensation
under this Section, such Lender shall furnish a certificate to Borrower that
states the additional amount or amounts to be paid to it hereunder and the basis
therefor. Borrower shall have the burden of proving that any such certificate is
not correct.
4.9. LIBOR ADVANCE FUNDING LOSSES. Borrower shall pay to a Lender upon
demand an amount sufficient to compensate such Lender for all loss and expense
suffered by such Lender, including but not limited to loss of profit and the
cost of acquiring funds to make or carry one or more LIBOR Advances, (i) if for
any reason (other than a default by such Lender or pursuant to Section hereof)
an Advance does not occur on the date specified therefor in a Advance Request
(whether or not withdrawn), (ii) if any prepayment or repayment of a LIBOR
Advance or conversion of a LIBOR Advance to a CBR Advance, whether or not
required hereby, occurs on a date which is not the last day of the Interest
Period therefor, or (iii) if for any reason Borrower fails to repay a LIBOR
Advance when required by the terms of this Agreement. The minimum that Borrower
shall be obligated to pay to such Lender in any such event shall be an amount
equal to (x) the greater of zero or
{[A x (B-C) x D]} OVER 360
wherein
"A" is the Affected Principal Amount;
"B" is the decimal equivalent of the LIBO Rate that is (or would be in
the case of Borrower's failure to borrow after giving an Advance
Request) payable by Borrower on such Advance;
"C" is the decimal equivalent of the LIBO Rate that would apply to a
hypothetical LIBOR Advance whose Advance Date were on the last Business
Day on or before the first day of the Remaining Interest Period and
whose amount and whose Interest Period were approximately equal, as
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determined by such Lender, to the Affected Principal Amount and the Remaining
Interest Period; and
"D" is the number of days from and including the first day of the
Remaining Interest Period to but excluding the last day of the Remaining
Interest Period;
plus (y) any other out-of-pocket loss or expense (including any internal
processing charge customarily charged by such Lender) suffered by such Lender in
liquidating deposits prior to maturity in amounts which correspond to the
Affected Principal Amount.
For purposes of this Section:
"Affected Principal Amount" means, as applicable, (i) the principal
amount of a LIBOR Advance that Borrower fails to take after having given
an Advance Request; (ii) the entire principal amount of a LIBOR Advance
that Borrower fails to repay when required by the terms of this
Agreement; or (iii) the amount of any prepayment or repayment on a LIBOR
Advance that occurs, or the entire principal amount of a LIBOR Advance
that converts to a CBR Advance, whether or not required hereby, on a
date which is not the last day of the Interest Period therefor.
"Remaining Interest Period" means, as applicable, (i) the entire
Interest Period that would have been applicable to a LIBOR Advance that
Borrower fails to take after having given an Advance Request; (ii) a
period equal in duration to the Interest Period of a LIBOR Advance that
Borrower fails to repay when required by the terms of this Agreement; or
(iii) if a prepayment or repayment on a LIBOR Advance occurs, or a LIBOR
Advance converts to a CBR Advance, whether or not required hereby, prior
to the last day of the Interest Period therefor, the period from and
including the date thereof to but excluding the last day of such
Interest Period.
If a Lender claims compensation under this Section, such Lender shall
furnish a certificate to Borrower that states the additional amount or amounts
to be paid to it hereunder and the basis therefor. Borrower shall have the
burden of proving that any such certificate is not correct. Any compensation
payable by Borrower to a Lender under this Section shall be payable without
regard to whether such Lender has funded its LIBOR Advances through the purchase
of deposits in an amount or of a maturity corresponding to the deposits used as
a reference in determining the LIBO Rate.
4.10. CAPITAL ADEQUACY REIMBURSEMENT. If after the Execution Date there
is any change of Law, or in any rule, order, or guideline of any Governmental
Authority (whether or not having the force of law and whether or not failure to
comply therewith would be unlawful), regarding the capital that financial
institutions in a class that includes a Lender are required to maintain, and
which has the effect of reducing the rate of return on, or increasing the cost
of maintaining, such Lender's capital as a consequence of its obligations
hereunder, then such Lender may from time to time demand, and Borrower shall pay
to such Lender within fifteen days after each demand, such additional amount as
will compensate such Lender for such reduction or increase. If a Lender claims
compensation under this Section, such Lender shall furnish a certificate to
Borrower that states the additional amount to be paid to it hereunder and
includes a description of the method used by such Lender in calculating such
amount. Borrower shall have the burden of proving that the amount of any such
additional compensation calculated by a Lender is not correct.
4.11. USURY. Notwithstanding any provisions to the contrary in Section
or elsewhere in any of the Loan Documents, Borrower shall not be obligated to
pay interest at a rate which exceeds the maximum rate permitted by Law. If, but
for this Section , Borrower would be deemed obligated to pay interest at a rate
which exceeds the maximum rate permitted by Law, or if any of the Loan
Obligations is paid or becomes payable before its originally scheduled Maturity
and as a result Borrower has paid or would be obligated to pay interest at such
an excessive rate, then (i) Borrower shall not be obligated to pay
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interest to the extent it exceeds the interest that would be payable at the
maximum rate permitted by Law; (ii) if the outstanding Loan Obligations have not
been accelerated as provided in Section , any such excess interest that has been
paid by Borrower shall be refunded; (iii) if the outstanding Loan Obligations
have been accelerated as provided in Section , any such excess that has been
paid by Borrower shall be applied to the Loan Obligations as provided in Section
; and (iv) the effective rate of interest shall be deemed automatically reduced
to the maximum rate permitted by Law; provided that if thereafter the rate of
interest on any Loan hereunder is less than the maximum rate permitted by Law
such rate of interest shall automatically be increased to the maximum rate
permitted by Law until Lenders recapture the aggregate amount of all interest
payments they would have otherwise been entitled to hereunder and under the
Notes but for the terms of this Section.
5. FEES.
5.1. COMMITMENT FEE TO LENDERS. Borrower shall pay to Agent for the
ratable account of Lenders a "Commitment Fee" calculated by applying the daily
equivalent of the Commitment Fee Rate to the Unused Aggregate Revolving
Commitment on each day during the preceding calendar quarter (based on a 360 day
year). The "Commitment Fee Rate" shall be one half of one percent (.50%). The
"Unused Aggregate Revolving Commitment" on any day shall be an amount equal to
(i) the Aggregate Revolving Commitment MINUS (ii) the sum of the amounts of (a)
the Aggregate Revolving Loan plus (b) the Letter of Credit Exposure and (c) the
Swingline Loan. The Commitment Fee shall be payable quarterly in arrears
commencing on the first day of the first full calendar quarter beginning after
the Effective Date and continuing on the first day of each calendar quarter
thereafter and on the Revolver Maturity Date.
5.2. LETTER OF CREDIT FEES TO AGENT FOR RATABLE BENEFIT OF LENDERS.
Borrower shall pay to Agent for the ratable account of Lenders a non-refundable
"Letter of Credit Fee" for each Letter of Credit issued that shall be calculated
by multiplying the Revolver LIBO Spread then in effect by the undrawn amount of
such Letter of Credit. The Letter of Credit Fee for each Letter of Credit shall
be payable in fourths and in advance on the date such Letter of Credit is issued
and on the first day of every calendar quarter ended after issuance of such
Letter of Credit and on the date of termination or expiration of such Letter of
Credit. The Letter of Credit Fee shall accrue based on the undrawn face amount
of each Letter of Credit outstanding during each day of the relevant quarterly
period (based on a 360 day year). Any portion of a Letter of Credit Fee received
by Agent but not accrued for any such quarterly period as a result of a decrease
in the undrawn face amount of the applicable Letter of Credit or the termination
of the applicable Letter of Credit whereby the Letter of Credit Issuer no longer
has any obligations thereunder shall be reimbursed by Agent to Borrower on the
next payment date so long as there exists no Unwaived Event of Default. Agent
shall notify each Lender of the amount of any such Letter of Credit Fee
reimbursed by Agent pursuant to the previous sentence and each Lender shall
promptly thereafter remit to Agent such Lender's pro-rata portion of the amount
of such reimbursed Letter of Credit Fee. Agent shall retain for its benefit, as
issuer, its customary fees charged to its customers for issuing letters of
credit.
6. PAYMENTS.
6.1. SCHEDULED PAYMENTS ON REVOLVING LOANS AND THE SWINGLINE LOAN.
6.1.1. INTEREST. Borrower shall pay interest accrued on all
Revolving CBR Advances and on all Swingline Advances monthly in arrears
beginning on the first day of the first full calendar month following
the Effective Date and continuing on the first day of each calendar
month thereafter, and on the Revolver Maturity Date. Borrower shall pay
interest accrued on all Revolving LIBOR Advances with Interest Periods
of three months or less on the last day of the Interest Period
applicable to any such Revolving LIBOR Advance and on the Revolver
Maturity Date. Borrower shall pay interest accrued on all Revolving
LIBOR Advances with Interest Periods in excess of three
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months quarterly in arrears beginning on the first day of the first
full calendar quarter following the Effective Date and continuing on
the first day of each calendar quarter thereafter, on the last day of
the Interest Period applicable to any such Revolving LIBOR Advance,
and on the Revolver Maturity Date.
6.1.2. PRINCIPAL.
6.1.2.1. DAILY PAYMENTS. Borrower shall maintain one or
more lockboxes with Agent under its standard lockbox agreements
or other institutions acceptable to Agent (the "Lockboxes").
Agent will establish on its books an account in the name of
Borrower designated as the "Cash Collateral Account". Borrower
shall direct all Account Debtors to remit payments on their
Accounts to one or another of the Lockboxes. All proceeds of
Collateral and all funds Borrower receives directly (other than
Revolving Advances and Swingline Advances) shall be deposited in
the Cash Collateral Account. Collected funds in the Cash
Collateral Account on each Business Day, to the extent they do
not exceed the Swingline Loan on such Business Day, shall be
remitted by Agent to Boatmen's and applied by Boatmen's to reduce
the Swingline Loan. The collected funds remaining in the Cash
Collateral Account on the next to last Business Day of every
calendar week after such remittance and application to reduce the
Swingline Loan, to the extent they do not exceed the Aggregate
Revolving CBR Loan on the Settlement Date, shall be remitted by
Agent to Lenders weekly on the last Business Day of each such
calendar week (the "Settlement Date") in accordance with their
prorata shares of the Aggregate Revolving Commitment and applied
by Lenders to reduce the Aggregate Revolving CBR Loan. Any
collected funds still remaining in the Cash Collateral Account
after such remittances and application to reduce the Swingline
Loan and Aggregate Revolving CBR Loan shall be applied at
Lender's discretion to (i) the outstanding principal balance of
any Revolving LIBOR Advances when their respective Interest
Periods expire, or (ii) the outstanding principal balance of any
subsequent Revolving CBR Advances.
6.1.2.2. PAYMENT ON REVOLVER MATURITY DATE. Borrower
shall pay the entire amount of the Aggregate Revolving Loan and
the Swingline Loan on the Revolver Maturity Date.
6.2. SCHEDULED PAYMENTS ON THE TERM LOANS.
6.2.1. INTEREST. Borrower shall pay interest accrued on all Term
1 Loan CBR Advances and Term 2 Loan CBR Advances monthly in arrears,
beginning on the first day of the first full calendar month following
the Effective Date, and continuing on the first day of each calendar
month thereafter, and on August 16, 2002 (the "Term Maturity Date").
Borrower shall pay interest accrued on all Term 1 Loan LIBOR Advances
and Term 2 Loan LIBOR Advances with Interest Periods of three months or
less on the last day of the Interest Period applicable to any such Term
1 Loan LIBOR Advance or Term 2 Loan LIBOR Advance, as the case may be,
and on the Term Maturity Date. Borrower shall pay interest accrued on
all Term 1 Loan LIBOR Advances and Term 2 Loan LIBOR Advances with
Interest Periods in excess of three months quarterly in arrears
beginning on the first day of the first full calendar quarter following
the Effective Date and continuing on the first day of each calendar
quarter thereafter, on the last day of the Interest Period applicable to
any such Term 1 Loan LIBOR Advance or Term 2 Loan LIBOR Advance, as the
case may be, and on the Term Maturity Date.
6.2.2. TERM 1 LOAN PRINCIPAL. Borrower shall repay the Aggregate
Term 1 Loan as set forth in Exhibit.
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6.2.3. TERM 2 LOAN PRINCIPAL. Borrower shall repay the Aggregate
Term 2 Loan as set forth in Exhibit .
6.3. PREPAYMENTS; REDUCTION OF REVOLVING COMMITMENT.
6.3.1. VOLUNTARY PREPAYMENTS. In addition to daily payments
contemplated in Section above, Borrower may wholly prepay the Aggregate
Term 1 Loan, the Aggregate Term 2 Loan, the Aggregate Revolving Loan, or
the Swingline Loan at any time and may make partial prepayments thereon
from time to time, without penalty or premium, but only if (i) Borrower
gives Agent written notice (which shall be mailed, personally delivered
or telecopied as provided in Section ) of Borrower's intention to make
such prepayments at least one Business Day prior to tendering the
prepayments, (ii) the total amount of the prepayments is a whole
multiple of $100,000 and no less than $500,000, and (iii) Borrower pays
any accrued interest on the amount prepaid at the time of such
prepayment. Each such prepayment will be applied by Agent, in accordance
with each Lender's respective prorata shares of the applicable
Commitment, to reduce the Aggregate Revolving Loan and, in the case of
the Aggregate Term 1 Loan and the Aggregate Term 2 Loan, to reduce the
repayment installments in the inverse order of their due dates. The
foregoing notwithstanding, Borrower shall not be entitled to voluntarily
prepay the Aggregate Term 1 Loan, the Aggregate Term 2 Loan, or the
Aggregate Revolving Loan, if the effect of such voluntary prepayment or
reduction would be to prepay principal or interest under the relevant
Loan which is attributable to a LIBOR Advance, unless Borrower also
reimburses Lenders pursuant to the terms of Section . Without limiting
the terms of the previous sentence, Borrower shall not be entitled to
partially prepay any LIBOR Advance if the remaining balance outstanding
of such LIBOR Advance after such prepayment is less than $400,000.
6.3.2. VOLUNTARY REDUCTION OF AGGREGATE REVOLVING COMMITMENT.
Borrower may reduce the Aggregate Revolving Commitment in whole
multiples of $1,000,000 at any time and from time to time, but only if
(i) Borrower gives Agent written notice of Borrower's intention to make
such reduction at least one Business Day prior to the effective date of
the reduction, and (ii) Borrower makes on the effective date of the
reduction any payment on the Aggregate Revolving Loan required under
Section as a consequence of the reduction. Any such reduction of the
Aggregate Revolving Commitment shall be permanent. The foregoing
notwithstanding, Borrower shall not be entitled to voluntarily reduce
the Aggregate Revolving Commitment, if the effect of such voluntary
reduction would be to prepay principal or interest under the relevant
Commitment which is attributable to a LIBOR Advance, unless Borrower
also reimburses Lenders pursuant to the terms of Section .
6.3.3. MANDATORY PREPAYMENTS WHEN OVER-ADVANCES EXIST. If at any
time the sum of the Aggregate Revolving Loan and the Swingline Loan
exceeds the Maximum Available Amount (an "Overadvance"), whether as a
result of optional Revolving Advances by Lenders as contemplated by
Section or otherwise, Borrower shall on demand by Agent make a
prepayment in the amount of the excess. Each such prepayment shall be
applied first by Boatmen's to reduce the Swingline Loan until it is
reduced to zero, then by the Lenders in accordance with their respective
prorata shares of the Revolving Commitment to reduce the Revolving
Loans, including Revolving LIBOR Advances, until they are reduced to
zero.
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6.3.4. OTHER MANDATORY PREPAYMENTS.
6.3.4.1. PROCEEDS FROM SALES OF ASSETS. If Borrower sells
any of its assets in a single transaction or related series of
transactions that are not in the ordinary course of business,
Borrower shall make a prepayment to Agent, for the ratable
benefit of the Lenders, to be applied in the manner required
under Section , in the amount of the gross proceeds therefrom
less reasonable selling expenses and the increment in federal,
state and local income taxes, if any, payable as a consequence of
any taxable gain from such sale. The foregoing shall not apply to
(i) the net proceeds from such sale or sales that are less than
$75,000 during any Fiscal Year during the term hereof, or (ii)
the net proceeds of any such sale of a capital asset if (a) such
net proceeds are expended by Borrower within 90 days of
completion of the sale for replacement of such asset by another
asset of comparable type and utility (Lenders agree that the
amount of such net proceeds expended will not be included for the
purposes of calculating Capital Expenditures in Section ), (b)
such replacement asset is made subject to Lenders' first priority
Security Interest and is free and clear of all other Security
Interests, and (c) Borrower delivers to Agent written evidence of
the use of the proceeds for such purchase, or (iii) the net
proceeds of any such sale of assets described in Section 11.5 of
the Asset Purchase Agreement which is a part of the Acquisition
Documents.
6.3.4.2. PROCEEDS FROM SALE OF SECURITIES. If after the
Execution Date Borrower or any other Covered Person issues any
equity or debt securities, or warrants or options therefor,
Borrower shall make a prepayment to Agent, for the ratable
benefit of the Lenders, to be applied in the manner required
under Section , promptly after such sale in an amount equal to
the gross proceeds therefrom less reasonable brokers' and
underwriters' fees and commissions and other reasonable issuing
expenses.
6.3.4.3. APPLICATION OF INSURANCE/CONDEMNATION PROCEEDS.
Agent for the ratable benefit of the Lenders is hereby authorized
to participate with the Borrower in any proceeding for the
condemnation or other taking of any Covered Person's property and
each Covered Person from time to time will deliver to Agent all
instruments reasonably requested by Agent to permit such
participation. If an Unwaived Event of Default exists, Agent is
hereby authorized to collect, for the ratable benefit of the
Lenders, all Insurance/Condemnation Proceeds directly and, after
deducting the expenses, if any, incurred by Agent in collection
or handling thereof, apply such Insurance/Condemnation Proceeds
as a prepayment to be applied in the manner required under
Section . If no Unwaived Event of Default exists, Agent will
permit such Covered Person to use such Insurance/Condemnation
Proceeds or any part thereof to replace, repair, restore or
rebuild the property giving rise to such Insurance/Condemnation
Proceeds in a diligent and expeditious manner with materials and
workmanship of substantially the same quality as existed before
the condemnation, taking, loss, damage or destruction, and if
such Covered Person elects so to proceed, it shall commence the
work of replacement, repair, restoration or rebuilding as soon as
practicable and proceed diligently with it until completion. In
such event, Agent shall hold such Insurance/Condemnation Proceeds
and disburse the same for such repair work. Plans and
specifications for any such repair or restoration (if the amount
involved is in excess of $250,000) shall be reasonably
satisfactory to Agent and the Required Lenders and shall be
submitted to Agent prior to commencement of the work and shall be
subject to the reasonable approval of Agent and the Required
Lenders. Expenditures by Borrower for such rebuilding, repairing
or
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replacement in excess of the amount of the Insurance/Condemnation
Proceeds shall be deemed Capital Expenditures subject to the
limits in Section . In the event that any Insurance/Condemnation
Proceeds remain after application as described above, they shall
be applied to make a prepayment to Agent, for the ratable benefit
of Lenders, in the manner required under Section .
6.3.4.4. EXCESS CASH FLOW.
6.3.4.4.1. Borrower shall pay (and/or cause the
applicable Covered Person to pay) to Agent, for the
ratable benefit of the Lenders, an amount equal to 100% of
each Covered Person's Excess Cash Flow for Borrower's
Fiscal Year ending September 30, 1997 and Borrower's
Fiscal Year ending September 30, 1998, in each case
payable in three equal installments with the first
installment due within 90 days after the end of each such
Fiscal Year, the second installment due within 120 days
after the end of each such Fiscal Year, and the last
installment due within 150 days after the end of each such
Fiscal Year.
6.3.4.4.2. Within 90 days after the end of
Borrower's Fiscal Year ending September 30, 1999 and
within 90 days after the end of each of Borrower's Fiscal
Years thereafter, Borrower shall pay (and/or cause the
applicable Covered Person to pay) to Agent, for the
ratable benefit of the Lenders, an amount equal to 75% of
each Covered Person's Excess Cash Flow for each such
Fiscal Year.
6.3.4.4.3. "Excess Cash Flow" means, for any period
of calculation, (A) Consolidated Operating Cash Flow MINUS
(B) the sum of (i) Consolidated Fixed Charges PLUS (ii)
the amount of any voluntary prepayments of the Aggregate
Term 1 Loan and the Aggregate Term 2 Loan during any
period of calculation.
6.3.4.5. APPLICATION OF MANDATORY PAYMENTS. Each
prepayment required under Section , other than prepayments made
under Section , shall be applied (i) first, to reduce the
Aggregate Term 1 Loan and the repayment installments thereon due
under Section . in the inverse order of their due dates, (ii)
second, to reduce the Aggregate Term 2 Loan and the repayment
installments thereon due under Section . in the inverse order of
their due dates, and (iii) third, to the remaining outstanding
Loan Obligations. All prepayments required under Section , shall
be applied:
(i) first, to reduce the Aggregate Term 1 Loan such that
each of the remaining quarterly principal installments on
the Aggregate Term 1 Loan is reduced (but not below zero)
by an amount calculated by dividing (a) the amount of any
such prepayment by (b) the number of quarterly payments
remaining under the Aggregate Term 1 Loan as of the date
that such prepayment is received by Agent for the ratable
benefit of the Lenders;
(ii) second, to reduce the Aggregate Term 2 Loan such that
each of the remaining quarterly principal installments on
the Aggregate Term 2 Loan is reduced (but not below zero)
by an amount calculated by dividing (a) the amount of any
such prepayment by (b) the number of quarterly payments
remaining under the Aggregate Term 2 Loan as of the date
that such prepayment is received by Agent for the ratable
benefit of the Lenders; and
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(iii) third, to reduce the Aggregate Revolving Loan and
any other remaining Loan Obligations.
6.4. MANNER OF PAYMENTS AND TIMING OF APPLICATION OF PAYMENTS.
6.4.1. PAYMENT REQUIREMENT. Except as provided in Section with
respect to payments from collected funds in the Cash Collateral Account
and unless expressly provided to the contrary elsewhere herein, Borrower
shall make each payment on the Loan Obligations to Agent for the ratable
account of the Lenders as required under the Loan Documents at the
Lending Office. All such payments shall be made in Dollars on the date
when due, without deduction, set-off or counterclaim. All such payments
will be distributed by Agent to Lenders as provided in Section for
application to the Loan Obligations as provided herein.
6.4.2. APPLICATION OF PAYMENTS AND PROCEEDS. Except as provided
below, all payments received by Agent or a Lender in immediately
available funds at or before 1:00 p.m. (St. Louis, Missouri time) on a
Business Day will be applied to the relevant Loan Obligation on the same
day. Such payments received on a day that is not a Business Day or after
1:00 p.m. (St. Louis, Missouri time) on a Business Day will be applied
to the relevant Loan Obligation on the next Business Day. Except as
expressly provided otherwise herein or in any other Loan Document, (i)
Lenders may apply, and reverse and reapply, payments and proceeds of the
Collateral to the Loan Obligations in such order and manner as Lenders
determine in their absolute discretion, and (ii) Borrower hereby
irrevocably waives the right to direct the application of payments and
proceeds of the Collateral.
6.4.3. INTEREST CALCULATION. Notwithstanding anything contained
herein to the contrary, for purposes of interest calculation on the Loan
Obligations, (i) a payment by check, draft or other instrument received
at or before 1:00 p.m. (St. Louis, Missouri time) on a Business Day
shall be deemed to have been applied to the relevant Loan Obligation on
the second following Business Day, (ii) a payment by check, draft or
other instrument received on a day that is not a Business Day or after
1:00 p.m. (St. Louis, Missouri time) on a Business Day shall be deemed
to have been applied to the relevant Loan Obligation on the third
following Business Day, (iii) a payment in cash or by wire transfer
received at or before 1:00 p.m. (St. Louis, Missouri time) on a Business
Day shall be deemed to have been applied to the relevant Loan Obligation
on the Business Day when it is received, and (iv) a payment in cash or
by wire transfer received on a day that is not a Business Day or after
1:00 p.m. (St. Louis, Missouri time) on a Business Day shall be deemed
to have been applied to the relevant Loan Obligation on the next
Business Day.
6.4.4. PREPAYMENTS OF THE TERM LOAN 1 LIBOR ADVANCES. All
prepayments required under Section and all scheduled principal payments
required under Section to be applied against the Aggregate Term 1 Loan
shall first be applied against the outstanding principal, if any, of the
Aggregate Term 1 CBR Loan. Anything herein to the contrary
notwithstanding, until the Term Maturity Date, each and every prepayment
of the outstanding principal on the Aggregate Term 1 Loan required under
Section and each and every scheduled payment of the outstanding
principal on the Aggregate Term 1 Loan required under Section , which
would have the effect of reducing the outstanding principal balance of
the Aggregate Term 1 Loan below the outstanding principal balance of the
Aggregate Term 1 LIBOR Loan, shall not be applied against the Aggregate
Term 1 LIBOR Loan at such time, but shall be deposited into a separate
blocked interest bearing account at Agent in the name of Borrower.
Borrower hereby assigns to Agent, for the ratable benefit of Lenders,
such account along with all funds held in such account, all proceeds of
such account, and all interest earned thereon, to further secure the
Loan Obligations and at the time such deposit is made shall execute and
deliver to Agent any other written assignments and related
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financing statements reasonably requested by Agent to evidence the Lenders'
first priority Security Interest in said account, funds, proceeds, and interest.
Agent shall apply the amount remaining in such blocked account to the
outstanding principal balance of each Term Loan 1 LIBOR Advance as and when its
respective Interest Period expires.
6.4.5. PREPAYMENTS OF THE TERM LOAN 2 LIBOR ADVANCES. All
prepayments required under Section and all scheduled principal payments
required under Section to be applied against the Aggregate Term 2 Loan
shall first be applied against the outstanding principal, if any, of the
Aggregate Term 2 CBR Loan. Anything herein to the contrary
notwithstanding, until the Term Maturity Date, each and every prepayment
of the outstanding principal on the Aggregate Term 2 Loan required under
Section and each and every scheduled payment of the outstanding
principal on the Aggregate Term 2 Loan required under Section , which
would have the effect of reducing the outstanding principal balance of
the Aggregate Term 2 Loan below the outstanding principal balance of the
Aggregate Term 2 LIBOR Loan, shall not be applied against the Aggregate
Term 2 LIBOR Loan at such time, but shall be deposited into a separate
blocked interest bearing account at Agent in the name of Borrower.
Borrower hereby assigns to Agent, for the ratable benefit of Lenders,
such account along with all funds held in such account, all proceeds of
such account, and all interest earned thereon, to further secure the
Loan Obligations and at the time such deposit is made shall execute and
deliver to Agent any other written assignments and related financing
statements reasonably requested by Agent to evidence the Lenders' first
priority Security Interest in said account, funds, proceeds, and
interest. Agent shall apply the remaining amount in such blocked account
to the outstanding principal balance of each Term Loan 2 LIBOR Advance
as and when its respective Interest Period expires.
6.5. RETURNED INSTRUMENTS. If a payment is made by check, draft or other
instrument and the check, draft or other instrument is returned unpaid, the
application of the payment to the Loan Obligations will be reversed and will be
treated as never having been made.
6.6. COMPELLED RETURN OF PAYMENTS OR PROCEEDS. If a Lender is for any
reason compelled to surrender any payment or any proceeds of the Collateral
because such payment or the application of such proceeds is for any reason
invalidated, declared fraudulent, set aside, or determined to be void or
voidable as a preference, an impermissible setoff, or a diversion of trust
funds, then this Agreement and the Loan Obligations to which such payment or
proceeds was applied or intended to be applied shall be revived as if such
application was never made for all purposes, including, without limitation, the
calculation of interest; and Borrower shall be liable to pay to such Lender, and
shall indemnify such Lender for and hold such Lender harmless from any loss with
respect to, the amount of such payment or proceeds surrendered. This Section
shall be effective notwithstanding any contrary action such Lender may take in
reliance upon its receipt of any such payment or proceeds. Any such contrary
action so taken by such Lender shall be without prejudice to such Lender's
rights under this Agreement and shall be deemed to have been conditioned upon
the application of such payment or proceeds having become final and irrevocable.
The provisions of this Section shall survive termination of the Commitments, the
expiration of the Letter of Credits and the payment and satisfaction of all of
the Loan Obligations.
6.7. DUE DATES NOT ON BUSINESS DAYS. If any payment required hereunder
becomes due on a date that is not a Business Day, then such due date shall
be deemed automatically extended to the next Business Day.
7. BORROWINGS.
7.1. INITIAL INTER-LENDER ADVANCES. To the extent that on the
Effective Date the Revolving Loan owing to a Lender exceeds such Lender's
prorata share of the Aggregate Revolving Commitment, or the
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Term 1 Loan owing to a Lender exceeds the Aggregate Term 1 Commitment, or the
Term 2 Loan owing to a Lender exceeds the Aggregate Term 2 Commitment, each of
the other Lenders shall remit to such Lender by 3:00 p.m. (St. Louis, Missouri
time) on the Effective Date, in accordance with such Lender's remittance
instructions, its share of each such excess calculated in accordance with its
prorata share of the Aggregate Revolving Commitment, the Aggregate Term 1
Commitment, and the Aggregate Term 2 Commitment, as applicable, rounded to the
nearest penny, in immediately available funds consisting solely of Dollars. Each
such remittance by a Lender shall be deemed to be a Revolving Advance, Term 1
Advance, or Term 2 Advance hereunder, as applicable, by such Lender, and shall
reduce the Revolving Advance, the Term 1 Advance, or Term 2 Advance, as
applicable, of the Lender to whom such remittance is made.
7.2. ADVANCES TO BORROWER. Borrower may request Revolving Advances by
submitting an Advance Request to Agent. Agent may treat every request for a CBR
Advance as a request for a Swingline Advance from Borrower to the extent the
requested amount does not exceed the Maximum Swingline Amount and as a request
for a Revolving Advance in the amount of the excess. Every Advance Request shall
be irrevocable. An Advance Request received by Agent on a day that is not a
Business Day or that is received by Agent after 11:00 a.m. (St. Louis, Missouri
time) on a Business Day shall be treated as having been received by Agent at
11:00 a.m. (St. Louis, Missouri time) on the next Business Day.
7.3. REVOLVING ADVANCES TO REPAY THE SWINGLINE LOAN.
7.3.1. Boatmen's shall, (i) (A) on any Advance Date for an
Advance other than a Swingline Advance, (B) on any date when a
prepayment of the Aggregate Revolving CBR Loan is made as permitted or
required under Section and Section , and (C) on each Settlement Date,
and (ii) Boatmen's may, on any other date in Boatmen's absolute
discretion, in each case, give notice to Lenders of the amount of the
Swingline Loan after application of all payments to be applied thereto
as provided elsewhere herein. Such notice shall be given no later than
12:00 noon (St. Louis, Missouri time) and may include a demand that the
Swingline Loan be fully paid. If Boatmen's demands that the Swingline
Loan be fully paid, then prior to 3:00 p.m. (St. Louis, Missouri time)
on such date, each Lender (other than Boatmen's) shall make a Revolving
CBR Advance (a "Mandatory Advance") to Boatmen's for the account of
Borrower and the proceeds thereof shall be applied by Boatmen's to
reduce the Swingline Loan. Such Revolving CBR Advances shall be made by
Lenders (other than Boatmen's) in accordance with their prorata shares
of the Aggregate Revolving Commitment and shall be made notwithstanding
that (i) the amount of the aggregate Mandatory Advances may not be in
the minimum amount for Advances otherwise required hereunder, (ii) any
conditions to Advances in Section may not be then satisfied, (iii) there
is an Existing Default, (iv) the amount of such Mandatory Advances would
result in the Aggregate Revolving Loan exceeding the Maximum Available
Amount, or (v) such Mandatory Advances may be made after the Revolver
Maturity Date; provided, however, that in no event shall any Lender be
required to make any Mandatory Advance that would result in the
Revolving Loan of such Lender exceeding such Lender's Revolving
Commitment. After application of the proceeds of Mandatory Advances to
reduce the Swingline Loan, Boatmen's Revolving Loan shall be deemed
increased by the remaining amount of the Swingline Loan and the
Swingline Loan simultaneously reduced to zero.
7.3.2. If for any reason, including the commencement of a
proceeding in bankruptcy with respect to any Borrower, Mandatory
Advances cannot be made on the date otherwise required above, then each
Lender shall be deemed automatically to have purchased from Boatmen's as
of such date a prorata undivided interest and participation in the
Swingline Loan so as to cause such Lender to share in the Swingline Loan
in accordance with its prorata share of the Aggregate Revolving
Commitment. Each Lender shall remit its prorata share of the Swingline
Loan to
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Boatmen's promptly on demand. All interest payable with respect to such Lender's
prorata share of the Swingline Loan shall be for the account of Boatmen's to the
date such remittance is made, and shall be for the account of and remitted by
Boatmen's to such Lender as a participant from and after such date. Further,
until such remittance is made, such Lender shall pay to Boatmen's, on demand,
interest on such Lender's prorata share of the Swingline Loan at the Federal
Funds Rate.
7.4. LENDERS' RIGHT TO MAKE OTHER REVOLVING ADVANCES. With the prior
approval of Required Lenders in each instance, Lenders shall have the right
themselves to make prorata Revolving Advances at any time and from time to time
to cause timely payment of any of the Loan Obligations. Agent will give notice
to Borrower after any such Revolving Advance is made.
7.5. LETTERS OF CREDIT. Borrower may request the issuance of a Letter of
Credit by submitting a Letter of Credit Request to the Agent and Letter of
Credit Issuer and executing the reimbursement agreement required under Section
no less than five Business Days prior to the requested issue date for such
Letter of Credit (provided that if Agent is also the Letter of Credit Issuer, a
Letter of Credit Request need only be submitted to Agent).
7.6. AGENT'S NOTICE TO LENDERS; FUNDS DEPOSIT.
7.6.1. ADVANCES. Not later than 12:00 noon (St. Louis time) on
the date when an Advance is requested to be made (each an "Advance
Date"), which may only be on a Business Day, Agent shall promptly notify
each Lender of the amount of the Advance to be made on that Business
Day. Each Lender shall make available by 3:00 p.m. (St. Louis, Missouri
time) on the Advance Date its prorata share of such Advance (except a
Swingline Advance, which shall be funded solely by Boatmen's as provided
herein), rounded to the nearest penny, in immediately available funds
consisting solely of Dollars, to Agent in accordance with such
remittance instructions as may be given by Agent to Lenders from time to
time.
7.6.2. FUNDING DRAWS ON LETTERS OF CREDIT. In the event that a
draw is made on a Letter of Credit and Borrower does not reimburse the
amount of such draw in full to the Letter of Credit Issuer on demand,
the Letter of Credit Issuer shall promptly notify Agent of such failure.
Upon Agent's receipt of such notice from the Letter of Credit Issuer,
Agent shall promptly notify each Lender thereof and shall have the right
to cause a Revolving Advance to be made, regardless of whether such
Revolving Advance would result in the Aggregate Revolving Loan exceeding
the Maximum Available Amount, by notifying each Lender of the draw, the
amount of the Revolving Advance required to fund such draw, and the
amount of each such Lender's ratable share of such Revolving Advance
(which notice shall be deemed to be an Advance Request). Unless
otherwise agreed by Lenders, the Advance Date and time for such
Revolving Advance shall not be later than 1:00 p.m. (St. Louis, Missouri
time) on the first Business Day following Agent's delivery of notice to
the Lenders. By no later than such Advance Date and time, each Lender
shall unconditionally make available its prorata share of the Revolving
Advance, in immediately available funds consisting solely of Dollars, to
Agent in accordance with such remittance instructions as may be given by
Agent to each Lender from time to time and upon Agent receiving all such
funds it shall promptly pay over such amount to the Letter of Credit
Issuer for application to outstanding draws. Each Revolving Advance made
by Lenders pursuant to this Section shall be deemed to be a Revolving
CBR Advance.
7.7. ADVANCES RATABLE. All Advances shall be made by Lenders as
provided herein in accordance with their prorata shares of the respective
Commitments, as applicable. Except as otherwise expressly provided herein,
a Lender shall not be obligated to make Revolving Advances in excess of its
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Revolving Commitment, Term 1 Advances in excess of its Term 1 Commitment, Term 2
Advances in excess of its Term 2 Commitment, or advance more than its prorata
share of any Advance.
7.8. AGENT'S AVAILABILITY ASSUMPTION. Unless Agent has been given
written notice by a Lender prior to an Advance Date that such Lender does not
intend to make available to Agent such Lender's prorata portion of the Advance
which it will be obligated to make on the Advance Date, Agent may assume that
each Lender has made the required amount available to Agent on the Advance Date
and Agent may, in reliance upon such assumption, make available to Borrower a
corresponding amount. If such corresponding amount is not in fact made available
to Agent by such Lender on the Advance Date, Agent shall be entitled to recover
such corresponding amount on demand from such Lender. If such Lender does not
pay such corresponding amount immediately upon Agent's demand therefor, then
Agent shall promptly notify Borrower and the other Lenders and Borrower shall
immediately pay such corresponding amount to Agent. Agent shall also be entitled
to recover, either from such defaulting Lender or Borrower, interest on such
corresponding amount for each day from, but not including, the date such
corresponding amount was made available by Agent to Borrower to, and including,
the date such corresponding amount is recovered by Agent, at a rate per annum
equal to (i) if paid by such Lender, the cost to Agent of funding such amount at
the Federal Funds Rate, or (ii) if paid by Borrower, the applicable rate for
Revolving Advances determined from the Advance Request to which such amount
relates. Each Lender shall be obligated only to fund its prorata share of an
Advance subject to the terms and conditions hereof, regardless of the failure of
another Lender to fund its prorata share thereof.
7.9. DISBURSEMENT. Provided that all conditions precedent herein to a
requested Advance have been satisfied, Agent (Boatmen's, in the case of a
Swingline Advances) will make the amount of such requested Advance available to
Borrower on the applicable Advance Date in immediately available funds in
Dollars at the Lending Office. Such funds will be deposited in an account of
Borrower's at the Lending Office unless Borrower gives Agent specific
disbursement instructions otherwise.
7.10. AMOUNT, NUMBER, AND PURPOSE RESTRICTIONS ON ADVANCES. No Advance
will be made unless it is a whole multiple of $100,000 and not less than
$400,000, in the case of a LIBOR Advance, or a whole multiple of $10,000 and not
less than $50,000, in the case of a CBR Advance. On any one day, no more than
one Revolving Advance will be made from each Lender pursuant to an Advance
Request; and no more than one Swingline Advance will be made from Boatmen's
pursuant to an Advance Request. Advances will only be made for the purposes
permitted in Section .
7.11. RESTRICTION ON NUMBER OF LIBOR ADVANCES. No more than ten (10)
LIBOR Advances with different Interest Periods may be outstanding at any one
time.
7.12. EACH ADVANCE REQUEST AND LETTER OF CREDIT REQUEST A CERTIFICATION.
Each Advance Request and each Letter of Credit Request by a Borrowing Officer
shall constitute a certification by Borrower that (i) there is no Existing
Default, (ii) all representations and warranties of Borrower in this Agreement
are then true, with such exceptions as have been disclosed to Agent in writing
by Borrower which are reasonably satisfactory to Agent, and will be true on the
Advance Date or date such Letter of Credit is to be issued, as applicable, as if
then made, with such exceptions as have been disclosed to Agent in writing by
Borrower which are reasonably acceptable to Agent, except that with respect to
the representations and warranties made regarding financial data, such
representations and warranties shall be deemed made with respect to the most
recent Financial Statements and other financial data delivered by Borrower to
Agent, and (iii) all conditions precedent hereunder to the making of the
requested Advance or issuance of the requested Letter of Credit have been
satisfied.
7.13. REQUIREMENTS FOR EVERY ADVANCE REQUEST. Only a written request
in the form attached hereto as Exhibit (which may be mailed, personally
delivered or telecopied as provided in Section
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20.1) from a Borrowing Officer to Agent that specifies the amount of the
Revolving Advance to be made, the Advance Date, whether it is to be a Revolving
LIBOR Advance or a Revolving CBR Advance, and the Interest Period to be
applicable to the Advance if it is a Revolving LIBOR Advance, shall be treated
as an "Advance Request".
7.14. REQUIREMENTS FOR EVERY LETTER OF CREDIT REQUEST. Only a written
request (which may be mailed, personally delivered or telecopied as provided in
Section ) from a Borrowing Officer to Agent and the Letter of Credit Issuer (if
a different Lender than Agent) that specifies the amount, requested issue date
(which shall be a Business Day and in no event later than 180 days before the
Revolver Maturity Date) and beneficiary of the requested Letter of Credit and
other information necessary for its issuance shall be treated as a "Letter of
Credit Request".
7.15. EXONERATION OF AGENT, LENDERS, AND LETTER OF CREDIT ISSUER.
Neither Agent nor any Lender or Letter of Credit Issuer shall incur any
liability to Borrower for treating a request that meets the express requirements
of Section or Section as an Advance Request or Letter of Credit Request, as
applicable, if Agent believes in good faith that the Person making the request
is a Borrowing Officer. Neither Agent nor any Lender or Letter of Credit Issuer
shall incur any liability to Borrower for failing to treat any such request as
an Advance Request or Letter of Credit Request, as applicable, if Agent, Lender,
or Letter of Credit Issuer, as the case may be, believes in good faith that the
Person making the request is not a Borrowing Officer.
7.16. SUSPENSION OF OBLIGATION TO MAKE LIBOR ADVANCES. If (i) on any
date for determining the LIBO Rate for any Interest Period, by reason of any
changes arising after the Execution Date affecting the London Interbank Market,
or any Lender's position in such market, adequate and fair means do not exist
for ascertaining the applicable interest rate on the basis provided for in the
definition herein of LIBO Rate, or (ii) the making of any Advance which is to be
a LIBOR Advance or the continuance of any LIBOR Advance by a Lender has become
unlawful by compliance by such Lender in good faith with any Law or any
pronouncement of a Governmental Authority (whether or not having the force of
law and whether or not failure to comply therewith would be unlawful), then such
Lender shall promptly give notice to Borrower of such determination. Until such
Lender notifies Borrower that the circumstances giving rise to the suspension
described herein no longer exist, (a) the obligation of such Lender to make
Advances which are LIBOR Advances shall be suspended, (b) each outstanding LIBOR
Advance from such Lender shall be automatically converted into a CBR Advance on
the earlier of the last day of the Interest Period for such LIBOR Advance or the
last date permitted by applicable law, and (c) all Revolving Advances from such
Lender shall be CBR Advances. Notwithstanding anything to the contrary contained
herein, if a LIBOR Advance is converted to a CBR Advance pursuant to this
Section , the per annum interest rate applicable thereto from and after the
effective date of such conversion shall be the Revolver Adjusted CBR if a
Revolving CBR Advance or the Term Loan Adjusted CBR if a Term 1 Loan CBR Advance
or a Term 2 Loan CBR Advance (as calculated in accordance with Section ).
8. SECURITY. As security for payment and performance of the Loan
Obligations, Borrower shall on the Execution Date execute and deliver, or cause
to be executed and delivered, to Agent the following documents, each being
satisfactory to Lenders:
8.1. SECURITY AGREEMENTS. Security agreements from Borrower and every
other Covered Person (including, without limitation, Holdings) granting to
Agent, for the ratable benefit of Lenders, a Security Interest under the UCC, in
the case of Borrower and each Covered Person, in all of the Goods, Equipment,
Accounts, Inventory, Instruments, Documents, Chattel Paper, General Intangibles,
Fixtures, and other personal property (of any type or nature, tangible or
intangible) of Borrower and the other Covered Persons, whether now owned or
hereafter acquired, wherever located, and all proceeds thereof, subject only to
Permitted Security Interests affecting such property.
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8.2. MORTGAGES. Mortgages and deeds of trust granting to Agent for the
ratable benefit of Lenders Security Interests in the real property described in
Attachment 1 to the Disclosure Schedule, and all income, rent and proceeds
thereof, subject only to Permitted Encumbrances affecting such real property and
existing on the Execution Date and Permitted Security Interests (each such
mortgage and deed of trust that Borrower or any other Covered Person executes
and delivers to Agent, for the ratable benefit of Lenders, either on or after
the Execution Date, a "Mortgage"). If Borrower or any other Covered Person
acquires or leases any real property after the Execution Date, Borrower shall
notify Agent thereof and shall deliver to Agent for the ratable benefit of
Lenders a deed of trust or mortgage, or leasehold deed of trust or mortgage, as
appropriate, on each parcel of such real property promptly upon request by Agent
(each such mortgage and deed of trust executed and delivered by Borrower or any
other Covered Person, as the case may be, to Agent, for the ratable benefit of
Lenders, shall be included in the definition of "Mortgage").
8.3. INTELLECTUAL PROPERTY ASSIGNMENTS. One or more assignments
assigning to Agent for the ratable benefit of Lenders a Security Interest in all
the Intellectual Property of Borrower and the other Covered Persons described in
Attachment 2 to the Disclosure Schedule.
8.4. STOCK PLEDGE AGREEMENTS. Stock Pledge Agreements granting to Agent
for the ratable benefit of Lenders a Security Interest in all of the capital
stock and other equity securities of Borrower and every Subsidiary of Borrower,
if any, and all dividends and other proceeds thereof. If Borrower or any
Subsidiary of any Covered Person issues any such capital stock or other equity
securities, Borrower, or Subsidiary, shall notify Agent thereof and shall
deliver to Agent a stock pledge agreement granting to Agent for the ratable
benefit of the Lenders a Security Interest in such capital stock or other equity
securities.
8.5. ACCOUNT ASSIGNMENT. The Account Assignment.
8.6. RIGHTS ASSIGNMENT. The Rights Assignment.
8.7. GUARANTIES. The Guaranty duly executed by Holdings.
Agent may, either before or after an Event of Default, but only with the consent
or at the direction of the Lenders, granted or withheld in their absolute
discretion, exchange, waive or release the Security Interests in any of the
Collateral or permit Borrower to substitute any real or personal property for
any of the Collateral without affecting the Loan Obligations or Agent's right to
take any other action with respect to any other Collateral; provided, however,
that Agent may, in its sole discretion and without the consent of any other
Lender, do, or permit Borrower to do, any of the foregoing with respect to the
Collateral or other real or personal property with a value of up to $100,000 in
the aggregate for each calendar year during the term hereof.
9. POWER OF ATTORNEY. Borrower hereby authorizes Agent and irrevocably appoints
Agent (acting by any of its officers) as such Borrower's agent and
attorney-in-fact (which appointment is coupled with an interest and is therefore
irrevocable) to do any of the following until all of the Loan Obligations are
fully paid and satisfied and the Commitments are terminated:
9.1. At any time while there is an Unwaived Event of Default, (i) demand
payment of any Account; (ii) enforce payment of any Account by legal proceedings
or otherwise; (iii) exercise all of Borrower's rights and remedies in
proceedings brought to collect any Account; (iv) sell or assign any Account upon
such terms, for such amount and at such time or times as Agent deems advisable;
(v) settle, adjust, compromise, extend or renew any Account; (vi) discharge and
release any Account; (vii) prepare, file and sign such Borrower's name on any
proof of claim in bankruptcy or other similar documents against an Account
Debtor; (viii) notify the postal authorities of any change of the address for
delivery of such
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Borrower's mail to any address designed by Agent, and open and process all mail
addressed to such Borrower; (ix) endorse such Borrower's name on any
verification of Accounts and notices thereof to Account Debtors; (x) make one or
more Revolving Advances to pay the costs and expenses of any of the foregoing;
and (xi) do anything that Agent deems necessary in its reasonable discretion to
assure that the Loan Obligations are fully paid.
9.2. At any time, (i) take control in any manner of any item of payment
or proceeds of any Account; (ii) have access to any lockbox or postal box into
which such Borrower's mail is deposited; (iii) endorse such Borrower's name upon
any items of payment and deposit the same in the Cash Collateral Account and
apply the proceeds thereof to the Loan Obligations as provided herein; (iv)
endorse such Borrower's name upon any chattel paper, document, instrument,
invoice, or similar document or agreement relating to any Account or other item
of the Collateral; and (v) execute in such Borrower's name and on such
Borrower's behalf any financing statement or amendments thereto deemed necessary
or appropriate by Agent to assure the perfection or continued perfection of
Agent's Security Interests in the Collateral for the ratable benefit of Lenders.
The foregoing power of attorney and authorization shall be deemed automatically
revoked upon the payment in full of all of the Loan Obligations and the
termination of the Commitments.
10. CONDITIONS OF LENDING.
10.1. CONDITIONS TO INITIAL ADVANCE. As conditions precedent
to Lenders' obligations to make the initial Advances:
10.1.1. LISTED DOCUMENTS AND OTHER ITEMS. Agent shall have
received on or before the Effective Date all of the documents and other
items listed or described in Exhibit hereto, with each being (as
applicable) duly executed and (also as applicable) sealed, attested,
acknowledged, certified, or authenticated.
10.1.2. NET WORTH. Borrower's Net Worth (before considering
any Harbour Subordinated Indebtedness or Boatmen's Subordinated
Indebtedness) shall not be less than $11,000,000.
10.1.3. PRO FORMAS; FINANCIAL CONDITION. Lenders shall have
determined to their satisfaction that the pro forma financial statements
dated as of August 15, 1996 which were previously delivered to Lenders
and which reflect Borrower's expectations as to the financial
performance of Borrower, after giving effect to the Acquisition, and the
funding of the Loans, the Minnesota Mutual Subordinated Indebtedness,
the Harbour Subordinated Indebtedness, the Boatmen's Subordinated
Indebtedness, and the initial Advance through September 30, 2001 (the
"Initial Financial Statements") (i) fairly and accurately reflect, on a
pro forma basis, the business and financial condition of Borrower in all
material respects, its cash flows, and the results of its operations for
such prior periods as of the date of such statement, (ii) for the
periods that will end after the Effective Date, fairly and accurately
forecast the business and financial condition of Borrower, its cash
flows, and the results of its operations for such periods, as of the
date of such projections, and (iii) demonstrate to the Lenders's
reasonable satisfaction that the Borrower and its Subsidiaries can repay
their Obligations as they become due, and can comply with each and every
covenant contained herein and in the other Loan Documents.
10.1.4. LULL'S AND TRAK'S FINANCIAL STATEMENTS. Lenders
shall have received audit reports prepared by McGladdery & Pullen with
respect to Lull's 1994 and 1995 fiscal years and audit reports prepared
by Price Waterhouse LLP with respect to Holdings' 1994 and 1995 fiscal
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year (collectively, the "Audit") and the unaudited financial statements
of both Lull and Trak for each month after their respective 1995 fiscal
year ends through and including May, 1996, which shall be reasonably
satisfactory to Lenders (along with the Audit, hereinafter collectively
referred to as the "Historical Financial Statements").
10.1.5. DEFAULT. There shall be no Existing Default and no
Default or Event of Default will occur as a result of such Advance
being requested or made or the application of the proceeds thereof,
after giving effect to the funding of such Advance, the Term 1 Advance,
the Term 2 Advance, and the consummation of the Acquisition.
10.1.6. PERFECTION OF SECURITY INTERESTS. Every Security
Interest required to be granted by Borrower to Agent under Section
shall have been perfected and shall be a first priority Security
Interest subject to the Permitted Security Interests and, in the case
of real property, Permitted Encumbrances.
10.1.7. REPRESENTATIONS AND WARRANTIES. The representations
and warranties contained in the Loan Documents shall be true and
correct.
10.1.8. STRUCTURE. The definitive ownership, organizational,
and asset structure of Borrower and its Subsidiaries, if any, shall
be satisfactory to Agent and the Lenders.
10.1.9. MATERIAL ADVERSE CHANGE. Since September 30, 1995 there
shall not have been any change which would have a Material Adverse
Effect on Trak or Holdings and since December 31, 1995 there shall not
have been any change which would have a Material Adverse Effect on Lull.
10.1.10. PENDING MATERIAL PROCEEDINGS. There shall be no pending
Material Proceedings.
10.1.11. PAYMENT OF FEES. Borrower shall have paid and
reimbursed to Agent and Lenders all fees, costs and expenses that are
payable or reimbursable to Agent and Lenders hereunder on or before the
Effective Date.
10.1.12. LEGAL OPINIONS. Agent shall have received opinion(s)
of Borrower's counsel, Seller's counsel, and of local counsel in the
States of Minnesota and Wisconsin deemed necessary by the Lenders,
dated the Effective Date, addressed to Agent and satisfactory to
Agent.
10.1.13. AVAILABILITY. The excess of the Maximum Available
Amount over the Aggregate Revolving Loan after taking into account the
initial Advances requested by Borrower against the Aggregate Revolving
Loan on the Effective Date shall be at least $7,000,000.
10.1.14. ACQUISITION. All conditions precedent to the
Acquisition shall have been met or waived, to the satisfaction of the
Lenders, and the Acquisition shall have been consummated. The
Acquisition Documents shall be in a form and substance acceptable to
Lenders, and all representations and warranties contained therein
shall be in form and substance satisfactory to Lenders.
10.1.15. MINNESOTA MUTUAL SUBORDINATED DEBT. Minnesota Mutual
shall have loaned in cash $5,000,000 to Trak pursuant to the Minnesota
Mutual Subordinated Documents which shall have payment terms acceptable
to the Lenders and shall provide that, among other things, the
repayment of the Minnesota Mutual Subordinated Indebtedness shall be at
all times
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subordinated to the rights of the Agent and the Lenders to the
satisfaction of the Lenders pursuant to the Minnesota Mutual
Subordination Documents.
10.1.16. HARBOUR SUBORDINATED DEBT. Harbour Group Investments
III, L.P. shall have loaned in cash $2,000,000 to Trak pursuant to the
Harbour Subordinated Documents which shall provide that, among other
things, the repayment of the Harbour Subordinated Indebtedness shall
be at all times subordinated to the rights of the Agent and the Lenders
to the satisfaction of the Lenders pursuant to the Harbour Subordination
Agreement.
10.1.17. BOATMEN'S SUBORDINATED DEBT. Boatmen's shall have
loaned in cash $14,000,000 to Holdings pursuant to the Boatmen's
Subordinated Documents which shall provide that, among other things, the
repayment of the Boatmen's Subordinated Indebtedness shall be at all
times subordinated to the rights of the Agent and the Lenders to the
satisfaction of the Lenders pursuant to the Boatmen's Subordination
Agreement.
10.1.18. GUARANTIES. Agent shall have received from the
Guarantor its Guaranty.
10.1.19. GOVERNMENTAL APPROVALS; PERMITS. Agent shall have
received evidence satisfactory to it that all necessary approvals and
consents, including, without limitation, any such approvals or consents
with regards to Hart-Scott-Rodino, have been obtained, and that Borrower
and each Covered Person has all Material Licenses necessary to operate
its business.
10.1.20. CLOSING COSTS. Agent shall have received a Borrower's
best estimate of all closing costs and fees related to the consummation
of the Acquisition in detail reasonably satisfactory to Agent.
10.1.21. OTHER ITEMS. Agent shall have received such other
consents, approvals , opinions , certificates or documents as it
reasonably deems necessary.
10.2. CONDITIONS TO ALL SUBSEQUENT ADVANCES. The obligation of Lenders
to make any Advance subsequent to the initial Advances shall be subject to the
prior or concurrent fulfillment of each of the following additional
conditions precedent:
10.2.1. GENERAL CONDITIONS. All of the conditions to the
initial Advances in Section shall have been satisfied.
10.2.2. REPRESENTATIONS AND WARRANTIES. The representations
and warranties contained in the Loan Documents, with such exceptions as
have been disclosed to Agent in writing by Borrower as addenda to the
Disclosure Schedule and reasonably agreed to by Agent, shall be true and
correct as of the time of such Advance and with the same force and
effect as if made at such time, except that with respect to the
representations and warranties made regarding financial data, such
representations and warranties shall be deemed made with respect to the
most recent Financial Statements and other financial data delivered by
Borrower to Agent.
10.2.3. DEFAULT. There shall be no Existing Default and no
Default or Event of Default will occur as a result of such Revolving
Advance being requested or made or the application of the proceeds
thereof.
11. CONDITIONS TO ISSUANCE OF LETTER OF CREDIT. As conditions precedent
to the issuance of any Letter of Credit:
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11.1. REIMBURSEMENT AGREEMENT. Borrower shall have executed and
delivered to the Letter of Credit Issuer a reimbursement agreement satisfactory
to the Letter of Credit Issuer under which Borrower undertakes to reimburse to
the Letter of Credit Issuer on demand the amount of each draw on such Letter of
Credit, together with interest from the date of the draw at the rate provided in
Section .
11.2. NO PROHIBITIONS. No order, judgment or decree of any Governmental
Authority shall exist which purports by its terms to enjoin or restrain the
Letter of Credit Issuer or any other Lender from issuing such Letter of Credit,
and no Law or request or directive (whether or not having the force of law) from
any Governmental Authority with jurisdiction over the Letter of Credit Issuer or
any other Lender shall exist which prohibits, or requests that the Letter of
Credit Issuer or any other Lender refrain from, the issuance of letters of
credit generally or such Letter of Credit in particular, or imposes upon the
Letter of Credit Issuer or any other Lender with respect to such Letter of
Credit any restriction or reserve or capital requirement (for which the Letter
of Credit Issuer or any other Lender is not otherwise compensable by Borrower
hereunder).
11.3. REPRESENTATIONS AND WARRANTIES. The representations and warranties
contained in the Loan Documents shall be true and correct, with such exceptions
as have been disclosed to Agent in writing by Borrower as addenda to the
Disclosure Schedule which are reasonably agreed to by the Agent, as of the time
of issuance, except that with respect to the representations and warranties made
regarding financial data, such representations and warranties shall be deemed
made with respect to the most recent Financial Statements and other financial
data delivered by Borrower to Agent.
11.4. NO DEFAULT. There shall be no Existing Default and no Default
or Event of Default will occur as a result of such Letter of Credit being
requested or issued.
11.5. OTHER CONDITIONS. All of the conditions to the initial Advances
in Section shall have been satisfied.
12. REPRESENTATIONS AND WARRANTIES. Except as otherwise described on the
disclosure schedule that is attached hereto as Exhibit (the "Disclosure
Schedule"), Borrower represents and warrants to Lenders as follows:
12.1. ORGANIZATION AND EXISTENCE. Each Covered Person is duly organized
and existing in good standing under the laws of the state or country, as the
case may be, of its organization, is duly qualified to do business and is in
good standing in every state or country, as the case may be, where the nature or
extent of its business or properties require it to be qualified to do business,
except where the failure to so qualify will not have a Material Adverse Effect
on any Covered Person. Each Covered Person has the power and authority to own
its properties and carry on its business as now being conducted.
12.2. AUTHORIZATION. Each Covered Person is duly authorized to execute
and perform every Loan Document to which such Covered Person is a party, and
Borrower is duly authorized to borrow hereunder, and this Agreement and the
other Loan Documents have been duly authorized by all requisite corporate or
limited liability company action of each Covered Person a party thereto. No
consent, approval or authorization of, or declaration or filing with, any
Governmental Authority, and no consent of any other Person, is required in
connection with Borrower's execution, delivery or performance of this Agreement
and the other Loan Documents to which it is a party or any other Covered
Person's execution, delivery and performance of any of the Loan Documents to
which it is a party, except in each case for those already duly obtained.
12.3. DUE EXECUTION. Every Loan Document to which a Covered Person
is a party has been executed on behalf of such Covered Person by a Person duly
authorized to do so.
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12.4. ENFORCEABILITY OF OBLIGATIONS. Each of the Loan Documents to which
a Covered Person is a party constitutes the legal, valid and binding obligation
of such Covered Person, enforceable against such Covered Person in accordance
with its terms, except to the extent that the enforceability thereof against
such Covered Person may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights generally or by equitable
principles of general application.
12.5. BURDENSOME OBLIGATIONS. No Covered Person is a party to or bound
by any Contract or is subject to any provision in the Charter Documents of such
Covered Person which would, if performed by such Covered Person, result in a
Default or Event of Default either immediately or upon the elapsing of time.
12.6. LEGAL RESTRAINTS. The execution of any Loan Document by a Covered
Person will not violate or constitute a default under the Charter Documents of
such Covered Person, any Material Agreement of such Covered Person, or any
Material Law, and will not, except as expressly contemplated or permitted in
this Agreement or any other Loan Document, result in any Security Interest being
imposed on any of such Covered Person's property. The performance by any Covered
Person of its obligations under any Loan Document to which it is a party will
not violate or constitute a default under the Charter Documents of such Covered
Person, any Material Agreement of such Covered Person, or any Material Law, and
will not, except as expressly contemplated or permitted in this Agreement or any
other Loan Document, result in any Security Interest being imposed on any of
such Covered Person's property.
12.7. LABOR CONTRACTS AND DISPUTES. There is no collective bargaining
agreement or other labor contract covering employees of a Covered Person. No
union or other labor organization is seeking to organize, or to be recognized
as, a collective bargaining unit of employees of a Covered Person. There is no
pending or, to Borrower's knowledge, threatened, strike, work stoppage, material
unfair labor practice claim or other material labor dispute against or affecting
any Covered Person or its employees.
12.8. NO MATERIAL PROCEEDINGS. There are no Material Proceedings
pending or, to the best knowledge of Borrower, threatened.
12.9. MATERIAL LICENSES. All Material Licenses have been obtained or
exist for each Covered Person.
12.10 COMPLIANCE WITH MATERIAL LAWS. Each Covered Person is in
compliance with all Material Laws. Without limiting the generality of the
foregoing:
12.10.1. GENERAL COMPLIANCE WITH ENVIRONMENTAL AND EMPLOYMENT
LAWS. The operations and employee compensation practices of every
Covered Person comply in all material respects with all applicable
Environmental Laws and Employment Laws. To Borrower's knowledge, there
are no underground storage tanks under or upon any real property now or
heretofore owned, leased, used or operated by any Covered Person.
12.10.2. PROCEEDINGS. None of the operations of any Covered
Person are the subject of any judicial or administrative complaint,
order or proceeding alleging the violation of any applicable
Environmental Laws or Employment Laws.
12.10.3. INVESTIGATIONS REGARDING HAZARDOUS MATERIALS. None of
the operations of any Covered Person are the subject of investigation by
any Governmental Authority regarding the improper transportation,
storage, disposal, generation or release into the environment of any
Hazardous Material, the results of which may have a Material Adverse
Effect on such Covered Person, or reduce materially the value of the
Collateral.
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12.10.4. NOTICES AND REPORTS REGARDING HAZARDOUS MATERIALS.
No notice or report under any Environmental Law indicating a past or
present spill or release into the environment of any Hazardous
Material has been filed, or is required to be filed, by any Covered
Person.
12.10.5. HAZARDOUS MATERIALS ON REAL PROPERTY. No Covered
Person, nor to Borrower's knowledge, any other Person, has at any time
transported, stored, disposed of, generated or released any Hazardous
Material on the surface, below the surface, or within the boundaries
of any real property owned or operated by such Covered Person or any
improvements thereon, except for transportation or storage in the
ordinary course of such Covered Person's business and in compliance
with all applicable Laws. Borrower has no knowledge of any Hazardous
Material on the surface, below the surface, or within the boundaries
of any real property owned or operated by such Covered Person or any
improvements thereon. No property of such Covered Person is subject to
a Security Interest in favor of any Governmental Authority for any
liability under any Environmental Law or damages arising from or costs
incurred by such Governmental Authority in response to a spill or
release of Hazardous Material into the environment.
12.10.6. ENVIRONMENTAL PROPERTY TRANSFER ACTS. No environmental
property transfer acts are applicable to the transactions contemplated
by this Agreement or any Acquisition Documents and Borrower has provided
all notices and obtained all necessary environmental permit transfers
and consents, if any, required in order to consummate the transactions
contemplated by this Agreement or the Acquisition Documents, to perfect
Agent's Security Interests for the benefit of the Lenders and to operate
Borrower's and every other Covered Person's business as presently or
proposed to be operated.
12.11. OTHER NAMES. During the 6 year period immediately preceding the
Effective Date, no Covered Person has used any name other than the full name
which identifies such Covered Person in this Agreement. The only trade name or
style under which a Covered Person sells Inventory or creates Accounts, or to
which instruments in payment of Accounts are made payable, is the name which
identifies such Covered Person in this Agreement.
12.12. PRIOR TRANSACTIONS. Since August 16, 1995, except with respect to
the Acquisition, no Covered Person has been a party to any merger or
consolidation, or acquired all or substantially all of the assets of any Person,
or acquired any of its property outside of the ordinary course of business
(other than as expressly permitted pursuant to the provisions hereof).
12.13. MEMBERS; CAPITALIZATION. Borrower and its Subsidiaries authorized
capital stock and issued and outstanding capital stock is as described in
Section of the Disclosure Schedule, and all issued and outstanding shares of
Borrower and each such Subsidiary are validly issued and outstanding, fully
paid, and non-assessable.
12.14. SOLVENCY. Borrower and each of its Subsidiaries is Solvent.
12.15. FINANCIAL STATEMENTS. The Initial Financial Statements are
complete and correct in all material respects, have been prepared in accordance
with GAAP, and fairly reflect or project in good faith, as the case may be, the
financial condition, results of operations and cash flows of the Persons covered
thereby, as of the dates and for the periods stated therein.
12.16. NO CHANGE IN CONDITION. Since September 30, 1995 there shall
not have been any change which would have a Material Adverse Effect on Trak or
Holdings, since December 31, 1995 there shall not
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have been any change which would have a Material Adverse Effect on Lull, and
since the Execution Date there has been no change which would have a Material
Adverse Effect on any other Covered Person.
12.17. NO DEFAULTS. No Covered Person has breached or violated or
has defaulted under any Material Agreement, or has defaulted with respect to any
Material Obligation of such Covered Person. There exists no Existing Default.
12.18. INVESTMENTS. No Covered Person has any Investments in other
Persons except Permitted Investments.
12.19. INDEBTEDNESS. No Covered Person has any Indebtedness except
Permitted Indebtedness.
12.20. INDIRECT OBLIGATIONS. No Covered Person has any Indirect
Obligations except Permitted Indirect Obligations.
12.21. ENCUMBRANCES. The Real Property Collateral is not subject to
any Encumbrances except Permitted Encumbrances.
12.22. OPERATING LEASES. No Covered Person has an interest as
lessee under any Operating Leases other than leases of non-material items of
office equipment and leases permitted by Section .
12.23. CAPITAL LEASES. No Covered Person has an interest as a lessee
under any Capital Leases other than Capital Leases that are Permitted
Indebtedness.
12.24. TAX LIABILITIES; GOVERNMENTAL CHARGES. Each Covered Person has
filed or caused to be filed all tax reports and returns required to be filed by
it with any Governmental Authority, except where extensions have been properly
obtained. Each Covered Person has paid or made adequate provision for payment of
all Taxes of such Covered Person, except Taxes which are being diligently
contested in good faith by appropriate proceedings and as to which such Covered
Person has established adequate reserves in conformity with GAAP. No Security
Interests for any such Taxes has been filed and no claims are being asserted
with respect to any such Taxes which, if adversely determined, would have a
Material Adverse Effect on such Covered Person. There are no material unresolved
issues concerning any liability of a Covered Person for any Taxes which, if
adversely determined, would have a Material Adverse Effect on such Covered
Person.
12.25. PENSION BENEFIT PLANS. All Pension Benefit Plans maintained by
each Covered Person or an ERISA Affiliate qualify under Section 401 of the Code
and are in compliance with the provisions of ERISA. Except with respect to
events or occurrences which would not have a Material Adverse Effect on any
Covered Person:
12.25.1. PROHIBITED TRANSACTIONS. None of such Pension Benefit
Plans has participated in, engaged in or been a party to any
non-exempt prohibited transaction as defined in ERISA or the Code, and
no officer, director or employee of a Covered Person or of an ERISA
Affiliate has committed a breach of any of the responsibilities or
obligations imposed upon fiduciaries by Title I of ERISA.
12.25.2. CLAIMS. There are no claims, pending or to Borrower's
knowledge threatened, involving any such Pension Benefit Plan by a
current or former employee (or beneficiary thereof) of such Covered
Person or ERISA Affiliate, other than claims for benefits made in the
ordinary course of business, nor is there any reasonable basis to
anticipate any such claims
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involving any such Pension Benefit Plan which would likely be successfully
maintained against such Covered Person or ERISA Affiliate.
12.25.3. REPORTING AND DISCLOSURE REQUIREMENTS. There are
no violations of any reporting or disclosure requirements with respect
to any such Pension Benefit Plan and none of such Pension Benefit
Plans has violated any applicable Law, including ERISA and the Code.
12.25.4. ACCUMULATED FUNDING DEFICIENCY. No such Pension
Benefit Plan has (i) incurred an accumulated funding deficiency
(within the meaning of Section 412(a) of the Code), whether or not
waived; (ii) been a Pension Benefit Plan with respect to which a
Reportable Event (to the extent that the reporting of such events to
the PBGC within thirty days of the occurrence has not been waived) has
occurred and is continuing; or (iii) been a Pension Benefit Plan with
respect to which there exist conditions or events which have occurred
that present a significant risk of termination of such Pension Benefit
Plan by the PBGC.
12.25.5. MULTI-EMPLOYER PLAN. All Multi-employer Plans to which
any Covered Person contributes or is obligated to contribute are
listed in Section of the Disclosure Schedule. No Covered Person or
ERISA Affiliate has received notice that any such Multi-employer Plan
is in reorganization or has been terminated within the meaning of
Title IV of ERISA, and no such Multi-employer Plan is reasonably
expected to be in reorganization or to be terminated within the
meaning of Title IV of ERISA.
12.26. WELFARE BENEFIT PLANS. No Covered Person or ERISA Affiliate
maintains a Welfare Benefit Plan that has a liability which, if enforced or
collected, would have a Material Adverse Effect on any Covered Person. Each
Covered Person and ERISA Affiliate has complied in all material respects with
the applicable requirements of Section 4980B of the Code pertaining to
continuation coverage as mandated by COBRA.
12.27. RETIREE BENEFITS. No Covered Person or ERISA Affiliate has an
obligation to provide any Person with any medical, life insurance, or similar
benefit following such Person's retirement or termination of employment (or to
such Person's beneficiary subsequent to such Person's death) other than (i) such
benefits provided to Persons at such Person's sole expense and (ii) obligations
under COBRA.
12.28. DISTRIBUTIONS. No Distribution as defined in Section has been
declared, paid or made upon or in respect of any capital stock, other
securities, or membership interest of any Covered Person on and after the
Execution Date, except as expressly permitted hereby.
12.29. REAL PROPERTY. Section to the Disclosure Schedule contains a
correct and complete list of (i) the street addresses and a general description
of all real property owned by Borrower, its Subsidiaries, or any of the
Guarantors, and (ii) a list of all leases and subleases of real property by
Borrower, its Subsidiaries, or any of the Guarantors, with Borrower, any of
Borrower's Subsidiaries, or any of the Guarantors identified for each as the
lessee, sublessee, lessor, or sublessor, as the case may be, together with the
street addresses and a general description of the real property involved and the
names of the other parties to such leases and subleases. Other than any such
lease or sublease which has expired pursuant to its terms, each of such leases
and subleases is valid and enforceable in accordance with its terms and is in
full force and effect, and no default under any such lease or sublease exists
with respect to Borrower, Borrower's Subsidiaries, or any of the Guarantors, as
the case may be, or, to Borrower's knowledge, any other party thereto which
could have a Material Adverse Effect on any Covered Person. Attachment 1 to the
Disclosure Schedule contains the legal descriptions from the most recent
evidences of title to all the real property in which Agent will have a Security
Interest under a Mortgage as provided in Section 8.2.
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12.30. STATE OF COLLATERAL AND OTHER PROPERTY. After giving effect to
the Acquisition, each Covered Person has good and marketable or merchantable
title to all real and personal property purported to be owned by it or reflected
in the Initial Financial Statements, except for personal property sold in the
ordinary course of business after the date of the Initial Financial Statements
or otherwise disposed of as expressly permitted hereby. There are no Security
Interests on any of the property purported to be owned by any Covered Person,
including the Collateral, except existing Permitted Security Interests. With the
exception of certain non-material items of tangible personal property, each
tangible item of Personal Property Collateral purported to be owned by a Covered
Person is in good working order, normal wear and tear excepted. Without limiting
the generality of the foregoing:
12.30.1. ACCOUNTS. With respect to each Account scheduled, listed
or referred to in reports submitted by Borrower to Agent pursuant to the
Loan Documents, except as disclosed therein: (i) the Account arose from
a bona fide transaction completed in accordance with the terms of any
documents pertaining to such transaction; (ii) the Account is not
evidenced by a judgment and there is no material dispute respecting it;
(iii) the amount of the Account as shown on Borrower's books and records
and all invoices and statements which may be delivered to Agent with
respect thereto are actually and absolutely owing to Borrower and are
not in any way contingent; (iv) there are no set-offs, counterclaims or
disputes existing or asserted with respect to the Account and Borrower
has not made any agreement with any Account Debtor for any deduction
therefrom except a discount or allowance allowed by Borrower in the
ordinary course of its business for prompt payment; (v) there are no
facts, events or occurrences which in any way impair the validity or
enforcement of the Account or tend to reduce the amount payable
thereunder as shown on Borrower's books and records and all invoices and
statements delivered to Agent with respect thereto; (vi) the Account is
assignable; (vii) the Account arose in the ordinary course of Borrower's
business; (viii) to the Borrower's knowledge, the Account Debtor with
respect to the Account has the capacity to contract; (ix) the services
furnished and/or goods sold giving rise to the Account are not subject
to any Security Interest except the first priority, perfected Security
Interest granted to Agent for the ratable benefit of Lenders and except
the Permitted Security Interests; (x) to the Borrower's knowledge, there
are no proceedings or actions which are threatened or pending against
the Account Debtor with respect to the Account; and (xi) no payments
have been or shall be made on the Account except payments promptly
delivered to Agent or to other financial institutions approved by Agent
pursuant to this Agreement.
12.30.2. INVENTORY. With respect to Inventory scheduled, listed
or referred to in any certificate, schedule, list or report given by
Borrower, except as disclosed therein: (i) such Inventory (except for
Inventory in transit and Inventory not subject to the negative covenant
set forth in the last sentence of Section ) is located at one or another
of the premises listed in Section of the Disclosure Schedule; (ii)
Borrower has good and merchantable title to such Inventory subject to no
Security Interest whatsoever except for the first priority, perfected
Security Interest granted to Agent for the ratable benefit of Lenders
and except for Permitted Security Interests; (iii) such Inventory is of
good and merchantable quality, free from any material defects; (iv) such
Inventory is not subject to any licensing, patent, royalty, trademark,
trade name or copyright agreements with any third parties; and (v) the
completion of manufacture and sale or other disposition of such
Inventory by Agent or Lenders following an Event of Default shall not
require the consent of any Person and shall not constitute a breach or
default under any contract or agreement to which Borrower is a party or
to which the Inventory is subject.
12.30.3. EQUIPMENT. With respect to the Borrower's equipment
or any Guarantor's or any Subsidiary of Borrower's equipment: (i)
Borrower or said Guarantor or Subsidiary, as the case may be, has good
and marketable title thereto; (ii) none of such equipment is subject to
any Security Interests except for the first priority Security Interest
granted to Agent for the ratable
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benefit of Lenders pursuant hereto and except for Permitted Security
Interests; and (iii) all such equipment is in good operating condition
and repair, ordinary wear and tear alone excepted, and is suitable for
the uses to which customarily put in the conduct of Borrower's, said
Guarantor's or said Subsidiary's business, as the case may be.
12.30.4. INTELLECTUAL PROPERTY. (i) Section of the Disclosure
Schedule contains a complete and correct list of the Intellectual
Property of Borrower, each of Borrower's Subsidiaries, and each
Guarantor, (ii) Borrower and each said Subsidiary and each Guarantor,
as the case may be, owns all right, title and interest in, under and
to such Intellectual Property owned by it, subject to no licenses or
any interest therein or other agreements relating thereto; (iii) no
Intellectual Property or grant of license by or to Borrower, said
Subsidiary or Guarantor is subject to any pending or, to Borrower's
knowledge, threatened challenge; (iv) to Borrower's knowledge, neither
Borrower nor any said Subsidiary or Guarantor has committed any
patent, trademark, trade name, service mark or copyright infringement,
and the present conduct of Borrower's and each said Subsidiary's and
Guarantor's business does not infringe any patents, trademarks, trade
name rights, service marks, copyrights, publication rights, trade
secrets or other proprietary rights of any Person; and (v) there are
no claims or demands of any Person pertaining to, or any proceedings
which are pending or, to Borrower's knowledge, threatened, which
challenge the rights of Borrower or any said Subsidiary or Guarantor
in respect of any proprietary or confidential information or trade
secrets used in the conduct of their respective businesses.
12.30.5. DOCUMENTS, INSTRUMENTS AND CHATTEL PAPER. All documents,
instruments and chattel paper describing, evidencing or constituting
Collateral, and all signatures and endorsements thereon, are complete,
valid, and genuine, and all goods evidenced by such documents,
instruments and chattel paper are owned by Borrower or one or more of
Borrower's Subsidiaries, or one or more of the Guarantors, free and
clear of all Security Interests other than Permitted Security
Interests.
12.31. CHIEF PLACE OF BUSINESS; LOCATIONS OF COLLATERAL. As of the
Execution Date,
12.31.1. the only chief executive office and the principal
places of business of Borrower, Borrower's Subsidiaries, and the
Guarantor are located at the places listed and so identified in
section of the Disclosure Schedule.;
12.31.2. the books and records of Borrower, Borrower's
Subsidiaries, and each Guarantor and all of the Borrower's, each of
Borrower's Subsidiaries, and each Guarantor's chattel paper and all
records of Accounts, are located only at the places listed and so
identified in section of the Disclosure Schedule; and
12.31.3. all of the Collateral (except for any Covered Person's
Inventory which is in transit, Inventory not subject to the negative
covenant set forth in the last sentence of Section and Borrower's Real
Property Collateral) is located only at the places listed and so
identified in section of the Disclosure Schedule.
12.32. NEGATIVE PLEDGES. No Covered Person is a party to or bound by
any Contract which prohibits the creation or existence of any Security Interest
upon or assignment or conveyance of any of the Collateral, except for the Loan
Documents.
12.33. Security Documents.
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12.33.1. SECURITY AGREEMENTS. Each Security Agreement is
effective to grant to Agent for the ratable benefit of the Lenders an
enforceable Security Interest in all rights, title and interest of
Borrower, Borrower's Subsidiary referenced therein, or Guarantor
referenced therein, as the case may be, in the Personal Property
Collateral described therein. Upon appropriate filing (as to all
Personal Property Collateral in which a Security Interest may be
perfected under the applicable state's UCC by filing a financing
statement) or Agent's taking possession (as to items of the Personal
Property Collateral of which a secured party must take possession in
order to perfect a Security Interest under the applicable state's UCC),
Agent will have a fully perfected first priority Security Interest in
such Personal Property Collateral described in each Security Agreement,
subject only to Permitted Security Interests affecting such Personal
Property Collateral.
12.33.2. MORTGAGES. The Mortgages are effective to grant to Agent
for the ratable benefit of the Lenders a legal, valid and enforceable
mortgage lien on the Real Property Collateral. Upon proper recording and
payment of recording fees and taxes, if any, Agent will have for the
ratable benefit of Lenders a fully perfected first priority lien on the
Real Property Collateral subject only to Permitted Security Interests
affecting the Real Property Collateral.
12.33.3. INTELLECTUAL PROPERTY ASSIGNMENTS. Each Intellectual
Property Assignment is effective to assign to Agent for the ratable
benefit of the Lenders all rights, title and interest of Borrower,
Borrower's Subsidiary referenced therein, or Guarantor referenced
therein, as the case may be, in and to the Intellectual Property
referenced therein, subject only to Permitted Security Interests
affecting the Intellectual Property.
12.33.4. ACCOUNT ASSIGNMENT. The Account Assignment is effective
to grant to Agent for the ratable benefit of the Lenders an enforceable
Security Interest in all rights, title and interest of Borrower in the
Cash Collateral Account.
12.33.5. RIGHTS ASSIGNMENT. The Rights Assignment is effective
to grant to Agent for the ratable benefit of the Lenders an enforceable
Security Interest in all rights, title and interest of Borrower under
the Acquisition Documents.
12.33.6. STOCK PLEDGE AGREEMENT. Each Stock Pledge Agreement is
effective to grant to Agent for the ratable benefit of the Lenders a
Security Interest in all rights, title and interest of Borrower,
Borrower's Subsidiary referenced therein, or Guarantor referenced
therein, as the case may be, in and to the stock and other securities
and proceeds thereof described therein.
12.34. S CORPORATION. There is no election in effect under Section
1362(a) of the Code for Borrower to be treated as an S Corporation as defined in
Section 1361(a) of the Code.
12.35. SUBSIDIARIES. Borrower has no Subsidiaries other than those
listed in section of the Disclosure Schedule. Harbour Group Investments III,
L.P. is the principal shareholder of Holdings.
12.36. BANK ACCOUNTS AND LOCKBOXES. Neither Borrower nor any of
Borrower's Subsidiaries has a lockbox other than the lockboxes allowed or
required hereunder. All bank accounts maintained by Borrower and each of
Borrower's Subsidiaries with any bank or other financial institution are
described in section of the Disclosure Schedule.
12.37. MARGIN STOCK. Borrower is not engaged and will not engage,
principally or as one of its important activities, in the business of extending
credit for the purpose of purchasing or carrying margin stock (within the
meaning of Regulation U), and no part of the proceeds of any Advance will be
used to
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purchase or carry any such margin stock or to extend credit to others for the
purpose of purchasing or carrying any such margin stock or for any purpose which
violates, or which would be inconsistent with, the provisions of Regulation U or
Regulation G. None of the transactions contemplated by any Acquisition Documents
will violate Regulations G, T, U or X of the FRB.
12.38. SECURITIES MATTERS. No proceeds of any Advance will be used
to acquire any security in any transaction which is subject to Sections 13 and
14 of the Securities Exchange Act of 1934, as amended.
12.39. INVESTMENT COMPANY ACT, ETC. Borrower is not an investment
company registered or required to be registered under the Investment Company Act
of 1940, as amended, or a company controlled (within the meaning of such
Investment Company Act) by such an investment company or an affiliated person
of, or promoter or principal underwriter for, an investment company, as such
terms are defined in the Investment Company Act of 1940, as amended. Borrower is
not subject to regulation under the Public Utility Holding Company Act of 1935,
the Federal Power Act, the Interstate Commerce Act or any other Law limiting or
regulating its ability to incur Indebtedness for money borrowed.
12.40. NO MATERIAL MISSTATEMENTS OR OMISSIONS. Neither the Loan
Documents, the Acquisition Documents, any of the Financial Statements nor any
statement, list, certificate or other information furnished or to be furnished
by Borrower to Agent or Lenders in connection with the Loan Documents or any of
the transactions contemplated thereby contains any untrue statement of a
material fact, or omits to state a material fact necessary to make the
statements therein not misleading. Borrower has disclosed to Agent and Lenders
everything regarding the business, operations, property, financial condition, or
business prospects of itself and every Covered Person that is likely to have a
Material Adverse Effect on Borrower or any Covered Person.
12.41. FILINGS. All registration statements, reports, proxy statements
and other documents, if any, required to be filed by Borrower with the
Securities and Exchange Commission pursuant to the Securities Act of 1933, as
amended, and the Securities Exchange Act of 1934, as amended, have been filed,
and such filings are complete and accurate and contain no untrue statements of
material fact or omit to state any material facts required to be stated therein
or necessary in order to make the statements therein not misleading.
12.42. BROKER'S FEES. No broker or finder is entitled to compensation
for services rendered with respect to the transactions contemplated by this
Agreement and the other Loan Documents.
12.43. ELIGIBILITY OF COLLATERAL. Each Account or item of Inventory
which Borrower, expressly or by implication, requests Agent to classify as an
Eligible Account or as Eligible Inventory, respectively, will, as of the time
when such request is made, conform in all respects to the requirements of such
classification set forth in the respective definitions of "Eligible Accounts"
and "Eligible Inventory" herein.
12.44. CLOSING OF THE ACQUISITION. The Acquisition Documents are in form
and substance adequate to effect the Acquisition and the Acquisition has been
validly consummated under the Laws of the States of Minnesota and Wisconsin, and
all required Acquisition Documents have been effected and are valid in
accordance with the Laws of the States of Minnesota and Wisconsin, as the case
may be. To the knowledge of Borrower after due inquiry, all of the
representations and warranties of Seller contained in the Acquisition Documents
or any instrument furnished in connection therewith or in reference thereto are
true and correct.
13. SURVIVAL OF REPRESENTATIONS. All representations and warranties in
Section , and all representations and warranties in any certificate delivered by
Borrower pursuant hereto, shall survive
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execution of each of the Loan Documents and the making of every Advance, and may
be relied upon by Agent and Lenders as being true and correct as of the date
when made or deemed made or reaffirmed until all of the Loan Obligations are
fully and irrevocably paid as contemplated in Section .
14. AFFIRMATIVE COVENANTS. Borrower covenants and agrees that, so long
as any of the Commitments remains in effect or any of the Loan Obligations are
owing to Lenders by Borrower or any Letter of Credits are outstanding, Borrower
shall do, or cause to be done, the following:
14.1. USE OF PROCEEDS. Subject to the terms and conditions hereof, the
proceeds of the Aggregate Term 1 Loan and the Aggregate Term 2 Loan shall be
used only to finance the Acquisition (including reasonable and necessary
expenses incurred in connection therewith), to repay the existing Indebtedness
of (i) Seller as set forth on Schedule 14.1 and for general corporate purposes,
and (ii) Trak as set forth on Schedule 14.1 and for general corporate purposes.
Subject to the terms and conditions hereof, (i) up to $3,500,000 of the
Aggregate Revolving Loan may be used to finance the Acquisition (including
reasonable and necessary expenses incurred in connection therewith) after the
application of the proceeds of the Aggregate Term 1 Loan and the Aggregate Term
2 Loan, and (ii) the balance may be used to provide working capital, including
payment of Borrower's reimbursement obligations with respect to draws on Letters
of Credit, and for general corporate purposes.
14.2. GOOD STANDING. Each Covered Person shall maintain its existence in
good standing and shall maintain in good standing its right to transact business
in those states or countries, as the case may be, in which it is now or
hereafter doing business, except where the failure to so qualify will not have a
Material Adverse Effect on any Covered Person. Each Covered Person shall obtain
and maintain all Material Licenses for such Covered Person.
14.3. MAINTENANCE OF PROPERTY AND LEASES. Each Covered Person shall
maintain in good condition and working order (normal wear and tear excepted),
and repair and replace as required, all buildings, equipment, machinery,
fixtures and other real and personal property whose useful economic life has not
elapsed and which is necessary for the ordinary conduct of the business of such
Covered Person. Each Covered Person shall maintain in full force and effect and
free of defaults all of its leases of buildings, equipment, machinery, fixtures
and other real and personal property whose useful economic life has not elapsed
and which is necessary for the ordinary conduct of the business of such Covered
Person. No Covered Person shall permit any of its equipment or other property to
become a fixture to real property or an accession to other personal property
unless Agent has a valid, perfected and first priority Security Interest for the
ratable benefit of Lenders in such real or personal property. No Covered Person
will, without Agent's prior written consent, alter or remove any identifying
symbol or number on its equipment.
14.4. INVENTORY. Borrower shall keep its Inventory in good and
merchantable condition at its own expense and shall hold such Inventory for sale
or lease, or to be furnished in connection with the rendition of services, in
the ordinary course of Borrower's business, on terms which do not include
bill-and-hold, guaranteed sale, sale and return, sale on approval, consignment
or similar repurchase or return terms. All such Inventory produced by Borrower
(or their predecessors) shall be produced in accordance with the Federal Fair
Labor Standards Act of 1938 and all rules, regulations, and orders thereunder.
14.5. INSURANCE. Each Covered Person shall at all times keep insured or
cause to be kept insured, in insurance companies having a rating of at least "A"
by Best's Rating Service, all property owned by it of a character usually
insured by others carrying on businesses similar to that of such Covered Person
in such manner and to such extent and covering such risks as such properties are
usually insured. Each Covered Person shall at all times carry insurance, in
insurance companies having a rating of at least "A" by Best's Rating Service,
against liability on account of damage to persons or property (including product
liability insurance and insurance required under all applicable workers'
compensation laws) and covering
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all other liabilities common to such Covered Person's business, in such manner
and to such extent as such coverage is usually carried by others conducting
businesses similar to that of such Covered Person. Such insurance must include
liability, casualty, business interruption, and environmental insurance. All
policies of liability insurance maintained hereunder shall name Agent as an
additional insured for the ratable benefit of Lenders; all fire and casualty
policies of insurance maintained hereunder shall reflect Lenders' interests
therein as mortgagees under a standard New York or Union mortgagee clause. Agent
is authorized, but not obligated, as the attorney-in-fact for Borrower or any
other Covered Person maintaining such insurance and for the ratable benefit of
Lenders, (i) prior to the occurrence of an Event of Default, with Borrower's or
such other Covered Person's consent (which consent shall not be unreasonably
withheld), and upon the occurrence of an Event of Default and at any time
thereafter so long as any Unwaived Event of Default exists, without Borrower's
or such other Covered Person's consent, to adjust and compromise proceeds
payable under such policies of insurance, (ii) to collect, receive and give
receipts for such proceeds in the name of Borrower or such other Covered Person,
and (iii) to endorse Borrower's or such other Covered Person's name upon any
instrument in payment thereof. Such power granted to Agent shall be deemed
coupled with an interest and shall be irrevocable. All policies of insurance
maintained hereunder shall contain a clause providing that such policies may not
be canceled, reduced in coverage or otherwise modified without 30 days prior
written notice to Agent. Borrower shall upon request of Agent at any time
furnish to Agent updated evidence of insurance (in the form required as a
condition to Agent's lending hereunder) for such insurance.
14.6. PAYMENT OF TAXES AND OTHER OBLIGATIONS. Each Covered Person shall
promptly pay and discharge or cause to be paid and discharged, as and when due,
any and all income taxes, federal or otherwise, lawfully assessed and imposed
upon it, and any and all lawful taxes, rates, levies, claims and assessments
whatsoever upon its properties and every part thereof, or upon the income or
profits therefrom and all claims of materialmen, mechanics, carriers,
warehousemen, landlords and other like Persons for labor, materials, supplies,
storage or other items or services which if unpaid might be or become a Security
Interest or charge upon any of its property; provided, however, that a Covered
Person may diligently contest in good faith by appropriate proceedings the
validity of any of the foregoing, provided such Covered Person has established
adequate reserves therefor in conformity with GAAP on the books of such Covered
Person.
14.7. COMPLIANCE WITH LAWS. Each Covered Person shall comply with
all Material Laws. Without limiting the generality of the foregoing:
14.7.1.ENVIRONMENTAL LAWS. Each Covered Person shall comply and
shall use commercially reasonable efforts to ensure compliance by all
tenants, subtenants and other occupants, if any, with all Environmental
Laws.
14.7.2.MATERIAL LICENSES. Each Covered Person shall possess all
Material Licenses which are required in connection with the conduct of
its business.
14.7.3.PENSION BENEFIT PLANS. Each Covered Person and each ERISA
Affiliate shall at all times make prompt payments or contributions to
meet the minimum funding standards as defined in Section 412 of the Code
with respect to any Pension Benefit Plan maintained by such Covered
Person or ERISA Affiliate, and shall comply with all reporting and
disclosure requirements and all provisions of the Code and ERISA
applicable to any Pension Benefit Plan maintained by such Covered Person
or ERISA Affiliate.
14.7.4.EMPLOYMENT LAWS. Each Covered Person shall comply with all
requirements of all Employment Laws applicable to such Covered Person.
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14.8. DISCOVERY AND CLEAN-UP OF HAZARDOUS MATERIAL.
14.8.1.IN GENERAL. Upon any Covered Person receiving notice of
any violation of Environmental Laws or any similar notice described in
Section , or upon any Covered Person otherwise discovering Hazardous
Material on any property owned or leased by such Covered Person which is
in violation of, or which would result in liability under, any
Environmental Law, Borrower shall: (i) promptly take such acts as may be
necessary to prevent danger or harm to the property or any person
therein as a result of such Hazardous Material; (ii) at the request of
Agent, and at Borrower's sole cost and expense, obtain and deliver to
Agent promptly, but in no event later than 90 days after such request, a
then currently dated environmental assessment of the property certified
to Agent and any future holder of the Loan Obligations, a proposed plan
for responding to any environmental problems described in such
assessment, and an estimate of the costs thereof; and (iii) take all
necessary steps to initiate and expeditiously complete all removal,
remedial, response, corrective and other action to eliminate any such
environmental problems, and keep Agent informed of such actions and the
results thereof.
14.8.2.ASBESTOS CLEAN-UP. In the event that any property of any
Covered Person is discovered to contain Asbestos Material, Borrower
shall develop and implement, as soon as reasonably possible, an
Operations and Maintenance Program (as contemplated by EPA guidance
document entitled "Managing Asbestos in Place; A Building Owner's Guide
to Operations and Maintenance Programs for Asbestos-Containing
Materials") for managing in place the Asbestos Material, and deliver a
true, correct and complete copy of such Operations and Maintenance
Program to Agent. In the event that the asbestos survey done in
connection with developing the Operations and Maintenance Program
reveals Asbestos Material which, due to its condition, location or
planned building renovation, is recommended to be encapsulated or
removed, Borrower shall promptly cause the same to be encapsulated or
removed and disposed of offsite, in either case by a licensed and
experienced asbestos contractor, all in accordance with applicable
state, federal and local Laws. Upon completion of any such encapsulation
or removal, Borrower shall deliver to Agent a certificate in such form
as is then customarily available signed by the consultant overseeing the
activity certifying to Agent that the work has been completed in
compliance with all applicable Laws regarding notification,
encapsulation, removal and disposal and that no airborne fibers beyond
permissible exposure limits remain on site. All costs of such
inspection, testing and remedial actions shall be paid by Borrower.
14.9. TERMINATION OF PENSION BENEFIT PLAN. No Covered Person or ERISA
Affiliate shall terminate or amend any Pension Benefit Plan maintained by such
Covered Person or ERISA Affiliate if such termination or amendment would result
in any liability to such Covered Person or ERISA Affiliate under ERISA or any
increase in current liability for the plan year for which such Covered Person or
ERISA Affiliate is required to provide security to such Pension Benefit Plan
under the Code.
14.10. NOTICE TO AGENT OF MATERIAL EVENTS. Borrower shall, promptly upon
any Borrowing Officer of Borrower obtaining knowledge or notice thereof, give
notice to Agent of (i) any breach of any of the covenants in Section , , or , or
any breach of any representation or warranty in Section ; (ii) any Default or
Event of Default promptly, but in any event within five (5) Business Days of
obtaining knowledge or notice of such Default or Event of Default; (iii) the
commencement of any Material Proceeding; and (iv) any loss of or damage to any
assets of a Covered Person or the commencement of any proceeding for the
condemnation or other taking of any of the assets of a Covered Person, if
Insurance/Condemnation Proceeds are likely to be payable as a consequence of
such loss, damage or proceeding, or if such loss, damage or proceeding has or
could have a Material Adverse Effect on such Covered Person. In addition,
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14.10.1. Borrower shall furnish to Agent from time to time all
information which Agent requests with respect to the status of any
Material Proceeding.
14.10.2. Borrower shall furnish to Agent from time to time all
information which Agent requests with respect to any Pension Benefit
Plan established by a Covered Person or ERISA Affiliate.
14.10.3. Borrower shall deliver notice to Agent of the
establishment by a Covered Person or an ERISA Affiliate of any Pension
Benefit Plan.
14.10.4. Borrower shall as soon as possible and in any event
within five (5) Business Days after receipt thereof by Borrower or any
Covered Person notify Agent of its receipt of, and deliver to Agent a
copy of, any (i) notice that any violation of any Environmental Law or
Employment Law may have been committed or is about to be committed by
any Covered Person, (ii) notice that any administrative or judicial
complaint or order has been filed or is about to be filed against any
Covered Person alleging violations of any Environmental Law or
Employment Law or requiring such Covered Person to take any action in
connection with the release of any Hazardous Material into the
environment, (iii) notice from a Governmental Authority or private party
alleging that a Covered Person may be liable or responsible for costs
associated with a response to or cleanup of a release of Hazardous
Material into the environment or any damages caused thereby, (iv) notice
that a Covered Person is subject to federal, state or local
investigation regarding the improper transportation, storage, disposal,
generation or release into the environment of any Hazardous Material, or
(v) notice that any properties or assets of a Covered Person are subject
to a Security Interest in favor of any Governmental Authority for any
liability under any Environmental Law or damages arising from or costs
incurred by such Governmental Authority in response to a release of
Hazardous Material into the environment.
14.10.5. Borrower shall deliver to Agent notice of the following
events as soon as possible and in any event within five (5) Business
Days after Borrower has knowledge thereof: (i) the failure of any
Covered Person or ERISA Affiliate to make any required installment or
any other required payment to any Pension Benefit Plan in sufficient
amount to comply with ERISA and the Code on or before the due date for
such installment or payment; (ii) the occurrence of any Reportable
Event, or a prohibited transaction or accumulated funding deficiency (as
those terms are defined in ERISA), with respect to any Pension Benefit
Plan maintained or contributed to by a Covered Person or ERISA
Affiliate; (iii) receipt by a Covered Person or ERISA Affiliate of any
notice from a Multi-employer Plan regarding the imposition of withdrawal
liability; and (iv) receipt by a Covered Person or ERISA Affiliate of
any notice of the institution, or a Covered Person's expectancy of the
institution, of any proceeding or receipt by such Covered Person or
ERISA Affiliate of any notice of the taking, or such Covered Person's
expectancy of the taking, of any other action which may result in the
termination of any Pension Benefit Plan maintained or contributed to by
such Covered Person or ERISA Affiliate, or the withdrawal or partial
withdrawal by a Covered Person or ERISA Affiliate from any Pension
Benefit Plan, and the filing or receipt by a Covered Person or ERISA
Affiliate of any such notice and filing or receipt of all subsequent
reports or notices under ERISA with or from the IRS, the PBGC, or the
DOL relating to the same; and, in addition to such notice, deliver to
Agent a certificate of a Borrowing Officer of Borrower, setting forth
details as to such events and the action that the affected Covered
Person or ERISA Affiliate proposes to take with respect thereto. For
purposes of this Section, Borrower and any ERISA Affiliate shall be
deemed to know all facts known by the administrator of any Plan of which
Borrower or any ERISA Affiliate is the plan sponsor.
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14.10.6. Borrower shall promptly deliver to Agent notice of, but
in any event within five (5) Business Days of becoming aware of, any
default or event of default, or the occurrence of any event which would
with the passage of time, giving of notice or otherwise, constitute a
default or event of default with respect to any of the Permitted
Indebtedness.
14.10.7. Borrower shall promptly deliver notice to Agent of the
assertion by the holder of any capital stock of a Covered Person, any
membership or partnership interest of a Covered Person, or any
Indebtedness of a Covered Person that a default exists with respect
thereto or that such Covered Person is not in compliance with the terms
thereof, or of the threat or commencement by such holder of any
enforcement action because of such asserted default or noncompliance.
14.10.8. Borrower shall, promptly after becoming aware thereof,
deliver notice to Agent of any pending or threatened strike, work
stoppage, material unfair labor practice claim or other material labor
dispute affecting a Covered Person.
14.10.9. Borrower shall promptly deliver notice to Agent of any
change in the name, state of incorporation, or form of organization of
any Covered Person, or fictitious names under which a Covered Person
will sell Inventory or create Accounts, or to which instruments in
payment of Accounts may be made payable, at least 30 days prior to such
change.
14.10.10. Borrower shall, promptly, but in any event within five
(5) Business Days after becoming aware thereof, deliver notice to Agent
of any event that has or could have a Material Adverse Effect with
respect to any Covered Person.
14.10.11. Borrower shall, promptly after becoming aware thereof,
deliver notice to Agent of an actual, alleged, or potential violation of
any Material Law applicable to a Covered Person or the property of a
Covered Person.
14.10.12. Borrower shall notify Agent promptly in writing of any
fact or condition of which Borrower is aware which materially adversely
affects the value of the Collateral, including any adverse fact or
condition or the occurrence of any event which causes material loss or
depreciation in the value of any item of the Collateral, and the amount
of such loss or depreciation. Borrower shall provide such additional
information to Agent regarding the amount of any loss or depreciation in
value of the Collateral as Agent may request from time to time.
14.10.13. Borrower shall deliver to Agent within 120 days after
the close of each Fiscal Year, a statement of the Unfunded Liabilities
of each Pension Benefit Plan, certified as correct by an actuary
enrolled under ERISA.
14.10.14. Promptly upon request of Agent, Borrower shall deliver
to Agent copies of any statement, report, or certificate furnished to
any holder of Indebtedness of any Covered Person to the extent the
information contained in such statement, report, or certificate has not
already been delivered to Agent.
14.11. BORROWING OFFICER. Borrower shall keep on file with Agent at
all times an appropriate instrument naming each Borrowing Officer.
14.12. MAINTENANCE OF SECURITY INTERESTS OF SECURITY DOCUMENTS.
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14.12.1. PRESERVATION AND PERFECTION OF SECURITY INTERESTS.
Borrower shall promptly, upon the reasonable request of Agent and at
Borrower's expense, execute, acknowledge and deliver, or cause the
execution, acknowledgment and delivery of, and thereafter file or record
in the appropriate governmental office, any document or instrument
supplementing or confirming the Security Documents or otherwise deemed
necessary by Agent to create, preserve or perfect any Security Interest
purported to be created by the Security Documents or to fully consummate
the transactions contemplated by the Loan Documents. The foregoing
actions by Borrower shall include (i) filing financing or continuation
statements, and amendments thereof, in form and substance satisfactory
to Agent; (ii) delivering to Agent the original certificates of title
for motor vehicles, or applications therefor duly executed, with Agent's
Security Interest for the ratable benefit of Lenders properly shown
thereon; (iii) delivering to Agent the originals of all instruments,
documents and chattel paper, and all other Collateral of which Agent
determines it should have physical possession in order to perfect and
protect Agent's Security Interest for the ratable benefit of Lenders
therein, duly endorsed or assigned to Agent without restriction; (iv)
delivering to Agent warehouse receipts covering any portion of the
Collateral located in warehouses and for which warehouse receipts are
issued; (v) transferring Inventory to warehouses designated by Agent;
(vi) delivering to Agent all letters of credit on which Borrower is
named beneficiary; (vii) placing a durable notice of the existence of
Agent's Security Interest for the ratable benefit of Lenders, acceptable
to Agent, upon such items of the Collateral as are designated by Agent;
and (viii) placing a notice of the existence of Agent's Security
Interest for the ratable benefit of Lenders, acceptable to Agent, upon
those writings evidencing the Collateral and the books and records of
Borrower pertaining to the Collateral, as designated by Agent.
14.12.2. COLLATERAL HELD BY WAREHOUSEMAN, BAILEE, ETC. If any
Collateral is at any time in the possession or control of a
warehouseman, bailee or any of Borrower's agents or processors, then
Borrower shall notify Agent thereof and shall notify such Person of
Agent's Security Interest for the ratable benefit of Lenders in such
Collateral and, upon Agent's request, instruct such Person to hold all
such Collateral for Agent's account subject to Agent's instructions. If
at any time any Collateral (other than Inventory not subject to the
negative covenant set forth in Section ) is located on any premises that
are not owned by Borrower, then Borrower shall obtain written waivers,
in form and substance satisfactory to Agent, of all present and future
Security Interests to which the owner or lessor or any mortgagee of such
premises may be entitled to assert against the Collateral.
14.12.3. COMPLIANCE WITH TERMS OF SECURITY DOCUMENTS. Borrower
shall comply with all of the terms, conditions and covenants in the
Security Documents to which Borrower is a party.
14.13. ACCOUNTING SYSTEM. Each Covered Person shall maintain a system
of accounting established and administered in accordance with GAAP. Without
limiting the generality of the foregoing:
14.13.1. ACCOUNT RECORDS. Each Covered Person shall maintain a
record of Accounts at its principal place of business that itemize each
Account of such Covered Person and describe the names and addresses of
the Account Debtors on such Accounts, all relevant invoice numbers,
invoice dates, and shipping dates, and the due dates, collection
histories, and aging of such Accounts.
14.13.2. INVENTORY RECORDS. Each Covered Person shall maintain
an inventory system satisfactory to Agent.
14.14. FINANCIAL STATEMENTS. Borrower shall deliver to each Lender:
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14.14.1. ANNUAL FINANCIAL STATEMENTS. Within 120 days after the
close of each Fiscal Year of Borrower, year-end consolidated and
consolidating financial statements of Holdings, Borrower and their
Subsidiaries, containing an audit report without qualification by an
independent certified public accounting firm selected by Borrower and
satisfactory to Agent, and accompanied by (a) a Compliance Certificate
of Borrower's chief financial officer, (b) a certificate of the
independent certified public accounting firm that examined such
financial statements to the effect that they have reviewed and are
familiar with this Agreement and that, in examining such financial
statements, they did not become aware of any fact or condition which
then constituted a Default or Event of Default, except for those, if
any, described in reasonable detail in such certificate, (c) any
management letter and report on internal controls delivered by such
independent certified public accounting firm in connection with their
audit, and (d) if requested by Agent, any summary prepared by such
independent certified public accounting firm and delivered to Borrower
of the adjustments proposed by the members of its audit team.
14.14.2. MONTHLY FINANCIAL STATEMENTS. Within 30 days after the
end of each month, unaudited consolidated and consolidating financial
statements of Holdings, Borrower and their Subsidiaries, in each case
accompanied by (i) a Compliance Certificate of Borrower's chief
financial officer, (ii) a statement comparing such financial statements
with budgeted projections for such month and for the elapsed portion of
the Fiscal Year of Borrower as contained in the annual budget prepared
for such Fiscal Year, (iii) a statement comparing the statements
delivered pursuant to clause (ii) above with the statements for the
equivalent months and equivalent elapsed periods during the prior Fiscal
Year of Borrower, and (iv) any routinely prepared management reports
requested by Agent. Such financial statements shall contain, at a
minimum, balance sheets, statements of earnings, and statements of cash
flows as of the end of the applicable period.
14.14.3. COMPLIANCE CERTIFICATES. Each "Compliance Certificate"
shall be in the form of Exhibit , shall contain detailed calculations of
the financial measurements referred to in Section for the relevant
periods, and shall contain statements by the signing officer to the
effect that, except as explained in reasonable detail in such Compliance
Certificate, (i) the attached financial statements are complete and
correct in all material respects (subject, in the case of financial
statements other than annual, to normal year-end audit adjustments) and
have been prepared in accordance with GAAP applied consistently
throughout the periods covered thereby and with prior periods (except as
disclosed therein), (ii) all of the representations and warranties of
Borrower contained in this Agreement and other Loan Documents are true
and correct as of the date such certification is given as if made on
such date, and (iii) there is no Existing Default. If any Compliance
Certificate delivered to Lender discloses an Existing Default or that a
representation or warranty is not true and correct, such Compliance
Certificate shall state what action Borrower has taken or proposes to
take with respect thereto.
14.15. OTHER FINANCIAL INFORMATION. Borrower shall also deliver the
following to Agent as specified below:
14.15.1. BORROWING BASE CERTIFICATE. On the Effective Date and
periodically thereafter (but at least monthly), but not more often than
weekly, a borrowing base certificate in substantially the form of
Exhibit (the "Borrowing Base Certificate") duly completed and signed by
Borrower's chief financial officer shall be delivered to Agent. If there
is an Unwaived Event of Default, or availability under the Revolving
Loan is less than $2,000,000, Borrower shall provide Borrowing Base
Certificates on a more frequent basis than set forth above if so
requested in writing by Agent in its discretion.
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14.15.2. AGINGS REPORT. Within five days after Agent's request
in writing, a report of the aging of all Accounts of Borrower in such
reasonable detail as Agent may require.
14.15.3. OTHER REPORTS OR INFORMATION CONCERNING ACCOUNTS OR
INVENTORY. Such other reports and information, in form and detail
satisfactory to Agent, and documents as Agent may request in writing
from time to time concerning Accounts or Inventory including, to the
extent requested by Agent, copies of all invoices, bills of lading,
shipping receipts, purchase orders, and warehouse receipts.
14.15.4. STOCKHOLDER AND SEC REPORTS. Promptly after their
preparation, copies of any and all (i) proxy statements, financial
statements and reports which Borrower or any other Covered Person makes
available to its stockholders or its members, and (ii) reports,
registration statements and prospectuses, if any, filed by Borrower with
any securities exchange or the Securities and Exchange Commission or any
Governmental Authority succeeding to any of its functions.
14.15.5. PENSION BENEFIT PLAN REPORTS. Upon the request
of Agent in writing, a copy of each annual report or other filing or
notice filed with respect to each Pension Benefit Plan of any Covered
Person or any ERISA Affiliate.
14.15.6. TAX RETURNS. Upon the request of Agent in writing,
a copy of each federal, state, or local tax return or report filed by
each Covered Person.
14.16. REVIEW OF ACCOUNTS. Once per Fiscal Year, and promptly at Agent's
request if there is an Unwaived Event of Default, Borrower shall conduct a
review, or cause a review to be conducted, of its and every other Covered
Person's Accounts, bad debt reserves, and collection histories of Account
Debtors and promptly following such review provide Agent with a report of such
review in form and detail satisfactory to Agent.
14.17. INVENTORY. Once per Fiscal Year, and promptly at Agent's written
request if there is an Unwaived Event of Default, Borrower shall conduct a
physical count of its and every other Covered Person's Inventory and promptly
following the completion of such count provide Agent with a report thereof in
form and detail satisfactory to Agent, including the value of such Inventory (on
a first-in-first-out basis).
14.18. ANNUAL PROJECTIONS. As soon as available, but in any event not
later than 90 days after the commencement of each Fiscal Year of Borrower,
Borrower shall deliver to Agent a copy of Borrower's plan and forecast for the
next Fiscal Year (provided if such plan and forecast includes projections for
more than the next Fiscal Year, such projections and other detail should also be
delivered to Agent), which plan and forecast shall provide for detail on a
monthly basis and such further detail as Agent may require and shall include,
without limitation, projected balance sheets, statements of income and expense,
and statements of cash flows for Borrower and every other Covered Person.
14.19. OTHER INFORMATION. Upon the request of Agent, Borrower shall
promptly deliver to Agent such other information about the business, operations,
revenues, financial condition, property, or business prospects of Borrower and
every other Covered Person as Agent may, from time to time, reasonably request.
14.20. AUDITS BY AGENT. Agent or Persons authorized by and acting on
behalf of Agent or any Lender may at any time during normal business hours
audit the books and records, and inspect any of the property, of each Covered
Person from time to time upon reasonable notice to such Covered Person, and
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in the course thereof may make copies or abstracts of such books and records and
discuss the affairs, finances and books and records of such Covered Person with
its accountants, officers and employees. Each Covered Person shall cooperate
with Agent and such Persons in the conduct of such audits and shall deliver to
Agent any instrument necessary for Agent to obtain records from any service
bureau maintaining records for such Covered Person. Borrower shall reimburse
Agent for all costs and expenses actually incurred by Agent in conducting each
audit during any period in which any Unwaived Event of Default exists.
Reimbursement for any such audits conducted during periods in which no Unwaived
Event of Default exists shall be limited to $500 per day per person involved in
conducting the audit plus Agent's other actual out of pocket expenses.
14.21. VERIFICATION OF ACCOUNTS AND NOTICES TO ACCOUNT DEBTORS. Agent
shall have the right at any time and from time to time, after first giving
either oral or written notice to Borrower, to verify the validity and amount of
any Account of Borrower or any other Covered Person and any other matter
relating to such Account, by communicating in writing or orally directly with
the Account Debtor or any Person who represents or Agent believes represents the
Account Debtor.
14.22. APPRAISALS OF COLLATERAL. Upon Agent's reasonable request at any
time, Borrower shall at its expense provide Agent with appraisals, prepared on a
basis satisfactory to Agent and from appraisers acceptable to Agent, of any or
all of the Collateral as Agent may specify.
14.23. ACCESS TO OFFICERS AND AUDITORS. Each Covered Person shall permit
any Lender and Persons authorized by Agent to discuss the affairs, finances and
accounts of such Covered Person with its officers and independent auditors as
often as Agent may reasonably request, and such Covered Person shall direct such
officers and independent auditors to cooperate with Agent and make full
disclosure to Agent of those matters that they may deem relevant to the
continuing ability of Borrower timely to pay and perform the Loan Obligations.
Each Lender agrees that it will not disclose to third parties any information
that it obtains about Borrower or its operations or finances that are designated
by Borrower as confidential or that Borrower has advised Lenders constitutes
non-public information. Lenders may, however, disclose such information to all
of their respective officers, attorneys, auditors, agents and representatives
who have a need to know such information in connection with the administration,
interpretation or enforcement of the Loan Documents or the lending and
collection activity contemplated therein. Lenders shall advise such Persons that
such information is to be treated as confidential. A Lender may also disclose
such information in any documents that it files in any legal proceeding to
pursue, enforce or preserve its rights under the Loan Documents to the extent
that such Lender's counsel advises in writing that such disclosure is reasonably
necessary. Lenders' non-disclosure obligation shall not apply to any information
that (i) is disclosed to a Lender by a third party not affiliated with or
employed by Borrower who does not have a commensurate duty of non-disclosure, or
(ii) becomes publicly known other than as a result of disclosure by a Lender.
14.24. ACQUISITION DOCUMENTS. Borrower shall fully perform all of its
obligations under all Acquisition Documents to which it is a party, and shall
promptly enforce all of its rights and remedies thereunder as it deems
appropriate in its reasonable business judgment; provided, however, that
Borrower shall not take any action or fail to take any action which would result
in a waiver or other loss of any material right or remedy of Borrower
thereunder. Without limiting the generality of the foregoing, Borrower shall
take all action necessary or appropriate to permit and shall not take any action
which would have any material adverse effect upon, the full enforcement of all
indemnification rights of Borrower against Seller under all Acquisition
Documents. Borrower shall not, without Agent's prior written consent (which
consent shall not be unreasonably withheld or delayed), modify, amend,
supplement, compromise, satisfy, release or discharge any of the Acquisition
Documents, any collateral securing the same, any Person liable directly or
indirectly with respect thereto, or any agreement relating to the Acquisition
Documents or the collateral therefor. Borrower shall notify Agent in writing
promptly after Borrower becomes aware thereof, of any
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event or fact which could give rise to a claim by it for indemnification under
any of the Acquisition Documents, which when aggregated with any other claims
thereunder exceeds $250,000, and shall diligently pursue such right and report
to Agent on all further developments with respect thereto. If Borrower fails
after Agent's demand to pursue diligently any right under any of the Acquisition
Documents, or if there is an Unwaived Event of Default, then Agent may directly
enforce such right in its own or Borrower's name and may enter into such
settlements or other agreements with respect thereto as Agent determines.
Notwithstanding the foregoing, Borrower shall at all times remain liable to
observe and perform all of its duties and obligations under all of the
Acquisition Documents, and Agent's exercise of any of its rights with respect to
the Collateral shall not release Borrower from any of such duties or
obligations. Agent shall not be obligated to perform or fulfill any of
Borrower's duties or obligations under any of the Acquisition Documents or to
make any payment thereunder, or to make any inquiry as to the sufficiency of any
payment or property received by it thereunder or the sufficiency of performance
by any party thereunder, or to present or file any claim, or to take any action
to collect or enforce any performance or payment of any amounts, or any delivery
of any property.
14.25. INTEREST RATE PROTECTION. Borrower shall have entered into an
Interest Rate Protection Agreement as of the Effective Date covering at a
minimum $10,000,000 and shall have entered to an Interest Rate Protection
Agreement within 150 days after the Effective Date covering no less than an
additional $15,000,000.
14.26. FURTHER ASSURANCES. Borrower shall execute and deliver, or cause
to be executed and delivered, to Agent such documents and agreements, and shall
take or cause to be taken such actions, as Agent may from time to time request
to carry out the terms and conditions of this Agreement and the other Loan
Documents. At Agent's request, Borrower will use all reasonable efforts to
cooperate to ensure that Agent obtains a perfected first priority Security
Interest in any investment Borrower may have in any Person who is a distributor.
14.27. LANDLORD WAIVER. Within forty-five (45) days following the
Execution Date, Borrower shall deliver a fully-executed landlord waiver
regarding the leased real property located in the City of Oakes, North Dakota in
form and substance reasonably satisfactory to Agent. In the event that Borrower
shall fail to deliver such fully-executed landlord waiver within such time
period, then Borrower shall promptly pay to Agent, for the ratable benefit of
each Lender, a fee payable as follows: $10,000 on the 46th day, and $10,000 each
thirty (30) days thereafter, not to exceed $50,000 in the aggregate; and any
Inventory located at such location shall not be Eligible Inventory.
15. NEGATIVE COVENANTS.
Borrower covenants and agrees that while any of the Commitments remains
in effect or any of the Loan Obligations are owing to Lenders by Borrower or any
of the Letters of Credit are outstanding, Borrower shall not, directly or
indirectly, do any of the following, or permit any Covered Person to do any of
the following, without the prior written consent of Required Lenders:
15.1. INVESTMENTS. Make any Investments in any other Person except
the following ("Permitted Investments"):
15.1.1.Investments in (i) interest-bearing United States
government obligations; (ii) certificates of deposit issued by any
Lender; (iii) certificates of deposit issued by and time deposits with
any commercial bank chartered under the laws of the United States or any
state thereof having capital and surplus of not less than $500,000,000
(in each case, a "Permitted Financial Institution"); (iv) prime
commercial paper rated A1 or better by Standard and Poor's Corporation
or Prime P1 or better by Moody's Investor Service, Inc.; or (v)
agreements involving
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the sale to Borrower of United States government securities and their guaranteed
repurchase the next Business Day by a Permitted Financial Institution.
15.1.2. Accounts arising in the ordinary course of business and
payable in accordance with Borrower's customary trade terms.
15.1.3. Investments existing on the Execution Date and disclosed
in the Disclosure Schedule.
Borrower may request Agent to invest on behalf of Borrower all of the excess
cash in the Cash Collateral Account as of the end of a Business Day, but only in
Permitted Investments described in Section (ii) and (iv). Any such request will
only be honored by Agent if made by a Borrowing Officer and received by Agent
before 2:00 p.m. (St. Louis, Missouri time) on a Business Day; and unless a
different Permitted Investment is specifically requested, Agent will invest
excess funds in agreements involving the sale to Borrower of United States
government securities and their guarantied repurchase on the next Business Day
by Agent.
15.2. INDEBTEDNESS. Create, incur, assume, or allow to exist any
Indebtedness of any kind or description, except the following ("Permitted
Indebtedness"):
15.2.1.Indebtedness to trade creditors incurred in the ordinary
course of business, to the extent that it is not overdue past the
original due date by more than 90 days.
15.2.2. The Loan Obligations.
15.2.3. Indebtedness secured by Permitted Security Interests.
15.2.4. The Minnesota Mutual Subordinated Indebtedness.
15.2.5. The Harbour Subordinated Indebtedness and the Boatmen's
Subordinated Indebtedness.
15.2.6. Indebtedness permitted by Sections and hereof.
15.2.7. Intercompany Indebtedness permitted by Section hereof.
15.3. PREPAYMENTS. Voluntarily prepay any Indebtedness other than
(a) the Loan Obligations in accordance with the terms of the Loan Documents, and
(b) trade payables in the ordinary course of business.
15.4. INDIRECT OBLIGATIONS. Create, incur, assume or allow to exist
any Indirect Obligations except Indirect Obligations existing on the Execution
Date and disclosed in the Disclosure Schedule and up to $100,000 in the
aggregate at any one time ("Permitted Indirect Obligations").
15.5. SECURITY INTERESTS. Create, incur, assume or allow to exist
any Security Interest upon all or any part of its property, real or personal,
now owned or hereafter acquired except the following ("Permitted Security
Interests"):
15.5.1.Security Interests for taxes, assessments or governmental
charges not delinquent or being diligently contested in good faith and
by appropriate proceedings and for which adequate book reserves in
accordance with GAAP are maintained.
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15.5.1. Security Interests arising out of deposits in connection
with workers' compensation insurance, unemployment insurance, old age
pensions, or other social security or retirement benefits legislation.
15.5.2. Deposits or pledges to secure bids, tenders, contracts
(other than contracts for the payment of money), leases, statutory
obligations, surety and appeal bonds, and other obligations of like
nature arising in the ordinary course of business.
15.5.3. Security Interests imposed by any Law, such as
mechanics', workmen's, materialmen's, landlords', carriers', maritime,
or other like Security Interests arising in the ordinary course of
business which secure payment of obligations which are not past due or
which are being diligently contested in good faith by appropriate
proceedings and for which adequate reserves in accordance with GAAP
are maintained on Borrower's books.
15.5.4. Purchase money Security Interests securing payment of
the purchase price of capital assets acquired by Borrower after the
Execution Date in an amount not to exceed $100,000 in the aggregate
during any Fiscal Year of Borrower and $500,000 in the aggregate, but
only to the extent the aggregate purchase price thereof would not (when
aggregated with other Capital Expenditures of Borrower in the same
period) exceed the limits for Capital Expenditures prescribed in Section
.
15.5.5. Security Interests securing the Loan Obligations in
favor of Agent for the ratable benefit of Lenders.
15.5.6. Permitted Encumbrances and the Security Interests
existing on the Execution Date that are disclosed in the Disclosure
Schedule and are satisfactory to Lenders.
15.5.7. Security Interest permitted by Section hereof.
15.6. ACQUISITIONS. Acquire stock or other equity interest in a Person
or acquire all or a material part of the assets of a Person, regardless of the
form of the transaction.
15.7. BAILMENTS; CONSIGNMENTS; WAREHOUSING; INVENTORY OUTSIDE OF NORTH
DAKOTA, WISCONSIN OR MINNESOTA. Store any Inventory with a bailee, warehouseman,
consignee or pursuant to an express or implied agreement establishing a bailment
or consignment of Inventory or similar arrangement, unless Agent has received a
written acknowledgment satisfactory to Agent from the third party involved which
acknowledges the prior perfected Security Interest of Agent for the ratable
benefit of Lenders in such Inventory. Except as permitted by the preceding
sentence, maintain Inventory outside of the States of North Dakota, Wisconsin or
Minnesota in an amount greater than $300,000 at any time.
15.8. DISPOSAL OF PROPERTY. Sell, transfer, exchange, lease, or
otherwise dispose of any of its assets except the following shall be permitted:
(i) sales of its Inventory in the ordinary course of business, (ii) sales made
in connection with the purchase by Borrower of replacement equipment (other than
equipment subject to a Security Interest), provided that Borrower uses the
proceeds of any such sale to finance the purchase by Borrower of replacement
equipment and Borrower delivers to Agent written evidence of the use of the
proceeds for such purchase; or (iii) other sales as contemplated by Section
(iii); provided, however, no consent from the Required Lenders shall be required
for the sale of the Permitted Investments in (i) High-Trak, Inc. if the net cash
proceeds shall be at least the book value carried on Borrower's books, and (ii)
in Great Southern Rental and Sales, Inc. if the sale is performed in accordance
with the terms and conditions of that certain Stock Purchase Agreement by and
between Trak and Great Southern Rental and Sales, Inc., dated April 24, 1994.
Notwithstanding the foregoing, Borrower
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may sell, transfer or otherwise dispose of obsolete or unusable equipment having
an orderly liquidation value no greater than $50,000 individually, and $100,000
in the aggregate in any Fiscal Year of Borrower, provided that (a) if such sale,
transfer or disposition is effected without replacement of such equipment, or if
such equipment is replaced by equipment leased by Borrower or by equipment
purchased by Borrower subject to a Permitted Security Interest, then Borrower
shall deliver all of the cash proceeds of any such sale, transfer or other
disposition to Agent for application to the Loan Obligations to the extent
required by Section , or (b) if such sale, transfer, or other disposition is
made in connection with the purchase by Borrower of replacement equipment (other
than equipment subject to a Security Interest), then Borrower shall use the
proceeds of any such sale, transfer or other disposition to finance the purchase
by Borrower of such replacement equipment and shall deliver to Agent written
evidence of the use of the proceeds for such purchase. All replacement equipment
purchased by Borrower shall be free and clear of all Security Interests and
Encumbrances, except for Permitted Security Interests.
15.9. DISTRIBUTIONS. Except with respect to intercompany loans or
transfers between Borrowers, or from either or both Borrower to Guarantor (but
not from Guarantor to its shareholders), directly or indirectly declare or make,
or incur any liability to make, any Distribution. For purposes of this Section,
a "Distribution" means and includes (i) any cash or in-kind dividend or
distribution, (ii) any acquisition or redemption of any outstanding stock,
membership, or partnership interest (except for any acquisition by Holdings of
its capital stock from former officers or employees of Borrower pursuant to
agreements in place as of the Execution Date), (iii) any retirement or
prepayment of debt securities before their regularly scheduled maturity dates,
and (iv) any loan or advance to a shareholder, partner, or member.
Notwithstanding the foregoing sentence, Borrower shall be permitted to make
payments to the former shareholders of Trak related to orders made under the
U.S. Army "ATLAS" contract, as identified in Section 12.20 to the Disclosure
Schedule.
15.10. CHANGE OF CONTROL. Permit the occurrence of a Change in Control
or a Control Event.
15.11. SECURITIES; CAPITAL STRUCTURE. Create any new class of stock,
issue any stock, or issue any other equity securities, or non-equity securities
or membership interests that are convertible into equity securities or
membership interests, unless the payments required by Section are made and, with
respect to Borrower or any of its Subsidiaries, all shares or membership
interests evidencing any such stock or security are simultaneously pledged to
Agent, for the ratable benefit of the Lenders, to secure the Loan Obligations,
in a manner and pursuant to documentation which in satisfactory to Agent and
Lenders; make any change in its capital structure which has or could have a
Material Adverse Effect on any Covered Person; or dispose of any Subsidiaries
existing on the date of this Agreement.
15.12. PAYMENTS ON THE MINNESOTA MUTUAL SUBORDINATED INDEBTEDNESS. Make
any payment of interest or prepayment of principal, or pay any fees (except
reimbursement for actual out-of-pocket cost and expenses, subject to the
subordination limitations contained in the Minnesota Mutual Subordinated
Documents), with regards to the Minnesota Mutual Subordinated Indebtedness;
provided, however, so long as there exists no Unwaived Event of Default,
Borrower may pay regularly scheduled interest and principal payments on the
Minnesota Mutual Subordinated Indebtedness.
15.13. PAYMENTS ON THE HARBOUR SUBORDINATED INDEBTEDNESS OR BOATMEN'S
SUBORDINATED INDEBTEDNESS. Make any payment of principal or cash payment of
interest, or pay any fees, with regards to the Harbour Subordinated Indebtedness
or the Boatmen's Subordinated Indebtedness.
15.14. CHANGE OF BUSINESS. Engage in any business other than
substantially as conducted on the Effective Date.
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<PAGE>
15.15. TRANSACTIONS WITH AFFILIATES. Enter into or be a party to any
transaction or arrangement, including without limitation, the purchase, sale or
exchange of property of any kind or the rendering of any service, with any
Affiliate, or make any loans or advances to any Affiliate except as otherwise
permitted in Section below and except for intercompany transfers of funds
permitted by Section .
15.16. MANAGEMENT PAYMENTS. Make any payments to any Person (including,
without limitation, any Affiliate of a Covered Person) in consideration for
management, advisory and other services provided by such Person to any Covered
Person ("Management Payments") except that any Covered Person shall be permitted
to engage Harbour Group Industries, Inc. and/or Harbour Group Ltd. (each a
"Management Company"; collectively the "Management Companies") to provide
advisory and other services ordinarily provided by such Management Companies to
their customers, and any such Covered Person may pay such Management Company or
Companies all reasonable fees and expenses invoiced by such Management Company
or Companies in connection with such services; provided, however, that (i)
aggregate payments by all Covered Persons to such Management Companies during
the period commencing with the Effective Date through the end of Borrower's
Fiscal Year 1996 shall not exceed $100,000 and such aggregate payments made
during any Fiscal Year of Borrower thereafter shall not exceed $600,000, (ii)
for so long as there is an Existing Default, other than an Existing Default
under Section or Section , that has been in existence for more than 30
consecutive days no Covered Person shall be permitted to pay any such fees and
expenses, and (iii) for so long as there is an Existing Default under either
Section or Section no Covered Person shall be permitted to pay any such fees and
expenses. Any such Management Payments not made as a result of the preceding
sentence may be made at a later date when there is no Existing Default and the
payment of such deferred Management Payments will not cause any of the events
described in subsections (i), (ii) and (iii) above to occur.
15.17. NO DEFAULT ON INDEBTEDNESS OR MATERIAL AGREEMENTS. Default upon
or fail to pay any Indebtedness for money borrowed as the same matures, or
breach, violate, or be in default under any Material Agreement beyond the
applicable grace period provided therein.
15.18. CONFLICTING AGREEMENTS. Enter into any indenture, agreement,
instrument or other arrangement which, (a) directly or indirectly prohibits or
restrains, or has the effect of prohibiting or restraining, or imposes
materially adverse conditions upon, the incurrence and maintenance of the Loan
Obligations, the provisions of the Loan Documents, or the amending of any of the
Loan Documents or (b) contains any provision which would be violated or breached
by any Covered Person's performance of its obligations under any Loan Document.
15.19. BANK ACCOUNTS. Maintain any deposit accounts at institutions
other than Agent (i) except zero or pegged balance payroll accounts and petty
cash accounts as described in the Disclosure Schedule and (ii) petty cash
accounts of which Borrower has notified Agent in writing and which have balances
not exceeding the aggregate $10,000.
15.20. SALE AND LEASEBACK TRANSACTIONS. Enter into any agreement or
arrangement with any Person providing for Borrower or any other Covered Person
to lease or rent property that Borrower or such other Covered Person has or will
sell or otherwise transfer to such Person.
15.21. NEW SUBSIDIARIES. Organize, create or acquire any Subsidiary.
15.22. FISCAL YEAR. Change its Fiscal Year.
15.23. TRANSACTIONS HAVING A MATERIAL ADVERSE EFFECT. Enter into
any transaction which has or is reasonably likely to have a Material Adverse
Effect on any Covered Person.
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<PAGE>
15.24. TAX CONSOLIDATION. File or consent to the filing of any
consolidated, combined or unitary income tax return with any Person which is not
a Covered Person, or enter into or be party to any tax sharing agreement or
similar arrangement.
15.25. MINNESOTA MUTUAL; HARBOUR SUBORDINATED DOCUMENTS; BOATMEN'S
SUBORDINATED DOCUMENTS; ACQUISITION DOCUMENTS. Borrower shall not agree to, or
acquiesce to, any amendment, modification, or change to any of the Minnesota
Mutual Subordinated Documents, the Harbour Subordinated Documents, the Boatmen's
Subordinated Documents, or the Acquisition Documents.
15.26. AMENDMENTS TO CHARTER DOCUMENTS AND MATERIAL AGREEMENTS. Enter
into or otherwise consent to any material amendment or modification of the
Charter Documents of Borrower delivered to the Lenders as a condition to Lenders
making the initial Advances hereunder, or any amendment or modification to any
Material Agreement which would materially adversely effect the Agent or the
Lenders, the Collateral, or the Agent's or the Lenders' Security Interests in
the Collateral.
16. FINANCIAL COVENANTS.
16. SPECIAL DEFINITIONS. As used in this Section and elsewhere in
this Agreement, the following capitalized terms have the following meanings:
"Capital Expenditure" means an expenditure for an asset that must be
depreciated or amortized under GAAP, for goodwill, or for any asset that
under GAAP must be treated as a capital asset, including, without
limitation, payments under Capital Leases, the amount of which must be
recorded as an amortizable asset, but not including any such
expenditures to the extent made from Insurance/Condemnation Proceeds in
the manner described in Section (the full amount of the payments so
capitalized under GAAP to be made thereunder by Borrower shall be taken
into account in the calculation period such Capital Lease is entered
to). When calculating Capital Expenditures for the purposes of
calculating the Interest Rate Ratio in Section , the terms of the
parenthetical in the preceding sentence shall not apply and only the
amount of all payments actually made in connection with all such Capital
Leases during the applicable Interest Rate Calculation Period need to be
accounted for when calculating Capital Expenditures for such purpose.
"Consolidated" or "consolidated" when used in connection with any
calculation, means a calculation to be determined on a consolidated
basis for Holdings and all of its Subsidiaries, including each Borrower
and their Subsidiaries, in accordance with GAAP.
"Current Assets" means current assets as determined in accordance with
GAAP.
"Current Liabilities" means current liabilities as determined in
accordance with GAAP, excluding amounts outstanding under the Aggregate
Revolving Loan.
"Fixed Charges" means, as of any date of calculation, the sum of (i)
Interest Expense (excluding for this purpose all interest accrued as an
expense with respect to the Harbour Subordinated Indebtedness and the
Boatmen's Subordinated Indebtedness to the extent it is on Borrower's
Consolidated books), (ii) the sum of all principal payments on Total
Funded Debt scheduled to be made during the calculation period ending on
such date, (iii) federal, state and local income taxes accrued during
the calculation period ending on such date, and (iv) all Capital
Expenditures incurred during the calculation period ending on such date
(provided, however, that the parenthetical at the end of the first
sentence in the definition of "Capital Expenditures" shall not apply
when calculating Capital Expenditures for purposes of calculating Fixed
Charges, i.e, only the amount of all
50
<PAGE>
payments actually made in connection with all such Capital Leases during the
applicable calculation period need to be accounted for in calculating Capital
Expenditures for the purposes of calculating Fixed Charges). For the purposes of
calculating Fixed Charges under this Agreement, the calculation period for Fixed
Charges shall be deemed to be the period from the Effective Date through any
date of calculation on or prior to July 31, 1997, and thereafter the calculation
period shall be the twelve month period immediately prior to the date of
calculation and Fixed Charges shall be calculated on a trailing twelve month
basis; provided, however, that each scheduled payment on the first of the month
of interest and principal on any of the Loans shall be deemed to have been made
on the immediately preceding day.
"Interest Expense" means, for any period of calculation, all interest
accrued as an expense in accordance with GAAP on Total Funded Debt
during such period.
"Net Income" means, for any period of calculation, "net income" as
determined in accordance with GAAP.
"Net Worth" means, as of any date, Total Assets MINUS Total Liabilities.
"Operating Cash Flow" means, as of any date of calculation, an amount
equal to the sum of (i) Net Income, (ii) federal, state and local income
tax expense, (iii) Interest Expense (including for this purpose all
interest accrued as an expense with respect to the Harbour Subordinated
Indebtedness or the Boatmen's Subordinated Indebtedness to the extent it
is on Borrower's Consolidated books), (iv) depreciation and amortization
expense, (v) losses on the sale or other disposition of assets, and (vi)
extraordinary losses, MINUS (a) gains on the sale or other disposition
of assets, and (b) extraordinary gains, all calculated for the
calculation period ending on such calculation date. For the purposes of
calculating Operating Cash Flow solely under Section and Section (and
any of the subsections thereunder and exhibits related thereto), the
calculation period for Operating Cash Flow shall be deemed to be the
period from the Effective Date through any date of calculation on or
prior to July 31, 1997 and thereafter the calculation period shall be
the twelve month period immediately prior to the date of calculation and
Operating Cash Flow shall be calculated on a trailing twelve month
basis.
"Total Assets" means the sum of all assets as presented in the balance
sheet in Borrower's most recent consolidated financial statements.
"Total Funded Debt" means, as of any time, the sum of the aggregate
outstanding principal balance of Borrower's Indebtedness and its
respective Subsidiaries' Indebtedness (including, without limitation,
the outstanding principal balance of the Aggregate Term 1 Loan, the
Aggregate Term 2 Loan, the Aggregate Revolving Loan, the Swingline Loan,
the unreimbursed amount of all draws on Letters of Credit, and the
outstanding principal balance of the Minnesota Mutual Subordinated
Indebtedness) at such time, but excluding the outstanding principal
balance of the Harbour Subordinated Indebtedness and the Boatmen's
Subordinated Indebtedness. For the purposes of calculating Total Funded
Debt under this Agreement, each scheduled payment on the first of the
month of interest and principal on the Loans shall be deemed to have
been made on the immediately preceding day.
"Total Liabilities" means the sum of all liabilities as presented in the
balance sheet in Borrower's most recent consolidated financial
statements (including, without limitation, the Minnesota Mutual
Subordinated Indebtedness, the Boatmen's Subordinated Indebtedness, and
the Harbour Subordinated Indebtedness).
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<PAGE>
All other capitalized terms used in this Section , not otherwise defined
elsewhere in this Agreement, shall have their meanings and shall be determined
under GAAP. For the purposes of calculating the amount of Borrower's and its
Subsidiaries' Indebtedness in this Section , each scheduled payment on the first
of the month of interest and principal on any of the Loans shall be deemed to
have been made on the immediately preceding day.
16.2. CAPITAL EXPENDITURES. Borrower and its Subsidiaries shall not make
Consolidated Capital Expenditures which in the aggregate exceed: (i) $5,500,000
during the period commencing with the Effective Date and ending September 30,
1997, (ii) $5,500,000 during Fiscal Year 1998, (iii) $8,800,000 during the
period commencing on the Effective Date and ending September 30, 1998, or (iv)
$4,400,000 for Fiscal Year 1999 or any Fiscal Year thereafter, and such amounts
may not be carried over from period to period.
16.3. CAPITAL LEASES. Borrower and its Subsidiaries shall not become
obligated as lessee(s) under any Capital Leases except Capital Leases existing
on the Execution Date and disclosed in the Disclosure Schedule and Capital
Leases entered into by Borrower and its Subsidiaries after the Execution Date
for capital assets whose aggregate cost if purchased would not exceed $25,000 in
any Fiscal Year and $50,000 in the aggregate.
16.4. LEASE RENTALS. Expenses incurred by Borrower and its Subsidiaries
as lessees under leases of property (whether real, personal, tangible,
intangible, or mixed property), other than Capital Leases, shall not exceed
$75,000 in the aggregate during any Fiscal Year and the aggregate amount of all
such expenses incurred on a cumulative basis after the Effective Date shall not
exceed $500,000.
16.5. MINIMUM CONSOLIDATED OPERATING CASH FLOW. Consolidated Operating
Cash Flow as of each calculation date set forth below, shall not be less than
the amount set forth opposite such calculation date:
<TABLE>
<CAPTION>
===================================================== =========================================
CALCULATION DATES MINIMUM OPERATING CASH FLOW
===================================================== =========================================
<S> <C>
October 31, 1996 and the last day of each month $2,900,000
thereafter ending with December 31, 1996
===================================================== =========================================
January 31, 1997 and the last day of each month $7,800,000
thereafter ending with March 31, 1997
===================================================== =========================================
April 30, 1997 and the last day of each month $14,900,000
thereafter ending with June 30, 1997
===================================================== =========================================
July 31, 1997 and the last day of each month $19,800,000
thereafter ending with September 30, 1997
===================================================== =========================================
October 31, 1997 and the last day of each month $21,400,000
thereafter ending with September 30, 1998
===================================================== =========================================
October 31, 1998 and the last day of each month $22,000,000
thereafter ending with September 30, 1999
===================================================== =========================================
October 31, 1999 and the last day of each month $23,000,000
thereafter
===================================================== =========================================
</TABLE>
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<PAGE>
16.6. FIXED CHARGE COVERAGE. The ratio of (a) Consolidated Operating
Cash Flow as of each calculation date set forth below to (b) Consolidated Fixed
Charges as of such calculation date, shall not be less than the ratio set forth
opposite such calculation date:
<TABLE>
<CAPTION>
================================================ ==============================================
CALCULATION DATES MINIMUM RATIO
================================================ ==============================================
<S> <C>
October 31, 1996 and the last day of each 1.10 to 1.00
month thereafter
================================================ ==============================================
</TABLE>
16.7. MINIMUM NET WORTH. Consolidated Net Worth shall at no time
during any fiscal period specified in the table below be less than the amount
specified for such period:
<TABLE>
<CAPTION>
================================================ ==============================================
PERIOD MINIMUM NET WORTH
================================================ ==============================================
<S> <C>
Effective Date through April 29, 1997 $11,000,000
================================================ ==============================================
April 30, 1997 through October 30, 1997 $13,100,000
================================================ ==============================================
October 31, 1997 through October 30, 1998 $16,000,000
================================================ ==============================================
October 31, 1998 and at any time thereafter $19,000,000
================================================ ==============================================
</TABLE>
16.8. CONSOLIDATED TOTAL FUNDED DEBT TO CONSOLIDATED OPERATING CASH
FLOW. The ratio of (a) Consolidated Total Funded Debt outstanding on each
calculation date set forth below on such calculation date, to (b) Consolidated
Operating Cash Flow (for periods less than twelve months from the Effective
Date, annualized) as of such calculation date, shall not exceed the ratio set
forth opposite such calculation date:
<TABLE>
<CAPTION>
===================================================== ========================================
CALCULATION DATES MAXIMUM RATIO
===================================================== ========================================
<S> <C>
April 30, 1997 and the last day of each month 3.20 to 1.00
thereafter ending with March 31, 1998
===================================================== ========================================
April 30, 1998 and the last day of each month 2.80 to 1.00
thereafter ending with September 30, 1998
===================================================== ========================================
October 31, 1998 and the last day of each month 2.50 to 1.00
thereafter ending with March 31, 1999
===================================================== ========================================
April 30, 1999 and the last day of each month 2.00 to 1.00
thereafter
===================================================== ========================================
</TABLE>
16.9. MINIMUM INTEREST COVERAGE. The ratio of (a) Consolidated Operating
Cash Flow as of each calculation date set forth below to (b) Consolidated
Interest Expense as of such calculation date, shall not be less than the ratio
set forth opposite such calculation date:
<TABLE>
<CAPTION>
===================================================== ========================================
CALCULATION DATES MINIMUM RATIO
===================================================== ========================================
<S> <C>
October 31, 1996 and the last day of each month 2.30 to 1.00
thereafter ending with March 31, 1997
===================================================== ========================================
53
<PAGE>
===================================================== ========================================
April 30, 1997 and the last day of each month 3.00 to 1.00
thereafter ending with March 31, 1998
===================================================== ========================================
April 30, 1998 and the last day of each month 3.30 to 1.00
thereafter ending with September 30, 1999
===================================================== ========================================
October 31, 1999 and the last day of each month 3.70 to 1.00
thereafter
===================================================== ========================================
</TABLE>
17. DEFAULT.
17.1. EVENTS OF DEFAULT. Any one or more of the following shall
constitute an event of default (an "Event of Default") under this Agreement:
17.1.1.FAILURE TO PAY PRINCIPAL OR INTEREST. Failure of Borrower
or any Guarantor to pay any principal of the Loans or interest accrued
thereon when due.
17.1.2.FAILURE TO PAY OTHER AMOUNTS OWED TO LENDERS. Failure of
Borrower or any Guarantor to pay any of the Loan Obligations (other than
principal of the Loans or interest accrued thereon) within three (3)
Business Days after the date when due.
17.1.3.FAILURE TO PAY AMOUNTS OWED TO OTHER PERSONS. Failure of
any Covered Person to make any payment due on Indebtedness of such
Covered Person over $250,000 to Persons other than Lenders which
continues unwaived beyond any applicable grace period specified in the
documents evidencing such Indebtedness.
17.1.4.REPRESENTATIONS OR WARRANTIES. Any representation or
warranty made by Borrower in this Agreement, or any statement or
representation made in any certificate, report, opinion or other
document delivered pursuant to this Agreement (made by any Covered
Person), is discovered to have been false in any material respect when
made.
17.1.5.CERTAIN COVENANTS. Failure of any Covered Person to comply
with any of the covenants in Sections , , , , , , , , , or .
17.1.6.COVENANTS WITH 30 DAY CURE PERIODS. Failure of any Covered
Person to comply with any of the covenants in Section not listed in
Section above, which is not remedied or waived in writing by Agent
within 30 days after the day on which an offer of Borrower or Guarantor
first obtains knowledge of initial occurrence of such failure; provided,
however, that no such grace period shall apply, and an Event of Default
shall exist promptly upon such failure to comply, if such failure may
not, in Agent's reasonable determination, be cured by such Covered
Person during such 15 day period.
17.1.7.Intentionally omitted.
17.1.8.FAILURE TO COMPLY WITH OTHER TERMS OF LOAN DOCUMENTS.
Failure of any Covered Person to comply with any of the terms or
provisions of any of the Loan Documents applicable to it (other than a
failure which constitutes an Event of Default under any of Sections
through ) which is not remedied or waived in writing by Agent within 30
days after the initial occurrence of such failure; provided, however,
that no such grace period shall apply, and
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<PAGE>
an Event of Default shall exist promptly upon such failure to comply, if such
failure may not, in Agent's reasonable determination, be cured by such Covered
Person during such 30 day period.
17.1.9.Intentionally omitted.
17.1.10. ACCELERATION OF OTHER INDEBTEDNESS. Any Obligation of a
Covered Person (other than the Loan Obligations) under the Minnesota
Mutual Subordinated Indebtedness, the Boatmen's Subordinated
Indebtedness, or the Harbour Subordinated Indebtedness for the payment
of borrowed money becomes or is declared to be due and payable or
required to be prepaid (other than by a regularly scheduled prepayment)
prior to the original maturity thereof as a consequence of a default
with respect thereto by any Covered Person. Any Obligation of a Covered
Person (other than the Loan Obligations, the Minnesota Mutual
Subordinated Indebtedness, the Boatmen's Subordinated Indebtedness, and
the Harbour Subordinated Indebtedness) in excess of $250,000 for the
payment of borrowed money becomes or is declared to be due and payable
or required to be prepaid (other than by a regularly scheduled
prepayment) prior to the original maturity thereof as a consequence of a
default with respect thereto by any Covered Person.
17.1.11. DEFAULT UNDER OTHER AGREEMENTS. The occurrence of any
default or event of default by any Covered Person under the Minnesota
Mutual Subordinated Documents, the Harbour Subordinated Documents, the
Boatmen's Subordinated Documents, or the Acquisition Documents. The
occurrence of any default or event of default under any agreement to
which a Covered Person is a party (other than the Loan Documents, the
Minnesota Mutual Subordinated Documents, the Boatmen's Subordinated
Documents, the Harbour Subordinated Documents or the Acquisition
Documents), which default or breach continues unwaived beyond any
applicable grace period provided therein and either (i) involves an
amount in excess of $250,000 or (ii) would or could reasonably be
expected to have a Material Adverse Effect on such Covered Person.
17.1.12. BANKRUPTCY; INSOLVENCY; ETC. A Covered Person (i) fails
to pay, or admits in writing its inability to pay, its debts generally
as they become due, or otherwise becomes insolvent (however evidenced);
(ii) makes a general assignment for the benefit of creditors; (iii)
files a petition in bankruptcy, is adjudicated insolvent or bankrupt,
petitions or applies to any tribunal for any receiver or any trustee of
such Covered Person or any substantial part of its property; (iv)
commences any proceeding relating to such Covered Person under any
reorganization, arrangement, readjustment of debt, dissolution or
liquidation law or statute of any jurisdiction, whether now or hereafter
in effect; (v) has commenced against it any such proceeding which
remains undismissed for a period of sixty (60) days, or by any act
indicates its consent to, approval of, or acquiescence in any such
proceeding or the appointment of any receiver of or any trustee for it
or of any substantial part of its property, or allows any such
receivership or trusteeship to continue undischarged for a period of
sixty (60) days; or (vi) takes any corporate action to authorize any of
the foregoing.
17.1.13. JUDGMENTS; ATTACHMENT; ETC. Any one or more judgments or
orders is entered against a Covered Person or any attachment or other
levy is made against the property of a Covered Person with respect to a
claim or claims involving in the aggregate liabilities (not paid or
fully covered by insurance, less the amount of reasonable deductibles in
effect on the Execution Date) in excess of $250,000, becomes final and
non-appealable or if timely appealed is not fully bonded and collection
thereof stayed pending the appeal.
17.1.14. PENSION BENEFIT PLAN TERMINATION, ETC. Any Pension
Benefit Plan termination by the PBGC or the appointment by the
appropriate United States District Court of a trustee to administer any
Pension Benefit Plan or to liquidate any Pension Benefit Plan; or any
55
<PAGE>
event which constitutes grounds either for the termination of any Pension
Benefit Plan by PBGC or for the appointment by the appropriate United States
District Court of a trustee to administer or liquidate any Pension Benefit Plan
shall have occurred and be continuing for thirty (30) days after Borrower has
notice of any such event; or any voluntary termination of any Pension Benefit
Plan which is a defined benefit pension plan as defined in Section 3(35) of
ERISA while such defined benefit pension plan has an accumulated funding
deficiency, unless Agent has been notified of such intent to voluntarily
terminate such plan and Lenders have given their consent and agreed that such
event shall not constitute a Default; or the plan administrator of any Pension
Benefit Plan applies under Section 412(d) of the Code for a waiver of the
minimum funding standards of Section 412(l) of the Code and Lenders determine
that the substantial business hardship upon which the application for such
waiver is based could subject any Covered Person or ERISA Affiliate to a
liability in excess of $100,000.
17.1.15. LIQUIDATION OR DISSOLUTION. A Covered Person files a
certificate of dissolution under applicable state law or the law of the
country in which it is organized or is liquidated or dissolved or
suspends or terminates the operation of its business, or has commenced
against it any action or proceeding for its liquidation or dissolution
or the winding up of its business, or takes any corporate action in
furtherance of any of the foregoing.
17.1.16. SEIZURE OF ASSETS. All or any part of the property of
Borrower or any other Covered Person is nationalized, expropriated,
seized or otherwise appropriated, or custody or control of such property
or of Borrower or any other Covered Person shall be assumed by any
Governmental Authority or any court of competent jurisdiction at the
instance of any Governmental Authority, unless the same is being
contested in good faith by proper proceedings diligently pursued and a
stay of enforcement is in effect; notwithstanding the foregoing to the
contrary, condemnation by any Government Authority of any real property
interest of any Covered Person which would not have a Material Adverse
Effect on such Covered Person shall not be an Event of Default under
this Section .
17.1.17. RACKETEERING PROCEEDING. There is filed against any
Covered Person in any civil or criminal action, suit or proceeding under
any federal or state racketeering statute (including, without
limitation, the Racketeer Influenced and Corrupt Organization Act of
1970), which action, suit or proceeding is not dismissed within 90 days
and could result in the confiscation or forfeiture of any material
portion of the Collateral.
17.1.18. LOAN DOCUMENTS; SECURITY INTERESTS. For any reason other
than the failure of Agent to take any action available to it to maintain
perfection of the Security Interests created in favor of Agent for the
ratable benefit of Lenders pursuant to the Loan Documents or the release
of such Security Interest by Agent, any Loan Document ceases to be in
full force and effect or any Security Interest with respect to any
portion of the Collateral intended to be secured thereby ceases to be,
or is not, valid, perfected and prior to all other Security Interests
(other than the Permitted Security Interests) or is terminated, revoked
or declared void or invalid.
17.1.19. LOSS TO COLLATERAL. Any loss, theft, damage or
destruction of any item or items of Collateral occurs which either (i)
has a Material Adverse Effect on any Covered Person, or (ii) materially
and adversely affects the operation of Borrower's business and is not
covered by insurance as required herein.
17.1.20. MATERIAL ADVERSE CHANGE. There occurs any material
adverse change in any Covered Person's property, business, operation,
or condition (financial or otherwise), or there occurs any event which
has or could have a Material Adverse Effect on any Covered Person.
56
<PAGE>
17.1.21. GUARANTY. Any Guaranty fails to be in full force and
effect, or a breach or default shall occur under any Guaranty.
17.2. CROSS-DEFAULT. Any Event of Default under this Agreement will
constitute an event of default under any other agreement of Borrower and any
Guarantor with Agent or any Lender including, without limitation, each of the
other Loan Documents, and under any evidence of Indebtedness of Borrower and any
Guarantor held by Agent or any Lender, whether or not such is an event of
default specified therein.
17.3. RIGHTS AND REMEDIES IN THE EVENT OF DEFAULT.
17.3.1. TERMINATION OF COMMITMENTS. Upon an Event of Default
described in Section , the Commitments shall be deemed canceled without
presentment, demand or notice of any kind. Upon any other Event of
Default, and at any time thereafter so long as any Unwaived Event of
Default exists, the Required Lenders may cancel the Commitments. Such
cancellation may be without demand or notice of any kind, which Borrower
expressly waives.
17.3.2. ACCELERATION. Upon an Event of Default described in
Section , all of the outstanding Loan Obligations shall automatically
become immediately due and payable. Upon any other Event of Default, and
at any time thereafter so long as any Unwaived Event of Default exists,
Required Lenders may declare all of the outstanding Loan Obligations
immediately due and payable. Such acceleration in either case may be
without presentment, demand or notice of any kind, which Borrower
expressly waives.
17.3.3. RIGHT OF SET-OFF. Upon the occurrence of any Event of
Default and at any time and from time to time thereafter so long as any
Unwaived Event of Default exists, each Lender is hereby authorized,
without notice to Borrower (any such notice being expressly waived by
Borrower), to set off and apply against the Loan Obligations any and all
deposits (general or special, time or demand, provisional or final) at
any time held, or any other Indebtedness at any time owing by such
Lender to or for the credit or the account of Borrower, irrespective of
whether or not such Lender shall have made any demand under this
Agreement or the Notes and although such Loan Obligations may be
unmatured. The rights of each Lender under this Section are in addition
to other rights and remedies (including, without limitation, other
rights of set-off) which such Lender may otherwise have.
17.3.4. NOTICE TO ACCOUNT DEBTORS. Upon the occurrence of any
Event of Default and at any time and from time to time thereafter so
long as any Unwaived Event of Default exists, Agent may (if Required
Lenders concur), without prior notice to Borrower, notify any or all
Account Debtors that the Accounts have been assigned to Agent for the
ratable benefit of Lenders and that Agent has a Security Interest
therein for the ratable benefit of Lenders, and Agent may direct, or
Borrower, at Agent's request, shall direct, any or all Account Debtors
to make all payments upon the Accounts directly to Agent for the ratable
benefit of Lenders.
17.3.5. ENTRY UPON PREMISES AND ACCESS TO INFORMATION. Upon an
Event of Default and at any time and from time to time thereafter so
long as any Unwaived Event of Default exists: Agent may (i) enter upon
the premises leased or owned by Borrower where Collateral is located (or
is believed to be located) without any obligation to pay rent to
Borrower, or any other place or places where Collateral is believed to
be located, (ii) render Collateral usable or saleable, (iii) remove
Collateral therefrom to the premises of Agent or any agent of Agent for
such time as Agent may desire in order effectively to collect or
liquidate Collateral; (iv) take possession of, and make copies and
abstracts of, Borrower's original books and records, obtain access to
Borrower's
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data processing equipment, computer hardware and software relating to
any of the Collateral and, subject to any proprietary rights of third
parties, use all of the foregoing and the information contained
therein in any manner Agent deems appropriate in connection with the
exercise of Agent's rights; and (v) notify postal authorities to
change the address for delivery of Borrower's mail to an address
designated by Agent and to receive, open and process all mail
addressed to Borrower.
17.3.6. ENVIRONMENTAL ASSESSMENT. Upon an Event of Default and
at any time and from time to time thereafter so long as any Unwaived
Event of Default exists, Agent (or any person retained by Agent for the
purposes described in this paragraph) may, at its sole option, enter
upon any premises leased or owned by any Covered Person to perform an
environmental assessment of Borrower, any Covered Person, or any of the
Real Property Collateral. The purposes and scope of such assessment
shall be as defined by Agent. Those purposes may include determining
whether conditions at the property evidence non-compliance with any
Environmental Law, and whether operations at the property are being and
have been conducted in accordance with Environmental Laws. Such
assessment may include, without limitation, soil sampling and other
intrusive assessment methods. Such assessment shall be at the expense of
Borrower.
17.3.7. COMPLETION OF UNCOMPLETED INVENTORY ITEMS. Agent may
request that Borrower, and Borrower shall upon such request, use
Borrower's best efforts to obtain the consent of its customers to the
completion (before or after foreclosure by Agent of its security
interest therein) of the manufacture of all uncompleted Inventory items
that Borrower was manufacturing for such customers pursuant to contracts
or accepted purchase orders, and the commitment by such customers to
purchase such items upon their completion as provided in the relevant
contracts or accepted purchase orders. Borrower shall, as an
uncompensated agent for Lenders, complete the manufacture and shipment
of all such items as provided in the relevant contracts or accepted
purchase orders if Agent so directs.
17.3.8. BORROWER'S OBLIGATIONS. Upon the occurrence of an Event
of Default and at any time thereafter so long as any Unwaived Event
of Default exists, Borrower shall, if Agent so requests, assemble all
the movable tangible Collateral and make it available to Agent at a
place or places to be designated by Agent in its discretion.
17.3.9. SECURED PARTY RIGHTS. Upon an Event of Default and
acceleration of the Loan Obligations as provided herein, and at any time
and from time to time thereafter so long as any Unwaived Event of
Default exists:
17.3.9.1. Agent may exercise any or all of its rights
under the Security Documents as a secured party under the UCC and
any other applicable Law; and
17.3.9.2. Agent may sell or otherwise dispose of any or
all of the Collateral at public or private sale in a commercially
reasonable manner, which sale Agent may postpone from time to
time by announcement at the time and place of sale stated in the
notice of sale or by announcement at any adjourned sale without
being required to give a new notice of sale, all as Agent deems
advisable, for cash or credit. A Lender may become the purchaser
at any such sale if permissible under applicable Law, and such
Lender may, in lieu of actual payment of the purchase price,
offset the amount thereof against Borrower's obligations owing to
Lender, and Borrower agrees that such Lender has no obligation to
preserve rights to Collateral against prior parties or to marshal
any Collateral for the benefit of any Person.
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In connection with the advertising for sale, selling, or otherwise realizing
upon any of the Collateral securing the obligations of Borrower to Lender, Agent
may use and is hereby granted a license to use, without charge or liability to
Agent or Lenders therefor, any of Borrower's labels, trade names, trademarks,
trade secrets, service marks, patents, patent applications, licenses,
certificates of authority, advertising materials, or any of Borrower's other
properties or interests in properties of similar nature, to the extent that such
use thereof is not prohibited by agreements under which Borrower has rights
therein, and all of Borrower's rights under license, franchise and similar
agreements shall inure to Lenders' benefit.
17.3.10. MISCELLANEOUS. Upon the occurrence of an Event of
Default and at any time thereafter and from time to time thereafter so
long as any Unwaived Event of Default exists, Lenders may exercise any
other rights and remedies available to Lenders under the Loan Documents
or otherwise available to Lenders at law or in equity.
17.3.11. APPLICATION OF FUNDS. Any funds received by Lenders or
Agent for the ratable benefit of Lenders with respect to the Loan
Obligations after any acceleration of the Loan Obligations as provided
herein, including proceeds of Collateral, shall be applied as follows:
(i) first, to reimburse Lenders prorata for any amounts due to Lenders
under Section ; (ii) second, to reimburse to Agent all unreimbursed
costs and expenses paid or incurred by Agent that are payable or
reimbursable by Borrower hereunder; (iii) third, to reimburse to Lenders
prorata all unreimbursed costs and expenses paid or incurred by Lenders
(including costs and expenses incurred by Agent as a Lender that are not
reimbursable as provided in the preceding clause) that are payable or
reimbursable by Borrower hereunder; (iv) fourth, to the payment of
accrued and unpaid fees due under the Loan Documents and all other
amounts due under the Loan Documents (other than the Loans and interest
accrued thereon); (v) fifth, to the payment of interest accrued on the
Loans prorata to each of the Lenders; (vi) sixth, to the payment of the
Loans prorata to each of the Lenders; and (vii) seventh, to the payment
of the other Loan Obligations prorata to each of the Lenders. Anything
herein to the contrary notwithstanding, if any Rate Hedging Obligations
of Borrower are owed to a Lender when funds or proceeds are applied to
the Loans, the amount thereof shall be deemed added to the Loans due to
such Lender so that such Lender will recover such amount on a PARI PASSU
basis with all the Loans upon application of funds and proceeds as
provided in this Section. Any amounts remaining after the application of
funds and proceeds as provided in this Section shall be paid to
Borrower, or to such other Persons as are legally entitled thereto.
17.4. LIMITATION OF LIABILITY; WAIVER. Agent and Lenders shall not be
liable to Borrower as a result of any commercially reasonable possession,
repossession, collection or sale by Agent of Collateral; and Borrower hereby
waives all rights of redemption from any such sale and the benefit of all
valuation, appraisal and exemption laws. If Agent seeks to take possession of
any of the Collateral by replevin or other court process after an Event of
Default, Borrower hereby irrevocably waives (i) the posting of any bonds, surety
and security relating thereto required by any statute, court rule or otherwise
as an incident to such possession, (ii) any demand for possession of the
Collateral prior to the commencement of any suit or action to recover possession
thereof, (iii) any requirement that Agent retain possession and not dispose of
any Collateral until after trial or final judgment, and (iv) to the extent
permitted by applicable Law, all rights to notice and hearing prior to the
exercise by Agent of Agent's right to repossess the Collateral without judicial
process or to replevy, attach or levy upon the Collateral without notice or
hearing. Agent shall have no obligation to preserve rights to the Collateral or
to marshall any Collateral for the benefit of any Person.
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17.5. NOTICE. Any notice of intended action required to be given by
Agent (including notice of a public or private sale of Collateral), if given as
provided in Section at least 10 days prior to such proposed action, shall be
effective and constitute reasonable and fair notice to Borrower.
18. AGENT AND LENDERS.
18.1. APPOINTMENT OF AGENT. Boatmen's is hereby appointed Agent. Each
Lender irrevocably authorizes Boatmen's to act as the Agent for such Lender.
Agent shall not have any duties or responsibilities except those expressly
stated in the Loan Documents, nor any fiduciary relationship with any Lender,
and no implied covenants, functions, duties, responsibilities, obligations or
liabilities shall be read into the Loan Documents or otherwise exist against
Agent by reason of this Agreement.
18.2. POWERS. Agent shall have and may exercise such powers hereunder as
are specifically delegated to Agent by the terms hereof, together with such
powers as are reasonably incidental thereto. Agent shall have and may exercise
such powers hereunder as are specifically delegated to Agent by the terms
hereof, together with such powers as are reasonably incidental thereto. Agent
shall have no implied duties to Lenders, or any obligation to Lenders to take
any action hereunder except action specifically provided by this Agreement to be
taken by Agent.
18.3. GENERAL IMMUNITY OF AGENT. Neither Agent, nor any of Agent's
directors, officers, agents, or employees shall be liable to any Lender for any
act or failure to act with respect to their respective duties hereunder that
does not constitute gross negligence or willful misconduct.
18.4. NO RESPONSIBILITY FOR LOANS, RECITALS, ETC. Agent, and its
respective directors, officers, agents, and employees shall not be responsible
to Lenders for any recitals, reports, statements, warranties or representations
herein or in any Loan Document or be bound to ascertain or inquire as to the
performance or observance of any of the terms of this Agreement.
18.5. ACTION ON INSTRUCTIONS OF REQUIRED LENDERS. Agent and its
respective directors, officers, agents, and employees shall in all cases be
fully protected in acting, or in refraining from acting, hereunder in accordance
with written instructions executed by Required Lenders, and such instructions
and any act or failure to act pursuant thereto shall be binding on all of
Lenders and on all holders of Notes.
18.6. EMPLOYMENT OF AGENTS AND COUNSEL. Agent may execute any of its
duties hereunder by or through employees, agents, and attorneys-in-fact and
shall not be answerable to Lenders, except as to money or securities received by
it or its authorized agents, for the default or misconduct of any such agents or
attorneys-in-fact selected by it with reasonable care. Agent shall be entitled
to advice of counsel concerning all matters pertaining to the agency hereby
created and its duties hereunder.
18.7. RELIANCE ON DOCUMENTS; COUNSEL. Agent shall be entitled to rely
upon any notice, consent, certificate, affidavit, letter, telegram, statement,
paper or document believed by it to be genuine and correct and to have been
signed or sent by the proper person or persons, and, in respect to legal
matters, upon the opinion of counsel selected by it, which counsel may be its
employees.
18.8. AGENT'S REIMBURSEMENT. Lenders agree to reimburse and indemnify
Agent prorata according to their respective Commitments (i) for any amounts not
reimbursed by Borrower for which Agent is entitled to reimbursement by Borrower
under the Loan Documents (other than incurred by Agent or its legal counsel and
expenses advanced by Agent's legal counsel in connection with the preparation
and negotiation of the Loan Documents and the closing of the transactions
contemplated hereby), and (ii) for any other expenses incurred by Agent on
behalf of Lenders, in connection with the enforcement of the Loan Documents.
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18.9. AGENT'S REIMBURSEMENT AND INDEMNIFICATION. Lenders agree to
reimburse and indemnify Agent for any liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind and nature whatsoever which may be imposed on, incurred by or asserted
against Agent in any way relating to or arising out of this Agreement or any
other document delivered in connection with this Agreement or the transactions
contemplated hereby or the enforcement of any of the terms hereof or of any such
other documents; provided, however, that no Lender shall be liable for any of
the foregoing to the extent arising from any act or failure to act of Agent that
constitutes gross negligence or willful misconduct with respect to its duties as
Agent.
18.10. RIGHTS AS A LENDER. With respect to the Commitments of, Advances
made and the Notes issued to Agent, Agent shall have the same rights and powers
hereunder as any Lender and may exercise the same as though it were not Agent,
and the term "Lender" or "Lenders" shall, unless the context otherwise
indicates, include Agent in its individual capacity as a Lender hereunder. Agent
may accept deposits from, lend money to, and generally engage in any kind of
banking or trust business with Borrower or any Subsidiary or Affiliate of
Borrower as if it were not Agent.
18.11. INDEPENDENT CREDIT DECISIONS. Each Lender acknowledges that it
has, independently and without reliance upon Agent or any other Lender and based
on the financial statements prepared by Borrower and such other documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement and the other Loan Documents. Each Lender
also acknowledges that it will, independently and without reliance upon Agent or
any other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement and the other Loan Documents.
18.12. SUCCESSOR AGENT. Agent may resign at any time by giving written
notice thereof to Lenders and the Borrower. Upon receipt of such notice of
Agent's resignation, Required Lenders may, after consultation with Borrower, and
subject to the requirements in this Section, appoint a successor Agent. If no
successor Agent shall have been so appointed by Required Lenders and shall have
accepted such appointment within thirty days after the retiring Agent's giving
notice of resignation, then the retiring Agent may appoint, on behalf of
Borrower and Lenders, a successor Agent. Such successor Agent shall be a
commercial bank having capital and retained earnings of at least $250,000,000.
Agent's resignation shall not be effective until a successor Agent has been
appointed and accepts such appointment. Upon a successor Agent's acceptance of
its appointment, such successor Agent shall succeed to and become vested with
all the rights, powers, privileges and duties of the resigning Agent as such,
and the resigning Agent shall be discharged from its duties and obligations as
Agent hereunder. After the resignation of Agent, the provisions of Section shall
continue in effect for the resigning Agent's benefit in respect of any act or
failure to act while it was Agent hereunder.
18.13. NOTIFICATION OF LENDERS. Each Lender agrees to use its good faith
efforts, upon becoming aware of anything which would likely have a Material
Adverse Effect on any Covered Person, to promptly notify Agent thereof. Agent
shall promptly deliver to each Lender copies of every written notice, demand,
report (including any financial report), or other writing which Agent gives to
or receives from Borrower and which itself (a) constitutes, or which contains
information about, something that would likely have a Material Adverse Effect
with respect to Borrower's Loan Obligations to such Lender or (b) is otherwise
delivered to Agent by Borrower pursuant to the Loan Documents and is deemed
material information by Agent in its sole discretion. Agent and its directors,
officers, agents, and employees shall have no liability to any Lender for
failure to deliver any such item to such Lender unless the failure constitutes
gross negligence or willful misconduct.
18.14. NO KNOWLEDGE OF DEFAULT. Agent shall not be deemed to have
knowledge of any Default or Event of Default unless Agent has received written
notice thereof from a Lender or the Borrower
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referring to this Agreement and describing such Default or Event of Default, or
Agent otherwise has actual knowledge thereof. If Agent receives such notice or
otherwise acquires such actual knowledge, Agent shall notify Lenders of the
same. Thereafter, regardless of whether Agent notified Lenders, Agent shall
solicit advice from Lenders as to the appropriate course of action, and take
such action (including but not limited to actions contemplated by Sections and )
as is directed by Lenders; provided, however, that unless and until Agent has
received such directions, Agent may at its option take such actions as it deems
appropriate without the direction of Lenders in circumstances where the ability
of Lenders to recover the Loan Obligations may otherwise be materially impaired.
18.15. COLLECTIONS AND DISTRIBUTIONS TO LENDERS BY AGENT. All interest,
fees, and payments of principal received by Agent for the account of Lenders
shall be distributed by Agent to Lenders in accordance with their prorata shares
of the outstanding Loan Obligations at the time of such distribution (or
entirely to Boatmen's in the case of interest, fees, and payments with respect
to the Swingline Loan) on the same Business Day when received, unless received
after 2:00 p.m. (St. Louis, Missouri time), in which case they shall be so
distributed on the next Business Day. All amounts received by any Lender on
account of the Loan Obligations, including amounts received by way of setoff,
shall be paid promptly to Agent for distribution to Lenders in accordance with
their prorata shares of the Loans. Such distributions shall be made according to
instructions that each Lender may give to Agent from time to time.
19. GENERAL.
19.1. LENDERS' RIGHT TO CURE. Lenders may from time to time, in their
absolute discretion, for Borrower's account and at Borrower's expense, pay (or,
with the consent of Required Lenders, make a Revolving Advance to pay) any
amount or do any act required of Borrower hereunder or requested by Agent or
Required Lenders to preserve, protect, maintain or enforce the Loan Obligations,
the Collateral or Agent's Security Interests therein for the ratable benefit of
Lenders, and which Borrower fails to pay or do, including payment of any
judgment against Borrower, insurance premium, taxes or assessments, warehouse
charge, finishing or processing charge, landlord's claim, and any other Security
Interest upon or with respect to the Collateral. All payments that Lenders make
pursuant to this Section and all out-of-pocket costs and expenses that Lenders
pay or incur in connection with any action taken by it hereunder shall be a part
of the Loan Obligations, the repayment of which shall be secured by the
Collateral. Any payment made or other action taken by Lenders pursuant to this
Section shall be without prejudice to any right to assert an Event of Default
hereunder and to pursue Lenders' other rights and remedies with respect thereto.
19.2. RIGHTS NOT EXCLUSIVE. Every right granted to Agent and Lenders
hereunder or under any other Loan Document or allowed to it at law or in
equity shall be deemed cumulative and may be exercised from time to time.
19.3. SURVIVAL OF AGREEMENTS. All covenants and agreements made herein
and in the other Loan Documents shall survive the execution and delivery of this
Agreement, the Notes and other Loan Documents and the making of every Advance.
All agreements, obligations and liabilities of Borrower under this Agreement
concerning the payment of money to Agent and Lenders, including Borrower's
obligations under Sections and , but excluding the obligation to repay the Loans
and interest accrued thereon, shall survive the repayment in full of the Loans
and interest accrued thereon, the return of the Notes to Borrower, the
termination of the Commitments and the expiration of all Letter of Credits.
19.4. ASSIGNMENTS AND PARTICIPATIONS.
19.4.1. PERMITTED ASSIGNMENTS. At any time after the Execution
Date any Lender may assign to one or more banks or financial
institutions all or a portion of its rights and obligations
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under this Agreement (including all or a portion of the Notes payable
to it), provided that the terms of assignment satisfy the following
requirements:
19.4.1.1. Agent shall have accepted the assignment,
which acceptance shall not be unreasonably withheld.
19.4.1.2. Each such assignment shall be of a constant,
and not a varying, percentage of all of the assigning Lender's
rights and obligations under this Agreement.
19.4.1.3. For each assignment involving the issuance and
transfer of Notes, the assigning Lender shall execute an
Assignment and Acceptance in the form attached hereto as Exhibit
(an "Assignment and Acceptance").
19.4.1.4. The minimum Commitment which shall be assigned
(which shall include the applicable portion of the assigning
Lender's Revolving Commitment, Term 1 Commitment, Term 2
Commitment, and Letter of Credit Commitment, which shall also be
assigned) is $5,000,000 or such lesser amount which constitutes
such Lender's entire Commitment; provided, however, that no such
minimum shall apply between Lenders and their Affiliates.
19.4.1.5. The assignee shall have an office located
in the United States.
Upon compliance with the foregoing, each such assignee shall be
deemed for all purposes under this Agreement and the other Loan
Documents to be "Lender" and Exhibit 3 shall be deemed to be amended to
reflect each such assignment.
19.4.2.CONSEQUENCES AND EFFECT OF ASSIGNMENTS.
19.4.2.1. From and after the effective date specified in
any Assignment and Acceptance, the assignee shall be deemed and
treated as a party to this Agreement and, to the extent that
rights and obligations hereunder and under the Notes held by the
assignor have been assigned or negotiated to the assignee
pursuant to such Assignment and Acceptance, to have the rights
and obligations of a Lender hereunder as fully as if such
assignee had been named as a Lender in this Agreement and of a
holder of such Notes, and the assignor shall, to the extent that
rights and obligations hereunder or under such Notes have been
assigned or negotiated by it pursuant to such Assignment and
Acceptance, relinquish its rights and be released from its future
obligations under this Agreement.
19.4.2.2. By executing and delivering an Assignment and
Acceptance, the assignor thereunder and the assignee confirm to
and agree with each other and the other parties hereto as
follows: (i) the assignment made under such Assignment and
Acceptance is made under such Assignment and Acceptance without
recourse; (ii) such assignor makes no representation or warranty
and assumes no responsibility with respect to the financial
condition of any Covered Person or the performance or observance
by any Covered Person of any of its Loan Obligations; (iii) such
assignee confirms that it has received a copy of this Agreement,
together with copies of the financial statements delivered
pursuant to Section hereof and such other Loan Documents and
other documents and information as it has deemed appropriate to
make its own credit analysis and decision to enter into such
Assignment and Acceptance; (iv) such assignee will, independently
and without reliance upon the Agent, any of the Agent, such
assignor, or
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any other Lender, and based on such documents and information as
it deems appropriate at the time, continue to make its own credit
decisions in taking or not taking action under this Agreement;
(v) such assignee appoints and authorizes the Agent to take such
action as agent on its behalf and to exercise such powers under
this Agreement and the other Loan Documents as are delegated to
the Agent by the terms hereof and thereof, together with such
powers as are reasonably incidental thereto; and (vi) such
assignee agrees that it will perform in accordance with their
terms all of the obligations which by the terms of this Agreement
are required to be performed by it as a Lender and a holder of a
Note.
19.4.3. ASSIGNMENT FEE. Any Lender who makes an assignment shall
pay to the Agent a one-time administrative fee of $3,500, which shall
not be reimbursed by Borrower.
19.4.4. AGENT TO RETAIN COPIES OF ASSIGNMENTS AND ACCEPTANCES.
Agent shall maintain a copy of each Assignment and Acceptance delivered
to and accepted by it.
19.4.5. NOTICE TO BORROWER OF ASSIGNMENT. Upon its receipt of an
Assignment and Acceptance executed by an assigning Lender, if Agent
accepts the assignment contemplated thereby, Agent shall give prompt
notice thereof to Borrower. Borrower shall execute and deliver
replacement Notes to the assignor and assignee as requested by Agent and
necessary to give effect to the assignment.
19.4.6. SALE OF PARTICIPATIONS. Each Lender may sell
participations to one or more banks or other entities as to all or a
portion of its rights and obligations under this Agreement provided that
the terms of sale satisfy the following requirements:
19.4.6.1. Such Lender's obligations under this Agreement
shall remain unchanged.
19.4.6.2. Such Lender shall remain solely responsible
to the other parties hereto for the performance of such
obligations.
19.4.6.3. Such Lender shall remain the holder of any
Notes issued to it for the purpose of this Agreement.
19.4.6.4. Such participations shall be in a minimum amount
of $5,000,000, except that there shall be no such minimum amount
between Lenders and their Affiliates or between Affiliates of
Lenders.
19.4.6.5. Borrower, Agent, and the other Lenders shall
continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under this
Agreement and with regard to Advances and payments to be made
under this Agreement. Participation agreements between a Lender
and its participants may, however, provide that such Lender will
obtain the approval of such participant prior to such Lender
agreeing to any amendment or waiver of any provisions of this
Agreement which would (i) extend the final maturity of the Notes,
(ii) reduce the interest rates on the Loans, (iii) increase any
of the Commitments of the Lender granting the participation, or
(iv) release all or any substantial part of the Collateral other
than in accordance with the terms of the Loan Documents.
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The sale of any such participations which require Borrower to file a
registration statement with the Securities and Exchange Commission or
under the securities laws of any state shall not be permitted.
19.4.7.ASSIGNMENTS TO AFFILIATES. Any Lender may assign all or
any portion of its interest in the Loans to its Affiliates without the
acceptance or consent of Borrower or Agent (notwithstanding anything in
Section to the contrary), upon payment of the administrative fee
described in Section , and may assign all or any portion of its interest
in the Loans to the Federal Reserve Bank without acceptance or approval
of Agent or Borrower and without payment of any fees.
19.5. PAYMENT OF EXPENSES. Borrower agrees to pay or reimburse to Agent
and the Lenders for all of Agent and the Lenders reasonable out-of-pocket costs
incurred in connection with Agent and the Lenders' due diligence review before
execution of the Loan Documents; the negotiation and preparation of the
commitment letter and the Loan Documents; the perfection of Agent's Security
Interests in any Collateral for the ratable benefit of the Lenders; the
interpretation of any of the Loan Documents; the enforcement of Agent and the
Lenders' rights and remedies under the Loan Documents after a Default or Event
of Default; any amendment of or supplementation to any of the Loan Documents;
and any waiver, consent or forbearance with respect to any Default or Event of
Default. Borrower further agrees to pay or reimburse to each Lender all of such
Lender's out-of-pocket costs incurred in connection with the enforcement of such
Lender's rights and remedies under the Loan Documents after a Default or Event
of Default. Out-of-pocket costs may include but are not limited to the
following, to the extent they are actually paid or incurred: title insurance
fees and premiums; the cost of searches for Security Interests existing against
Covered Persons; recording and filing fees; appraisal fees; environmental
consultant fees; litigation costs; and all attorneys' and paralegals' expenses
and reasonable fees. Attorneys' and paralegals' expenses may include but are not
limited to filing charges; telephone, data transmission, facsimile and other
communication costs; courier and other delivery charges; and photocopying
charges. Litigation costs may include but are not limited to filing fees,
deposition costs, expert witness fees, expenses of service of process, and other
such costs paid or incurred in any administrative, arbitration, or court
proceedings involving Agent, the Lenders and any Covered Person, including
proceedings under the Federal Bankruptcy Code. All costs which Borrower is
obligated to pay or reimburse to Agent or any Lender are Loan Obligations
payable to Agent or such Lender, secured by the Collateral, and are payable on
demand by Agent or such Lender.
19.6. GENERAL INDEMNITY.
19.6.1.Borrower shall pay, indemnify and hold harmless Agent and
each Lender and their respective directors, officers, employees, agents,
and representatives (collectively, the "Indemnified Parties") for, from
and against, and promptly reimburse the Indemnified Parties for, any and
all claims, damages, liabilities, losses, costs and expenses (including
reasonable attorneys' fees and expenses and amounts paid in settlement)
incurred, paid or sustained by the Indemnified Parties in connection
with, arising out of, based upon or otherwise involving or resulting
from any threatened, pending or completed action, suit, investigation or
other proceeding by, against or otherwise involving the Indemnified
Parties and in any way dealing with, relating to or otherwise involving
this Agreement, any of the other Loan Documents, or any transaction
contemplated hereby or thereby, except to the extent that they arise
from the gross negligence, bad faith or willful misconduct of any of the
Indemnified Parties. Borrower shall pay, indemnify and hold harmless the
Indemnified Parties for, from and against, and promptly reimburse the
Indemnified Parties for, any and all claims, damages, liabilities,
losses, costs and expenses (including reasonable attorneys' and
consultant fees and expenses, investigation and laboratory fees,
removal, remedial, response and corrective action costs, and amounts
paid in settlement) incurred,
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paid or sustained by the Indemnified Parties as a result of the manufacture,
storage, transportation, release or disposal of any Hazardous Material on, from,
over or affecting any of the Collateral or any of the assets, properties, or
operations of any Covered Person or any predecessor in interest, directly or
indirectly, except to the extent that they arise from the gross negligence, bad
faith or willful misconduct of any of the Indemnified Parties. Borrower shall
pay, indemnify and hold harmless the Indemnified Parties for, from and against,
and shall promptly reimburse the Indemnified Parties for, any and all claims,
damages, liabilities, losses, costs and expenses (including reasonable
attorneys' fees and expenses and amounts paid in settlement) incurred, paid or
sustained by the Indemnified Parties, arising out of or relating to any
Acquisition Documents or enforcement by Agent of any of its rights with respect
thereto, except to the extent that they arise from the gross negligence, bad
faith or willful misconduct of any of the Indemnified Parties.
19.6.2.The obligations of Borrower under this Section shall
survive the termination of the Commitments, the expiration of the
Letters of Credit, the payment and satisfaction of all of the Loan
Obligations, and the release of the Collateral.
19.6.3.To the extent that any of the indemnities required from
Borrower under this Section are unenforceable because they violate any
Law or public policy, Borrower shall pay the maximum amount which it is
permitted to pay under applicable Law.
19.7. LETTERS OF CREDIT. Borrower assumes all risks of the acts or
omissions of any beneficiary of any of the Letter of Credits. Neither the Letter
of Credit Issuer nor any of its directors, officers, employees, agents, or
representatives shall be liable or responsible for: (a) the use which may be
made of any of the Letter of Credits or for any acts or omissions of any
beneficiary in connection therewith; (b) the validity, sufficiency or
genuineness of documents, or of any endorsement(s) thereon, even if such
documents should in fact prove to be in any or all respects invalid,
insufficient, fraudulent or forged; (c) payment by the Letter of Credit Issuer
against presentation of documents which, on their face, appear to comply with
the terms of any Letter of Credit, even though such documents may fail to bear
any reference or adequate reference to any such Letter of Credit; or (d) any
other circumstances whatsoever in making or failing to make payment under any
Letter of Credit in connection with which the Letter of Credit Issuer would,
pursuant to the Uniform Customs and Practices for Documentary Credits (1993
Revision), International Chamber of Commerce Publication No. 500 (as amended
from time to time), be absolved from liability. In furtherance and not in
limitation of the foregoing, the Letter of Credit Issuer may accept documents
that appear on their face to be in order, without responsibility for further
investigation, regardless of any notice or information to the contrary.
19.8. CHANGES IN ACCOUNTING PRINCIPLES. If Borrower, at the end of its
Fiscal Year and with the concurrence of its independent certified public
accountants, changes the method of valuing the Inventory of Borrower, or if any
other changes in accounting principles from those used in the preparation of any
of the Financial Statements are required by or result from the promulgation of
principles, rules, regulations, guidelines, pronouncements or opinions by the
Financial Accounting Standards Board or the American Institute of Certified
Public Accountants (or successors thereto or bodies with similar functions), and
any of such changes result in a change in the method of calculation of, or
affect the results of such calculation of, any of the financial covenants,
standards or terms found herein, then the parties hereto agree to enter into and
diligently pursue negotiations in order to amend such financial covenants,
standards or terms so as to equitably reflect such changes, with the desired
result that the criteria for evaluating the financial condition and results of
operations of Borrower shall be the same after such changes as if such changes
had not been made; provided, however, that until such changes are made, all
financial covenants herein and all the provisions hereof which contemplate
financial calculation hereunder shall remain in full force and effect.
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19.9. LOAN RECORDS. The date and amount of all Advances to Borrower and
payments of amounts due from Borrower under the Loan Documents will be recorded
in the records that each Lender normally maintains for such types of
transactions. The failure to record, or any error in recording, any of the
foregoing shall not, however, affect the obligation of Borrower to repay the
Loans and other amounts payable under the Loan Documents. Borrower shall have
the burden of proving that a Lender's records are not correct. Borrower agrees
that a Lender's books and records showing the Loan Obligations and the
transactions pursuant to this Agreement shall be admissible in any action or
proceeding arising therefrom, and shall constitute prima facie proof thereof,
irrespective of whether any Loan Obligation is also evidenced by a promissory
note or other instrument. Agent will provide to Borrower a monthly statement of
Advances, payments, and other transactions pursuant to this Agreement. Such
statement shall be deemed correct, accurate and binding on Borrower and an
account stated (except for reversals and reapplications of payments as provided
in Section and corrections of errors discovered by such Lender), unless Borrower
notifies such Lender in writing to the contrary within ninety (90) days after
such statement is rendered. In the event a timely written notice of objections
is given by Borrower, only the items to which exception is expressly made will
be considered to be disputed by Borrower.
19.10. OTHER SECURITY AND GUARANTIES. Agent or any Lender may, without
notice or demand and without affecting Borrower's obligations hereunder, from
time to time: (a) take from any Person and hold collateral (other than the
Collateral) for the payment of all or any part of the Loan Obligations and
exchange, enforce and release such collateral or any part thereof; and (b)
accept and hold any endorsement or guaranty of payment of all or any part of the
Loan Obligations and release or substitute any such endorser or guarantor, or
any Person who has given any Security Interest in any other collateral as
security for the payment of all or any part of the Loan Obligations, or any
other Person in any way obligated to pay all or any part of the Loan
Obligations.
19.11. CHOICE OF FORUM. SUBJECT ONLY TO THE EXCEPTION IN THE NEXT
SENTENCE, BORROWER, AGENT, AND LENDERS HEREBY AGREE TO THE EXCLUSIVE
JURISDICTION OF THE FEDERAL COURT OF THE EASTERN DISTRICT OF MISSOURI AND THE
STATE COURTS OF MISSOURI LOCATED IN ST. LOUIS COUNTY OR THE CITY OF ST. LOUIS,
MISSOURI, AND WAIVE ANY OBJECTION BASED ON VENUE OR FORUM NON CONVENIENS WITH
RESPECT TO ANY ACTION INSTITUTED THEREIN, AND AGREE THAT ANY DISPUTE CONCERNING
THE RELATIONSHIP BETWEEN AGENT, LENDERS, AND BORROWER OR THE CONDUCT OF ANY OF
THEM IN CONNECTION WITH THIS AGREEMENT OR OTHERWISE SHALL BE HEARD ONLY IN THE
COURTS DESCRIBED ABOVE. NOTWITHSTANDING THE FOREGOING: (1) AGENT OR LENDERS
SHALL HAVE THE RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST BORROWER OR ITS
PROPERTY IN ANY COURTS OF ANY OTHER JURISDICTION AGENT OR LENDERS DEEM NECESSARY
OR APPROPRIATE IN ORDER TO REALIZE ON THE COLLATERAL, REAL ESTATE OR OTHER
SECURITY FOR THE LOAN OBLIGATIONS, AND (2) EACH OF THE PARTIES HERETO
ACKNOWLEDGES THAT ANY APPEALS FROM THE COURTS DESCRIBED IN THE IMMEDIATELY
PRECEDING SENTENCE MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE THOSE
JURISDICTIONS.
19.12. SERVICE OF PROCESS. BORROWER HEREBY WAIVES PERSONAL SERVICE OF
ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS MAY BE
MADE BY REGISTERED MAIL (RETURN RECEIPT REQUESTED) DIRECTED TO BORROWER AT ITS
ADDRESS SET FORTH ON THE SIGNATURE PAGES HEREOF, AND SERVICE SO MADE SHALL BE
DEEMED TO BE COMPLETED FIVE (5) DAYS AFTER THE SAME SHALL HAVE BEEN SO DEPOSITED
IN THE U.S. MAILS; OR AT AGENT'S OR LENDERS' OPTION, BY SERVICE UPON CT
CORPORATION, WHICH BORROWER IRREVOCABLY APPOINTS AS BORROWER'S AGENT FOR THE
PURPOSE OF ACCEPTING SERVICE OF PROCESS WITHIN THE STATE OF MISSOURI. AGENT OR
LENDERS SHALL PROMPTLY FORWARD BY REGISTERED MAIL ANY PROCESS SO SERVED UPON
SAID AGENT TO BORROWER AT ITS ADDRESS ON
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THE SIGNATURE PAGES HEREOF. NOTHING IN THIS SECTION SHALL AFFECT THE RIGHT OF
AGENT OR LENDERS TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
20. MISCELLANEOUS.
20.1. NOTICES. All notices, consents, requests and demands to or upon
the respective parties hereto shall be in writing, and shall be deemed to have
been given or made when delivered in person to those Persons listed on the
signature pages hereof or when deposited in the United States mail, postage
prepaid, or, in the case of telegraphic notice, or the overnight courier
services, when delivered to the telegraph company or overnight courier service,
or in the case of telex or telecopy notice, when sent, verification received, in
each case addressed as set forth on the signature pages hereof, or such other
address as either party may designate by notice to the other in accordance with
the terms of this paragraph. No notice given to or demand made on Borrower by
Agent or Lenders in any instance shall entitle Borrower to notice or demand in
any other instance.
20.2. AMENDMENTS, WAIVERS AND CONSENTS. Unless otherwise provided
herein, no amendment to or waiver of any provision of this Agreement, or of any
of the other Loan Documents, nor consent to any departure by Borrower herefrom
or therefrom, shall be effective unless it is in writing and signed by
authorized officers of Borrower and Required Lenders; provided, however, that
any such amendment, modification or consent shall be effective only in the
specific instance and for the purpose for which given, and no such amendment,
modification or consent shall, unless signed by authorized officers of Borrower
and all of the Lenders: (i) change the Letter of Credit Commitment or any
Revolving Commitment, or Term 1 Commitment or Term 2 Commitment of any Lender or
subject it to a greater obligation than expressly provided for herein, (ii)
reduce or forgive the principal of any Advance or change the rate, or mechanism
for determining the rate, of interest on any Advance or any fees or other
amounts payable by Borrower hereunder, (iii) change the regularly scheduled
dates for payments of principal or interest of any Advance or other fees or
amounts payable to Lenders under the Loan Documents (including, without
limitation, the Revolver Maturity Date), (iv) change the provisions of Section
to the detriment of any Lender, (v) change the definition of "Required Lenders"
hereunder, (vi) change the provisions of this Section, (vii) release any of the
Collateral (except in the ordinary course of business or as otherwise expressly
permitted by the terms of this Agreement) or any Covered Person from its
obligations under the Loan Documents, or (viii) change any provisions hereof
requiring ratable distributions to the Lenders. No notice to or demand on
Borrower in any case shall entitle Borrower to any other or further notice or
demand in similar or other circumstances. No failure by Agent or any Lender to
exercise, and no delay by Agent or any Lender in exercising, any right, remedy,
power or privilege hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise by Agent or any Lender of any right, remedy, power or
privilege hereunder preclude any other exercise thereof, or the exercise of any
other right, remedy, power or privilege. Each and every right granted to Agent
and the Lenders hereunder or under any other Loan Document or other document
delivered hereunder or in connection with this Agreement or allowed to it at law
or in equity shall be deemed cumulative and may be exercised from time to time.
20.3. NO CONFLICTS. To the extent that any of the terms or conditions
contained in any of the Loan Documents conflict with the terms of this
Agreement, the terms and provisions of this Agreement shall be deemed to govern
and be controlling in all circumstances. Without limiting the generality of the
foregoing, any default, grant of security interest, or fee provision set forth
in any letter of credit application which would modify or supplement the terms
of this Agreement shall be deemed inconsistent with the terms of this Agreement.
20.4. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and all future holders
of the Notes and their respective successors and assigns, except that
Borrower may not assign, delegate or transfer any of its rights or
obligations under this Agreement
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without the prior written consent of Agent and Required Lenders. With respect to
Borrower's successors and assigns, such successors and assigns shall include any
receiver, trustee or debtor-in-possession of or for Borrower.
20.5. SEVERABILITY. Any provision of this Agreement which is prohibited,
unenforceable or not authorized in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition, unenforceability
or lack of authorization without invalidating the remaining provisions hereof or
affecting the validity, enforceability or legality of such provision in any
other jurisdiction unless the ineffectiveness of such provision would result in
such a material change as to cause completion of the transactions contemplated
hereby to be unreasonable.
20.6. COUNTERPARTS. This Agreement may be executed by the parties hereto
on any number of separate counterparts, and all such counterparts taken together
shall constitute one and the same instrument. It shall not be necessary in
making proof of this Agreement to produce or account for more than one
counterpart signed by the party to be charged.
20.7. GOVERNING LAW; NO THIRD PARTY RIGHTS. This Agreement, the other
Loan Documents and the Notes and the rights and obligations of the parties
hereunder and thereunder shall be governed by and construed and interpreted in
accordance with the internal laws of the State of Missouri applicable to
contracts made and to be performed wholly within such state, without regard to
choice or conflict of laws provisions. This Agreement is solely for the benefit
of the parties hereto and their respective successors and assigns, and no other
Person shall have any right, benefit, priority or interest under, or because of
the existence of, this Agreement.
20.8. COUNTERPART FACSIMILE EXECUTION. For purposes of this Agreement, a
document (or signature page thereto) signed and transmitted by facsimile machine
or telecopier is to be treated as an original document. The signature of any
Person thereon, for purposes hereof, is to be considered as an original
signature, and the document transmitted is to be considered to have the same
binding effect as an original signature on an original document. At the request
of any party hereto, any facsimile or telecopy document is to be re-executed in
original form by the Persons who executed the facsimile or telecopy document. No
party hereto may raise the use of a facsimile machine or telecopier or the fact
that any signature was transmitted through the use of a facsimile or telecopier
machine as a defense to the enforcement of this Agreement or any amendment or
other document executed in compliance with this Section.
20.9. NO OTHER AGREEMENTS; TERMINATION OF COMMITMENT LETTER AND TERM
SHEET. There are no other agreements between Agent, Lenders, and Borrower, oral
or written, concerning the subject matter of the Loan Documents, and all prior
agreements concerning the same subject matter, including the Commitment Letter,
are merged into the Loan Documents and thereby extinguished.
20.10. INCORPORATION BY REFERENCE. Subject to Section , all of
the terms of the other Loan Documents are incorporated in and made a part of
this Agreement by this reference.
20.11. BOATMEN'S SUBORDINATED DOCUMENTS. THE AGENT AND THE LENDERS EACH
ACKNOWLEDGE AND AGREE THAT THE BOATMEN'S SUBORDINATED INDEBTEDNESS IS
UNCONDITIONALLY GUARANTEED BY HARBOUR GROUP INVESTMENTS III, L.P. AS A PART OF
THAT GUARANTY AND PUT AGREEMENT, HARBOUR GROUP INVESTMENTS III, L.P HAS AGREED
ON THE EARLIER TO OCCUR OF (I) FEBRUARY 14, 1997, OR (II) THE FUNDING OF AN
INITIAL PUBLIC OFFERING, PRIVATE PLACEMENT OR OTHER EQUITY ISSUANCE OF HOLDINGS
(OTHER THAN THE ISSUANCE OF DE MINIMIS SHARES), FOR ANY REASON, TO PURCHASE THE
BOATMEN'S SUBORDINATED INDEBTEDNESS. ACCORDINGLY, THE AGENT AND THE LENDERS EACH
CONSENT TO THE FOREGOING ARRANGEMENT, AND CONSENT TO THE ASSIGNMENT, IF ANY, OF
THE BOATMEN'S
69
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Subordinated Indebtedness and the Boatmen's Subordinated Documents to Harbour
Group Investments III, L.P.
20.12. STATUTORY NOTICE. The following notice is given pursuant to
Section 432.045 of the Missouri Revised Statutes; nothing contained in such
notice shall be deemed to limit or modify the terms of the Loan Documents:
ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO
FORBEAR FROM ENFORCING REPAYMENT OF A DEBT INCLUDING PROMISES TO EXTEND
OR RENEW SUCH DEBT ARE NOT ENFORCEABLE. TO PROTECT YOU (BORROWER) AND US
(CREDITOR) FROM MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS WE
REACH COVERING SUCH MATTERS ARE CONTAINED IN THIS WRITING, WHICH IS THE
COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN US, EXCEPT AS
WE MAY LATER AGREE IN WRITING TO MODIFY IT.
[THE NEXT TWO PAGES ARE THE SIGNATURE PAGES]
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by appropriate duly authorized officers as of the date first above
written.
"BORROWER"
Trak International, Inc.,
a Delaware corporation
By: /s/ James H. Hook
________________________________________
Print Name: James H. Hook
________________________________
Title: Vice President
_____________________________________
Lull Lift Corporation,
a Delaware corporation
By: /s/ James H. Hook
________________________________________
Print Name: James H. Hook
________________________________
Title: Vice President
_____________________________________
Notice Address:
c/o Harbour Group Industries, Inc.
7701 Forsyth Boulevard
Suite 600
St. Louis, Missouri 63105
Attn: Chief Executive Officer
FAX # (314) 727-9912
TEL # (314) 727-5550
With a copy to:
Dickstein, Shapiro, Morin & Oshinsky, LLP
2101 L Street, N.W.
Washington, D.C. 20037-1526
Attn: Rebecca Wright, Esq.
FAX # (202) 887-0689
TEL # (202) 785-9700
71
<PAGE>
Signature page to Loan Agreement
dated as of August 16, 1996, between Trak International, Inc.,
Lull Lift Corporation,
The Boatmen's National Bank of St. Louis, as Agent, and
The Boatmen's National Bank of St. Louis,
Fleet Capital Corporation, and LaSalle National Bank
The Boatmen's National Bank of St. Louis,
as Agent and Lender
By: /s/ Paul Porter
________________________________________
Print Name: Paul Porter
________________________________
Title: Vice President
_____________________________________
Notice Address:
One Boatmen's Plaza, 14th Floor
800 Market Street
St. Louis, Missouri 63101
Attn.: Leveraged Finance Group
FAX # (314) 466-6645
TEL # (314) 466-6000
With a copy to:
Lewis, Rice & Fingersh
500 N. Broadway, Suite 2000
St. Louis, Missouri 63102-2147
Attention: Steven C. Drapekin, Esq.
FAX # (314) 241-6056
TEL # (314) 444-7600
Fleet Capital Corporation,
a Lender
By: /s/ Kevin Sullivan
________________________________________
Print Name: Kevin Sullivan
________________________________
Title: Vice President
_____________________________________
LaSalle National Bank,
a Lender
By: /s/ Michael Foster
________________________________________
Print Name: Michael Foster
________________________________
Title: Senior Vice President
_____________________________________
<PAGE>
EXHIBIT
GLOSSARY AND INDEX OF DEFINED TERMS
"Account": as to any Person, the right of such Person to payment for goods sold
or leased or for services rendered by such Person.
"Account Assignment": the assignment of the Cash Collateral Account that is
executed and delivered to Agent for the benefit of Lenders as provided herein,
and all amendments, restatements, and replacements thereof.
"Account Debtor": the obligor on any Account.
"Acquisition": the acquisition of the assets and consummation of the
transactions contemplated by the Acquisition Documents.
"Acquisition Agreement": that certain Asset Purchase Agreement dated as of
August ___, 1996, between Lull and Seller, together with any and all other
documents, certificates, exhibits and schedules, and agreements executed in
connection therewith, or contemplated thereby.
"Acquisition Documents": (i) the Acquisition Agreement, and (ii) all amendments,
modifications, replacements, assignments, supplements, and restatements of the
foregoing, pursuant to which Borrower has purchased substantially all of the
assets of Lull.
"Adjusted Capital Expenditures" is defined in Section .
"Adjusted Operating Cash Flow" is defined in Section .
"Advance": a Revolving Advance, a Swingline Advance, a Term 1 Advance, or a Term
2 Advance.
"Advance Date" is defined in Section .
"Advance Request" is defined in Section .
"Affected Principal Amount" is defined in Section .
"Affiliate": with respect to any Person, (a) any other Person who is a partner,
director, officer, member, managing member, or stockholder of such Person; and
(b) any other Person which, directly or indirectly, is in control of, is
controlled by or is under common control with such Person, and any partner,
director, officer, member, managing member, or stockholder of such other Person
described. For purposes of this Agreement, control of a Person by another Person
shall be deemed to exist if such other Person has the power, directly or
indirectly, either to (i) vote twenty percent (20%) or more of the securities or
equity interests having the power to vote in an election of directors of such
Person which is a corporation or the management of the affairs of a Person which
is not a corporation, or (ii) direct the management of such Person, whether by
contract or otherwise and whether alone or in combination with others.
"Agent" is defined in the introductory paragraph of this Agreement.
"Aggregate Revolving CBR Loan": the sum of all Revolving CBR Advances.
"Aggregate Revolving Commitment" is defined in Section .
<PAGE>
"Aggregate Revolving LIBOR Loan": the sum of all Revolving LIBOR Advances.
"Aggregate Revolving Loan": the sum of the Aggregate Revolving CBR Loan and the
Aggregate Revolving LIBOR Loan.
"Aggregate Term 1 CBR Loan": the sum of all Term 1 Loan CBR Advances.
"Aggregate Term 2 CBR Loan": the sum of all Term 2 Loan CBR Advances.
"Aggregate Term 1 Commitment" is defined in Section .
"Aggregate Term 2 Commitment" is defined in Section .
"Aggregate Term 1 LIBOR Loan": the sum of all Term 1 Loan LIBOR Advances.
"Aggregate Term 2 LIBOR Loan": the sum of all Term 2 Loan LIBOR Advances.
"Aggregate Term 1 Loan": the sum of the Aggregate Term 1 CBR Loan and the
Aggregate Term 1 LIBOR Loan.
"Aggregate Term 2 Loan": the sum of the Aggregate Term 2 CBR Loan and the
Aggregate Term 2 LIBOR Loan.
"Asbestos Material": either asbestos or asbestos-containing materials.
"Assignment and Acceptance": is defined in Section .
"Audit" is defined in Section .
"Boatmen's" is defined in the introductory paragraph of this Agreement.
"Boatmen's Subordinated Documents": means that certain Subordinated Note
Agreement, of even date herewith, executed by Holdings, and payable to the order
of The Boatmen's National Bank of St. Louis, in the original principal amount of
$14,000,000, together with any and all other documents, certificates, exhibits
and schedules, and agreements executed in connection therewith, or contemplated
thereby, as any of the foregoing may be amended, modified, replaced or restated
from time to time.
"Boatmen's Subordinated Indebtedness": means an originally issued principal
amount of no more than $14,000,000, which shall have been loaned to Holdings
pursuant to the Boatmen's Subordinated Documents which shall be subject to the
Boatmen's Subordination Agreement.
"Boatmen's Subordination Agreement": that certain Subordination Agreement of
even date herewith between Agent and Boatmen's (in its capacity as subordinated
lender), as amended, modified, replaced or restated from time to time.
"Borrower" is defined in the introductory paragraph of this Agreement.
"Borrowing Base" is defined in Section .
"Borrowing Base Certificate" is defined in Section .
<PAGE>
"Borrowing Officer": as to Borrower, means the Chairman of the Board of
Directors, the President, the chief executive officer, the chief operating
officer, the chief financial officer, or the Treasurer, any Assistant Treasurer
or any Vice President in charge of a principal business unit.
"Business Day": a day other than a Saturday, Sunday or other day on which
commercial banks are authorized or required to close under the laws of either
the United States or the State of Missouri.
"Capital Expenditure" is defined in Section .
"Capital Lease": any lease that has been or should be capitalized under GAAP.
"Cash Collateral Account" is defined in Section .
"CBR": the per annum interest rate designated from time to time by Agent as its
Corporate Base Rate, which is a reference rate and does not necessarily
represent the lowest or best rate charged to any customer of Agent.
"CBR Advance": any Advance bearing interest at the Revolver Adjusted CBR or the
Term Loan Adjusted CBR.
"Change of Control": means (a) Holdings (or another corporation or partnership
owned directly or indirectly by Harbour Group Investments III, L.P. (or one of
its Affiliates) and Borrower's management) shall cease to own beneficially and
of record, free and clear of all Security Interests (other than any Security
Interest of Agent, for the ratable benefit of the Lenders), other encumbrances
or voting agreements, restrictions or trusts of any kind 100% of the outstanding
shares of the capital stock of Borrower, or (b) Harbour Group Investments III,
L.P. or any of its Affiliates shall cease to own beneficially and of record,
free and clear of all Security Interests, other encumbrances, or voting
agreements, restrictions or trusts of any kind at least (i) 80% of the
outstanding shares of capital stock of Holdings (or such other corporation which
becomes the parent of Borrower in accordance with the preceding clause (a)) on a
fully diluted basis and shares representing the right to elect a corresponding
percentage of directors of Holdings or (ii) equivalent ownership rights in any
partnership which becomes the parent of the Borrower in accordance with clause
(a).
"Charter Documents": the articles or certificate of incorporation and bylaws of
a corporation; the certificate of limited partnership and partnership agreement
of a limited partnership; the partnership agreement of a general partnership;
the operating agreement of a limited liability company; or the indenture of a
trust.
"Chattel Paper": the meaning given such term under the UCC.
"Claims Act": the Assignment of Claims Act of 1940, as amended from time to
time.
"COBRA": the Consolidated Omnibus Budget Reconciliation Act of 1985.
"Code": the Internal Revenue Code of 1986, as amended from time to time, and all
regulations thereunder, as amended from time to time, of the IRS.
"Collateral": all of the Real Property Collateral, Personal Property Collateral,
and other property in which Agent has a Security Interest for the ratable
benefit of Lenders and all proceeds and products thereof, and replacements
therefor.
"Commercial Letter of Credit": a commercial (documentary) letter of credit
issued by the Letter of Credit Issuer pursuant to the Letter of Credit
Commitment in Section .
<PAGE>
"Commitment Fee" is defined in Section .
"Commitment Fee Rate" is defined in Section .
"Commitments": the Aggregate Revolving Commitment, the Swingline Commitment, the
Aggregate Term 1 Commitment, the Aggregate Term 2 Commitment, and the Letter of
Credit Commitment.
"Commonly Controlled Entity": a Person which is under common control with
another Person within the meaning of Section 414(b) or (c) of the Code.
"Compliance Certificate" is defined in Section .
"Consented Acquisition": an acquisition by any Covered Person of the outstanding
stock, or substantially all of the assets, of another Person or the merger of
any Covered Person with another Person, which has been consented to in writing
by each of Lenders.
"Consolidated" and "consolidated" are defined in Section .
"Contract": any contract, note, bond, indenture, deed, mortgage, deed of trust,
security agreement, pledge, hypothecation agreement, assignment, or other
agreement or undertaking, or any security.
"Control Event": means (a) the execution by any Covered Person of any letter of
intent with respect to any proposed transaction or event or series of
transactions or events that, individually or in the aggregate, could reasonably
be expected to result in a Change of Control, or (b) the execution of any
written agreement that, when fully performed by the parties thereto, would
result in a Change in Control.
"Conversion Date" is defined in Section .
"Covered Person" is defined in Section .
"Current Assets" is defined in Section .
"Current Liabilities" is defined in Section .
"Default": any of the events listed in Section of this Agreement, without giving
effect to any requirement for the giving of notice, for the lapse of time, or
both, or for the happening of any other condition, event or act.
"Disclosure Schedule" is defined in Section .
"Distribution" is defined in Section .
"Documents": the meaning given such term under the UCC.
"DOL": the United States Department of Labor.
"Dollars" and the sign "$": lawful money of the United States.
"Effective Date" is defined in Section .
"Eligible Accounts": only such Accounts of Borrower as Agent, in its sole
discretion, which shall not be unreasonably exercised, shall from time to time
elect to consider Eligible Accounts for the purposes of this
<PAGE>
Agreement, PROVIDED, HOWEVER, that until Agent has given written notice to
Borrower disqualifying an Account, such Account shall be deemed to constitute an
Eligible Account to the extent not disqualified by any other provision of this
definition. Without limiting the discretion of Agent to consider Accounts of
Borrower not to be Eligible Accounts, and by way of example only of types of
Accounts that Agent will consider not to be Eligible Accounts, the following
classes of Accounts will not be Eligible Accounts, unless approved in writing by
Agent in each case: (i) any Account with respect to which Agent does not have a
valid and enforceable, first priority, perfected Security Interest; (ii) any
Account which remains unpaid as of 90 days after the original date of the
applicable invoice; (iii) any Account of a single Account Debtor if 25% or more
of the balances due on all Accounts of such Account Debtor are ineligible under
clause (i) or (ii); (iv) any Account with respect to which the Account Debtor is
(a) an Affiliate or employee of Borrower or (b) a supplier, creditor, sales
representative or distributor of Borrower, provided, however, that such Account
shall be ineligible only to the extent of any payable due and owing by Borrower
in favor of such Account Debtor; (v) any Account as to which the perfection of
Agent's Security Interest is governed by any federal, state or local statutory
requirements other than those of the UCC or the Claims Act; (vi) any Account
with respect to which the Account Debtor is the United States or any department,
agency, public corporation or other instrumentality thereof, unless filings and
acknowledgements in accordance with the Claims Act and any other steps necessary
to perfect Agent's Security Interest have been complied with to Agent's
satisfaction; (vii) notwithstanding subclause (ii) any Account with respect to
which the Account Debtor is not organized under the laws of the United States
and does not maintain its chief executive office within the United States and
any Account with respect to which the Account Debtor is the government of any
foreign country or any municipality or other political subdivision thereof, or
any department, agency, public corporation or other instrumentality thereof,
unless (x) either (a) the creditor with respect to such Account and Agent are
beneficiaries of a letter of credit in the amount of such Account that secures
such Account Debtor's payment on such Account and is in form and substance
satisfactory to Agent and has been issued by a bank satisfactory to Agent and,
if so required by Agent, confirmed by a bank satisfactory to Agent, or (b) the
creditor with respect to such Account has obtained for the benefit of Agent
F.C.I.A. insurance insuring such Account Debtor's payment of such Account, and
(y) such Account remains unpaid 60 days after the date due; (viii) any Account
with respect to which the Account Debtor is located in any state denying
creditors access to its courts without qualifying to do business in such state
or filing a notice in whatever form or substance, unless Borrower has so
qualified or filed to Agent's satisfaction; (ix) any Account with respect to
goods or services whose delivery or performance has been rejected by the Account
Debtor or whose earlier acceptance has been revoked; (x) any Account, the goods
giving rise to which have not been shipped and delivered to and accepted by the
Account Debtor or the services giving rise to which have not been performed by
Borrower, (xi) any Account arising from the delivery of goods or performance of
services for which an invoice has not been sent to the Account Debtor within ten
days after such delivery or performance; (xii) any Account owing by an Account
Debtor that is the subject of a bankruptcy or similar insolvency proceeding, has
made an assignment for the benefit of creditors, has acknowledged that it is
unable to pay its debts as they mature, or whose assets have been transferred to
a receiver or trustee, or who has ceased business as a going concern or, if an
individual, who is dead or has been judicially declared incompetent; (xiii) any
Account with respect to which the Account Debtor's obligation to pay the Account
is conditional upon the Account Debtor's approval or is otherwise subject to any
repurchase obligation or return right, as with sales made on a bill-and-hold,
guarantied sale, sale-and-return, sale on approval (except with respect to
Accounts in connection with which Account Debtors are entitled to return
Inventory solely on the basis of the quality of such Inventory) or consignment
basis or, to the extent of any dilution resulting therefrom, Accounts arising
from a sale involving any cash discount other than cash discounts offered by
Borrower in the ordinary course of business, contra-account, credit memorandum
or other similar factor; (xiv) any Account owing by an Account Debtor that has a
disputed liability or any existing unresolved claim with respect to any other
Account due from such Account Debtor, or that has any right of setoff against
such Account, or to which Borrower is indebted in any way, but only to the
extent of such indebtedness, setoff, dispute or claim; (xv) any Account subject
to a chargeback from a volume discount or an advertising discount, but only to
the extent of such chargeback or discount; (xvi) any Account owing by an Account
Debtor whose Indebtedness to Borrower
<PAGE>
exceeds a credit limit satisfactory to Agent, PROVIDED, HOWEVER, that until
Agent has given written notice to Borrower disqualifying an Account, such
Account shall not be disqualified under this clause; (xvii) any Account of an
Account Debtor with respect to particular goods still in the possession of
Borrower or included in Inventory of Borrower and against which the Account
Debtor has filed a financing statement under the UCC or has obtained or
purported to have obtained a Security Interest; (xviii) any Account with respect
to which the delivery of goods or performance of services is bonded; (xix) any
Account as to which Agent does not have the right or ability to obtain direct
payment to Agent; (xx) any Account with respect to which any of the
representations, warranties, covenants and agreements contained in any of the
Loan Documents are not or have ceased to be complete and correct or have been
breached; (xxi) any Account with respect to which, in whole or in part, a check
or other instrument for the payment of money has been received, presented for
payment and returned uncollected for any reason; (xxii) any Account which
represents a progress billing or as to which Borrower has extended the time for
payment without the consent of Agent (for purposes hereof, "progress billing"
being any invoice for goods sold or leased or services rendered under a contract
or agreement pursuant to which the Account Debtor's obligation to pay such
invoice is conditioned upon Borrower's completion of any further performance
under the contract or agreement); (xxiii) any Account which is evidenced by a
promissory note or other instrument or by chattel paper or which has been
reduced to judgment; (xxiv) any Account which arises out of a sale not made in
the ordinary course of Borrower's business; and (xxv) any Account as to which
Agent has determined in its absolute discretion that the prospect of payment or
collection on a timely basis is impaired or that Agent otherwise deems in its
absolute discretion to be uncreditworthy, PROVIDED, HOWEVER, that until Agent
has given written notice to Borrower disqualifying an Account, such Account
shall not be disqualified under this clause.
"Eligible Inventory": all Inventory of Borrower, except Inventory of Borrower
(i) that is obsolete, not in good condition, or not either currently usable or
currently saleable in the ordinary course of Borrower's business; (ii) that is
not subject to a valid and enforceable, first priority, perfected Security
Interest in favor of Agent, for the ratable benefit of Lenders; (iii) that is in
the possession of Borrower but not owned by Borrower; (iv) that is stored at a
location other than one of the locations listed in the Disclosure Statement,
unless approved by Agent in writing; (v) that is not satisfactory to Agent
because of its age, condition, type, or quantity, PROVIDED, HOWEVER, that until
Agent has given written notice to Borrower disqualifying any Inventory, such
Inventory shall not be disqualified under this clause; (vi) that is more than
two years old; (vii) to which Borrower does not have lawful and absolute title;
(viii) to which Borrower does not have the full and unqualified right to assign
and grant a Security Interest to Agent as security for the Loan Obligations;
(ix) which is subject to any Security Interest other than any of the Permitted
Security Interests described in Sections through , and ; (x) with respect to
which any of the representations, warranties, covenants and agreements contained
in any of the Loan Documents are not or have ceased to be complete and correct
or have been breached, or (xi) is not maintained in the States of Wisconsin,
Minnesota or North Dakota.
"Employment Law": ERISA, the Occupational Safety and Health Act, the Fair Labor
Standards Act, or any other Law pertaining to the terms or conditions of labor
or safety in the workplace.
"Encumbrance": as to any item of real or personal property any easement,
right-of-way, license, condition, or restrictive covenant or zoning, or similar
restriction, that is not a Security Interest but is enforceable by any Person
other than the record owner of such property.
"Environmental Law": shall mean any federal, state or local rule, law,
regulation, ordinance, code, or judgment (including, the common law and any
judicial or administrative interpretation, guidance, directive, policy,
statements, or opinions) relating to human health and safety, including, without
limitation, compliance with any Permit, the Resource Conservation and Recovery
Act, the Comprehensive Environmental Response, Compensation and Liability Act,
the Clean Water Act, the Clean Air Act, or any
<PAGE>
other Law pertaining to environmental quality or remediation of Hazardous
Material, as any of the foregoing are amended or modified from time to time.
"EPA": the United States Environmental Protection Agency.
"Equipment": the meaning given such term under the UCC.
"ERISA": the Employee Retirement Income Security Act of 1974, as amended from
time to time.
"ERISA Affiliate": any trade or business (irrespective of whether incorporated)
which is a member of a group of which Borrower is a member and thereafter
treated as a single employer under ss.414(b), (c), (m) or (o) of the Code or
applicable Treasury Regulations.
"Event of Default": any of the events listed in Section of this Agreement as to
which any requirement for the giving of notice, for the lapse of time, or both,
or for the happening of any further condition, event or act has been satisfied.
"Excess Cash Flow" is defined in Section .
"Execution Date": the date when this Agreement has been executed.
"Exemption Certificate" is defined in Section .
"Existing Default": a Default which has occurred and is continuing, or an Event
of Default which has occurred, in each case which has not been waived in writing
by the Required Lenders.
"Federal Funds Rate": for any day, the rate per annum (rounded to the nearest
1/100 of 1% or, if there is no nearest 1/100 of 1%, then to the next higher
1/100 of 1%) equal to the weighted average of the rates on overnight federal
funds transactions with members of the Federal Reserve System arranged by
federal funds brokers on such day, as published by the Federal Reserve Bank of
St. Louis on the Business Day next succeeding such day, provided that (i) if the
day for which such rate is to be determined is not a Business Day, the Federal
Funds Rate for such day shall be such rate on such transactions on the next
preceding Business Day as so published on the next succeeding Business Day, and
(ii) if such rate is not so published for any day, the Federal Funds Rate for
such day shall be the average rate charged to Agent on such day on such
transactions as determined by Agent.
"Financial Statements": financial statements of Borrower that are furnished to
Agent as required in Section of this Agreement.
"Finished Goods" is defined in Section .
"Fiscal Quarter": each three month period in a Covered Person's Fiscal Year.
"Fiscal Year": each Covered Person's fiscal year for financial accounting
purposes, which is a year of twelve calendar months ending on September 30 of
each year. Fiscal Year 1996 for each Covered Person commenced on the Effective
Date and will end on September 30.
"Fixed Charges" is defined in Section .
"Fixtures": the meaning given such term under the UCC.
<PAGE>
"FRB": the Board of Governors of the Federal Reserve System and any successor
thereto or to the functions thereof.
"GAAP": those generally accepted accounting principles set forth in Statements
of the Financial Accounting Standards Board and in Opinions of the Accounting
Principles Board of the American Institute of Certified Public Accountants or
which have other substantial authoritative support in the United States and are
applicable in the circumstances, as applied on a consistent basis.
"General Intangibles": the meaning given such term under the UCC.
"Goods": the meaning given such term under the UCC.
"Governmental Authority": the federal government of the United States; the
government of any foreign country that is recognized by the United States or is
a member of the United Nations; any state of the United States; any local
government or municipality within the territory or under the jurisdiction of any
of the foregoing; any department, agency, division, or instrumentality of any of
the foregoing; and any court, arbitrator, or board of arbitrators whose orders
or judgements are enforceable by or within the territory of any of the
foregoing.
"Guaranties": each guaranty of part or all of the Loan Obligations executed and
delivered to Agent for the benefit of Lenders by any Guarantor including,
without limitation, Holdings, and all amendments, restatements, and replacements
thereof.
"Guarantor": means Holdings.
"Harbour Subordinated Documents": means that certain Amended and Restated
Subordinated Note Agreement, of even date herewith, executed by Trak, and
payable to the order of Harbour Group Investments III, L.P. in the original
principal amount of $2,000,000, together with any and all other documents,
certificates, exhibits and schedules, and agreements executed in connection
therewith, or contemplated thereby, as any of the foregoing may be amended,
modified, replaced or restated from time to time.
"Harbour Subordinated Indebtedness": means an originally issued principal amount
of no more than $2,000,000, which shall have been loaned to Borrower pursuant to
the Harbour Subordinated Documents which shall be subject to the Harbour
Subordination Agreement.
"Harbour Subordination Agreement": that certain Subordination Agreement of even
date herewith between Agent and Harbour Group Investments III, L.P., as amended,
modified, replaced or restated from time to time.
"Hazardous Material": any hazardous, radioactive, petroleum, petroleum derived
substances, polychlorinated byphenyls, urea formaldehyde, toxic, solid or
special waste, material, substance, pollutants, contaminants or constituent
thereof, or any other such substance (as defined under any applicable
Environmental Law), including Asbestos Material, in each case which substance is
regulated under any Environmental Law or otherwise required to be remediated
under any Environmental Law.
"Historical Financial Statements" is defined in Section .
"Holdings": Uniquip Corporation, a Delaware corporation.
"Indebtedness": as to any Person at any particular date, any contractual
obligation enforceable against such Person (i) to repay borrowed money; (ii) to
pay the deferred purchase price of property or services;
<PAGE>
(iii) to make payments or reimbursements with respect to bank acceptances or to
a factor; (iv) to make payments or reimbursements with respect to letters of
credit whether or not there have been drawings thereunder; (v) with respect to
which there is any Security Interest in any property of such Person; (vi) to
make any payment or contribution to a Multi-Employer Plan; (vii) that is
evidenced by a note, bond, debenture or similar instrument; and (viii) under any
conditional sale agreement or title retention agreement.
"Indemnified Parties" is defined in Section .
"Indirect Obligation": as to any Person, (a) any guaranty by such Person of any
Obligation of another Person; (b) any Security Interest in any property of such
Person that secures any Obligation of another Person, (c) any enforceable
contractual requirement that such Person (i) purchase an Obligation of another
Person or any property that is security for such Obligation, (ii) advance or
contribute funds to another Person for the payment of an Obligation of such
other Person or to maintain the working capital, net worth or solvency of such
other Person as required in any documents evidencing an Obligation of such other
Person, (iii) purchase property, securities or services from another Person for
the purpose of assuring the beneficiary of any Obligation of such other Person
that such other Person has the ability to timely pay or discharge such
Obligation, (iv) grant a Security Interest in any property of such Person to
secure any Obligation of another Person, or (v) otherwise assure or hold
harmless the beneficiary of any Obligation of another Person against loss in
respect thereof; and (d) any other contractual requirement enforceable against
such Person that has the same substantive effect as any of the foregoing. The
term "Indirect Obligation" does not, however, include the indorsement by a
Person of instruments for deposit or collection in the ordinary course of
business or the liability of a general partner of a partnership for Obligations
of such partnership. The amount of any Indirect Obligation of a Person shall be
deemed to be the stated or determinable amount of the Obligation in respect of
which such Indirect Obligation is made or, if not stated or determinable, the
maximum reasonably anticipated liability in respect thereof as determined by
such Person in good faith.
"Initial Financial Statements" is defined in Section .
"Instruments": the meaning given such term under the UCC.
"Insurance/Condemnation Proceeds": insurance proceeds payable as a consequence
of damage to or destruction of any of the Collateral and proceeds payable as a
consequence of condemnation or sale in lieu of condemnation of any of the
Collateral.
"Intellectual Property": as to any Person, any domestic or foreign patents or
patent applications of such Person, any inventions made or owned by such Person
upon which either domestic or foreign patent applications have not yet been
filed, any domestic or foreign trade names or trademarks of such Person, any
domestic or foreign trademark registrations or applications filed by such
Person, any domestic or foreign service marks of such Person, any domestic or
foreign service mark registrations and applications by such Person, any domestic
or foreign copyrights of such Person, any domestic or foreign copyright
registrations or applications by such Person, and any proprietary information or
trade secrets.
"Intellectual Property Assignment": each assignment of Intellectual Property
that Borrower executes and delivers to Agent for the benefit of Lenders, either
on or after the Execution Date, and all amendments, restatements, and
replacements thereof.
"Interest Expense" is defined in Section .
"Interest Period" is defined in Section .
<PAGE>
"Interest Rate Protection Agreement": an agreement in form and substance
acceptable to Agent designed to protect Borrower from the fluctuations of
interest rates, whether in the form of an interest rate cap, interest rate swap
or exchange, interest rate corridor, or interest rate collar.
"Interest Rate Ratio Calculation Date" is defined in Section .
"Inventory": goods owned and held by a Person for sale, lease or resale or
furnished or to be furnished under contracts for services, and raw materials,
goods in process, materials, component parts and supplies used or consumed, or
held for use or consumption in such Person's business.
"Investment": (a) a loan or advance of money or property to a Person, (b) stock
or other equity interest in a Person, (c) a debt instrument issued by a Person,
whether or not convertible to stock or other equity interest in such Person, or
(d) any other interest in or rights with respect to a Person which include, in
whole or in part, a right to share, with or without conditions or restrictions,
some or all of the revenues or net income of such Person.
"IRS": the Internal Revenue Service of the United States.
"Law": any statute, rule, regulation, order, judgment, award or decree of any
Governmental Authority.
"Lenders": shall collectively mean (a) The Boatmen's National Bank of St. Louis,
(b) each of the other banks and financial institutions listed on the signature
pages hereof, and (c) all banks and financial institutions which take assignment
from time to time of all or a portion any of the foregoing's rights and
obligations under the Agreement pursuant to the terms of Section and an
Assignment and Acceptance.
"Lenders' Exposure": The sum of the Aggregate Revolving Loan, the Aggregate
Swingline Loan, the Aggregate Term 1 Loan, the Aggregate Term 2 Loan, and the
Letter of Credit Exposure.
"Lending Office": 800 Market Street, St. Louis, MO 63101; Attention: Leveraged
Lending.
"Letter of Credit": a Standby Letter of Credit issued by the Letter of Credit
Issuer pursuant to the Letter of Credit Commitment in Section .
"Letter of Credit Commitment" is defined in Section .
"Letter of Credit Exposure": the undrawn amount of all outstanding letters of
credit issued for the account of Borrower under the Letter of Credit Commitment,
plus all amounts drawn on such letters of credit and not reimbursed by Borrower.
"Letter of Credit Fee" is defined in Section .
"Letter of Credit Issuer": The Boatmen's National Bank of St. Louis.
"Letter of Credit Request" is defined in Section .
"LIBOR Advance": an Advance bearing interest at the Revolver Adjusted LIBO Rate
or the Term Loan Adjusted LIBO Rate.
"LIBO Rate": an interest rate per annum equal to the quotient (rounded to the
nearest 0.001%) of
(i) the rate at which Dollar deposits in immediately available funds,
approximately equal in amount to the applicable Advance and for a
maturity equal to the applicable Interest Period for such
<PAGE>
Advance, are offered or available in the London Interbank Market for Eurodollars
as of 11:00 a.m. (London time) two Business Days before the applicable Advance
Date or Conversion Date, as reported on Telerate Screen LIBO page 3750, and if
such Telerate Screen no longer exists at any time subsequent to the Effective
Date, then the equivalent thereof,
divided by
(ii) a number equal to one minus the decimal equivalent of the aggregate
of the maximum rates during the applicable Interest Period of all
reserve requirements (including, without limitation, marginal,
emergency, supplemental and special reserves), established by the FRB or
any other Governmental Authority to which any Lender is subject, in
respect of "Eurocurrency liabilities" as referred to in Regulation D,
including but not limited to those imposed under Regulation D. (The
amount of every LIBOR Advance shall be deemed to constitute a
Eurocurrency liability and as such shall be deemed to be subject to such
reserve requirements without benefit of credits for proration,
exceptions or offsets which may be available from time to time to any
Lender under Regulation D.) The LIBO Rate shall be adjusted
automatically on and as of the effective date of any change in any such
reserve requirements.
"Loan": a Revolving Loan, a Swingline Loan, or a Term Loan.
"Loan Documents": this Agreement, the Notes, the Security Documents and all
other agreements, certificates, documents, instruments and other writings
executed in connection herewith, or from time to time executed in connection
herewith, as any may be amended, modified, restated or replaced from time to
time.
"Loan Obligations": all of Borrower's Indebtedness owing to Lenders under the
Loan Documents, whether as principal, interest, fees or otherwise, all
reimbursement obligations of Borrower to Lenders with respect to the Letter of
Credit Exposure, all obligations of Borrower to any Lender under Rate Hedging
Obligations or the like or options therefor, and all other obligations and
liabilities of Borrower to Lenders under the Loan Documents (including all
extensions, renewals, modifications, rearrangements, restructures, replacements
and refinancings of the foregoing, whether or not the same involve modifications
to interest rates or other payment terms), whether now existing or hereafter
created, absolute or contingent, direct or indirect, joint or several, secured
or unsecured, due or not due, contractual or tortious, liquidated or
unliquidated, arising by operation of law or otherwise, and whether or not
presently contemplated by Borrower and Lenders in the Loan Documents.
"Lockboxes" is defined in Section .
"Lull" is defined in the introductory paragraph of this Agreement.
"Management Agreement" is defined in Section .
"Management Payments" is defined in Section .
"Mandatory Advance" is defined in Section .
"Material Adverse Effect": as to any Covered Person and with respect to any
event or occurrence of whatever nature (including any adverse determination in
any litigation, arbitration, investigation or proceeding), a material adverse
effect on the business, operations, revenues, financial condition, property, or
business prospects of such Covered Person taken as a whole, or the value of the
Collateral, or the ability of such Covered Person to timely pay or perform such
Covered Person's Obligations generally, or in the
<PAGE>
case of Borrower specifically, the ability of Borrower to pay or perform any of
Borrower's Obligations to Lender.
"Material Agreement": as to any Person, any Contract to which such Person is a
party or by which such Person is bound which, if violated or breached, would
have a Material Adverse Effect on such Person or any Covered Person; the
Minnesota Mutual Subordinated Documents, the Harbour Subordinated Documents, the
Boatmen's Subordinated Documents, and the Acquisition Documents are deemed to be
Material Agreements of the Covered Person a party thereto.
"Material Law": any Law whose violation by a Person could reasonably be expected
to have a Material Adverse Effect with respect to such Person.
"Material License": (i) as to any Covered Person, any Permit or consent from a
Governmental Authority or other Person and any registration and filing with a
Governmental Authority or other Person which if not obtained, held or made by
such Covered Person would have a Material Adverse Effect with respect to such
Covered Person or any other Covered Person, and (ii) as to any Covered Person
who is a party to this Agreement or any of the other Loan Documents, any
license, permit or consent from a Governmental Authority or other Person and any
registration or filing with a Governmental Authority or other Person that is
necessary for the execution or performance by such party, or the validity or
enforceability against such party, of this Agreement or such other Loan
Document.
"Material Obligation": as to any Person, an Obligation of such Person which if
not fully and timely paid or performed would have a Material Adverse Effect on
such Person.
"Material Proceeding": any litigation, investigation or other proceeding by or
before any Governmental Authority (i) which involves any of the Loan Documents
or any of the transactions contemplated thereby, or involves a Covered Person as
a party or any property of a Covered Person, and would have a Material Adverse
Effect with respect to any Covered Person if adversely determined, (ii) in which
there has been issued an injunction, writ, temporary restraining order or any
other order of any nature which purports to restrain or enjoin the making of any
Advance, the consummation of any other transaction contemplated by the Loan
Documents, or the enforceability of any provision of any of the Loan Documents,
(iii) which involves the actual or alleged breach or violation by a Covered
Person of, or default by a Covered Person under, any Material Agreement, or (iv)
which involves the actual or alleged violation by a Covered Person of any
Material Law.
"Maturity": as to any Indebtedness, the time when it becomes payable in full,
whether at a regularly scheduled time, because of acceleration or otherwise.
"Maximum Available Amount" is defined in Section .
"Maximum Swingline Amount" is defined in Section .
"Minnesota Mutual": means The Minnesota Mutual Life Insurance Company.
"Minnesota Mutual Subordinated Documents": means that certain Note Purchase
Agreement dated as of August 16, 1995, as amended from time to time, executed by
Trak, and payable to the order of Minnesota Mutual in the original principal
amount of $5,000,000, together with any and all other documents, certificates,
exhibits and schedules, and agreements executed in connection therewith, or
contemplated thereby, as any of the foregoing may be amended, modified, replaced
or restated from time to time.
<PAGE>
"Minnesota Mutual Subordinated Indebtedness": means an originally issued
principal amount of no more than $5,000,000, which shall have been loaned to
Trak pursuant to the Minnesota Mutual Subordinated Documents
"Mortgage": is defined in Section .
"Multi-employer Plan": a Pension Benefit Plan which is a multi-employer plan as
defined in Section 4001(a)(3) of ERISA.
"Net Income": is defined in Section .
"Net Worth" is defined in Section .
"Non-bank Lender" is defined in Section .
"Note": the Swingline Note, any Revolving Note, any Term 1 Note, or any Term 2
Note.
"Notice of Conversion/Continuation" is defined in Section .
"Obligation": as to any Person, any Indebtedness of such Person, any guaranty by
such Person of any Indebtedness of another Person, and any contractual
requirement enforceable against such Person that does not constitute
Indebtedness of such Person or a guaranty by such Person but which would involve
the expenditure of money by such Person if complied with or enforced.
"Operating Cash Flow" is defined in Section .
"Operating Lease": any lease that is not a Capital Lease.
"Overadvance" is defined in Section .
"PBGC": the Pension Benefit Guaranty Corporation.
"Pension Benefit Plan": any pension or profit-sharing plan which is covered by
Title I of ERISA and all other benefit plans in respect of which a Covered
Person or a Commonly Controlled Entity of such Covered Person is an "employer"
as defined in Section 3(5) of ERISA.
"Permits": shall mean all governmental licenses, approvals, regulations,
authorizations and permits, including, without limitation, any of the foregoing
issued pursuant to, under or related to, any Environmental Law.
"Permitted Encumbrances": those Encumbrances listed in Schedule B-1 of the
mortgagee title insurance policies required to be delivered by Borrower to Agent
as a condition to Lenders making the initial Advance and such other Encumbrances
consented to in writing by the Lenders.
"Permitted Financial Institution" is defined in Section .
"Permitted Indebtedness" is defined in Section .
"Permitted Indirect Obligations" is defined in Section .
"Permitted Investments" is defined in Section .
<PAGE>
"Permitted Security Interests" is defined in Section .
"Person": any individual, partnership, corporation, trust, unincorporated
association, joint venture, limited liability company, Governmental Authority,
or other organization in any form that has the legal capacity to sue or be sued.
If the context so implies or requires, the term Person includes Borrower.
"Personal Property Collateral": all of the Goods, Equipment, Accounts,
Inventory, Instruments, Documents, Chattel Paper, General Intangibles and other
personal property of Borrower, whether now owned or hereafter acquired, and all
proceeds thereof, in which Agent at any time holds a Security Interest for the
benefit of Lenders.
"Rate Hedging Obligation": of a Person means any and all Obligations of such
Person, whether absolute or contingent and howsoever and whensoever created,
arising, evidenced, or acquired (including all renewals, extensions,
modifications thereof and substitutions therefor), under (a) any Interest Rate
Protection Agreement and any and all other agreements, devices or arrangements
designed to protect at least one of the parties thereto from the fluctuations of
interest rates, exchange rates or forward rates applicable to such party's
assets, liabilities, or exchange transactions, including, but not limited to,
Dollar-denominated or cross-currency interest rate exchange agreements, forward
currency exchange agreements, interest rate cap or collar protection agreements,
forward rate currency or interest rate options, puts and warrants, and (b) any
and all cancellations, buybacks, reversals, terminations or assignments of any
of the foregoing.
"Real Property Collateral": the real property of Borrower described in
Attachment 1 to the Disclosure Schedule and all other real property in which
Agent at any time holds a Security Interest for the benefit of Lenders pursuant
to a Mortgage.
"Regulation D", "Regulation G", "Regulation T", "Regulation U", and "Regulations
X", mean, respectively, Regulation D issued by the FRB, Regulation G issued by
the FRB, Regulation T issued by the FRB, Regulation U issued by the FRB, and
Regulation X issued by the FRB,.
"Remaining Interest Period" is defined in Section .
"Reportable Event": a reportable event as defined in Title IV of ERISA or the
regulations thereunder.
"Required Lenders" is defined in Section .
"Revolver Adjusted CBR" is defined in Section .
"Revolver Adjusted LIBO Rate" is defined in Section .
"Revolver CBR Spread" is defined in Section .
"Revolver LIBO Spread" is defined in Section .
"Revolver Maturity Date" is defined in Section .
"Revolving Advance" is defined in Section .
"Revolving CBR Advance": a Revolving Advance bearing interest at the Revolver
Adjusted CBR.
"Revolving Commitment" is defined in Section .
<PAGE>
"Revolving LIBOR Advance": a Revolving Advance bearing interest at the Revolver
Adjusted LIBO Rate.
"Revolving Loan": each Lender's prorata share of the Aggregate Revolving Loan.
"Revolving Note" is defined in Section .
"Revolving Notes" is defined in Section .
"Rights Assignment": means that certain Rights Assignment Agreement between
Borrower and Agent (for the ratable benefit of the Lenders), of even date
herewith (as amended, modified, restated or replaced from time to time),
pursuant to which the Borrower has assigned and granted a security interest in
its rights (but not its obligations) under the Acquisition Documents, as more
fully described therein.
"Security Agreement": each security agreement covering Goods, Equipment,
Accounts, Inventory, Instruments, Documents, Chattel Paper, General Intangibles
or other personal property or the proceeds of the any of the foregoing that
Borrower or any other Covered Person executes and delivers to Agent for the
benefit of Lenders, either on or after the Execution Date, and all amendments,
modifications, restatements, and replacements thereof.
"Security Documents": all of the documents described in Section , together with
any similar documents (whether or not enumerated in Section ) that Borrower or
any other Person (including, without limitation, Holdings) executes and delivers
to Agent for the benefit of Lenders on or after the Execution Date to secure
part or all of the Loan Obligations, and all amendments, modifications,
restatements, and replacements thereof.
"Security Interest": as to any item of tangible or intangible property, any
interest therein or right with respect thereto that secures an Obligation or
Indirect Obligation, whether such interest or right is created under a Contract,
or by operation of law or statute (such as but not limited to a statutory lien
for work or materials), or as a result of a judgment, or which arises under any
form of preferential or title retention agreement or arrangement (including a
conditional sale agreement or a lease) that has substantially the same economic
effect as any of the foregoing.
"Seller": shall collectively mean Lull, Lull Industries, Inc., Badger R. Bazen,
Charles H. Powers, Wilbur F. Sharpe, Jr., Richard B. Baxter, James R. Wisnoski,
James E. Hoogervorst, David P. Tonia, Glenn B. Bazen, and Jeffrey R. Bazen.
"Settlement Date" is defined in Section .
"Solvent": as to any Person, such Person not being "insolvent" within the
meaning of Section 101(32) of the Bankruptcy Code, Section 2 of the Uniform
Fraudulent Transfer Act (the "UFTA") or Section 428.014 of the Missouri Revised
Statutes, (ii) such Person not having unreasonably small capital, within the
meaning of Section 548 of the Bankruptcy Code, Section 4 of the UFTA or Section
428.024 of the Missouri Revised Statutes, and (iii) such Person not being unable
to pay such Person's debts as they become due within the meaning of Section 548
of the Bankruptcy Code, Section 4 of the UFTA or Section 428.024 of the Missouri
Revised Statutes.
"Standby Letter of Credit": a standby letter of credit issued by the Letter of
Credit Issuer pursuant to the Letter of Credit Commitment in Section .
"Stock Pledge Agreement": (i) any stock pledge agreement that Borrower executes
and delivers to Agent for the ratable benefit of Lenders, either on or after the
Execution Date, as provided herein, and all amendments, restatements, and
replacements thereof, and (ii) any stock pledge agreement that Holdings
<PAGE>
or any Subsidiary of Holdings or Borrower executes and delivers to Agent for the
ratable benefit of Lenders, either on or after the Execution Date, as provided
herein, and all amendments, restatements, and replacements thereof.
"Subsidiary": as to any Person, a corporation with respect to which more than
20% of the outstanding shares of stock of each class having ordinary voting
power (other than stock having such power only by reason of the happening of a
contingency) is at the time owned by such Person or by one or more Subsidiaries
of such Person; provided, however, that the Trak distributors disclosed on
Schedule 12.18 to the Disclosure Schedule shall not be deemed to be Subsidiaries
of any Covered Person.
"Swingline Advance" is defined in Section .
"Swingline Commitment" is defined in Section .
"Swingline Loan" is defined in Section .
"Swingline Note" is defined in Section .
"Target Company": the Person whose assets or stock are acquired by a Covered
Person in a Consented Acquisition, or if applicable, with which a Covered Person
has merged in a Consented Acquisition.
"Tax": as to any Person, any tax, assessment, fee, or other charge levied by a
Governmental Authority on the income or property of such Person, including any
interest or penalties thereon, and which is payable by such Person.
"Term 1 Advance" is defined in Section .
"Term 2 Advance" is defined in Section .
"Term 1 Commitment" is defined in Section .
"Term 2 Commitment" is defined in Section .
"Term 1 Loan": each Lender's prorata share of the Aggregate Term 1 Loan.
"Term 2 Loan": each Lender's prorata share of the Aggregate Term 2 Loan.
"Term Loan Adjusted CBR" is defined in Section .
"Term Loan Adjusted LIBO Rate" is defined in Section .
"Term 1 Loan CBR Advance": a Term 1 Advance bearing interest at the Term Loan
Adjusted CBR.
"Term 2 Loan CBR Advance": a Term 2 Advance bearing interest at the Term Loan
Adjusted CBR.
"Term Loan CBR Spread" is defined in Section .
"Term Loan LIBO Spread" is defined in Section .
"Term 1 Loan LIBOR Advance": a Term 1 Advance bearing interest at the Term Loan
Adjusted LIBO Rate.
"Term 2 Loan LIBOR Advance": a Term 2 Advance bearing interest at the Term Loan
Adjusted LIBO Rate.
<PAGE>
"Term Maturity Date" is defined in Section .
"Term 1 Note" is defined in Section .
"Term 1 Notes" is defined in Section .
"Term 2 Note" is defined in Section .
"Term 2 Notes" is defined in Section .
"this Agreement": this document (including every document that is stated herein
to be an appendix, exhibit or schedule hereto, whether or not physically
attached to this document), as amended, modified, restated or replaced from time
to time.
"Total Assets" is defined in Section .
"Total Funded Debt" is defined in Section .
"Total Liabilities" is defined in Section .
"Trak" is defined in the introductory paragraph of this Agreement.
"UCC": the Uniform Commercial Code as in effect from time to time in the State
of Missouri or such other similar statute as in effect from time to time in
Missouri or any other appropriate jurisdiction.
"Unfunded Liabilities": means the amount (if any) by which the present value of
all vested and unvested accrued benefits under a Pension Benefit Plan exceeds
the fair market value of assets allocable to such benefits, all determined as of
the then most recent valuation date for such Plan using PBGC actuarial
assumptions for Pension Benefit Plan terminations.
"United States": when used in a geographical sense, all the states of the United
States of America and the District of Columbia; and when used in a legal
jurisdictional sense, the government of the country that is the United States of
America.
"Unused Aggregate Revolving Commitment" is defined in Section .
"Unwaived Event of Default": an Event of Default which has occurred, and which
has not been waived in writing by the Required Lenders.
"Welfare Benefit Plan": any plan described by Section 3(1) of ERISA.
<PAGE>
EXHIBIT
LENDERS' COMMITMENTS AND PRORATA SHARES
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
LENDER TOTALS REVOLVING TERM 1 TERM 2 PRORATA
COMMITMENT COMMITMENT COMMITMENT SHARES
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
The Boatmen's National $45,000,700 $13,235,500 $28,588,680 $3,176,520 52.942%
Bank of St. Louis
- --------------------------------------------------------------------------------------------
Fleet Capital $19,999,650 $5,882,250 $12,705,660 $1,411,740 23.529%
Corporation
- --------------------------------------------------------------------------------------------
LaSalle National Bank $19,999,650 $5,882,250 $12,705,660 $1,411,740 23.529%
- --------------------------------------------------------------------------------------------
AGGREGATES $85,000,000 $25,000,000 $54,000,000 $6,000,000 100.0000%
- --------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
================================================================================
TRAK INTERNATIONAL, INC.
--------------------------------
NOTE PURCHASE AGREEMENT
--------------------------------
DATED AS OF AUGUST 16, 1995
$5,000,000 15% SUBORDINATED NOTES DUE AUGUST 31, 2003
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
1. PURCHASE AND SALE OF NOTES............................................... 1
1.1 Issue of Notes...................................................... 1
1.2 The Closing......................................................... 1
1.3 Purchase for Investment; ERISA...................................... 2
1.4 Expenses............................................................ 3
2. WARRANTIES AND REPRESENTATIONS.......................................... 4
2.1 Nature of Business.................................................. 4
2.2 Financial Statements; Indebtedness; Material Adverse Change......... 4
2.3 Subsidiaries........................................................ 5
2.4 Title to Properties................................................. 5
2.5 Taxes............................................................... 5
2.6 Pending Litigation.................................................. 6
2.7 Full Disclosure..................................................... 6
2.8 Corporate Organization and Authority................................ 6
2.9 Charter Instruments, Other Agreements............................... 7
2.10 Restrictions on Company............................................. 7
2.11 Compliance with Law................................................. 7
2.12 Pension Plans....................................................... 8
2.13 Environmental Compliance............................................ 9
2.14 Sale of Notes is Legal and Authorized; Obligations are Enforceable.. 10
2.15 Governmental Consent to Sale of Notes............................... 10
2.16 No Defaults under Notes............................................. 11
2.17 Private Offering of Notes........................................... 11
2.18 Use of Proceeds of Notes............................................ 12
2.19 Capitalization...................................................... 12
2.20 Company Matters Prior to the Merger................................. 12
2.21 Closing of the Merger............................................... 13
2.22 All Documents Provided.............................................. 13
2.23 Solvency............................................................ 13
2.24 Certain Fees........................................................ 14
3. CLOSING CONDITIONS...................................................... 14
3.1 Opinions of Counsel................................................. 14
3.2 Warranties and Representations True................................. 14
3.3 Officers' Certificates.............................................. 15
3.4 Company Solvency Certificate........................................ 15
3.5 Legality............................................................ 15
3.6 Private Placement Number............................................ 15
3.7 Expenses............................................................ 15
</TABLE>
<PAGE>
<TABLE>
<S> <C>
3.8 Commitment Fee...................................................... 16
3.9 Merger Documents.................................................... 16
3.10 Senior Financing Documents.......................................... 16
3.11 Equity Contribution / Junior Subordinated Debt...................... 16
3.12 Pro Forma Balance Sheet; Projections................................ 16
3.13 Accountants' Letter................................................. 17
3.14 Environmental Reports............................................... 17
3.15 Proceedings Satisfactory............................................ 17
4. PRINCIPAL PAYMENTS...................................................... 17
4.1 Required Payments................................................... 17
4.2 Offer to Prepay upon Change in Control.............................. 20
4.3 Optional Prepayments................................................ 22
4.4 Prepayments Among Noteholders....................................... 24
4.5 Notation of Notes on Prepayment..................................... 24
4.6 No Other Prepayments; Acquisition of Notes.......................... 24
5. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES............................ 25
5.1 Registration of Notes............................................... 25
5.2 Exchange of Notes................................................... 25
5.3 Replacement of Notes................................................ 26
5.4 Issuance Taxes...................................................... 26
6. COVENANTS................................................................ 26
6.1 Financial Reporting................................................. 26
6.2 Use of Proceeds..................................................... 29
6.3 Notice of Default or Claimed Default................................ 29
6.4 Conduct of Business................................................. 30
6.5 Taxes............................................................... 30
6.6 Insurance........................................................... 30
6.7 Compliance with Laws................................................ 30
6.8 Maintenance of Properties........................................... 30
6.9 Inspection.......................................................... 31
6.10 Dividends; Redemptions.............................................. 31
6.11 Indebtedness........................................................ 31
6.12 Merger.............................................................. 32
6.13 Sale of Assets...................................................... 32
6.14 Investments and Purchases........................................... 32
6.15 Contingent Obligations.............................................. 33
6.16 Liens............................................................... 34
6.17 Capital Expenditures................................................ 35
6.18 Lease Rentals....................................................... 35
6.19 Affiliates.......................................................... 35
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
6.20 Amendments to Agreements; Preferred Stock........................... 35
6.21 Junior Indebtedness................................................. 35
6.22 Rate Hedging Obligations............................................ 36
6.23 Environmental Matters............................................... 36
6.24 Change in Corporate Structure; Fiscal Year.......................... 36
6.25 Inconsistent Agreements............................................. 37
6.26 Financial Covenants................................................. 37
6.27 Tax Consolidation................................................... 38
6.28 ERISA Compliance.................................................... 38
6.29 Guarantees from Subsidiaries........................................ 39
6.30 Maintenance of Most Favored Lender Status........................... 39
6.31 Payment of Notes and Maintenance of Office.......................... 40
6.32 Private Offering.................................................... 40
7. EVENTS OF DEFAULT........................................................ 40
7.1 Nature of Events.................................................... 40
7.2 Default Remedies.................................................... 42
7.3 Annulment of Acceleration of Notes.................................. 44
8. SUBORDINATION OF NOTES................................................... 44
8.1 General............................................................. 44
8.2 Amendment of Senior Debt, etc....................................... 45
8.3 Default in Respect of Senior Debt................................... 45
8.4 Insolvency, etc..................................................... 46
8.5 Acceleration of Subordinated Debt................................... 47
8.6 Turnover of Payments................................................ 47
8.7 Obligations Not Impaired............................................ 48
8.8 Payment of Senior Debt; Subrogation................................. 49
8.9 Right of Senior Holders to Amend and Act............................ 50
8.10 Notices by Company.................................................. 50
8.11 Amendment of Subordination Provisions............................... 50
8.12 Reliance of Holders of Senior Debt.................................. 50
8.13 Waiver and Consent.................................................. 51
8.14 Reinstatement of Subordination...................................... 51
8.15 Annulment of Acceleration........................................... 51
9. INTERPRETATION OF THIS AGREEMENT......................................... 52
9.1 Terms Defined....................................................... 52
9.2 Accounting Principles............................................... 67
9.3 Directly or Indirectly.............................................. 68
9.4 Section Headings and Table of Contents; Independent Construction.... 68
9.5 Governing Law....................................................... 68
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
10. MISCELLANEOUS............................................................ 68
10.1 Communications...................................................... 68
10.2 Reproduction of Documents........................................... 69
10.3 Survival............................................................ 70
10.4 Successors and Assigns; Beneficiaries............................... 70
10.5 Amendment and Waiver................................................ 70
10.6 Expenses............................................................ 72
10.7 Indemnification..................................................... 72
10.8 Payments on Notes................................................... 73
10.9 Entire Agreement.................................................... 74
10.10 Duplicate Originals, Execution in Counterpart...................... 74
</TABLE>
Annex 1 -- Information as to Purchaser
Annex 2 -- Payment Instructions at Closing, Address of Company
Annex 3 -- Information as to Company
Exhibit A -- Form of 15% Subordinated Note Due August 31, 2003
Exhibit B1 -- Form of Opinion of special counsel to the Company
Exhibit B2 -- Form of Opinion of special Wisconsin counsel to the Company
Exhibit C -- Form of Certificate of Officer of the Company
Exhibit D1 -- Form of Certificate of Secretary of the Company
Exhibit D2 -- Form of Certificate of Secretary of Subsidiary
Exhibit E -- Form of Subsidiary Guarantee
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<PAGE>
TRAK INTERNATIONAL, INC.
----------------------------
NOTE PURCHASE AGREEMENT
----------------------------
$5,000,000 15% SUBORDINATED NOTES DUE AUGUST 31, 2003
Dated as of August 16, 1995
The Minnesota Mutual Life Insurance Company
400 Robert Street North
St. Paul, Minnesota 55101
Ladies and Gentlemen:
TRAK INTERNATIONAL, INC. (together with any successors and assigns who
become such in accordance herewith, the "COMPANY"), a Delaware corporation,
hereby agrees with you as follows:
1. PURCHASE AND SALE OF NOTES
1.1 ISSUE OF NOTES.
The Company will authorize the issue of Five Million Dollars ($5,000,000)
in aggregate principal amount of its fifteen percent (15%) Subordinated Notes
due August 31, 2003 (all such notes, whether initially issued, or issued in
exchange or substitution for, any such note, in each case in accordance with
this Agreement, individually a "NOTE" and collectively, the "NOTES"). The Notes
shall be in the form of Exhibit A and shall have the terms as herein and therein
provided.
1.2 THE CLOSING.
(a) PURCHASE AND SALE OF NOTES. The Company hereby agrees to sell to
you and you hereby agree to purchase from the Company, in accordance with
the provisions hereof, the aggregate principal amount of Notes set forth
below your name on Annex 1 at one hundred percent (100%) of the principal
amount thereof.
(b) THE CLOSING. The closing (the "CLOSING") of the Company's sale
of Notes will be held on August 16, 1995 (the "CLOSING DATE") at 9:00 a.m.,
local time, at the office of Michael Best & Friedrich, 100 East Wisconsin
Avenue, Milwaukee, Wisconsin. At the Closing, the Company will deliver to
you one or more Notes (as set forth below your name on Annex 1), in the
denominations indicated on Annex 1, in the aggregate principal amount of
your purchase, dated the Closing Date and payable to you or payable as
indicated on
<PAGE>
Annex 1, against payment by federal funds wire transfer in immediately
available funds of the purchase price thereof, as directed by the Company
on Annex 2.
1.3 PURCHASE FOR INVESTMENT; ERISA.
(a) PURCHASE FOR INVESTMENT. You represent that
(i) you are purchasing the Notes for investment for your own
account, for a separate account (as such term is used in Rule 144A, 17
C.F.R. Section 230.144A), for the account of another for which you have
sole investment discretion, or for a trust of which you are the trustee,
and
(ii) you are not purchasing the Notes with a view to or for sale
in connection with any distribution thereof within the meaning of the
Securities Act;
PROVIDED, that you have the right to dispose of the Notes, or any part
thereof, if you deem it advisable to do so, either pursuant to a
registration of the Notes under the Securities Act and applicable state
securities laws or pursuant to an applicable exemption from the requirement
of such registration (it being understood that the Company has no
obligation hereunder to effect any registration of the Notes under the
Securities Act and applicable state securities laws). It is understood
that, in making the representations set out in Section 2.14 and Section
2.15, the Company is relying, to the extent applicable, upon your
representation as aforesaid.
(b) ERISA. You represent, with respect to the funds with which you are
acquiring the Notes, that all of such funds are from or are
attributable to one or more of:
(i) GENERAL ACCOUNT -- your general account assets or assets of one
or more segments of such general account, as the case may be;
(ii) SEPARATE ACCOUNT -- a "separate account" (as defined in section 3
of ERISA),
(A) 10% POOLED SEPARATE ACCOUNT -- in respect of which all
requirements for an exemption under DOL Prohibited
Transaction Class Exemption 90-1 are met with respect to the
use of such funds to purchase the Notes,
(B) IDENTIFIED PLAN ASSETS -- that is comprised of employee
benefit plans identified by you in writing and with respect
to which the Company hereby warrants and represents that, as
of the Closing Date, neither the Company nor any ERISA
Affiliate is a "party in interest" (as defined in section 3
of ERISA) or a "disqualified person" (as defined in section
4975 of the IRC) with respect to any plan so identified, or
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<PAGE>
(C) GUARANTEED SEPARATE ACCOUNT -- that is maintained solely in
connection with fixed contractual obligations of an
insurance company, under which any amounts payable, or
credited, to any employee benefit plan having an interest in
such account and to any participant or beneficiary of such
plan (including an annuitant) are not affected in any manner
by the investment performance of the separate account (as
provided by 29 C.F.R. Section 2510.3-101 (h)(1)(iii));
(iii) QUALIFIED PROFESSIONAL ASSET MANAGER -- an "investment fund"
managed by a "qualified professional asset manager" (as such
terms are defined in Part V of DOL Prohibited Transaction
Class Exemption 84-14) with respect to which the
requirements of such exemption have been satisfied, PROVIDED
that in making this representation, it is assumed that the
conditions set forth in Part I(a), Part I(d) and Part I(e)
of such Exemption have been satisfied; or
(iv) EXCLUDED PLAN -- an employee benefit plan that is excluded
from the provisions of section 406(a) of ERISA by virtue of
section 4(b) of ERISA.
1.4 EXPENSES.
Whether or not the Notes are sold, the Company shall pay (at the Closing if
the Notes are sold, and otherwise upon receipt of any statement or invoice
therefor), all reasonable fees, expenses and costs relating hereto, including,
without limitation, the out-of-pocket travel and other expenses incurred by
representatives of the Purchaser in connection with the issuance of the Notes
(including, without limitation, all expenses payable in respect of the filing,
analysis or rating of such transaction with or by the National Association of
Insurance Commissioners, whether payable in connection with the Closing or
thereafter), all expenses incurred in complying with each of the conditions to
closing set forth in Section 3, and the statement presented at the Closing by
your special counsel for fees and disbursements incurred in connection herewith.
The Company shall also pay, promptly upon receipt thereof, each additional
statement for reasonable fees and disbursements of your special counsel rendered
after the Closing in connection with the issuance of the Notes.
2. WARRANTIES AND REPRESENTATIONS
To induce you to enter into this Agreement and to purchase the Notes listed
on Annex 1 below your name, the Company hereby warrants and represents the
accuracy of the following statements as of the Time of Closing:
2.1 NATURE OF BUSINESS.
-3-
<PAGE>
The information which has been furnished to you regarding the Company
correctly describes the general nature of the business and principal Properties
of the Company.
2.2 FINANCIAL STATEMENTS; INDEBTEDNESS; MATERIAL ADVERSE CHANGE.
(a) FINANCIAL STATEMENTS. The Company has provided you with the
financial statements described in PART 2.2(a) OF ANNEX 3. Such financial
statements have been prepared in accordance with Agreement Accounting
Principles consistently applied and present fairly, in all material
respects, the financial position of the Company as of such dates and the
results of operations and cash flows for the periods specified therein
(except, in the case of unaudited financial statements, for normal year-end
audit adjustments).
(b) INDEBTEDNESS. PART 2.2(b) OF ANNEX 3 lists all Indebtedness of
the Company and provides the following information with respect to each
item of such Indebtedness: the obligor, the holder thereof, the outstanding
amount, the current portion, the final maturity, and the collateral
securing such Indebtedness, if any.
(c) MATERIAL ADVERSE CHANGE. Since September 3, 1994, there has been
no change in the business operations, profits, financial condition,
Properties or business prospects of the Company, except changes that, in
the aggregate, could not reasonably be expected to have a Material Adverse
Effect.
(d) PRO FORMA FINANCIAL INFORMATION. The pro forma and projected
information with respect to the Company described in PART 2.2(d) OF ANNEX 3
(collectively, the "PROJECTIONS") (a copy of which has been delivered to
you and a certified copy of which shall be delivered to you at the Closing)
is based upon assumptions which were reasonable when made and continue to
be reasonable. Such Projections have been prepared in good faith, have a
reasonable basis and represent the good faith opinion of the Company as to
the projected results of the operations of the Company after giving effect
to the Merger and the transactions contemplated by this Agreement. The
estimates of future performance and financial condition set forth in the
Projections, taken as a whole, are, in the present good faith opinion of
the senior management of the Company, reasonably attainable, subject to the
uncertainties and approximations inherent in any projections. No material
facts have occurred since the preparation of the Projections that, in the
reasonable belief of the senior management of the Company, would cause the
Projections, taken as a whole, not to be reasonably attainable.
2.3 SUBSIDIARIES.
As of the date hereof the Company has no Subsidiaries.
2.4 TITLE TO PROPERTIES.
-4-
<PAGE>
(a) GENERAL. The Company has good title to all of the Property
reflected in the most recent balance sheet referred to in Section 2.2(a)
and to all of the Property purported to have been acquired by the Company
after said date (except as sold or otherwise disposed of in the ordinary
course of business), except for such failures to have good title as are
immaterial to such balance sheet and that, in the aggregate for all such
failures, could not reasonably be expected to have a Material Adverse
Effect. All Property of the Company is free from Liens not permitted by
Section 6.16.
(b) LEASES. All leases necessary for the conduct of the business of
the Company are valid and subsisting and are in full force and effect,
except for such failures to be valid and subsisting that, in the aggregate
for all such failures, could not reasonably be expected to have a Material
Adverse Effect.
(c) INTELLECTUAL PROPERTY. The Company owns, possesses or has the
right to use all of the licenses, permits, franchises, patents, copyrights,
trademarks, service marks and trade names necessary for the present and
currently planned future conduct of its business, without any known
conflict with the rights of others, except for such failures to own,
possess, or have the right to use, that, in the aggregate for all such
failures, could not reasonably be expected to have a Material Adverse
Effect.
2.5 TAXES.
(a) RETURNS FILED; TAXES PAID.
(i) All tax returns required to be filed by or on behalf of the
Company or any other Person with which the Company files or has filed a
consolidated return in any jurisdiction have been filed on a timely basis,
and all taxes, assessments, fees and other governmental charges upon the
Company or upon any of its Properties, income or franchises, that are due
and payable have been paid, except for such tax returns and such tax
payments that, in the aggregate for all such tax returns and payments,
could not reasonably be expected to have a Material Adverse Effect.
(ii) All liabilities of the Company with respect to federal
income taxes have been finally determined except for the fiscal years
ending on or about August 30, 1990, 1991, 1992, 1993 and 1994, the only
years not closed by the completion of an audit or the expiration of the
statute of limitations.
(iii) The provision for taxes shown on the unaudited balance sheet
of the Company as of April 1, 1995 is adequate for all open years and for
the Company's current fiscal period.
2.6 PENDING LITIGATION. Except as set forth on PART 2.6 OF ANNEX 3:
-5-
<PAGE>
(a) there are no proceedings, actions or investigations pending or,
to the knowledge of the Company, threatened against or affecting the
Company in any court or before any Governmental Authority or arbitration
board or tribunal that, in the aggregate for all such proceedings, actions
and investigations, could reasonably be expected to have a Material Adverse
Effect; and
(b) the Company is not in default with respect to any judgment,
order, writ, injunction or decree of any court, Governmental Authority,
arbitration board or tribunal that, in the aggregate for all such defaults,
could reasonably be expected to have a Material Adverse Effect.
2.7 FULL DISCLOSURE.
Neither the financial statements referred to in Section 2.2, this Agreement
nor any written statement furnished by or on behalf of the Company to you in
connection with the negotiation or the closing of the sale of the Notes contains
any untrue statement of a material fact or omits a material fact necessary to
make the statements contained therein or herein not misleading. There is no
fact known to the Company (other than matters of a general economic nature) that
has had or could at present reasonably be expected to have a Material Adverse
Effect and that has not been disclosed herein or in such financial statements or
other written statements furnished to you in connection with the negotiation or
the closing of the sale of the Notes.
2.8 CORPORATE ORGANIZATION AND AUTHORITY.
The Company:
(a) is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation,
(b) has all corporate power and authority necessary to own and
operate its Properties and to carry on its business as now conducted and as
presently proposed to be conducted,
(c) has all licenses, certificates, permits, franchises and other
governmental authorizations necessary to own and operate its Properties and
to carry on its business as now conducted and as presently proposed to be
conducted, except where the failure to have such licenses, certificates,
permits, franchises and other governmental authorizations, in the aggregate
for all such failures, could not reasonably be expected to have a Material
Adverse Effect, and
(d) has duly qualified or has been duly licensed, and is authorized
to do business and is in good standing, as a foreign corporation, in each
state in the United States of America and in each other jurisdiction where
the failure to be so qualified or licensed and
-6-
<PAGE>
authorized and in good standing, in the aggregate for all such failures,
could reasonably be expected to have a Material Adverse Effect.
2.9 CHARTER INSTRUMENTS, OTHER AGREEMENTS.
The Company is not in violation in any respect of any term of any charter
instrument or bylaw. The Company is not in violation in any respect of any term
in any agreement or other instrument to which it is a party or by which it or
any of its Property may be bound except for such violations that, in the
aggregate for all such violations, could not reasonably be expected to have a
Material Adverse Effect.
2.10 RESTRICTIONS ON COMPANY
The Company:
(a) is not a party to any contract or agreement, or subject to any
charter or other corporate restriction that, in the aggregate for all such
contracts, agreements, charters and corporate restrictions, is reasonably
likely to have a Material Adverse Effect;
(b) is not a party to any contract or agreement that restricts the
right or ability of such corporation to incur Indebtedness, other than this
Agreement and the Senior Financing Documents, none of which restricts the
issuance and sale of the Notes or the performance of the Company of its
obligations under the Financing Documents, and true, correct and complete
copies of each of which have been provided to you; and
(c) has not agreed or consented to cause or permit in the future
(upon the happening of a contingency or otherwise) any of its Property,
whether now owned or hereafter acquired, to be subject to a Lien not
permitted by Section 6.16.
2.11 COMPLIANCE WITH LAW.
The Company is not in violation of any law, ordinance, governmental rule or
regulation to which it is subject, except for such violations that, in the
aggregate, could not reasonably be expected to have a Material Adverse Effect.
2.12 PENSION PLANS.
(a) DISCLOSURE. PART 2.12(a) OF ANNEX 3 correctly identifies all
ERISA Affiliates and all employee benefit plans with respect to which the
Company or any "affiliate" (as such term is defined in section 407(d) of
ERISA) is a "party-in-interest" (as such term is defined in section 3 of
ERISA) or in respect of which the Notes would constitute an "employer
security" (as such term is defined in section 407(d) of ERISA).
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(b) PROHIBITED TRANSACTIONS. The execution and delivery of this
Agreement and the issuance and sale of the Notes hereunder and the holding
thereof by the Purchaser will not involve any transaction that is subject
to the prohibitions of section 406 of ERISA or in connection with which a
tax could be imposed pursuant to section 4975(c)(1)(A)-(D) of the IRC. The
representation by the Company in the immediately preceding sentence is made
in reliance upon the representations in Section 1.3(b) as to the source of
funds used by you.
(c) COMPLIANCE WITH ERISA. The Company and the ERISA Affiliates and
each Pension Plan are in compliance with ERISA, except for such failures to
comply that in the aggregate for all such failures could not reasonably be
expected to have a Material Adverse Effect.
(d) PLAN FUNDING STATUS AND LIABILITIES.
(i) FUNDING STATUS. The aggregate amount of the "benefit
liabilities" (as such term is defined in section 4001 of ERISA) under
each Pension Plan, determined as of the end of each such Pension
Plan's most recently ended plan year on the basis of the actuarial
assumptions specified for funding purposes in such Pension Plan's most
recent actuarial valuation report, did not exceed the aggregate
"current value" (as such term is defined in section 3 of ERISA) of the
assets of such Pension Plan allocable to such benefit liabilities.
(ii) CLOSING DATE LIABILITIES. All liabilities to all Pension
Plans and Multiemployer Plans that are due and payable as of the
Closing Date have been paid or adequate reserves have been established
therefor. Neither the Company nor any ERISA Affiliate has incurred
any liability pursuant to Title I or Title IV of ERISA or the penalty
or excise tax or security provisions of the IRC relating to "employee
benefit plans" (as defined in section 3 of ERISA), and no event,
transaction, or condition has occurred or exists that could result in
the imposition of any Lien on any of the Properties of the Company or
any ERISA Affiliate, in either case pursuant to Title I or Title IV of
ERISA or pursuant to such penalty or excise tax or security provisions
of the IRC, except for such liabilities and Liens that, in the
aggregate for all such liabilities and Liens, could not reasonably be
expected to have a Material Adverse Effect.
(iii) MULTIEMPLOYER WITHDRAWAL LIABILITIES. Neither the Company
nor any ERISA Affiliate has incurred or currently expects to incur any
withdrawal liability under Title IV of ERISA with respect to any
Multiemployer Plan. There has been no event with respect to any
Multiemployer Plan that could result in the termination of such
Multiemployer Plan and give rise to a liability of the Company or any
ERISA Affiliate in respect thereof.
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(iv) PBGC. No circumstance exists that constitutes grounds under
section 4042 of ERISA entitling the PBGC to institute proceedings to
terminate, or appoint a trustee to administer, any Pension Plan or
trust created thereunder, nor has the PBGC instituted any such
proceeding.
2.13 ENVIRONMENTAL COMPLIANCE.
Except as disclosed on PART 2.13 OF ANNEX 3, the Company:
(a) does not have knowledge of
(i) any claim, any notice of any claim, or the existence of any
proceeding raising any claim, or
(ii) any facts that would give rise to any claim, public or
private,
against the Company or any real properties or other assets now or formerly
owned, leased or operated by the Company alleging any damage to the
environment or violation of any Environmental Laws, except, for such claims
or facts that, in the aggregate, could not reasonably be expected to have a
Material Adverse Effect;
(b) has not stored or disposed of any hazardous or toxic substances,
wastes or pollutants in a manner contrary to any Environmental Laws, except
for such violations that, in the aggregate, could not reasonably be
expected to have a Material Adverse Effect; and
(c) has not maintained, operated or permitted to exist conditions in
buildings and improvements on any real properties now or formerly owned,
leased or operated by any of them in a manner in violation of any
Environmental Laws, except, for such violations that, in the aggregate,
could not reasonably be expected to have a Material Adverse Effect.
2.14 SALE OF NOTES IS LEGAL AND AUTHORIZED; OBLIGATIONS ARE ENFORCEABLE.
(a) SALE OF NOTES IS LEGAL AND AUTHORIZED. Each of the issuance,
sale and delivery of the Notes by the Company, the execution and delivery
of this Agreement and the Notes by the Company and compliance by the
Company with all of the provisions of this Agreement, and the Notes:
(i) is within the corporate powers of the Company; and
(ii) is legal and does not conflict with, result in any breach of
any of the provisions of, constitute a default under, or result in the
creation of any Lien upon any Property of the Company under the
provisions of,
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(A) any agreement, charter instrument, bylaw or other instrument
to which the Company is a party or by which the Company or
any of its Property may be bound, or
(B) any order, judgment, decree, or ruling of any court,
arbitrator or Governmental Authority applicable to the
Company.
(b) OBLIGATIONS ARE ENFORCEABLE. Each of this Agreement and the
Notes has been duly authorized by all necessary action on the part of the
Company, has been executed and delivered by duly authorized officers of the
Company, and constitutes a legal, valid and binding obligation of the
Company, enforceable in accordance with its terms, except that the
enforceability hereof and of the Notes may be:
(i) limited by applicable bankruptcy, reorganization,
arrangement, insolvency, moratorium or other similar laws affecting
the enforceability of creditors' rights generally; and
(ii) subject to the availability of equitable remedies.
2.15 GOVERNMENTAL CONSENT TO SALE OF NOTES.
(a) Neither the nature of the Company or of any of its businesses or
Properties, nor any relationship between the Company and any other Person,
nor any circumstance in connection with the offer, issuance, sale or
delivery of the Notes and the execution and delivery of this Agreement, or
the performance of the obligations hereunder and thereunder, is such as to
require a consent, approval or authorization of, or filing, registration or
qualification with, any Governmental Authority on the part of the Company
as a condition to the execution and delivery of this Agreement and the
other Financing Documents, the offer, issuance, sale or delivery of the
Notes, or the performance of the obligations hereunder or thereunder.
(b) The issuance and sale of the Notes, the incurrence of the
Indebtedness represented thereby, and the performance hereunder and
thereunder, by the Company,
(i) is not subject to regulation under the Investment Company
Act of 1940, as amended, the Public Utility Holding Company Act of
1935, as amended, the Interstate Commerce Act, as amended, or the
Federal Power Act, as amended, and
(ii) does not violate any provision of any statute or other rule
or regulation of any Governmental Authority applicable to the Company.
(c) All consents, approvals and authorizations of, and filings,
registrations and qualifications with (including, without limitation, under
the Hart-Scott-Rodino Antitrust
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Improvements Act of 1976, as amended), any Governmental Authority on the
part of the Company (or any other Persons with respect to the transactions
contemplated by the Merger Agreement) required in connection with the
consummation of the Merger have been obtained or made and remain in full
force and effect.
2.16 NO DEFAULTS UNDER NOTES.
No event has occurred and no condition exists that constitutes a Default or
an Event of Default.
2.17 PRIVATE OFFERING OF NOTES.
(a) Neither the Company nor any other Person (no other Person having
been authorized or employed by the Company as agent, broker, dealer or
otherwise in connection with the offering or sale of the Notes or any
similar Security of the Company, other than employees of the Company) has
offered any of the Notes or any similar Security of the Company for sale
to, or solicited offers to buy any thereof from, or otherwise approached or
negotiated with respect thereto with, any prospective purchaser, other than
you and not more than ten (10) other institutional investors, each of whom
was offered all or a portion of the Notes at private sale for investment.
(b) Neither the Company nor any agent acting on behalf of any of the
Company has taken any action that would subject the issue or sale of the
Notes, the Merger or any other transaction contemplated by this Agreement
to the registration provisions of section 5 of the Securities Act or to the
registration, qualification or other similar provisions of any securities
or "blue sky" law of any applicable jurisdiction.
2.18 USE OF PROCEEDS OF NOTES.
(a) USE OF PROCEEDS. The Company shall use the proceeds of the sale
of the Notes to provide funds for the Merger, the transactions contemplated
by the Merger Agreement and the payment of related fees and expenses.
(b) MARGIN SECURITIES. None of the transactions contemplated herein
and in the Notes (including, without limitation, the use of the proceeds
from the sale of the Notes) violates, will violate or will result in a
violation of section 7 of the Exchange Act, or any regulation issued
pursuant thereto, including, without limitation, Regulation G, Regulation T
and Regulation X of the Board of Governors of the Federal Reserve System,
12 C.F.R., Chapter II. The Company does not intend to use the proceeds of
the sale of the Notes for the purpose of "buying or carrying" (as defined
in said Regulation G), or refinancing borrowings that were used for the
purpose of buying or carrying, any "margin stock" (as defined in said
Regulation G).
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(c) ABSENCE OF FOREIGN OR ENEMY STATUS. None of the Merger, the sale
of the Notes nor the use of proceeds from the sale of the Notes will result
in a violation of any of the foreign assets control regulations of the
United States Treasury Department (31 C.F.R., Subtitle B, Chapter V, as
amended) or any ruling issued thereunder or any enabling legislation or
Presidential Executive Order in connection therewith.
2.19 CAPITALIZATION.
PART 2.19 OF ANNEX 3 correctly sets forth:
(a) the authorized and outstanding capitalization of the Company;
(b) for each holder of any stock of the Company, or Holdings, the
identity of such holder, the number of shares of each class of such stock
so held and the percentage of the shares of each class so held; and
(c) that Harbor Group Investments III, L.P. or any of its Affiliates
owns beneficially and of record, free and clear of all Liens, other
encumbrances, or voting agreements, restrictions or trusts of any kind at
least 75% of the outstanding shares of capital stock of Holdings on a fully
diluted basis and shares representing the right to elect a corresponding
percentage of the directors of Holdings
2.20 COMPANY MATTERS PRIOR TO THE MERGER.
Immediately prior to the Merger Effective Time, each of the Company and
Acquisition Co.:
(a) was a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation;
(b) had all legal and corporate power and authority to:
(i) own and operate its Properties;
(ii) carry on its business as then conducted and as proposed to
be conducted; and
(iii) consummate the transactions contemplated by the Merger
Documents (including, without limitation, the Merger) and perform its
obligations set forth therein; and
(c) had duly authorized by all necessary corporate and other action
(including, without limitation, any and all action on behalf of the holders
of its capital stock) the execution and delivery of the Merger Documents
and the transactions contemplated thereby,
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and each of the Merger Documents had been duly executed and delivered by
each party thereto.
2.21 CLOSING OF THE MERGER.
The Merger Documents are in form and substance adequate to effect the
Merger under the laws of the State of Delaware, all required Merger Documents
have been filed with the Secretary of State of the State of Delaware and the
Merger has been effected and is valid in accordance with the Merger Agreement
and the laws of the State of Delaware.
2.22 ALL DOCUMENTS PROVIDED.
The Company has provided to the Purchaser copies of:
(a) the Senior Financing Agreement, as in effect on the Closing Date,
and all other Senior Financing Documents (including all schedules,
exhibits, annexes, amendments, supplements, modifications, and all other
documents delivered pursuant thereto or in connection therewith), and there
is no agreement or understanding between the Company and the Senior Lender
except as set forth in the Senior Financing Documents; and
(b) the Merger Agreement, as in effect at the Time of Closing, and
all other Merger Documents (including all schedules, exhibits, annexes,
amendments, supplements, modifications, and all other documents delivered
pursuant thereto or in connection therewith).
2.23 SOLVENCY.
As of the Closing Date, after giving effect to the consummation of the
transactions contemplated by the Financing Documents and the other Transaction
Documents and the payment of all fees, costs and expenses payable by the Company
with respect to the transactions contemplated by the Financing Documents and the
other Transaction Documents, the Company is Solvent.
2.24 CERTAIN FEES.
Other than as disclosed on PART 2.24 OF ANNEX 3, no broker's or finder's
fee or commission was, is or will be payable by the Company with respect to any
of the transactions (including, without limitation, the Merger) contemplated by
this Agreement or the other Transaction Documents or for any other services
rendered to the Company ancillary to such transactions. The Company hereby
agrees to indemnify the Purchaser against and agrees that it will hold each of
them harmless from any claim, demand or liability for broker's or finder's fees
or commissions alleged to have been incurred by the Company in connection with
any of the transactions (including, without limitation, the Merger) contemplated
by this Agreement or the other Transaction Documents and any expenses
(including, without limitation, attorneys' fees and time charges of attorneys
for any Purchaser, which
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attorneys may be employees of any Purchaser) arising in connection with any such
claim, demand or liability.
3. CLOSING CONDITIONS
Your obligation to purchase and pay for the Notes to be delivered to you at
the Closing is subject to the conditions precedent set forth in this Section 3.
The failure of the Company to satisfy such conditions shall not operate to waive
any of your rights against the Company.
3.1 OPINIONS OF COUNSEL.
You shall have received from
(a) Dickstein, Shapiro & Morin, L.L.P., counsel for the Company, and
(b) Michael Best & Friedrich, special Wisconsin counsel for the
Company,
closing opinions, each dated as of the Closing Date, substantially in the
respective forms set forth in Exhibit Bl and Exhibit B2. This Section 3.1 shall
constitute direction by the Company to such counsel named in the foregoing
subsection (a) to deliver such closing opinion to you. In addition, you shall
have received confirmation from counsel to each party to the Merger Agreement
that you may rely upon its opinion delivered pursuant to the Merger Agreement
and shall have received an opinion from Winston & Strawn, your special counsel,
in form satisfactory to you.
3.2 WARRANTIES AND REPRESENTATIONS TRUE.
The warranties and representations contained in Section 2 hereof shall be
true in all material respects as of the Time of Closing.
3.3 OFFICERS' CERTIFICATES.
You shall have received
(a) a certificate dated the Closing Date and signed by a Senior
Officer, substantially in the form of Exhibit C, and
(b) a certificate dated the Closing Date and signed by the Secretary
or an Assistant Secretary of the Company, substantially in the form of
Exhibit D1.
3.4 COMPANY SOLVENCY CERTIFICATE.
You shall have received a solvency certificate (the "COMPANY SOLVENCY
CERTIFICATE") from the chief financial officer of the Company in form and
content satisfactory to you, dated the Closing
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Date, with respect to the Solvency of the Company, after giving effect to the
Transaction Documents.
3.5 LEGALITY.
The purchase of and payment for the Notes to be purchased by you on the
Closing Date on the terms and conditions herein provided (including the use of
the proceeds of such Notes by the Company ) shall not violate, or require you to
make any filing under, any applicable law or governmental regulation (including,
without limitation, section 5 of the Securities Act or Regulation G, Regulation
T, Regulation U or Regulation X of the Board of Governors of the Federal Reserve
System) and shall not subject you to any tax, penalty, liability or other
onerous condition under or pursuant to any applicable law or governmental
regulation.
3.6 PRIVATE PLACEMENT NUMBER.
The Company shall have obtained or caused to be obtained a private
placement number for the Notes from the CUSIP Service Bureau of Standard &
Poor's Ratings Group, a division of McGraw-Hill, Inc., and you shall have been
informed of such private placement number.
3.7 EXPENSES.
All fees and disbursements required to be paid pursuant to Section 1.4
shall have been paid in full.
3.8 COMMITMENT FEE.
The Company shall have paid in full to the Purchaser in respect of the
Notes a nonrefundable commitment fee in the aggregate amount of Fifty Thousand
Dollars ($50,000).
3.9 MERGER DOCUMENTS.
The Merger Documents shall be in form and substance satisfactory to you and
your special counsel. The Merger shall have been consummated substantially in
accordance with the terms of the Merger Documents, without waiver of any closing
condition set forth in the Merger Documents (except as shall have been approved
by you (or your special counsel) in writing). The Company shall have delivered
to you copies of the fully executed Merger Documents, certified as true and
correct as of the Time of Closing by an officer of the Company.
3.10 SENIOR FINANCING DOCUMENTS.
The Company, the Agent and the Senior Lenders shall have entered into the
Senior Financing Agreement, which agreement, and all other Senior Financing
Documents, shall be in form and substance satisfactory to you, and the Senior
Financing Agreement shall be in full force and effect.
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The Company shall have delivered to you copies of the fully executed Senior
Financing Documents, certified as true and correct by an officer of the Company.
3.11 EQUITY CONTRIBUTION / JUNIOR SUBORDINATED DEBT.
The Company shall have received at least $6,000,000 from the contribution
to capital by Holdings for common stock and $2,000,000 from the issuance to
Harbour Group Investments III, L.P. of junior subordinated debt to be evidenced
by the Junior Subordinated Note, the terms and conditions of which note and
related documentation shall be satisfactory to you, which proceeds shall be
available to satisfy in part obligations under the Merger Agreement and the
payment of fees and expenses related to the Merger or shall have been expended
previously for such purposes.
3.12 PRO FORMA BALANCE SHEET; PROJECTIONS.
You shall have received a certificate dated the Closing Date and signed by
a Senior Officer to which is attached:
(a) a pro forma estimated opening balance sheet (the "PRO FORMA
BALANCE SHEET") giving effect to the Merger which shall not be materially
less favorable, in your reasonable judgment, than the projected balance
sheet previously provided to you, and which Pro Forma Balance Sheet shall
demonstrate, in your reasonable judgment, together with all other
information then available to you, that the Company can repay its debts and
satisfy its other obligations as and when due, and (to the extent
applicable) can comply with the financial covenants set forth herein; and
(b) the Projections.
3.13 ACCOUNTANTS' LETTER.
You shall have received a letter from Price Waterhouse, L.L.P. in form and
substance satisfactory to you acknowledging that the Purchaser may rely on
financial statements audited by such firm and may communicate directly with such
auditors.
3.14 ENVIRONMENTAL REPORTS.
You shall have received such environmental reports (the findings of which
shall be satisfactory to you) as you may request with respect to the real
property owned by the Company.
3.15 PROCEEDINGS SATISFACTORY.
All proceedings taken in connection with the issuance and sale of the Notes
and all documents and papers relating thereto shall be satisfactory to you and
your special counsel. You and your special counsel shall have received copies
of such documents and papers as you or they may
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reasonably request in connection therewith or in connection with your special
counsel's closing opinion, all in form and substance satisfactory to you and
your special counsel.
4. PRINCIPAL PAYMENTS
4.1 REQUIRED PAYMENTS.
The Company shall pay, and there shall become due and payable, on each of
the dates set forth below, the principal amount of the Notes set forth below
opposite each such date (each, a "REQUIRED PRINCIPAL PAYMENT"), as follows:
<TABLE>
===================================================================================
<S> <C>
DATE OF REQUIRED PRINCIPAL PAYMENT AMOUNT OF REQUIRED PRINCIPAL PAYMENT
===================================================================================
August 31, 2001 $500,000
- -----------------------------------------------------------------------------------
February 28, 2002 $1,000,000
- -----------------------------------------------------------------------------------
August 31, 2002 $1,000,000
- -----------------------------------------------------------------------------------
February 28, 2003 $1,250,000
- -----------------------------------------------------------------------------------
August 31, 2003 $1,250,000 or such lesser amount as
shall be the outstanding balance of
the Notes.
===================================================================================
</TABLE>
Each Required Principal Payment shall be made when due, together with interest
accrued thereon to the date of payment. The entire principal of the Notes
remaining outstanding on August 31, 2003, together with interest accrued
thereon, shall become due and payable on such date.
4.2 OFFER TO PREPAY UPON CHANGE IN CONTROL.
(a) NOTICE AND OFFER. Subject to Article 8, in the event of either:
(i) a Change in Control; or
(ii) the obtaining of knowledge of a Control Event by any Senior
Officer (including, without limitation, via the receipt of notice of a
Control Event from any holder of Notes);
the Company will, within five (5) Business Days of the occurrence of either of
such events (or, in the case of any Change in Control the consummation or
finalization of which would involve any action of the Company, at least thirty
(30) days prior to such Change in Control), give written notice of such Change
in Control or Control Event to each holder of Notes by facsimile transmission
and overnight courier of national reputation. In the event of a Change in
Control, such written notice shall contain, and such written notice shall
constitute, an irrevocable offer to prepay all, but not less
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than all, the Notes held by such holder on a date specified in such notice (the
"Control Prepayment Date") that is not less than thirty (30) days and not more
than sixty (60) days after the date of such notice. If the Control Prepayment
Date shall not be specified in such notice, the Control Prepayment Date shall be
the thirtieth (30th) day after the date of such holder's receipt of such notice.
If the Company shall not have received a written response to such notice from
each holder of Notes within ten (10) days after the date of posting of such
notice to such holder of Notes, then the Company shall promptly send a second
written notice via facsimile transmission and overnight courier of national
reputation to each such holder of Notes who shall have not previously responded
to the Company. In no event will the Company take any action to consummate or
finalize a Change in Control unless contemporaneously with such action the
Company prepays all Notes required to be prepaid in accordance with Section
4.2(b) hereof.
(b) ACCEPTANCE AND PAYMENT; REJECTION.
(i) ACCEPTANCE AND PAYMENT. To accept such offered prepayment,
holder of Notes shall either:
(A) cause a notice of such acceptance to be delivered to
the Company prior to the Control Prepayment Date; or
(B) fail to respond to all written offers of prepayment
referred to in Section 4.2(a) hereof prior to the Control
Prepayment Date, which failure shall be deemed to constitute an
acceptance of such offer.
If accepted or deemed accepted, such offered prepayment shall be due
and payable on the Control Prepayment Date. Such offered prepayment
shall be made at one hundred percent (100%) of the principal amount of
the Notes held by holders having accepted, or deemed to have accepted,
such offer, together with interest on the Notes then being prepaid
accrued to the Control Prepayment Date and the Make-Whole Amount at
such time, with respect to such principal amount of such Notes.
(ii) REJECTION. To reject such offered prepayment, a holder of
Notes must cause a notice of such rejection to be delivered to the
Company at least ten (10) days prior to the Control Prepayment Date in
respect of any such written offer of prepayment.
(c) OFFICER'S CERTIFICATE. Each offer to prepay the Notes pursuant to
this Section 4.2 shall be accompanied by a certificate, executed by a
Senior Officer and dated the date of such offer, specifying:
(i) the Control Prepayment Date;
(ii) the Section hereof under which such offer is made;
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(iii) the principal amount of each Note offered to be prepaid;
(iv) the interest that would be due on each such Note offered to
be prepaid, accrued to the date fixed for payment;
(v) the calculation (with details) of an estimated Make-Whole
Amount, if any (calculated as if the date of such notice was the date
of prepayment), due in connection with such prepayment;
(vi) that the conditions of this Section 4.2 have been fulfilled;
and
(vii) in reasonable detail, the nature and date or proposed date
of the Change in Control.
Two (2) Business Days prior to the making of such prepayment, the Company
shall deliver to each holder of Notes by facsimile transmission a
certificate of a Senior Financial Officer specifying the details of the
calculation of such Make-Whole Amount as of the specified prepayment date.
(d) EFFECT OF PREPAYMENT. If the aggregate principal amount of the
Notes prepaid pursuant to this Section 4.2 is less than the aggregate
principal balance of all Notes then outstanding, then the aggregate amount
of the prepayment will reduce ratably the amount due on the maturity date
of the Notes and each then remaining Required Principal Payment applicable
to the Notes, as set forth in Section 4.l.
(e) TIMING OF PREPAYMENT. Notwithstanding the foregoing, in no event
shall the Company be obligated to make any prepayment pursuant to this
Section 4.2 unless and until the closing of the transactions contemplated
by the Change in Control to which such offered prepayment relates.
4.3 OPTIONAL PREPAYMENTS.
(a) OPTIONAL PREPAYMENTS.
(i) The Company may prepay the principal amount of the Notes in
whole or in part, at any time on and after August 16, 1998, in
multiples of Five Hundred Thousand Dollars ($500,000) (or, if the
aggregate outstanding principal amount of the Notes is less than Five
Hundred Thousand Dollars ($500,000) at such time, then such lesser
principal amount), together with
(A) an amount equal to the Make-Whole Amount due at such
time in respect of the principal amount of the Notes being so
prepaid, and
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(B) interest on such principal amount then being prepaid
accrued to the prepayment date.
(ii) Notwithstanding the terms of clause (i) of this Section 4.3,
in the event, at any time, of (x) the consummation by the Company or
Holdings of an initial public offering of equity interests in the
Company or Holdings for a net proceeds to the Company or Holdings of
not less than Ten Million Dollars ($10,000,000) (an "IPO") or (y) the
sale of all or substantially all of the assets of the Company in a
single transaction or series of related transactions (a "TOTAL ASSET
SALE"), the Company may, contemporaneously with the consummation of
the IPO or the completion of the Total Asset Sale, prepay all or a
portion of the outstanding principal amount of the Notes in an amount
of not less than Two Hundred Fifty Thousand Dollars ($250,000) (or if
the aggregate outstanding principal amount of the Notes is less than
Two Hundred Fifty Thousand Dollars ($250,000) at such time, then such
lesser principal amount), together with
(A) an amount equal to the Make-Whole Amount due at such
time in respect of the principal amount of the Notes being so
prepaid, and
(B) interest on such principal amount then being prepaid
accrued to the prepayment date.
(b) NOTICE OF OPTIONAL PREPAYMENT. The Company will give notice of
any optional prepayment of the Notes to each holder of Notes not less than
thirty (30) days nor more than sixty (60) days before the date fixed for
prepayment, specifying:
(i) the date fixed for such prepayment;
(ii) the Section under which the prepayment is to be made and, if
in respect of an IPO or a Total Asset Sale, providing a detailed
description of such transaction;
(iii) the principal amount of each Note to be prepaid on such
date;
(iv) the interest to be paid on each such Note, accrued to the
date fixed for prepayment;
(v) the amounts and the due dates of the then remaining Required
Principal Payments determined after giving effect to such prepayment;
and
(vi) the calculation (with details) of an estimated Make-Whole
Amount, if any, (calculated as if the date of such notice was the date
of prepayment) due in connection with such prepayment.
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Notice of prepayment having been so given, the aggregate principal amount
of the Notes to be prepaid specified in such notice, together with the
Make-Whole Amount as of the specified prepayment date with respect thereto,
if any, and accrued interest thereon shall become due and payable on the
specified prepayment date. Two (2) Business Days prior to the making of
such prepayment, the Company shall deliver to each holder of Notes by
facsimile transmission a certificate of a Senior Financial Officer
specifying the details of the calculation of such Make-Whole Amount as of
the specified prepayment date.
(c) EFFECT OF PARTIAL PREPAYMENTS ON REQUIRED PREPAYMENTS. Each
partial prepayment of the principal of the Notes made pursuant to this
Section 4.3 shall be applied against and reduce the then remaining Required
Principal Payments in the inverse order of the due dates of such
prepayments.
(d) TIMING OF PREPAYMENT. Notwithstanding the foregoing, in no event
shall the Company be obligated to make any prepayment pursuant to this
Section 4.3 in respect of an IPO or a Total Asset Sale unless and until the
consummation of the IPO or Total Asset Sale to which such offered
prepayment relates.
(e) EFFECT OF CONFLICT BETWEEN SECTION 4.2 AND SECTION 4.3. In the
event of any conflict between the right of the Company to prepay the Notes
pursuant to Section 4.3 and the right of any Purchaser to reject an offered
prepayment pursuant to Section 4.2(b), the provisions of Section 4.3 shall
govern and control.
4.4 PREPAYMENTS AMONG NOTEHOLDERS.
If at the time any prepayment of the principal of the Notes made pursuant
to Section 4.1 or Section 4.3 is due there is more than one Note outstanding,
the aggregate principal amount of each such required or optional partial
prepayment of the Notes shall be allocated among the Notes at the time
outstanding pro rata in proportion to the respective unpaid principal amounts of
all such outstanding Notes. For the purpose of this Section 4.4 only, any Notes
reacquired by the Company shall be deemed to be outstanding for purposes of
allocating prepayments made pursuant to Section 4.1 or Section 4.3(a)(i) and the
Company shall be deemed to be the holder thereof.
4.5 NOTATION OF NOTES ON PREPAYMENT.
Upon any partial prepayment of a Note, the holder of such Note may (but
shall not be required to), at its option,
(a) surrender such Note to the Company pursuant to Section 5.2 in
exchange for a new Note in a principal amount equal to the principal amount
remaining unpaid on the surrendered Note,
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(b) make such Note available to the Company for notation thereon of
the portion of the principal so prepaid, or
(c) mark such Note with a notation thereon of the portion of the
principal so prepaid.
In case the entire principal amount of any Note is prepaid, such Note shall be
surrendered to the Company for cancellation and shall not be reissued, and no
Note shall be issued in lieu of the prepaid principal amount of any Note.
4.6 NO OTHER PREPAYMENTS; ACQUISITION OF NOTES.
Except for prepayments required or specifically permitted by this Section
4, the Company may not make any prepayment of principal in respect of the Notes.
The Company will not, and will not permit any Subsidiary or any Affiliate (other
than a limited partner of Harbour Group Investments III, L.P. which is a bank,
savings and loan company, insurance company, pension fund, separate account,
investment company, trust fund, nonprofit institution or other similar
institutional investor) to, directly or indirectly, acquire or make any offer to
acquire any Notes.
5. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES
5.1 REGISTRATION OF NOTES.
The Company will keep at its office, maintained pursuant to Section 6.31, a
register for the registration and transfer of Notes. The name and address of
each holder of one or more Notes, each transfer thereof and the name and address
of each transferee of one or more Notes shall be registered in such register.
The Person in whose name any Note shall be registered shall be deemed and
treated as the owner and holder thereof for all purposes hereof, and the Company
shall not be affected by any notice or knowledge to the contrary.
5.2 EXCHANGE OF NOTES.
(a) EXCHANGE OF NOTES. Upon surrender of any Note at the office of
the Company maintained pursuant to Section 6.31, duly endorsed or
accompanied by a written instrument of transfer duly executed by the
registered holder of such Note, the Company will execute and deliver, at
the Company's expense (except as provided in this Section 5.2(a) below), a
new Note or Notes in exchange therefor, in an aggregate principal amount
equal to the unpaid principal amount of the surrendered Note. Each such
new Note shall be payable to such Person as such holder may request and
shall be substantially in the form of Exhibit A. Each such new Note shall
be dated and bear interest from the date to which interest shall have been
paid on the surrendered Note or dated the date of the surrendered Note if
no interest shall have been paid thereon. Each such new Note shall carry
the same rights to unpaid interest and interest to accrue that were carried
by the Note so exchanged or
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transferred. The Company may require payment of a sum sufficient to cover
any stamp tax or governmental charge imposed in respect of any such
transfer of Notes. Notes shall not be transferred in denominations of less
than One Hundred Thousand Dollars ($100,000), provided that a holder of
Notes may transfer its entire holding of Notes regardless of the principal
amount of such holder's Notes.
(b) COSTS. The Company will pay the cost of delivering to or from
such holder's home office or custodian bank from or to the Company, insured
to the reasonable satisfaction of such holder, the surrendered Note and any
Note issued in substitution or replacement for the surrendered Note.
(c) ACTIONS OF NOTEHOLDER. Each holder of Notes agrees that in the
event it shall sell or transfer any Note without surrendering such Note to
the Company as set forth in Section 5.2(a), it shall
(i) prior to the delivery of such Note make a notation thereon
of all principal, if any, prepaid on such Note and shall also indicate
thereon the date to which interest shall have been paid on such Note,
and
(ii) promptly notify or cause the transferee to notify the
Company of the name and address of the transferee of any such Note so
transferred and the effective date of such transfer.
5.3 REPLACEMENT OF NOTES.
Upon receipt by the Company of evidence reasonably satisfactory to it of
the ownership of and the loss, theft, destruction or mutilation of any Note
(which evidence shall be, in the case of an institutional investor, notice from
such institutional investor of such ownership (or of ownership by such
institutional investor's nominee) and such loss, theft, destruction or
mutilation), and
(a) in the case of loss, theft or destruction, of indemnity
reasonably satisfactory to the Company (provided that if the holder of such
Note is an institutional investor or a nominee of an institutional
investor, such holder's own unsecured agreement of indemnity shall be
deemed to be satisfactory), or
(b) in the case of mutilation, upon surrender and cancellation
thereof,
the Company at its own expense will execute and deliver, in lieu thereof, a
replacement Note, dated and bearing interest from the date to which interest
shall have been paid on such lost, stolen, destroyed or mutilated Note or dated
the date of such lost, stolen, destroyed or mutilated Note if no interest shall
have been paid thereon.
5.4 ISSUANCE TAXES.
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The Company will pay all taxes (if any) due (but not, in any event, income
taxes) in connection with and as the result of the initial issuance and sale of
the Notes and in connection with any modification, waiver or amendment of this
Agreement or the Notes and shall save each holder of Notes harmless without
limitation as to time against any and all liabilities with respect to all such
taxes.
6. COVENANTS
The Company covenants that on and after the Closing Date and so long as any
of the Notes shall be outstanding:
6.1 FINANCIAL REPORTING.
The Company will maintain, for itself and each Subsidiary, a system of
accounting established and administered in accordance with generally accepted
accounting principles, consistently applied, and furnish to each holder of
Notes:
(a) As soon as practicable and in any event within 75 days after the
close of each of its fiscal years, an unqualified audit report certified by
independent certified public accountants, acceptable to the holders of
Notes, prepared in accordance with Agreement Accounting Principles on a
consolidated and consolidating basis (consolidating statements need not be
certified by such accountants) for itself and its Subsidiaries, including
balance sheets as of the end of such period and related income and cash
flow statements, accompanied by (i) any management letter prepared by said
accountants, and (ii) a certificate of said accountants that, in the course
of the examination necessary for their certification of the foregoing, they
have obtained no knowledge of any Event of Default or Default, or if, in
the opinion of such accountants, any Event of Default or Default shall
exist, stating the nature and status thereof.
(b) As soon as practicable and in any event within 45 days after the
close of the first three quarterly periods of each of its fiscal years, for
itself and its Subsidiaries, consolidated and consolidating unaudited
balance sheets as at the close of each such period and consolidated and
consolidating income and cash flow statements for the period from the
beginning of such fiscal year to the end of such quarter, all certified by
its chief financial officer.
(c) As soon as practicable and in any event within 30 days after the
end of each month, for itself and its Subsidiaries, consolidated and
consolidating unaudited income and cash flow statements and an unaudited
balance sheet of the Company and its Subsidiaries as at the end of such
monthly period and for the period from the beginning of such fiscal year to
the end of such monthly period, setting forth in each case in comparative
form consolidated figures for the corresponding period in the preceding
fiscal year and for the
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projections delivered for such fiscal year, all certified by the chief
financial officer of the Company.
(d) As soon as available, but in any event not later than the last
Business Day in November of each year, a copy of the plan and forecast
(including a projected consolidated and consolidating balance sheet, income
statement and funds flow statement) of the Company and its Subsidiaries for
the next fiscal year.
(e) Together with the financial statements required by clause (a) and
clause (b) above, a compliance certificate signed by its chief financial
officer showing the calculations necessary to determine compliance with the
covenants set forth in Sections 6.13, 6.15, 6.16, 6.17. 6.18, and 6.26 of
this Agreement and stating that no Event of Default or Default exists, or
if any Event of Default or Default exists, stating the nature and status
thereof.
(f) Promptly upon request of any holder of Notes, a copy of any
Borrowing Base Certificate delivered pursuant to the Senior Financing
Agreement.
(g) Within 270 days after the close of each fiscal year, a statement
of the Unfunded Liabilities of each Single Employer Plan, certified as
correct by an actuary enrolled under ERISA.
(h) As soon as possible and in any event within 10 days after the
Company knows that any Termination Event has occurred with respect to any
Plan, a statement, signed by the chief financial officer of the Company,
describing said Termination Event and the action which the Company proposes
to take with respect thereto.
(i) As soon as possible and in any event within 10 days after receipt
thereof by the Company, a copy of (i) any notice, claim, complaint or order
to the effect that the Company or any of its Subsidiaries is or may be
liable to any Person for $250,000 or more as a result of the release by the
Company, any of its Subsidiaries, or any other Person of any Hazardous
Materials into the environment or requiring that action be taken to respond
to or clean up a Release of Hazardous Materials into the environment, and
(ii) any notice, complaint or citation alleging any violation of any
Environmental Law or Environmental Permit by the Company or any of its
Subsidiaries which could reasonably be expected to give rise to such
liability.
(j) Promptly upon the furnishing thereof to the shareholders of the
Company, copies of all financial statements, reports and proxy statements
so furnished.
(k) Promptly upon the filing thereof, copies of all registration
statements and annual, quarterly, monthly or other regular reports which
Holdings, the Company or any of its Subsidiaries files with the Securities
and Exchange Commission.
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(l) Promptly and in any event within ten (10) days after learning
thereof, notification of (i) any tax assessment, demand, notice of proposed
deficiency or notice of deficiency received by the Company or any other
Consolidated Person or (ii) the filing of any tax Lien or commencement of
any judicial proceeding by or against any such Consolidated Person, if any
such assessment, demand, notice, Lien or judicial proceeding relates to tax
liabilities in excess of ten percent (10%) of the net worth (determined
according to generally accepted accounting standards and without reduction
for any reserve for such liabilities) of the Company and its Subsidiaries
taken as a whole.
(m) Promptly after the commencement of any action or proceeding
relating to the Company or any Subsidiary in any court or before any
Governmental Authority or arbitration board or tribunal as to which there
is a reasonable possibility of an adverse determination and that, if
adversely determined, is reasonably likely to have a Material Adverse
Effect, a written notice specifying the nature and period of existence
thereof and what action the Company is taking or proposes to take with
respect thereto.
(n) Promptly upon the request of any holder of Notes, copies of any
statement, report or certificate furnished to any holder of Indebtedness of
the Company or any Subsidiary to the extent that the information contained
in such statement, report or certificate has not already been delivered to
each holder of Notes.
(o) Promptly upon the request of any holder of Notes, information
required to comply with 17 C.F.R. Section 230.144A, as amended from time to
time.
(p) With reasonable promptness, such other information (including
non-financial information) as from time to time may be requested by any
holder of Notes.
6.2 USE OF PROCEEDS.
The Company will, and will cause each Subsidiary to, use the proceeds of
the Notes to provide funds for the Merger and the payment of related fees and
expenses. The Company will not, nor will it permit any Subsidiary to, use any
of the proceeds of the Notes to purchase or carry any "margin stock" (as defined
in Regulation G).
6.3 NOTICE OF DEFAULT OR CLAIMED DEFAULT.
The Company shall deliver to each holder of Notes:
(a) promptly, but in any event within three (3) Business Days of
becoming aware of the existence of any condition or event which constitutes
a Default or an Event of Default, a written notice specifying the nature
and period of existence thereof and what action the Company is taking or
proposes to take with respect thereto;
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(b) promptly, but in any event within three (3) Business Days of
becoming aware that the holder of any Note, or of any Indebtedness of the
Company or any Subsidiary, shall have given notice or taken any other
action with respect to a claimed Default, Event of Default or default or
event of default, a written notice specifying the notice given or action
taken by such holder and the nature of the claimed Default, Event of
Default or default or event of default and what action the Company is
taking or proposes to take with respect thereto; and
(c) prompt notice in writing of any other development, financial or
otherwise, relating specifically to the Company or any of its Subsidiaries
(and not of a general economic or political nature) which could reasonably
be expected to have a Material Adverse Effect.
6.4 CONDUCT OF BUSINESS.
The Company will, and will cause each Subsidiary to, carry on and conduct
its business in substantially the same manner and in substantially the same
fields of enterprise as it is presently conducted and to do all things necessary
to remain duly incorporated, validly existing and in good standing as a domestic
corporation in its jurisdiction of incorporation and maintain its qualification
as a foreign corporation in each jurisdiction where the conduct of its business
makes such qualification necessary, except where the failure to maintain such
qualification could not reasonably be expected to have a Material Adverse
Effect.
6.5 TAXES.
The Company will, and will cause each Subsidiary to, timely file complete
and correct United States federal and applicable foreign, state and local tax
returns required by applicable law and pay when due all taxes, assessments and
governmental charges and levies upon it or its income, profits or Property,
except those which are being contested in good faith by appropriate proceedings
and with respect to which adequate reserves have been set aside.
6.6 INSURANCE.
The Company will, and will cause each Subsidiary to, maintain with
financially sound and reputable insurance companies insurance on all their
Property in such amounts and covering such risks as is consistent with sound
business practice, and the Company will furnish to any holder of Notes upon
request full information as to the insurance carried.
6.7 COMPLIANCE WITH LAWS.
The Company will, and will cause each Subsidiary to, comply with all laws,
rules, regulations, orders, writs, judgments, injunctions, decrees or awards to
which it may be subject and obtain all licenses, certificates, permits,
franchises and other governmental authorizations necessary
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to the ownership of its Properties and the conduct of its business, the failure
to comply with which or obtain which could reasonably be expected to have a
Material Adverse Effect.
6.8 MAINTENANCE OF PROPERTIES.
The Company will, and will cause each Subsidiary to, do all things
necessary to maintain, preserve, protect and keep its material Property in good
repair, working order and condition, ordinary wear and tear excepted, and make
all necessary and proper repairs, renewals and replacements so that its business
carried on in connection therewith may be properly conducted at all times.
6.9 INSPECTION.
Upon at least two (2) Business Days' prior notice, the Company will, and
will cause each Subsidiary to, permit each holder of Notes, by their respective
representatives and agents, to inspect during normal business hours any of the
Property, corporate books and financial records of the Company and each
Subsidiary, to examine and make copies of the books of accounts and other
financial records of the Company and each Subsidiary, and to discuss the
affairs, finances and accounts of the Company and each Subsidiary with, and to
be advised as to the same by, their respective officers, employees and
independent public accountants (and by this provision the Company authorizes
said accountants to discuss the finances and affairs of the Company and its
Subsidiaries). The Company will keep or cause to be kept, and cause each
Subsidiary to keep or cause to be kept, appropriate records and books of account
in which complete entries are to be made reflecting its and their business and
financial transactions, such entries to be made in accordance with Agreement
Accounting Principles consistently applied. Any inspection provided for in this
Section 6.9 shall be at the expense of the holder of Notes unless a Default or
Event of Default shall exist at such time, in which event such inspection shall
be at the expense of the Company; provided, however, that whether or not a
Default or Event of Default shall exist at such time, the Company shall pay the
travel and other out-of-pocket expenses of up to two representatives acting on
behalf of all holders of Notes once during each fiscal year of the Company for
the purpose of performing such inspection or attending any scheduled meeting
among representatives of the Company and its lenders or investors.
6.10 DIVIDENDS; REDEMPTIONS.
The Company will not, nor will it permit any Subsidiary to, declare or pay
any dividends or make any distributions on its capital stock (other than
dividends payable in its own capital stock) or redeem, repurchase or otherwise
acquire or retire any of its capital stock or any options or other rights in
respect thereof at any time outstanding, except that any Subsidiary may declare
and pay dividends or make distributions to the Company.
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6.11 INDEBTEDNESS.
The Company will not, nor will it permit any Subsidiary to, create, incur
or suffer to exist any Indebtedness, except:
(a) the Indebtedness evidenced by the Notes;
(b) Indebtedness existing on the date hereof and described in PART
2.2(b) OF ANNEX 3;
(c) the Indebtedness evidenced by the Senior Financing Documents;
(d) Rate Hedging Obligations related to the Senior Financing
Documents;
(e) other Indebtedness in an aggregate outstanding principal amount
not to exceed $100,000, including, without limitation, Rate Hedging
Obligations other than those described in Section 6.11(d);
(f) Indebtedness incurred pursuant to Section 6.29;
(g) Refunding Debt; and
(h) Indebtedness permitted by Section 6.15.
6.12 MERGER.
The Company will not, nor will it permit any Subsidiary to, merge or
consolidate with or into any other Person, except that a Subsidiary may merge
into the Company or any Wholly-Owned Subsidiary of the Company.
6.13 SALE OF ASSETS.
The Company will not, nor will it permit any Subsidiary to, lease, sell or
otherwise transfer any Property, to any other Person except for (a) sales of
inventory in the ordinary course of business, and (b) leases, sales, transfers
or other dispositions of Property (collectively, "Dispositions") that, together
with all other Property of the Company and its Subsidiaries previously leased,
sold or transferred (other than inventory sold in the ordinary course of
business) as permitted by this Section 6.13 since the date hereof do not
constitute a Substantial Portion of the Property of the Company and its
Subsidiaries, provided, however, that if at any time the aggregate amount of
Property subject to Dispositions made pursuant to this Section 6.13 shall exceed
an Insubstantial Portion of the Property of the Company and its Subsidiaries,
the proceeds attributable to such excess must be applied within ninety (90) days
of the date of receipt thereof to (i) purchase assets used or useful in the
ordinary course of the business of the Company or any Subsidiary as theretofore
conducted or (ii) reduce the
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outstanding principal amount of the Installment Notes (or, if the Installment
Notes are paid in full, permanently reduce the Aggregate Revolving Credit
Commitment), or both.
6.14 INVESTMENTS AND PURCHASES.
The Company will not, nor will it permit any Subsidiary to, make or suffer
to exist any Investments (including, without limitation, loans and advances to,
and other Investments in, Subsidiaries), or commitments therefor, or to create
any Subsidiary or to become or remain a partner in any partnership or joint
venture, or to make any Purchases, except:
(a) Short-term obligations of, or fully guaranteed by, the United
States of America;
(b) Commercial paper rated A-1 or better by Standard and Poor's
Ratings Group, a division of McGraw-Hill, Inc., or P-1 or better by Moody's
Investors Service, Inc.;
(c) Demand deposit accounts maintained in the ordinary course of
business;
(d) Certificates of deposit issued by and time deposits with
commercial banks (whether domestic or foreign) having capital and surplus
in excess of $100,000,000;
(e) Purchases by the Company of the assets or all of the capital
stock of Persons engaged in substantially the same business as is conducted
by the Company as of the Closing Date or other complementary businesses for
consideration not to exceed $3,000,000 in the aggregate; provided, that (i)
no such Purchase is a "hostile" transaction, (ii) no Event of Default or
Default has occurred and is continuing at the consummation of or would be
caused by any such Purchase, (iii) the Company provides each holder of
Notes with pro forma financial statements giving effect to each such
Purchase which evidence the Company's ability to comply with Section 6.26
hereof for each of the four succeeding fiscal quarters and (iv) the Company
shall cause any Subsidiary so acquired (or any Subsidiary created to
acquire or hold such assets) to comply with the provisions of Section 6.29;
and
(f) Other Investments in existence on the date hereof, as described
on PART 6.14 OF ANNEX 3.
6.15 CONTINGENT OBLIGATIONS.
The Company will not, nor will it permit any Subsidiary to, make or suffer
to exist any Contingent Obligation (including, without limitation, any
Contingent Obligation with respect to the obligations of a Subsidiary), except
(a) by endorsement of instruments for deposit or collection in the ordinary
course of business, (b) Contingent Obligations in respect of any Senior Debt,
(c) the Subsidiary Guarantees, (d) Contingent Obligations under indemnity
agreements to title insurers to cause such title insurers to issue mortgagee
title insurance policies to the Agent, (e) Contingent
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Obligations with respect to customary indemnification and purchase price
adjustment obligations incurred in connection with Asset Dispositions and
Purchases permitted pursuant to Section 6.14(e), (f) Contingent Obligations
incurred in the ordinary course of business with respect to surety and appeal
bonds, performance and return-of-money bonds and other similar obligations not
exceeding at any time outstanding $100,000 in aggregate liability, (g)
Contingent Obligations with respect to Indebtedness permitted with respect to
Section 6.11, (h) Contingent Obligations incurred in connection with the
guaranty of obligations under floorplan financing arrangements with Deutsch
Financial Services or any successor thereto ("DFS") and other lenders for
certain of the Company's distributors in an aggregate amount not exceeding at
any time outstanding the lesser of (A) $20,000,000 and (B) twenty-five percent
(25%) of the aggregate amount outstanding under such floorplan financing
arrangements at the end of the previous calendar year, (i) repurchase
endorsements incurred in connection with the guaranty of obligations under
floorplan arrangements with lenders other than DFS for certain of the Company's
distributors in an aggregate amount not exceeding at any time outstanding
$3,000,000, (j) Contingent Obligations with respect to the guaranty of
obligations of certain of the Company's distributors relating to (x) revolving
credit facilities for company stores operated by such distributors in an amount
not exceeding at any time outstanding $500,000 in aggregate liability and (y)
vehicle and equipment financing not exceeding at any time outstanding $300,000
in aggregate principal amount, and (k) other Contingent Obligations not to
exceed $100,000 in the aggregate at any time outstanding.
6.16 LIENS.
The Company will not, nor will it permit any Subsidiary to, create, incur,
or suffer to exist any Lien in, of or on the Property of the Company or any of
its Subsidiaries, except:
(a) Liens for taxes, assessments or governmental charges or levies on
its Property if the same shall not at the time be delinquent or are being
contested in good faith and by appropriate proceedings and for which
adequate reserves in accordance with generally accepted principles of
accounting shall have been set aside on its books;
(b) Liens imposed by law, such as carriers', warehousemen's and
mechanics' liens and other similar liens arising in the ordinary course of
business which secure the payment of obligations not more than 60 days past
due or which are being contested in good faith by appropriate proceedings
and for which adequate reserves shall have been set aside on its books;
(c) Liens arising out of pledges or deposits under worker's
compensation laws, unemployment insurance, old age pensions, or other
social security or retirement benefits, or similar legislation;
(d) Utility easements, landlords' liens, building restrictions and
such other encumbrances or charges against real property as are of a nature
generally existing with respect to properties of a similar character and
which do not in any material way affect the
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marketability of the same or interfere with the use thereof in the business
of the Company or the Subsidiaries;
(e) Liens existing on the date hereof and described on PART 6.16 OF
ANNEX 3; and
(f) Liens securing any Senior Debt.
6.17 CAPITAL EXPENDITURES.
The Company will not, nor will it permit any Subsidiary to, expend, or be
committed to expend, for Capital Expenditures (including, without limitation,
for the acquisition of fixed assets) in the aggregate for the Company and its
Subsidiaries, more than $4,000,000 during the Company's fiscal year ending
September 30, 1995, $6,500,000 cumulatively during the Company's two fiscal
years ending September 30, 1995 and 1996, or $3,000,000 during any fiscal year
of the Company subsequent to the fiscal year ending September 30, 1996.
6.18 LEASE RENTALS.
The Company will not, nor will it permit any Subsidiary to, create, incur
or suffer to exist obligations for Rentals in excess of $750,000 during any one
fiscal year on a non-cumulative basis in the aggregate for the Company and its
Subsidiaries.
6.19 AFFILIATES.
The Company will not, and will not permit any Subsidiary to, enter into any
transaction (including, without limitation, the purchase or sale of any Property
or service) with, or make any payment or transfer to, any Affiliate except (a)
payments to affiliates of Harbour Group Investments III, L.P. for services
actually rendered which services are related to operations management, review
and analysis, asset management, corporate development (including the
identification , evaluation and negotiation of complementary Purchases and the
financing thereof and Asset Dispositions), financial analysis and management
information, and (b) in the ordinary course of business and pursuant to the
reasonable requirements of the Company's or such Subsidiary's business and upon
fair and reasonable terms no less favorable to the Company or such Subsidiary
than the Company or such Subsidiary would obtain in a comparable arms-length
transaction. Notwithstanding any provision of this Agreement to the contrary,
the Company shall be permitted to make the payments to its former stockholders
identified as the "Atlas Payments" in PART 6.19 OF ANNEX 3 hereto without
subordination.
6.20 AMENDMENTS TO AGREEMENTS; PREFERRED STOCK.
The Company will not, and will not permit any Subsidiary to, (a) amend,
waive, modify or terminate any Merger Document, or the terms and conditions
governing any preferred stock, or (b) redeem or retire any preferred stock.
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6.21 JUNIOR INDEBTEDNESS.
The Company will not, and will not permit any Subsidiary to, make any
amendment or modification to any indenture, note or other agreement evidencing
or governing any Junior Indebtedness, or directly or indirectly prepay, defease
or in substance defease, purchase, redeem, retire or otherwise acquire, any
Junior Indebtedness. During the existence of an Event of Default, the Company
will not, and will not permit any Subsidiary to, make any direct or indirect
payment, whether in cash, property or Securities or by set-off or otherwise, in
respect of any Junior Indebtedness (including without limitation payments of
interest, fees and expenses).
6.22 RATE HEDGING OBLIGATIONS.
Within ninety (90) days after the Closing Date, the Company will enter into
an interest rate exchange or insurance agreement or agreements with one or more
financial institutions providing for a fixed rate of interest on a notional
amount of at least $8,000,000 of the Senior Debt.
6.23 ENVIRONMENTAL MATTERS.
The Company shall and shall cause each of its Subsidiaries to (a) at all
times comply in all material respects with all applicable Environmental Laws and
(b) promptly take any and all necessary remedial actions in response to the
presence, storage, use, disposal, transportation or Release of any Hazardous
Materials on, under or about any real property owned, or, to the extent
permitted by the property owner, leased or operated by the Company or any of its
Subsidiaries. In the event that the Company or any Subsidiary undertakes any
remedial action with respect to any Hazardous Material on, under or about any
real property, the Company or such Subsidiary shall conduct and complete such
remedial action in compliance in all material respects with all applicable
Environmental Laws and in accordance with the policies, orders and directives of
all federal, state and local Governmental Authorities, except when the Company's
or such Subsidiary's liability for such presence, storage, use, disposal,
transportation or Release of any Hazardous Material is being contested in good
faith by the Company or such Subsidiary and appropriate reserves therefor have
been established. If any holder of Notes at any time has a reasonable basis to
believe that there may be a material violation of any Environmental Law by the
Company or any of its Subsidiaries, or any material liability of the Company or
any of its Subsidiaries arising thereunder or related to a Release of Hazardous
Materials on any real property owned, leased or operated by the Company or any
of its Subsidiaries or a Release on real property adjacent to such real
property, then the Company shall, upon the request of such holder, provide each
holder of Notes with all such reports, certificates, engineering studies and
other written material or data as any holder of Notes may reasonably require.
6.24 CHANGE IN CORPORATE STRUCTURE; FISCAL YEAR.
The Company shall not, nor shall it permit any Subsidiary to, (a) permit
any amendment or modification to be made to its certificate or articles of
incorporation or by-laws which is materially adverse to the interests of the
holders of Notes (provided that the Company shall notify the holders
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of Notes of any other amendment or modification thereto as soon as practicable
thereafter) or (b) change its fiscal year to end on any date other than
September 30 of each year.
6.25 INCONSISTENT AGREEMENTS.
The Company shall not, nor shall it permit any Subsidiary to, enter into
any indenture, agreement, instrument or other arrangement which, (a) directly or
indirectly prohibits or restrains, or has the effect of prohibiting or
restraining, or imposes materially adverse conditions upon, the incurrence and
maintenance of the Indebtedness evidenced by the Notes, or the execution and
delivery of any Subsidiary Guarantee pursuant to the provisions of Section 6.29
or any provision of any Subsidiary Guarantee, or the amending of any of the
Financing Documents or (b) contains any provision which would be violated or
breached by the Company's or any Subsidiary's performance of any of its
obligations under any Financing Document.
6.26 FINANCIAL COVENANTS.
Subject to normal year-end and closing audit adjustments for calculations
or determinations made in accordance with Agreement Accounting Principles prior
to the end of their fiscal year:
(a) DEFINITIONS -- As used in this Section 6.26, the following terms
have the respective meanings set forth or referenced below:
"DEBT" means (i) obligations for borrowed money; (ii) obligations
representing the deferred purchase price of property or services
(other than accounts payable arising in the ordinary course of
business payable on terms customary in the trade); (iii) obligations
which are evidenced by notes, acceptances or other instruments (other
than obligations to insurance agents or carriers evidenced by a note
representing the deferred purchase price of insurance coverage); (iv)
the portion of any capitalized lease obligations reflected as a
liability on the Company's balance sheet; (v) "Rate Hedging
Obligations" (as defined in the Senior Financing Agreement as in
effect on the date hereof); (vi) "Contingent Obligations" (as defined
in the Senior Financing Agreement as in effect on the date hereof)
(vii) obligations pursuant to or in respect of letters of credit; and
(viii) repurchase obligations or liabilities with respect to accounts
or notes receivable sold.
"EXCESS CASH FLOW" means Net Income after tax plus depreciation
and amortization, less the unfinanced portion of capital expenditures
and less principal debt service (including capitalized leases).
"MINIMUM DEBT SERVICE COVERAGE RATIO" means year-to-date after
tax Net Income plus year-to-date depreciation plus year-to-date
amortization minus year-to-date unfinanced portion of capital
expenditures; the total of the foregoing to be divided by the sum of
year-to-date principal payments on any scheduled or required
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installment obligations on any long term Debt (excluding payments on
the "Line of Credit" (as defined in the Senior Financing Agreement as
in effect on the date hereof)) plus payments on capitalized leases
(excluding "Mandatory Repayments" (as defined in the Senior Financing
Agreement as in effect on the date hereof)).
"TANGIBLE NET WORTH" means book equity plus Subordinated Debt
plus Junior Subordinated Debt minus goodwill minus capitalized
acquisition costs minus any other intangible assets minus non-trade
receivables due from officers, affiliates and employees minus advances
to affiliates, officers and employees minus investments in affiliates
in excess of the affiliates' tangible net worth multiplied by the
Company's percentage ownership interest in such affiliates minus
prepaid assets not already included above.
"OPERATING CASH FLOW" means for any period of calculation, an
amount equal to the sum of (i) Net Income, (ii) federal, state and
local income tax expense, (iii) interest expense, (iv) depreciation
and amortization expense, (v) losses on the sale or other disposition
of assets and (vi) extraordinary losses, minus (a) gains in the sale
or other disposition of assets and (b) extraordinary gains, all
calculated for such period.
(b) MINIMUM TANGIBLE NET WORTH -- the Company shall, at all times
during the periods set forth below, maintain a Tangible Net Worth of not
less than the amount set forth below opposite the applicable period:
====================================================================
PERIOD AMOUNT
====================================================================
From and after Closing Date $1,350,000
- --------------------------------------------------------------------
During the Company's 1996 fiscal year $2,970,000
- --------------------------------------------------------------------
During the Company's 1997 fiscal year $3,870,000
- --------------------------------------------------------------------
During the Company's 1998 fiscal year $8,100,000
- --------------------------------------------------------------------
During the Company's 1999 fiscal year $9,000,000
- --------------------------------------------------------------------
From end of the Company's 1999 fiscal $13,500,000
year and thereafter
====================================================================
(c) MAXIMUM CASH FLOW LEVERAGE RATIO -- the ratio of (i) the sum of
the "Obligations" (as defined in the Senior Financing Agreement as in
effect on the date hereof) plus Subordinated Debt plus Junior Subordinated
Debt to (ii) Operating Cash Flow,
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calculated at the end of each fiscal quarter of the Company on the basis of
the four consecutive fiscal quarters then ended, shall not be more than the
ratio set forth below opposite the applicable period:
====================================================================
PERIOD RATIO
====================================================================
1996 fiscal year 5.00 to 1.0
- --------------------------------------------------------------------
1997 fiscal year 4.89 to 1.0
- --------------------------------------------------------------------
1998 fiscal year 2.22 to 1.0
- --------------------------------------------------------------------
1999 fiscal year 1.22 to 1.0
- --------------------------------------------------------------------
2000 fiscal year 0.67 to 1.0
====================================================================
(d) MINIMUM OPERATING CASH FLOW -- the Company's Operating Cash Flow,
calculated at the end of each fiscal quarter of the Company on the basis of
the four consecutive fiscal quarters then ended, shall not be less than the
amount set forth below opposite the applicable period:
====================================================================
PERIOD AMOUNT
====================================================================
1996 fiscal year $4,611,600
- --------------------------------------------------------------------
1997 fiscal year $5,305,500
- --------------------------------------------------------------------
1998 fiscal year $10,153,800
- --------------------------------------------------------------------
1999 fiscal year $13,248,000
- --------------------------------------------------------------------
2000 fiscal year $12,081,600
====================================================================
(e) DEBT SERVICE COVERAGE RATIO -- the Company shall maintain a
Minimum Debt Service Coverage Ratio of at least 1.39 to 1.0 (measured at
the end of each fiscal quarter).
(f) INDEBTEDNESS TO TANGIBLE NET WORTH RATIO -- the ratio of (i) the
sum of Senior Debt plus Subordinated Debt plus Junior Indebtedness to (ii)
Tangible Net Worth plus Senior Debt, calculated at the end of each fiscal
quarter of the Company, shall not be more than the ratio set forth below
opposite the applicable period:
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====================================================================
PERIOD RATIO
====================================================================
1995 fiscal year .80 to 1.0
- --------------------------------------------------------------------
1996 fiscal year .80 to 1.0
- --------------------------------------------------------------------
1997 fiscal year .75 to 1.0
- --------------------------------------------------------------------
1998 fiscal year .75 to 1.0
- --------------------------------------------------------------------
1999 fiscal year .70 to 1.0
- --------------------------------------------------------------------
2000 fiscal year .70 to 1.0
- --------------------------------------------------------------------
2001 fiscal year and thereafter 0.65 to 1.0
====================================================================
6.27 TAX CONSOLIDATION.
The Company will not and will not permit any of its Subsidiaries to (a)
file or consent to the filing of any consolidated, combined or unitary income
tax return with any Person other than Holdings and the Company and its
Subsidiaries or (b) amend, terminate or fail to enforce the Tax Sharing
Agreement or enter into any other tax sharing agreement or similar arrangement.
6.28 ERISA COMPLIANCE.
With respect to any Plan, neither the Company nor any Subsidiary shall:
(a) engage in any "prohibited transaction" (as such term is defined
in Section 406 of ERISA or Section 4975 of the IRC) for which a civil
penalty pursuant to Section 502(i) of ERISA or a tax pursuant to Section
4975 of the IRC in excess of $150,000 could be imposed;
(b) incur any "accumulated funding deficiency" (as such term is
defined in Section 302 of ERISA) in excess of $150,000 whether or not
waived, or permit any Unfunded Liability to exceed $150,000;
(c) permit the occurrence of any Termination Event which could result
in a liability to the Company or any other member of a Controlled Group in
excess of $150,000;
(d) fail to make any contribution or payment to any Multiemployer
Plan which the Company or any other member of a Controlled Group may be
required to make under any agreement relating to such Multiemployer Plan or
any law pertaining thereto which results in or could result in a liability
in excess of $150,000; or
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(e) permit the establishment or amendment of any Plan or fail to
comply with the applicable provisions of ERISA and the IRC with respect to
any Plan which could result in liability to the Company or any other member
of a Controlled Group which, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect.
6.29 GUARANTEES FROM SUBSIDIARIES.
If at any time any Subsidiary shall guarantee any Senior Debt, then within
twenty (20) days of executing such guarantee such Subsidiary shall execute and
deliver to the holders of the Notes (a) a Subsidiary Guarantee and (b) a
certificate of even date therewith, signed by the Secretary or an Assistant
Secretary of such Subsidiary, substantially in the form of Exhibit D2 hereto.
In the event a Subsidiary shall be sold or otherwise disposed of in a
transaction permitted by Section 6.13, the holders of the Notes will release
such Subsidiary from its obligations under its Subsidiary Guarantee at such
time, PROVIDED such Subsidiary shall have been released from, or shall not be
subject to, any guarantee of the obligations of the Company under the Senior
Financing Agreement.
6.30 MAINTENANCE OF MOST FAVORED LENDER STATUS.
The Company and the holders of the Notes hereby acknowledge and agree that
if the Company or any Subsidiary shall enter into any amendment to the Senior
Financing Agreement with the Senior Lenders or enter into any other agreement
with the Senior Lenders which provides for the benefit of the Senior Lenders any
Financial Covenants which are more favorable to the Senior Lenders than the
Financial Covenants in this Agreement, THEN, and in each and any such event, the
Financial Covenants in this Agreement shall, notwithstanding the provisions of
Section 10.5 and without any further action on the part of the Company or any
other Person being necessary or required, be, and shall be deemed to be, amended
to afford the holders of Notes the same benefits and rights as such amendments
to, or other agreements in respect of, the Financial Covenants of the Senior
Financing Agreement afford to the Senior Lenders; PROVIDED that in all such
instances the Financial Covenants of the holders of the Notes shall be 10% less
restrictive than the Financial Covenants of the Senior Lenders.
6.31 PAYMENT OF NOTES AND MAINTENANCE OF OFFICE.
The Company will punctually pay, or cause to be paid, the principal of and
interest (and Make-Whole Amount, if any) on, the Notes, as and when the same
shall become due according to the terms hereof and of the Notes, and will
maintain an office at the address of the Company as provided in Section 10.1
where notices, presentations and demands in respect hereof or the Notes may be
made upon it. Such office will be maintained at such address until such time as
the Company shall notify the holders of the Notes of any change of location of
such office, which will in any event be located within the United States of
America.
6.32 PRIVATE OFFERING.
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The Company will not, and will not permit any Person acting on its behalf
to, offer the Notes or any part thereof or any similar Securities for issue or
sale to, or solicit any offer to acquire any of the same from, any Person so as
to bring the issuance and sale of the Notes within the provisions of section 5
of the Securities Act.
7. EVENTS OF DEFAULT
7.1 NATURE OF EVENTS.
An "EVENT OF DEFAULT" shall exist if any of the following occurs and is
continuing:
(a) PRINCIPAL OR MAKE-WHOLE AMOUNT PAYMENTS -- the Company shall fail
to make any payment of principal or Make-Whole Amount on any Note on or
before the date such payment is due;
(b) INTEREST PAYMENTS -- the Company shall fail to make any payment
of interest on any Note or shall fail to pay any other amount due hereunder
on or before five (5) days after the date such payment is due;
(c) OTHER DEFAULTS -- the Company or any Subsidiary shall fail to
comply with any other provision hereof, and such failure continues for more
than thirty (30) days after the earlier of the date upon which (i) the
Company or such Subsidiary shall have become aware of such failure or (ii)
written notice of such failure shall first have been given to the Company
or such Subsidiary by a holder of Notes;
(d) WARRANTIES OR REPRESENTATIONS -- any warranty, representation or
other statement by or on behalf of the Company or any Subsidiary contained
herein or in any instrument furnished in compliance herewith or in
reference hereto shall have been false or misleading in any material
respect when made;
(e) ACCELERATION OF SENIOR INDEBTEDNESS -- any event shall occur or
any condition shall exist in respect of Indebtedness evidenced by any
Senior Note, or under any agreement securing or relating to such
Indebtedness, that:
(i) causes such Indebtedness, or a portion thereof, to become
due prior to its stated maturity or prior to its regularly scheduled
date or dates of payment (excluding any mandatory prepayment in
respect of, or in connection with, excess cash flow, asset
dispositions or securities issuances); or
(ii) permits one or more of the holders thereof to require the
Company or any Subsidiary to repurchase such Indebtedness from such
holder and one or more of such Persons shall have required such
repurchase;
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(f) DEFAULT ON INDEBTEDNESS --
(i) the Company or any Subsidiary shall fail to make any payment
on any Indebtedness having an outstanding principal amount of at least
One Million Dollars ($1,000,000) (other than Senior Debt) when due
after the expiration of any applicable grace period; or
(ii) any event shall occur or any condition shall exist in
respect of Indebtedness of the Company or any Subsidiary having an
outstanding principal amount of at least One Million Dollars
($1,000,000) (other than Senior Debt), or under any agreement securing
or relating to such Indebtedness, that immediately or with any one or
more of the passage of time or the giving of notice:
(A) causes (or permits any one or more of the holders
thereof or a trustee therefor to cause) such Indebtedness, or a
portion thereof, to become due prior to its stated maturity or
prior to its regularly scheduled date or dates of payment; or
(B) permits any one or more of the holders thereof or a
trustee therefor to require the Company or any Subsidiary to
repurchase such Indebtedness from the holders thereof;
(g) INVOLUNTARY BANKRUPTCY PROCEEDINGS --
(i) a receiver, liquidator, custodian or trustee of the Company
or any Subsidiary, or of all or any substantial part of the Property
of either, shall be appointed by court order and such order remains in
effect for more than sixty (60) days; or an order for relief shall be
entered with respect to the Company or any Subsidiary, or the Company
or any Subsidiary shall be adjudicated a bankrupt or insolvent;
(ii) all or any substantial part of the Property of the Company
or any Subsidiary shall be sequestered by court order and such order
shall remain in effect for more than sixty (60) days; or
(iii) a petition shall be filed against the Company or any
Subsidiary under any bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, dissolution or liquidation law of
any jurisdiction, whether now or hereafter in effect, and shall not be
dismissed within sixty (60) days after such filing;
(h) VOLUNTARY PETITIONS -- the Company or any Subsidiary shall file a
petition in voluntary bankruptcy or seeking relief under any provision of
any bankruptcy, reorganization, arrangement, insolvency, readjustment of
debt, dissolution or liquidation law
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of any jurisdiction, whether now or hereafter in effect, or shall consent
to the filing of any petition against it under any such law;
(i) ASSIGNMENTS FOR BENEFIT OF CREDITORS, ETC. -- the Company or a
Subsidiary shall make an assignment for the benefit of its creditors, or
admits in writing its inability, or fails, to pay its debts generally as
they become due, or shall consent to the appointment of a receiver,
liquidator or trustee of the Company or a Subsidiary or of all or a
substantial part of its Property; or
(j) UNDISCHARGED FINAL JUDGMENTS -- a final, non-appealable judgment
for the payment of money in excess of $1,250,000, or final, non-appealable
judgments for the payment of money aggregating in excess of $2,500,000, is
or are outstanding against one or more of the Company and the Subsidiaries
and any one of such judgments shall have been outstanding for more than
sixty (60) days from the date of its entry and shall not have been
discharged in full or stayed; or
(k) SUBSIDIARY GUARANTEES -- any Subsidiary Guarantee shall fail to
remain in full force or effect or any action shall be taken to discontinue
or to assert the invalidity or unenforceability of any Subsidiary
Guarantee, or any Subsidiary shall fail to comply with any of the terms or
provisions of a Subsidiary Guarantee, or any Subsidiary denies that it has
any further liability under a Subsidiary Guarantee or gives notice to such
effect.
7.2 DEFAULT REMEDIES.
(a) ACCELERATION ON EVENT OF DEFAULT.
(i) If any Event of Default specified in Section 7.1(g), Section
7.1(h) or Section 7.1(i) shall exist, all of the Notes at the time
outstanding shall automatically become immediately due and payable
together with interest accrued thereon and, to the extent permitted by
law, the Make-Whole Amount at such time with respect to the principal
amount of such Notes, without presentment, demand, protest or notice
of any kind, all of which are hereby expressly waived, and,
(ii) If any Event of Default other than those specified in
Section 7.1(g), Section 7.1(h) and Section 7.1(i) shall exist, the
holder or holders of at least thirty-five percent (35%) in principal
amount of the Notes then outstanding (exclusive of Notes then owned by
any one or more of the Company, any Subsidiary or any Affiliate) may
exercise any right, power or remedy permitted to such holder or
holders by law, and shall have, in particular, without limiting the
generality of the foregoing, the right to declare the entire principal
of, and all interest accrued on, all the Notes then outstanding to be,
and such Notes shall thereupon become, forthwith due and payable,
without any further presentment, demand, protest or other notice of
any kind, all of which are hereby expressly waived, and, subject to
Section 8.3, the
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Company shall forthwith pay to the holder or holders of all the Notes
then outstanding the entire principal of, and interest accrued on, the
Notes and, to the extent permitted by law, the Make-Whole Amount at
such time with respect to such principal amount of such Notes.
(b) ACCELERATION ON PAYMENT DEFAULT. Subject to Section 8.3, during
the existence of an Event of Default described in Section 7.1(a) or Section
7.1(b), and irrespective of whether the Notes then outstanding shall have
been declared to be due and payable pursuant to Section 7.2(a)(ii), any
holder of Notes who or which shall have not consented to any waiver with
respect to such Event of Default may, at his or its option, by notice in
writing to the Company, declare the Notes then held by such holder to be,
and such Notes shall thereupon become, forthwith due and payable together
with all interest accrued thereon, without any presentment, demand, protest
or other notice of any kind, all of which are hereby expressly waived, and
the Company shall forthwith pay to such holder the entire principal of and
interest accrued on such Notes and, to the extent permitted by law, the
Make-Whole Amount at such time with respect to such principal amount of
such Notes.
(c) VALUABLE RIGHTS. The Company acknowledges, and the parties
hereto agree, that the right of each holder to maintain its investment in
the Notes free from repayment by the Company (except as herein specifically
provided for) is a valuable right and that the provision for payment of a
Make-Whole Amount by the Company in the event that the Notes are prepaid or
are accelerated as a result of an Event of Default is intended to provide
compensation for the deprivation of such right under such circumstances.
(d) OTHER REMEDIES. During the existence of an Event of Default and
irrespective of whether the Notes then outstanding shall have been declared
to be due and payable pursuant to Section 7.2(a) or Section 7.2(b) and
irrespective of whether any holder of Notes then outstanding shall
otherwise have pursued or be pursuing any other rights or remedies, any
holder of Notes may proceed to protect and enforce its rights hereunder and
under such Notes by exercising such remedies as are available to such
holder in respect thereof under applicable law, either by suit in equity or
by action at law, or both, whether for specific performance of any
agreement contained herein or in aid of the exercise of any power granted
herein, subject to Section 8.3, PROVIDED that the maturity of such holder's
Notes may be accelerated only in accordance with Section 7.2(a) and Section
7.2(b).
(e) NONWAIVER. No course of dealing on the part of any holder of
Notes nor any delay or failure on the part of any holder of Notes to
exercise any right shall operate as a waiver of such right or otherwise
prejudice such holder's rights, powers and remedies.
7.3 ANNULMENT OF ACCELERATION OF NOTES.
If a declaration is made pursuant to Section 7.2(a)(ii), then and in every
such case, the holders of at least seventy-five percent (75%) in aggregate
principal amount of the Notes then outstanding
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(exclusive of Notes then owned by any one or more of the Company, any
Subsidiaries and any Affiliates) may, by written instrument filed with the
Company, rescind and annul such declaration, and the consequences thereof,
PROVIDED that at the time such declaration is annulled and rescinded:
(a) no judgment or decree shall have been entered for the payment of
any moneys due on or pursuant hereto or the Notes;
(b) all arrears of interest upon all the Notes and all other sums
payable hereunder and under the Notes (except any principal of, or interest
or Make-Whole Amount on, the Notes which shall have become due and payable
by reason of such declaration under Section 7.2(a)(ii)) shall have been
duly paid; and
(c) each and every other Default and Event of Default shall have been
waived pursuant to Section 10.5 or otherwise made good or cured;
and PROVIDED FURTHER that no such rescission and annulment shall extend to
or affect any subsequent Default or Event of Default or impair any right
consequent thereon.
8. SUBORDINATION OF NOTES
8.1 GENERAL.
All Subordinated Debt is and shall be subordinate and junior in right of
payment to all Senior Debt to the extent provided in this Section 8 and nothing
in this Section 8 or in the definition of Maximum Senior Debt Amount shall be
construed as a limit on the extent of the secured claim of the Senior Lenders.
8.2 AMENDMENT OF SENIOR DEBT, ETC.
The Senior Debt shall continue to be Senior Debt and entitled to the
benefits of these subordination provisions irrespective of any amendment,
modification or waiver of any term of the Senior Debt, any extension or renewal
of the Senior Debt or the granting or release of any collateral or security
securing the repayment of the Senior Debt.
8.3 DEFAULT IN RESPECT OF SENIOR DEBT.
(a) PAYMENT DEFAULT. In the event the Company shall default in the
payment of any principal of, or interest on, any Senior Debt when the same
becomes due and payable, whether at maturity, at a date fixed for
prepayment, by declaration of acceleration or otherwise, then,
(i) unless and until such default shall have been cured or
waived or shall have ceased to exist, no direct or indirect payment
(in cash, Property or Securities or
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by set-off or otherwise) shall be made or agreed to be made on account
of any Subordinated Debt, or as a sinking fund for any Subordinated
Debt, or in respect of any redemption, retirement, purchase, prepayment or
other acquisition of any Subordinated Debt, and
(ii) no holder of Subordinated Debt will take action to
accelerate the Subordinated Debt or commence, cause the commencement
of, participate in or support any action or proceeding (whether at law
or in equity) against the Company or any Subsidiary to recover all or
any part of the Subordinated Debt or any action to commence or
prosecute any bankruptcy or similar proceeding in respect of the
Company or any Subsidiary (unless the Agent (or, if there shall be no
agent for the holders of Senior Debt at such time, the Required Senior
Lenders) shall have agreed in writing in advance to, and shall have
joined in, such proceeding) during the period of one hundred eighty
(180) days commencing on the occurrence of such default.
(b) SPECIFIED NONPAYMENT DEFAULT. Upon the occurrence of any other
"default" (as defined in the Senior Financing Agreement), then, unless and
until such Default shall have been cured or waived in writing or shall have
ceased to exist,
(i) no direct or indirect payment (in cash, Property or
Securities or by set-off or otherwise) shall be made or agreed to be
made on account of any Subordinated Debt, or as a sinking fund for any
Subordinated Debt, or in respect of any redemption, retirement,
purchase, prepayment or other acquisition of any Subordinated Debt,
and
(ii) no holder of Subordinated Debt will accelerate the
Subordinated Debt or commence, cause the commencement of, participate
in or support any action or proceeding (whether at law or in equity)
against the Company or any Subsidiary to recover all or any part of
Subordinated Debt or any action to commence or prosecute any
bankruptcy or similar proceeding in respect of the Company or any
Subsidiary (unless the Agent (or, if there shall be no agent for the
holders of Senior Debt at such time, the Required Senior Lenders)
shall have agreed in writing in advance to, and shall have joined, in
such proceeding),
during any period of one hundred eighty (180) days after the time a notice
of such Default shall have been given to the Company by the Agent (or, if
there shall be no agent for the holders of Senior Debt at such time, the
Required Senior Lenders) stating that such notice is a "Blockage Notice"
given pursuant to this Section 8.3. Only one (1) such period of up to one
hundred eighty (180) days may be commenced within any three hundred sixty
(360) day period and no Blockage Notice shall be given with respect to a
Default which existed and was known to the Agent (or if there shall be no
Agent for the holders of the Senior Debt at such time, the Required Senior
Lenders) at the time the most recent Blockage Notice was
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given (unless such Default has been cured or waived in writing for at least
ninety (90) consecutive days in the interim).
8.4 INSOLVENCY, ETC.
In the event of
(a) any insolvency, bankruptcy, receivership, liquidation,
reorganization, readjustment, composition or other similar proceeding which
relates to the Company or its Property,
(b) any proceeding for the liquidation, dissolution or other
winding-up of the Company, voluntary or involuntary, whether or not
involving insolvency or bankruptcy proceedings,
(c) any assignment by the Company for the benefit of creditors, or
(d) any other marshaling of the assets of the Company,
then and in any such event:
(i) all Senior Debt shall first be paid in full, in cash or cash
equivalents, before any payment or distribution, whether in cash,
Securities or other Property, shall be made to any holder of any
Subordinated Debt on account of any Subordinated Debt;
(ii) any payment or distribution, whether in cash, Securities or
other Property (other than Securities of the Company or any other
corporation provided for by a plan or reorganization or readjustment
the payment of which is subordinated, at least to the extent of the
Subordinated Debt as provided in this Section 8, to the payment of all
Senior Debt at the time outstanding and to any Securities issued to
the holders of Senior Debt in respect of the Senior Debt under any
such plan or reorganization or readjustment), that would otherwise
(but for this Section 8) be payable or deliverable in respect of
Subordinated Debt, shall be paid or delivered directly to the holders
of Senior Debt in accordance with the priorities then existing among
such holders of Senior Debt until all Senior Debt shall have been paid
in full, in cash or cash equivalents; and
(iii) if any holder of Subordinated Debt fails to file a claim or
proof of debt in respect of such Subordinated Debt in such proceedings
at least five (5) Business Days prior to the latest date permitted by
rule of law or court order for such filing, then the holders of Senior
Debt shall be authorized (but not obligated) to file such
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claim or proof on behalf of such holder of Subordinated Debt. Each
holder of the Subordinated Debt agrees that, while it shall retain the
right to vote its claim and otherwise act in any bankruptcy,
insolvency or similar proceeding related to the Company, such holder
will not take any act or vote in any way so as to contest the
enforceability of the subordination provisions set forth herein.
8.5 ACCELERATION OF SUBORDINATED DEBT.
In the event that any Subordinated Debt shall be declared due and payable
as the result of the occurrence of any one or more defaults in respect thereof,
under circumstances when the terms of Section 8.4 of this Agreement do not
prohibit payment on Subordinated Debt, no direct or indirect payment (in cash,
Securities, other Property or by set-off or otherwise) shall be made or agreed
to be made on account of any Subordinated Debt, or as a sinking fund for any
Subordinated Debt, or in respect of any redemption, retirement, purchase,
prepayment or other acquisition of any Subordinated Debt, unless and until all
Senior Debt shall have been paid in full, in cash or cash equivalents, or such
declaration and its consequences shall have been rescinded and all such defaults
shall have been remedied or waived in writing or shall have ceased to exist.
8.6 TURNOVER OF PAYMENTS.
In the event that
(a) any payment or distribution shall be paid to or collected or
received by any holders of Subordinated Debt in contravention of any of the
terms of this Section 8 and prior to the payment in full, in cash or cash
equivalents, of the Senior Debt at the time outstanding, and
(b) any holder of such Senior Debt shall have notified such holders
of Subordinated Debt, within one hundred eighty (180) days of any such
payment or distribution, of the facts by reason of which such collection or
receipt so contravenes this Section 8,
then and in any such event such holders of Subordinated Debt will deliver such
payment or distribution, to the extent necessary to pay all such Senior Debt in
full, in cash or cash equivalents, to the holders of such Senior Debt and, until
so delivered, the same shall be held in trust by such holders of Subordinated
Debt as the Property of the holders of such Senior Debt. If after any amount is
delivered to the holders of Senior Debt pursuant to this Section 8.6 and (i) the
holders of Subordinated Debt shall be required by an order or judgment of a
court of competent jurisdiction to disgorge a payment (the "AVOIDED PAYMENT")
received by them and so paid over (in whole or in part) to the holders of Senior
Debt, or (ii) the outstanding Senior Debt shall thereafter be paid in full, in
cash or cash equivalents, without giving effect to such delivery made pursuant
to this Section 8.6, then, in either case, the holders of Senior Debt shall
return to such holders of Subordinated Debt an amount equal to the amount
delivered to such holders of Senior Debt pursuant to this Section 8.6,
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so long as (in the case of the immediately preceding clause (ii) only) after the
return of such amount the Senior Debt shall remain paid in full, in cash or cash
equivalents. For purposes of clause (i) of the immediately preceding sentence,
if less than all of the Avoided Payment was paid over to the holders of Senior
Debt and the holders of Subordinated Debt are able to satisfy their obligations
under such order or judgment in whole or in part from the portion of the Avoided
Payment not so paid over to the holders of the Senior Debt, the holders of
Senior Debt shall not be required to return any portion of the Avoided Payment
in excess of the amount actually required by the holders of the Subordinated
Debt to satisfy their obligations.
8.7 OBLIGATIONS NOT IMPAIRED.
No right of any present or future holder of any Senior Debt to enforce
subordination as herein provided shall at any time in any way be prejudiced or
impaired by (and such right shall remain in full force and effect
notwithstanding):
(a) any act or failure to act on the part of the Company (including
by way of an amendment to the provisions of this Section 8);
(b) any extension or indulgence in respect of any payment or
prepayment of the Senior Debt or any part thereof or in respect of any
other amount payable to any holder of Senior Debt;
(c) any amendment, modification, restatement, or waiver of, or
addition or supplement to, or deletion from, or compromise, release,
consent or other action in respect of, any of the terms of any Senior Debt
or any other agreement which may be relating to any Senior Debt;
(d) any exercise or non-exercise by any holder of Senior Debt of any
right, power, privilege or remedy under or in respect of any Senior Debt or
the Subordinated Debt, or any waiver of any such right, power, privilege or
remedy or any default in respect of any Senior Debt or the Subordinated
Debt, or any receipt by any holder of Senior Debt of any collateral
security, or any failure of any holder of Senior Debt to perfect a security
interest in any collateral, or any release by any holder of Senior Debt of
any security for the payment of such Senior Debt;
(e) any merger or consolidation of the Company or any of its
Subsidiaries into or with any of its Subsidiaries or into or with any
Person, or any sale, lease or transfer of any or all of the assets of the
Company or any of its Subsidiaries to any other Person; or
(f) the absence of any notice to, or knowledge by, any holder of
Subordinated Debt of the existence or occurrence of any of the matters or
events set forth in the foregoing clauses (a) through (e).
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Nothing contained in this Section 8 shall impair, as between the Company and any
holder of Subordinated Debt, the obligation of the Company to pay to such holder
the principal thereof and Make-Whole Amount or premium, if any, and interest, on
the Subordinated Debt, as and when the same shall become due and payable in
accordance with the terms thereof, or prevent any holder of any Subordinated
Debt from exercising all rights, powers and remedies otherwise permitted by
applicable law or under any agreement under which such Subordinated Debt was
incurred, all subject to the rights of the holders of the Senior Debt to receive
cash, Securities or other Property otherwise payable or deliverable to the
holders of Subordinated Debt as provided in this Section 8.
8.8 PAYMENT OF SENIOR DEBT; SUBROGATION.
Upon the payment in full, in cash or cash equivalents, of all Senior Debt,
the holders of Subordinated Debt shall be subrogated to all rights of any holder
of Senior Debt to receive any further payments or distributions applicable to
the Senior Debt until the Subordinated Debt shall have been paid in full, and
such payments or distributions received by the holders of Subordinated Debt by
reason of such subrogation, of cash, Securities or other Property that otherwise
would be paid or distributed to the holders of Senior Debt, shall, as between
the Company and its creditors other than the holders of Senior Debt, on the one
hand, and the holders of Subordinated Debt, on the other hand, be deemed to be a
payment by the Company on account of Senior Debt, and not on account of
Subordinated Debt.
8.9 RIGHT OF SENIOR HOLDERS TO AMEND AND ACT.
The holders of Senior Debt may, at any time and from time to time, without
the consent of or notice to any holder of Subordinated Debt, without incurring
responsibility to any holder of Subordinated Debt, and without impairing or
releasing the obligations of any holder of Subordinated Debt to the holders of
Senior Debt:
(a) change the manner, place or terms of payment or change or extend
the time of payment of, or renew or alter, or increase (subject to the
limitations set forth in the definition of Senior Debt in Section 9) the
amount of, Senior Debt, or otherwise amend, modify, restate, refinance,
supplement or terminate in any manner Senior Debt (including, without
limitation, changes to the rate of interest applicable thereto) or any
instrument evidencing the same or any agreement under which Senior Debt is
outstanding;
(b) sell, exchange, release or otherwise deal with any property
pledged, mortgaged or otherwise securing Senior Debt;
(c) release any person liable in any manner for the payment or
collection of Senior Debt;
(d) exercise or refrain from exercising any rights against the
Company and any other person;
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(e) apply any sums paid in respect of the Senior Debt to the Senior
Debt, regardless of who made such payment or how such payment was realized;
and
(f) otherwise take any other action deemed necessary or appropriate
in connection with the Senior Debt.
8.10 NOTICES BY COMPANY.
In the event that Subordinated Debt, or any portion thereof, shall become
due and payable before its expressed maturity for any reason other than the mere
passage of time, the Company shall give prompt notice in writing of such
happening to all known holders of Senior Debt.
8.11 AMENDMENT OF SUBORDINATION PROVISIONS.
Notwithstanding anything contained in this Agreement or any other Financing
Document to the contrary, no provision of this Section 8 may be amended without
the prior written consent of the Agent (or, if there shall be no agent for the
holders of the Senior Debt at such time, each holder of Senior Debt).
8.12 RELIANCE OF HOLDERS OF SENIOR DEBT.
Each holder of Subordinated Debt by its acceptance thereof shall be deemed
to acknowledge and agree that the foregoing subordination provisions are, and
are intended to be, an inducement to and a consideration of each holder of any
Senior Debt, whether such Senior Debt was created or acquired before or after
the creation of Subordinated Debt, to acquire and hold, or to continue to hold,
such Senior Debt, and such holder of Senior Debt shall be deemed conclusively to
have relied on such subordination provisions in acquiring and holding, or in
continuing to hold, such Senior Debt. The holders of Senior Debt shall be
third-party beneficiaries of this Article 8.
8.13 WAIVER AND CONSENT.
Each holder of Subordinated Debt waives any and all notices of the
acceptance of the provisions of this Section 8 or of the creation, renewal,
extension or accrual, now or any time in the future, of any Senior Debt or of
the reliance of the holders of the Senior Debt on the provisions of this Section
8. Each holder of Subordinated Debt acknowledges and agrees that the provisions
set forth in this Section 8 shall be enforceable against such Persons by the
holders of the Senior Debt, without in any manner or to any extent impairing or
affecting the obligations of the Company to the holders of the Subordinated
Debt.
8.14 REINSTATEMENT OF SUBORDINATION.
The obligations of each holder of Subordinated Debt under the provisions
set forth in this Section 8 shall continue to be effective, or to be reinstated,
as the case may be, as to any payment
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in respect of any Senior Debt that is rescinded or must otherwise be returned by
the holder of such Senior Debt upon the occurrence or as a result of any
bankruptcy or judicial proceeding, all as though such payment had not been made.
8.15 ANNULMENT OF ACCELERATION.
In the event of a declaration of acceleration hereunder based solely
upon an Event of Default under Section 7.1(e), such declaration of acceleration
shall be automatically annulled if (i) the holders of the Senior Debt which is
the subject of such Event of Default have rescinded their declaration of
acceleration in respect of such Senior Debt within fifteen (15) Business Days of
acceleration and (ii) no other Event of Default has occurred during such fifteen
(15) Business Day period. Any Event of Default under Section 7.1(a) or Section
7.1(b) arising solely out of the Company's observance of its obligations under
this Section 8 shall be deemed waived, and any acceleration of the Subordinated
Debt predicated solely upon such Event of Default shall be automatically
rescinded, if within one (1) Business Day after the restriction on payment of
Subordinated Debt has expired or been terminated, the Company has made payment
in full of all past due amounts (excluding amounts due solely as a result of
acceleration) and no other Event of Default exists.
9. INTERPRETATION OF THIS AGREEMENT
9.1 TERMS DEFINED.
As used herein, the following terms have the respective meanings set forth
below or set forth in the Section hereof following such term:
ACCOUNTS -- means all present and future rights of the Company or any
Subsidiary to payment for goods sold or leased or for services rendered, whether
or not they have been earned by performance.
ACQUISITION CO. -- means TRK Acquisition Corporation, a Delaware
corporation.
AFFILIATE -- means, at any time, a Person (other than a Subsidiary)
(a) that directly or indirectly through one or more intermediaries
Controls, or is Controlled by, or is under common Control with, the
Company,
(b) that beneficially owns or holds ten percent (10%) or more of any
class of the Voting Stock of the Company, or
(c) ten percent (10%) or more of the Voting Stock (or in the case of
a Person that is not a corporation, ten percent (10%) or more of the equity
interest) of which is beneficially owned or held by the Company or a
Subsidiary,
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at such time. As used in this definition,
CONTROL -- means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise provided that no Person shall be deemed to be in control of
another Person solely by virtue of the ownership of Notes.
AGENT -- means Firstar Financial Services, a division of Firstar Bank
Milwaukee, N.A., in its capacity as agent for the Lenders under the Senior
Financing Agreement, and not in its individual capacity as a Senior Lender, and
any successor Agent appointed pursuant to the Senior Financing Agreement.
AGGREGATE REVOLVING CREDIT COMMITMENT -- shall mean the aggregate
availability under the Line of Credit.
AGREEMENT, THIS -- means this Note Purchase Agreement, as it may be
amended,
restated, supplemented or otherwise modified from time to time.
AGREEMENT ACCOUNTING PRINCIPLES -- means generally accepted accounting
principles as in effect from time to time, applied in a manner consistent with
those used in preparing the financial statements referred to in Section 2.2(a);
PROVIDED, HOWEVER, that for purposes of all computations required to be made
with respect to compliance by the Company with Section 6.26, such term shall
mean generally accepted accounting principles as in effect on the date hereof,
applied in a manner consistent with those used in preparing the financial
statements referred to in Section 2.2(a).
ASSET DISPOSITION -- means any sale, transfer or other disposition of any
asset of the Company or any Subsidiary in a single transaction or in a series of
related transactions (other than the sale of inventory in the ordinary course).
AVOIDED PAYMENT -- Section 8.6
BUSINESS DAY -- means a day other than a Saturday, a Sunday or, a day on
which the bank designated by the holder of a Note to receive for such holder's
account payments on such Note is required by law (other than a general banking
moratorium or holiday for a period exceeding four (4) consecutive days) to be
closed.
CAPITAL EXPENDITURES -- means, without duplication, any expenditures for
any purchase or other acquisition for value of any asset that is classified on a
consolidated balance sheet of the Company with the Subsidiaries prepared in
accordance with Agreement Accounting Principles as a fixed or capital asset
excluding (a) the cost of assets acquired in connection with any Capitalized
Lease, (b) expenditures of insurance proceeds to rebuild or replace any asset
after a casualty loss, and (c) leasehold improvement expenditures for which the
Company or a Subsidiary is reimbursed promptly by the lessor.
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CAPITALIZED LEASE -- of a Person means any lease of Property by such Person
as lessee which would be capitalized on a balance sheet of such Person prepared
in accordance with Agreement Accounting Principles.
CAPITALIZED LEASE OBLIGATIONS -- of a Person means the amount of the
obligations of such Person under Capitalized Leases which would be shown as a
liability on a balance sheet of such Person prepared in accordance with
Agreement Accounting Principles.
CHANGE IN CONTROL -- means (a) Holdings (or another corporation or
partnership owned directly or indirectly by Harbour Group Investments III, L.P.
(or one of its Affiliates) and the Company's management) shall cease to own
beneficially and of record, free and clear of all Liens, other encumbrances or
voting agreements, restrictions or trusts of any kind 100% of the outstanding
shares of capital stock of the Company, or (b) Harbor Group Investments III,
L.P. or any of its Affiliates shall cease to own beneficially and of record,
free and clear of all Liens, other encumbrances, or voting agreements,
restrictions or trusts of any kind at least (i) 75% of the outstanding shares of
capital stock of Holdings (or such other corporation which becomes the parent of
the Company in accordance with the preceding clause (a)) on a fully diluted
basis and shares representing the right to elect a corresponding percentage of
the directors of Holdings or (ii) equivalent ownership rights in any partnership
which becomes the parent of the Company in accordance with clause (a).
CLOSING -- Section 1.2(b).
CLOSING DATE -- Section 1.2(b).
COMPANY -- has the meaning specified in the introductory sentence hereof.
COMPANY SOLVENCY CERTIFICATE -- Section 3.4.
CONSOLIDATED or CONSOLIDATED when used in connection with any calculation,
means a calculation to be determined on a consolidated basis for the Company and
its Subsidiaries in accordance with Agreement Accounting Principles.
CONSOLIDATED PERSON -- means, for the taxable year of reference, each
Person which is a member of the affiliated group of the Company (if Consolidated
returns are or shall be filed for such affiliated group for federal income tax
purposes) or any combined or unitary group of which the Company is a member for
state income tax purposes.
CONTINGENT OBLIGATION -- of a Person means any agreement, undertaking or
arrangement by which such Person assumes, guarantees, endorses, contingently
agrees to purchase or provide funds for the payment of the obligation or
liability of any other Person, or agrees to maintain the net worth or working
capital or other financial condition of any other Person, or otherwise assures
any creditor
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of such other Person against loss, including, without limitation, any comfort
letter, operating agreement or take-or-pay contract or application for a Letter
of Credit.
CONTROL EVENT -- means
(a) the execution by the Company, any Subsidiary or any Affiliate of
any letter of intent with respect to any proposed transaction or event or
series of transactions or events that, individually or in the aggregate,
could reasonably be expected to result in a Change in Control or
(b) the execution of any written agreement that, when fully performed
by the parties thereto, would result in a Change in Control.
CONTROLLED GROUP -- means all members of a controlled group of corporations
and all trades or businesses (whether or not incorporated) under common control
which, together with the Company or any of its Subsidiaries, are treated as a
single employer under Section 414 of the IRC.
CONTROL PREPAYMENT DATE -- Section 4.2(a).
DEFAULT -- means an event or condition the occurrence of which would, with
the lapse of time or the giving of notice or both, become an Event of Default.
ENVIRONMENTAL LAW -- means any law, statute or regulation enacted by any
jurisdiction in connection with or relating to the protection or regulation of
the environment, including, without limitation, those laws, statutes and
regulations regulating the disposal, removal, production, storing, refining,
handling, transferring, processing or transporting of hazardous or toxic
substances, and any orders, decrees or judgments issued by any court of
competent jurisdiction in connection with any of the foregoing.
ENVIRONMENTAL PERMIT -- means and includes all permits, certifications,
licenses, approvals and other authorizations pertaining to Environmental Laws
required in respect of the operation of a business.
ERISA -- means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
ERISA AFFILIATE -- means any member of a Controlled Group other than the
Company.
EVENT OF DEFAULT -- Section 7.1.
EXCHANGE ACT -- means the Securities and Exchange Act of 1934, as amended
from time to time.
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FAIR MARKET VALUE -- means, with respect to any Property, the sale value of
such Property that would be realized in an arm's-length sale at such time
between an informed and willing buyer, and an informed and willing seller, under
no compulsion to buy or sell, respectively.
FINANCIAL COVENANT -- means any covenant (or substantially equivalent
default provision) which requires any one or more of the Company and its
Subsidiaries to attain or maintain a prescribed level of financial condition or
financial achievement, including without limitation, covenants of the type
contained in Section 6.26 of this Agreement.
FINANCING DOCUMENTS -- means and includes this Agreement, the Notes and the
Subsidiary Guarantees, together with any other documents and instruments
required to be executed and delivered in connection therewith, as the same may
be amended or modified from time to time.
GOVERNMENTAL AUTHORITY -- means
(a) the government of
(i) the United States of America and any State or other
political subdivision thereof, or
(ii) any other jurisdiction in which the Company or any
Subsidiary conducts all or any part of its business, or that asserts
any jurisdiction over the conduct of the affairs of, or the Property
of the Company or any Subsidiary, and
(b) any entity exercising executive, legislative, judicial,
regulatory or administrative functions of, or pertaining to, any such
government.
HAZARDOUS MATERIALS -- means any and all pollutants, contaminants, toxic or
hazardous wastes or any other substances that might pose a hazard to health or
safety, the removal of which may be required or the generation, manufacture,
refining, production, processing, treatment, storage, handling, transportation,
transfer, use, disposal, release, discharge, spillage, seepage, or filtration of
which is or shall be restricted, prohibited or penalized by any applicable law
(including, without limitation, asbestos, urea formaldehyde foam insulation and
polychlorinated biphenyls).
HOLDINGS -- means Uniquip Corporation, a Delaware corporation, or such
other Person which becomes the parent of the Company in accordance with clause
(a) of the definition of "Change in Control".
INDEBTEDNESS -- of a Person means such Person's (a) obligations for
borrowed money, (b) obligations representing the deferred purchase price of
Property or services (other than accounts payable arising in the ordinary course
of such Person's business payable on terms customary in the trade), (c)
obligations, whether or not assumed, secured by Liens or payable out of the
proceeds or production from Property now or hereafter owned or acquired by such
Person, (d) obligations which
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are evidenced by notes, acceptances, or other instruments (other than
obligations to the Company's insurance agents or carriers evidenced by a note
representing the deferred purchase price of insurance coverage), (e) that
portion of the Capitalized Lease Obligations that is reflected as a liability on
the Company's balance sheet, (f) Rate Hedging Obligations, (g) Contingent
Obligations, (h) obligations for which such Person is obligated pursuant to or
in respect of a Facility Letter of Credit and the face amount of any other
Letter of Credit and (i) repurchase obligations or liabilities of such Person
with respect to Accounts or notes receivable sold by such Person.
INSTALLMENT NOTES -- shall have the meaning ascribed thereto in the Senior
Financing Agreement.
INSUBSTANTIAL PORTION -- means, with respect to the Property of the Company
and its Subsidiaries, Property which represents 10% or less of the consolidated
assets of the Company and its Subsidiaries, as would be shown in the
consolidated financial statements of the Company and its Subsidiaries as at the
end of the quarter next preceding the date on which such determination is made,
or (b) is responsible for 10% or less of the consolidated net sales or of the
consolidated net income of the Company and its Subsidiaries for the 12-month
period ending as of the end of the quarter next preceding the date of
determination.
INVENTORY -- means all of the inventory of every kind and description, now
or at any time hereafter owned by the Company or any Subsidiary, or in the
custody or possession of the Company or any Subsidiary, wherever located,
including, without limitation, all merchandise, raw materials, parts, supplies,
work-in-process and finished goods intended for sale.
INVESTMENT -- of a Person means any loan, advance (other than commission,
travel, relocation, tuition reimbursement and similar advances to officers and
employees made in the ordinary course of business), extension of credit (other
than accounts receivable arising in the ordinary course of business on terms
customary in the trade), deposit account or contribution of capital by such
Person to any other Person or any investment in, or purchase or other
acquisition of, the stock, partnership interests, notes, debentures or other
securities of any other Person made by such Person.
IPO -- Section 4.3(a)(ii).
IRC -- means the Internal Revenue Code of 1986, together with all rules and
regulations promulgated pursuant thereto, as amended from time to time.
JUNIOR INDEBTEDNESS -- of a Person means any Indebtedness of such Person
the payment of which is subordinated to payment of the Notes to the written
satisfaction of the Required Holders. Without limiting the foregoing, the
Junior Subordinated Note shall constitute Junior Indebtedness.
JUNIOR SUBORDINATED DEBT -- means and includes all obligations, liabilities
and indebtedness of the Company now or hereafter existing, whether fixed or
contingent, and whether for principal,
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interest, fees, expenses, indemnification of otherwise, including Post-Petition
Interest in respect of any of the foregoing, under or in connection with the
Junior Subordinated Note.
JUNIOR SUBORDINATED NOTE -- means that certain promissory note of the
Company dated the date hereof in the principal amount of $2,000,000 in favor of
Harbour Group Investments III, L.P.
LETTER OF CREDIT -- of a Person means a letter of credit or similar
instrument which is issued upon the application of such Person or upon which
such Person is an account party or for which such Person is in any way liable.
LIEN -- means any security interest, lien (statutory or other), mortgage,
pledge, hypothecation, assignment, deposit arrangement, encumbrance or
preference, priority or other security agreement or preferential arrangement of
any kind or nature whatsoever (including, without limitation, the interest of a
vendor or lessor under any conditional sale, Capitalized Lease or other title
retention agreement).
LINE OF CREDIT -- shall have the meaning ascribed thereto in the Senior
Financing Agreement.
MAKE-WHOLE AMOUNT -- means, with respect to Prepaid Principal and the date
the prepayment thereof is due (the "Prepayment Date") the greater of
(a) zero (0), or
(b) an amount equal to the Present Value of the Prepaid Cash Flows
determined in respect of such Prepaid Principal as of such Prepayment Date
minus the amount of such Prepaid Principal.
As used in this definition,
PREPAID PRINCIPAL -- means any portion of the principal amount of any
Indebtedness being paid for any reason (including, without limitation,
acceleration, optional prepayment or mandatory prepayment required because
of the occurrence of a contingency) prior to its regularly scheduled
maturity date.
PRESENT VALUE OF THE PREPAID CASH FLOWS -- means the sum of the
present values of the then remaining scheduled payments of principal and
interest that would have been payable in respect of such Prepaid Principal
but that are no longer payable as a result of the early prepayment of such
Prepaid Principal. In determining such present values,
(i) the amount of interest accrued through and including the day
immediately preceding such Prepayment Date on such Prepaid Principal
since the scheduled interest payment date immediately preceding such
Prepayment Date shall be deducted from the first of such payments of
interest, and
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(ii) a discount rate equal to the Make-Whole Discount Rate
determined with respect to such Prepaid Principal and such Prepayment
Date divided by four (4), and a discount period of three (3) months of
thirty (30) days each, shall be used.
MAKE-WHOLE DISCOUNT RATE -- (i) with respect to the prepayment of a
principal amount of the Notes pursuant to Section 4.2(b) or Section
4.3(a)(ii), means the "CHANGE IN CONTROL DISCOUNT RATE," and (ii) with
respect to the payment of a principal amount of the Notes for any other
reason (including, without limitation, acceleration, optional prepayment or
mandatory prepayment required because of the occurrence of a contingency)
prior to its regularly scheduled maturity date, means the "STANDARD
DISCOUNT RATE."
CHANGE IN CONTROL DISCOUNT RATE -- at any time means,
(i) if such time is prior to August 31, 1998, four and fifty
one-hundredths percent (4.50%) per annum, or
(ii) if such time is on or after August 31, 1998, two percent
(2.00%) per annum,
plus, in either case, the per annum percentage rate (rounded to the nearest
three decimal (3) places) equal to the bond equivalent yield to maturity
derived from the Measuring Rate determined as of the date that is two (2)
business days prior to such Prepayment Date.
STANDARD DISCOUNT RATE -- means one percent (1.00%) per annum plus the
per annum percentage rate (rounded to the nearest three decimal (3) places)
equal to the bond equivalent yield to maturity derived from the Measuring
Rate determined as of the date that is two (2) business days prior to such
Prepayment Date.
APPLICABLE H.15 -- means, at any time, the United States Federal
Reserve Statistical Release H.15(519) then most recently published and
available to the public, or if such publication is not available, then any
other source of current information in respect of interest rates on
securities of the United States of America that is generally available and,
in the judgment of the Required Holders, provides information reasonably
comparable to the H.15(519) report.
MEASURING RATE -- means, at any time, the Bloomberg Rate, or if the
Bloomberg Rate is not then available, the Telerate Rate, or if both the
Telerate Rate and the Bloomberg Rate is not then available, the Applicable
H.15 Rate.
APPLICABLE H.15 RATE -- means, at any time, the then most current
annual yield to maturity of the hypothetical United States Treasury
obligation listed in the Applicable H.15 with a Treasury Constant Maturity
(as such term is defined in such Applicable H.15) equal to the Weighted
Average Life to Maturity of such Prepaid Principal. If no such United
States
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Treasury obligation with a Treasury Constant Maturity corresponding exactly
to such Weighted Average Life to Maturity is listed, then the yields for
the two (2) then most current hypothetical United States Treasury
obligations with Treasury Constant Maturities most closely corresponding to
such Weighted Average Life to Maturity one (1) with a longer maturity and
one (1) with a shorter maturity, if available) shall be calculated pursuant
to the immediately preceding sentence and the Make-Whole Discount Rate
shall be interpolated or extrapolated from such yields on a straight-line
basis.
BLOOMBERG RATE -- means the per annum yield reported on the Bloomberg
Financial Markets System at 10:00 a.m. (New York time) on the second (2nd)
Business Day preceding such Prepayment Date for United States government
Securities having a maturity (rounded to the nearest month) corresponding
to the Weighted Average Life to Maturity of such Prepaid Principal. Page
USD shall be used as the source of such yields, or if not then available,
such other screen available on the Bloomberg Financial Markets System as
shall, in the opinion of the Required Holders, provide equivalent
information.
TELERATE RATE -- means the per annum yield reported on the Telerate
Service at 10:00 a.m. (New York time) on the second (2nd) Business Day
preceding such Prepayment Date for United States government Securities
having a maturity (rounded to the nearest month) corresponding to the
Weighted Average Life to Maturity of such Prepaid Principal. Page 678
shall be used as the source of such yields, or if not then available, such
other screen available on the Telerate Service as shall, in the opinion of
the Required Holders, provide equivalent information.
WEIGHTED AVERAGE LIFE TO MATURITY -- means the number of years
obtained by dividing the Remaining Dollar-Years of such Prepaid Principal
by such Prepaid Principal, determined as of such Prepayment Date.
REMAINING DOLLAR-YEARS -- means the result obtained by
(a) MULTIPLYING, in the case of each then remaining scheduled
payment of principal that would have been payable in respect of
Prepaid Principal but is no longer payable as a result of the
prepayment of such Prepaid Principal,
(i) an amount equal to such scheduled payment of principal,
by
(ii) the number of years (calculated to the nearest
one-twelfth) that will elapse between such Prepayment Date and
the date such scheduled principal payment would be due if such
Prepaid Principal had not been so prepaid, and
(b) calculating the sum of each of the products obtained in the
preceding subsection (a).
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MATERIAL ADVERSE EFFECT -- means a material adverse effect on (a) the
business, Property, condition (financial or other), performance, results of
operations, or prospects of either the Company or the Company and its
Subsidiaries taken as a whole, (b) the ability of the Company or any Subsidiary
to perform its obligations under any Financing Document to which it is a party,
or (c) the validity or enforceability of this Agreement or the Notes (as
determined by the holders of the Notes in their sole discretion) or the rights
or remedies of the holders of Notes thereunder.
MAXIMUM SENIOR DEBT AMOUNT -- means the result of (a) Thirty Million
Dollars ($30,000,000) principal amount of Senior Debt minus, on a
dollar-for-dollar basis, any and all amounts of principal repaid by the Company
or any other Person on the Installment Notes, plus (b) up to Three Million
Dollars ($3,000,000) in interest, fees and expenses relating to such Senior
Debt.
MERGER -- means the merger of Acquisition Co. with and into the Company.
MERGER AGREEMENT -- means that certain Agreement and Plan of Merger dated
as of July 19, 1995 between Acquisition Co. and the Company.
MERGER DOCUMENTS -- means the Merger Agreement, together with the
certificates of ownership and merger filed with the Delaware Secretary of State
to effectuate the Merger and the other documents, certificates and agreements
delivered in connection with the Merger Agreement.
MERGER EFFECTIVE TIME -- means the time of effectiveness of the Merger.
MULTIEMPLOYER PLAN -- means and includes (without duplication) (i) any
"multiemployer plan" (as defined in section 3(37) of ERISA) in respect of which
the Company or any ERISA Affiliate is an "employer" (as such term is defined in
section 3 of ERISA), and (ii) any Plan maintained pursuant to a collective
bargaining agreement or any other arrangement to which the Company or any member
of a Controlled Group is a party to which more than one employer is obligated to
make contributions.
NET WORTH -- means at any date the consolidated stockholders' equity of the
Company and its consolidated Subsidiaries determined in accordance with
Agreement Accounting
Principles.
NOTE -- Section 1.1.
PBGC -- means the Pension Benefit Guaranty Corporation, and any Person
succeeding to the functions of the PBGC.
PENSION PLAN -- means, at any time, any "employee pension benefit plan" (as
such term is defined in section 3(2) of ERISA) maintained at such time by the
Company or any ERISA Affiliate for employees or former employees of the Company
or such ERISA Affiliate, excluding any Multiemployer Plan.
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PERSON -- means any natural person, corporation, firm, joint venture,
partnership, association, enterprise, trust or other entity or organization, or
any government or political subdivision or any agency, department or
instrumentality thereof.
PLAN -- means an employee pension benefit plan, as defined in Section 3(2)
of ERISA, as to which the Company or any member of a Controlled Group may have
any liability.
POST-PETITION INTEREST -- means interest accruing in respect of Senior Debt
after the commencement of any bankruptcy, insolvency, receivership or similar
proceeding by or against the Company, at the rate applicable to such Senior Debt
pursuant to the terms of the Senior Financing Agreement or other applicable
document, whether or not such interest is allowed as a claim enforceable against
the Company in any such proceeding.
PRO FORMA BALANCE SHEET -- Section 3.12.
PROJECTIONS -- Section 2.2(d).
PROPERTY -- of a Person means any and all property, whether real, personal,
tangible, intangible, or mixed, of such Person, or other assets owned, leased or
operated by such Person.
PURCHASE -- means any transaction, or any series of related transactions,
consummated on or after the date of this Agreement, by which the Company or any
of its Subsidiaries (a) acquires any going business or all or substantially all
of the assets of any firm, corporation or division thereof, whether through
purchase of assets, merger or otherwise, or (b) directly or indirectly acquires
(in one transaction or as the most recent transaction in a series of
transactions) at least a majority (in number of votes) of the securities of a
corporation which have ordinary voting power for the election of directors
(other than securities having such power only by reason of the happening of a
contingency) or a majority (by percentage of voting power) of the outstanding
partnership interests of a partnership.
PURCHASER -- means the Person listed as the purchaser of Notes on Annex 1.
RATE HEDGING OBLIGATIONS -- of a Person means any and all obligations of
such Person, whether absolute or contingent and howsoever and whensoever
created, arising, evidenced or acquired (including all renewals, extensions and
modifications thereof and substitutions therefor), under (a) any and all
agreements, devices or arrangements designed to protect at least one of the
parties thereto from the fluctuations of interest rates, exchange rates or
forward rates applicable to such party's assets, liabilities or exchange
transactions, including, but not limited to, dollar-denominated or
cross-currency interest rate exchange agreements, forward currency exchange
agreements, interest rate cap or collar protection agreements, forward rate
currency or interest rate options, puts and warrants, and (b) any and all
cancellations, buybacks, reversals, terminations or assignments of any of the
foregoing.
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REFUNDING DEBT -- means Indebtedness which replaces, refunds or refinances
any Senior Debt, provided that:
(a) the aggregate amount thereof plus the aggregate amount of any
Senior Debt not thereby replaced, refunded or refinanced, does not exceed
the Maximum Senior Debt Amount immediately prior to the incurrence of such
Indebtedness,
(b) the terms thereof do not subject the Company to any prohibition
on paying principal or interest on the Notes other than those prohibitions
contained in Section 8 of this Agreement,
(c) if any portion of such Indebtedness shall consist of a revolving
credit facility, advances thereunder shall be related to a formula based
upon, inter alia, inventory and accounts receivable, and
(d) if any portion of such Indebtedness shall consist of a term loan,
the weighted average life of such term loan shall be not less than the
remaining weighted average life of the Senior Debt being replaced, refunded
or refinanced.
REGULATION G -- means Regulation G of the Board of Governors of the Federal
Reserve System as from time to time in effect and shall include any successor or
other regulation or official interpretation of said Board of Governors relating
to the extension of credit by Persons other than banks, brokers and dealers for
the purpose of purchasing or carrying margin stocks applicable to such Persons.
RELEASE -- is defined in the Comprehensive Environmental Response,
Compensation and Liability Act, as amended, 42 U.S.C. 39601 ET SEQ.
RENTALS -- of a Person means the aggregate fixed amounts payable by such
Person under any lease of Property, other than any Capitalized Lease.
REPORTABLE EVENT -- means a reportable event as defined in Section 4043 of
ERISA and the regulations issued under such section, with respect to a Plan,
excluding, however, such events as to which the PBGC has by regulation waived
the requirement of Section 4043(a) of ERISA that it be notified within 30 days
of the occurrence of such event; provided, that a failure to meet the minimum
funding standard of Section 412 of the IRC and of Section 302 of ERISA shall be
a Reportable Event regardless of the issuance of any such waiver of the notice
requirement in accordance with either Section 4043(a) of ERISA or Section 412(d)
of the IRC.
REQUIRED HOLDERS -- means, at any time, the holders of at least sixty-six
and two-thirds percent (66-2/3%) in principal amount of the Notes at the time
outstanding (exclusive of Notes then owned by any one or more of the Company,
any Subsidiary or any Affiliate).
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REQUIRED PRINCIPAL PAYMENT -- Section 4.1.
REQUIRED SENIOR LENDERS -- means, at any time, the holders of at least
66.666% in principal amount of the Senior Notes at the time outstanding
(exclusive of Senior Notes then owned by any one or more of the Company, any
Subsidiary or any Affiliate).
SECURITIES ACT -- means the Securities Act of 1933, as amended from time to
time.
SECURITY -- means "security" as defined in section 2(1) of the Securities
Act.
SENIOR DEBT -- means and includes all obligations, liabilities and
indebtedness of the Company now or hereafter existing, whether fixed or
contingent, and whether for principal, interest, fees, expenses, indemnification
or otherwise, including Post-Petition Interest in respect of any of the
foregoing, under each Senior Financing Document, including liabilities and
obligations not constituting Indebtedness but arising under any agreement
executed in connection with, and related to, the Senior Financing Agreement
(including, without limitation, fees and disbursements incurred by any holder of
Senior Debt in connection therewith); PROVIDED, HOWEVER, that if the aggregate
amount of such Senior Debt (as defined above without respect to this proviso)
shall exceed the Maximum Senior Debt Amount, such excess shall not constitute
Senior Debt for purposes of this Agreement.
SENIOR FINANCING AGREEMENT -- means (i) that certain Revolving Loan and
Security Agreement, dated as of August __, 1995, among the Company, the Senior
Lenders and the Agent, as such agreement is amended, supplemented, modified or
restated from time to time, and (ii) each agreement pursuant to which any
Refunding Debt shall be issued and any amendment, supplement, modification or
restatement thereof.
SENIOR FINANCING DOCUMENTS -- means and includes each Senior Financing
Agreement, the Senior Notes, the Installment Notes, and the security agreements,
pledge agreements, guaranties, mortgages and other documents and instruments
contemplated by each Senior Financing Agreement and executed in favor of the
Agent or any Senior Lender, as the same may be amended, supplemented, modified
or restated from time to time in accordance with the provisions thereof.
SENIOR FINANCIAL OFFICER -- means any one of the chief financial officer
and the principal accounting officer of the Company.
SENIOR LENDERS -- means and includes Firstar Financial Services, a division
of Firstar Bank Milwaukee, N.A., and each other lending institution that becomes
a "Lender" in accordance with the Senior Financing Agreement.
SENIOR NOTES -- means and includes any one or more promissory notes issued
by the Company to the Senior Lenders pursuant to each Senior Financing
Agreement, evidencing the obligations of the Company thereunder.
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SENIOR OFFICER -- means any one of the chairman of the board of directors,
the chief executive officer, the chief operating officer, the chief financial
officer and the president, of the Company.
SINGLE EMPLOYER PLAN -- means a Plan subject to Title IV of ERISA
maintained by the Company or any member of a Controlled Group for employees of
the Company or any member of a Controlled Group, other than a Multiemployer
Plan.
SOLVENT -- means, when used with respect to a Person, that (a) the fair
saleable value of the assets of such Person is in excess of the total amount of
the present value of its liabilities (including for purposes of this definition
all liabilities (including loss reserves as determined by the Company), whether
or not reflected on a balance sheet prepared in accordance with Agreement
Accounting Principles and whether direct or indirect, fixed or contingent,
secured or unsecured, disputed or undisputed), (b) such Person is able to pay
its debts or obligations in the ordinary course as they mature and (c) such
Person does not have unreasonably small capital to carry out its business as
conducted and as proposed to be conducted. "Solvency" shall have a correlative
meaning.
SUBORDINATED DEBT -- means and includes all obligations, liabilities and
indebtedness of the Company now or hereafter existing, whether fixed or
contingent, and whether for principal, Make-Whole Amount, prepetition interest,
fees, expenses, indemnification or otherwise, under this Agreement or the Notes,
together with any post-petition interest on the foregoing indebtedness which has
been allowed by the applicable bankruptcy court having jurisdiction over a
bankruptcy or similar proceeding involving the Company.
SUBSIDIARY -- of a Person means (a) any corporation more than 50% of the
outstanding securities having ordinary voting power of which shall at the time
be owned or controlled, directly or indirectly, by such Person or by one or more
of its Subsidiaries or by such Person and one or more of its Subsidiaries, or
(b) any partnership, association, joint venture or similar business organization
more than 50% of the ownership interests having ordinary voting power of which
shall at the time be so owned or controlled. Unless otherwise expressly
provided, all references herein to a "Subsidiary" shall mean a Subsidiary of the
Company.
SUBSIDIARY GUARANTEE -- means a guarantee of the obligations and
indebtedness of the Company under this Agreement and the Notes in substantially
the form of Exhibit E hereto.
SUBSTANTIAL PORTION -- means, with respect to the Property of the Company
and its Subsidiaries, Property which represents more than 25% of the
consolidated assets of the Company and its Subsidiaries, as would be shown in
the consolidated financial statements of the Company and its Subsidiaries as at
the end of the quarter next preceding the date on which such determination is
made, or (b) is responsible for more than 25% of the consolidated net sales or
of the consolidated net income of the Company and its Subsidiaries for the
12-month period ending as of the end of the quarter next preceding the date of
determination.
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TERMINATION EVENT -- means, with respect to a Plan which is subject to
Title IV of ERISA, (a) a Reportable Event, (b) the withdrawal of the Company or
any other member of a Controlled Group from such Plan during a plan year in
which the Company or any other member of a Controlled Group was a "substantial
employer" as defined in Section 4001(a)(2) of ERISA or was deemed such under
Section 4068(f) of ERISA, (c) the termination of such Plan, the filing of a
notice of intent to terminate such Plan or the treatment of an amendment of such
Plan as a termination under Section 4041 of ERISA, (d) the institution by the
PBGC of proceedings to terminate such Plan or (e) any event or condition which
might constitute grounds under Section 4042 of ERISA for the termination of, or
appointment of a trustee to administer, such Plan.
TIME OF CLOSING -- means the time, on the Closing Date, immediately
following the consummation of the Merger and the transactions contemplated
hereby.
TOTAL ASSET SALE -- Section 4.3(a)(ii).
TRANSACTION DOCUMENTS -- means and includes the Financing Documents, the
Senior Financing Documents and the Merger Documents,
UNFUNDED LIABILITY -- means the amount (if any) by which the present value
of all vested and unvested accrued benefits under a Single Employer Plan exceeds
the fair market value of assets allocable to such benefits, all determined as of
the then most recent valuation date for such Plans using PBGC actuarial
assumptions for single employer plan terminations.
VOTING STOCK -- means capital stock of any class or classes of a
corporation the holders of which are ordinarily, in the absence of
contingencies, entitled to vote in the election of corporate directors (or
Persons performing similar functions).
WHOLLY-OWNED SUBSIDIARY -- of a Person means (a) any Subsidiary all of the
outstanding voting securities of which shall at the time be owned or controlled,
directly or indirectly, by such Person or one or more Wholly-Owned Subsidiaries
of such Person, or by such Person and one or more Wholly-Owned Subsidiaries of
such Person, or (b) any partnership, association, joint venture or similar
business organization 100% of the ownership interests having ordinary voting
power of which shall at the time be so owned or controlled.
The foregoing definitions shall be equally applicable to both the singular
and plural forms of the defined terms.
9.2 ACCOUNTING PRINCIPLES.
Unless otherwise provided herein, all financial statements delivered in
connection herewith will be prepared in accordance with Agreement Accounting
Principles. Where the character or amount of any asset or liability or item of
income or expense, or any consolidation or other accounting computation is
required to be made for any purpose hereunder, it shall be done in
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accordance with Agreement Accounting Principles, provided, that if any term
defined herein includes or excludes amounts, items or concepts that would not be
included in or excluded from such term if such term was defined with reference
solely to Agreement Accounting Principles, such term will be deemed to include
or exclude such amounts, items or concepts as set forth herein.
9.3 DIRECTLY OR INDIRECTLY.
Where any provision herein refers to action to be taken by any Person, or
which such Person is prohibited from taking, such provision shall be applicable
whether such action is taken directly or indirectly by such Person, including
actions taken by or on behalf of any partnership in which such Person is a
general partner.
9.4 SECTION HEADINGS AND TABLE OF CONTENTS; INDEPENDENT CONSTRUCTION.
(a) SECTION HEADINGS AND TABLE OF CONTENTS, ETC. The titles of the
Sections of this Agreement and the Table of Contents of this Agreement
appear as a matter of convenience only, do not constitute a part hereof and
shall not affect the construction hereof. The words "herein," "hereof,"
"hereunder" and "hereto" refer to this Agreement as a whole and not to any
particular Section or other subdivision. References to Sections are,
unless otherwise specified, references to Sections of this Agreement.
References to Annexes and Exhibits are, unless otherwise specified,
references to Exhibits and Annexes attached to this Agreement.
(b) INDEPENDENT CONSTRUCTION. Each covenant contained herein shall be
construed (absent an express contrary provision herein) as being
independent of each other covenant contained herein, and compliance with
any one covenant shall not (absent such an express contrary provision) be
deemed to excuse compliance with one or more other covenants.
9.5 GOVERNING LAW.
THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, INTERNAL WISCONSIN LAW.
10. MISCELLANEOUS
10.1 COMMUNICATIONS.
(a) METHOD; ADDRESS. All communications hereunder or under the Notes
shall be in writing, shall be delivered by
(i) nationwide overnight courier, and
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(ii) facsimile transmission, and
shall be addressed, if to the Company, at the address and telecopy number
set forth on Annex 2, and if to any of the holders of the Notes,
(A) if such holder is a Purchaser, at the address set forth on
Annex 1 for such holder, and further including any parties referred to
on such Annex 1 which are required to receive notices in addition to
such holder, and
(B) if such holder is not a Purchaser, at the address and
telecopy number set forth in the register for the registration and
transfer of Notes maintained pursuant to Section 5.1 for such holder,
or to any such party at such other address as such party may designate
by notice duly given in accordance with this Section 10.1.
(b) WHEN GIVEN. Any communication addressed and delivered as herein
provided shall be deemed to be received when actually delivered to the
address of the addressee (whether or not delivery is accepted) or received
by the telecopy machine of the recipient. Any communication not so
addressed and delivered shall be ineffective.
10.2 REPRODUCTION OF DOCUMENTS.
This Agreement and all documents relating hereto, including, without
limitation,
(a) consents, waivers and modifications that may hereafter be
executed,
(b) documents received by you at the closing of your purchase of the
Notes (except the Notes themselves), and
(c) financial statements, certificates and other information
previously or hereafter furnished to you or any other holder of Notes,
may be reproduced by any holder of Notes by any photographic, photostatic,
microfilm, micro-card, miniature photographic, digital or other similar process
and each holder of Notes may destroy any original document so reproduced. The
Company agrees and stipulates that any such reproduction shall be admissible in
evidence as the original itself in any judicial or administrative proceeding
(whether or not the original is in existence and whether or not such
reproduction was made by such holder of Notes in the regular course of business)
and that any enlargement, facsimile or further reproduction of such reproduction
shall likewise be admissible in evidence. Nothing in this Section 10.2 shall
prohibit the Company or any holder of Notes from contesting the accuracy or
validity of any such reproduction.
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10.3 SURVIVAL.
All warranties, representations, certifications and covenants made by the
Company herein or in any certificate or other instrument delivered by it or on
its behalf hereunder at or prior to the Closing shall be considered to have been
relied upon by you and shall survive the delivery to you of the Notes regardless
of any investigation made by you or on your behalf. All statements in any
certificate or other instrument delivered by or on behalf of the Company
pursuant to the terms hereof shall constitute warranties and representations by
the Company hereunder. All payment obligations of the Company hereunder
(including, without limitation, reimbursement obligations in respect of costs,
expenses and fees of or incurred by the holders of the Notes) other than the
obligation to pay the principal of and interest and Make-Whole Amount on the
Notes, shall survive the payment or prepayment of the Notes, such interest and
such Make-Whole Amount and the termination hereof.
10.4 SUCCESSORS AND ASSIGNS; BENEFICIARIES.
This Agreement shall inure to the benefit of and be binding upon the
successors and assigns of each of the parties hereto except that the Company
shall not have the right to assign its rights or obligations hereunder. The
provisions hereof are intended to be for the benefit of all holders, from time
to time, of Notes, and shall be enforceable by any such holder whether or not an
express assignment of rights has been executed by such holder, subject to
Section 5.1. This Agreement shall not be deemed to confer any right or benefit
upon any Person other than the parties hereto and their successors and permitted
assigns.
10.5 AMENDMENT AND WAIVER.
(a) REQUIREMENTS. This Agreement may be amended, and the observance
of any term hereof may be waived, with (and only with) the written consent
of the Company and the Required Holders; PROVIDED that no such amendment or
waiver of any of the provisions of Section 1 through Section 3, inclusive,
or any defined term used therein, shall be effective as to any holder of
Notes unless consented to by such holder in writing; and PROVIDED FURTHER
that no such amendment or waiver shall, without the written consent of the
holders of all Notes (exclusive of Notes held by the Company, any
Subsidiary or any Affiliate) at the time outstanding:
(i) change the amount or time of any prepayment or payment of
principal or Make-Whole Amount or the rate or time of payment of
interest,
(ii) amend or waive the provisions of Section 7.1(a), Section
7.1(b), Section 7.2, Section 7.3 or Section 8,
(iii) amend or waive the definition of "Required Holders," or
amend or waive any other definition to the extent used therein, in
Section 7, in Section 8 or in this Section 10.5,
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(iv) permit any assignment by the Company of its obligations or
rights hereunder, or
(v) amend or waive this Section 10.5.
(b) SOLICITATION OF NOTEHOLDERS.
(i) SOLICITATION. Each holder of the Notes (irrespective of the
amount of Notes then owned by it) shall be provided by the Company
with sufficient information to enable such holder to make an informed
decision with respect to any proposed waiver or amendment of any of
the provisions hereof or of the Notes. Executed or true and correct
copies of any waiver or consent effected pursuant to the provisions of
this Section 10.5 shall be delivered by the Company to each holder of
outstanding Notes forthwith following the date on which the same shall
have been executed and delivered by all holders of outstanding Notes
required to consent or agree to such waiver or consent.
(ii) PAYMENT. The Company shall not, directly or indirectly, pay
or cause to be paid any remuneration, whether by way of supplemental
or additional interest, fee or otherwise, or grant any security, to
any holder of Notes as consideration for or as an inducement to the
entering into by any holder of Notes of any waiver or amendment of any
of the provisions hereof or of the Notes unless such remuneration is
concurrently paid, or security is concurrently granted, on the same
terms, ratably to the holders of all Notes then outstanding.
(iii) SCOPE OF CONSENT. Any amendment, waiver or consent made
pursuant to this Section 10.5 by a holder of Notes that has
transferred or has agreed to transfer its Notes to the Company, any
Subsidiary or any Affiliate and has provided or has agreed to provide
such amendment, waiver or consent as a condition to such transfer
shall be void and of no force and effect except solely as to such
holder, and any amendments effected or waivers or consents granted
that would not have been or would not be so effected or granted but
for such amendment, waiver or consent (and the amendments, waivers or
consents of all other holders of Notes that were acquired under the
same or similar conditions) shall be void and of no force and effect,
retroactive to the date such amendment or waiver initially took or
takes effect, except solely as to such holder.
(c) BINDING EFFECT. Except as provided in Section 10.5(b)(iii), any
amendment or waiver consented to as provided in this Section 10.5 shall
apply equally to all holders of Notes and shall be binding upon them and
upon each future holder of any Note and upon the Company whether or not
such Note shall have been marked to indicate such amendment or waiver. No
such amendment or waiver shall extend to or affect any obligation,
covenant,
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agreement, Default or Event of Default not expressly amended or waived or
impair any right consequent thereon.
10.6 EXPENSES.
(a) The Company shall pay when billed the reasonable costs and
expenses (including reasonable attorneys' fees and allocated time charges
of internal counsel for the holders of the Notes) incurred by the holders
of the Notes in connection with the consideration, negotiation, preparation
or execution of any amendments, waivers, consents, standstill agreements
and other similar agreements with respect hereto (whether or not any such
amendments, waivers, consents, standstill agreements or other similar
agreements are executed).
(b) At any time when the Company and the holders of Notes are
conducting restructuring or workout negotiations in respect hereof, or a
Default or Event of Default exists, the Company shall pay when billed the
reasonable costs and expenses (including reasonable attorneys' fees,
allocated time charges of internal counsel for the holders of the Notes,
and the fees of other professional advisors) incurred by the holders of the
Notes in connection with inspections made pursuant to Section 6.9 and in
connection with the assessment, analysis or enforcement of any rights or
remedies that are or may be available to the holders of Notes.
(c) If the Company shall fail to pay when due any principal of, or
Make-Whole Amount or interest on, any Note, the Company shall pay to each
holder of Notes, to the extent permitted by law, such amounts as shall be
sufficient to cover the costs and expenses, including but not limited to
reasonable attorneys' fees and allocated time charges of internal counsel
for such holder of the Notes, incurred by such holder in collecting any
sums due on such Notes.
10.7 INDEMNIFICATION.
(a) The Company agrees to indemnify each holder of Notes, and its
directors, officers and employees, against all losses, claims, damages,
penalties, judgments, liabilities and expenses (including, without
limitation, all expenses of litigation or preparation therefor whether or
not the any holder of Notes is a party thereto) which any of them may pay
or incur arising out of or relating to this Agreement, the other Financing
Documents or the Transaction Documents, the transactions contemplated
hereby or thereby or the direct or indirect application or proposed
application of the proceeds of any Notes hereunder, except to the extent
that they arise out of the gross negligence or willful misconduct of the
party seeking indemnification. The obligations of the Company under this
Section 10.7(a) shall survive the termination of this Agreement and the
payment and satisfaction of the Notes and shall continue to be the
liability, obligation and indemnification of the Company, binding upon the
Company.
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(b) The Company shall indemnify, pay and hold each holder of Notes
harmless from and against any and all losses, costs (including, without
limitation, court costs and attorneys' fees), liabilities, injuries,
expenses, claims and damages whatsoever incurred or suffered by or asserted
against such holder of Notes by reason of any violation of any applicable
Environmental Law for which the Company or any of its Subsidiaries is
liable or which is related to any real estate owned, leased or operated by
the Company or any of its Subsidiaries, or by reason of the imposition of
any governmental lien for the recovery of environmental cleanup or response
costs expended by reason of any such violation, or by reason of any breach
of any representation, warranty or affirmative or negative covenant of this
Agreement, including, without limitation, by reason of any matter disclosed
herein; PROVIDED, HOWEVER, that, to the extent that the Company or any of
its Subsidiaries is strictly liable under any such statute, order or
regulation, the Company's obligation to each holder of Notes under this
indemnity shall likewise be without regard to fault on the part of the
Company or any of its Subsidiaries with respect to the violation of law
which results in liability to any such holder. The provisions of and
undertakings and indemnification set out in this Section 10.7(b) shall
survive the termination of this Agreement and the payment and satisfaction
of the Notes and shall continue to be the liability, obligation and
indemnification of the Company, binding upon the Company.
10.8 PAYMENTS ON NOTES.
(a) MANNER OF PAYMENT. The Company shall pay all amounts payable
with respect to each Note (without any presentment of such Notes and
without any notation of such payment being made thereon) by crediting, by
federal funds bank wire transfer, the account of the holder thereof in any
bank in the United States of America as may be designated in writing by
such holder, or in such other manner as may be reasonably directed or to
such other address in the United States of America as may be reasonably
designated in writing by such holder. Annex 1 shall be deemed to
constitute notice, direction or designation (as appropriate) by the
Purchaser to the Company with respect to payments to be made to the
Purchaser as aforesaid. In the absence of such written direction, all
amounts payable with respect to each Note shall be paid by check mailed and
addressed to the registered holder of such Note at the address shown in the
register maintained by the Company pursuant to Section 5.1.
(b) PAYMENTS DUE ON HOLIDAYS. If any payment due on, or with respect
to, any Note shall fall due on a day other than a Business Day, then such
payment shall be made on the first Business Day following the day on which
such payment shall have so fallen due; PROVIDED that if all or any portion
of such payment shall consist of a payment of interest, for purposes of
calculating such interest, such payment shall be deemed to have been
originally due on such first following Business Day, such interest shall
accrue and be payable to (but not including) the actual date of payment,
and the amount of the next succeeding interest payment shall be adjusted
accordingly. If any payment is to be made on the first Business Day
following the day on which the same shall have fallen due, as provided in
this Section
-70-
<PAGE>
10.8(b) and is not so paid on such first Business Day, interest shall
accrue thereon (to the extent permitted by applicable law) at the rate of
seventeen percent (17%) PER ANNUM, from (in each case) the originally
scheduled day of its payment.
(c) PAYMENTS, WHEN RECEIVED. Any payment to be made to a holder of
Notes hereunder or under the Notes shall be deemed to have been made on the
Business Day such payment actually becomes available at such holder's bank
prior to the close of business of such bank, provided that interest for one
day at the non-default interest rate of the Notes shall be due on the
amount of any such payment that actually becomes available to such holder
at such holder's bank after 11 a.m. (local time of such bank).
10.9 ENTIRE AGREEMENT.
This Agreement constitutes the final written expression of all of the terms
hereof and is a complete and exclusive statement of those terms.
10.10 DUPLICATE ORIGINALS, EXECUTION IN COUNTERPART.
Two or more duplicate originals hereof may be signed by the parties, each
of which shall be an original but all of which together shall constitute one and
the same instrument. This Agreement may be executed in one or more counterparts
and shall be effective when each party hereto shall have executed a counterpart
hereof (whether or not the other parties hereto shall have signed that same
counterpart), and each set of counterparts that, collectively, show execution by
each party hereto shall constitute one duplicate original.
[Remainder of page intentionally blank. Next page is signature page.]
-71-
<PAGE>
If this Agreement is satisfactory to you, please so indicate by signing the
acceptance at the foot of a counterpart hereof and returning such counterpart to
the Company, whereupon this Agreement shall become binding between us in
accordance with its terms.
Very truly yours,
TRAK INTERNATIONAL, INC.
By: /s/ James H. Hook
Name: James H. Hook
Title: Vice President / CFO
Accepted:
THE MINNESOTA MUTUAL LIFE INSURANCE COMPANY
By: /s/ Lynne M. Mills
Name: Lynne M. Mills
Title: Second Vice President
Document # 0040060.06
-72-
<PAGE>
ANNEX 1
INFORMATION AS TO PURCHASER
===============================================================================
PURCHASER NAME THE MINNESOTA MUTUAL LIFE INSURANCE COMPANY
- -------------------------------------------------------------------------------
Registered Name THE MINNESOTA MUTUAL LIFE INSURANCE COMPANY
- -------------------------------------------------------------------------------
Note Registration Number; R-1; $5,000,000
Principal Amount
- -------------------------------------------------------------------------------
Method of Payment Federal Funds Wire Transfer
- -------------------------------------------------------------------------------
Account Information The Federal Reserve Bank of Minneapolis
For the Account of The First Bank National
Association
Minneapolis, Minnesota
ABA #091000022
BNF The Minnesota Mutual Life Insurance Company
Account #1801-10-00600-4
- -------------------------------------------------------------------------------
Accompanying Information TRAK International, Inc.; 15% Subordinated Notes
due August 31, 2003;
PPN: 89288# AA 0; [due date and application (as
among principal, Make-Whole Amount and interest)
of the payment being made]; TRAK International,
Inc. [contact name] and [telephone number]
- -------------------------------------------------------------------------------
Address/Fax # for Payment The Minnesota Mutual Life Insurance Company
Notices 400 Robert Street North
St. Paul, Minnesota 55101
Attention: MIMLIC Asset Management Company
Fax # 612-223-5959
- -------------------------------------------------------------------------------
Address/Fax # for Other The Minnesota Mutual Life Insurance Company
Notices 400 Robert Street North
St. Paul, Minnesota 55101
Attention: MIMLIC Asset Management Company
Fax # 612-223-5959
===============================================================================
Annex 1-1
<PAGE>
===============================================================================
PURCHASER NAME THE MINNESOTA MUTUAL LIFE INSURANCE COMPANY
- -------------------------------------------------------------------------------
Other Instructions (if any) Please notify Carol V. Slavik, Investment Services
Coordinator, at (612) 298-7873 at least two
business days prior to closing.
Please deliver one complete set of executed
closing documents, as well as one composite
conformed copy of the Note Purchase Agreement.
Documents on behalf of The Minnesota Mutual Life
Insurance Company should be executed as follows:
The Minnesota Mutual Life Insurance Company
By:________________________________________
- -------------------------------------------------------------------------------
Instructions re Delivery of Vicki Bailey, Esq.
Notes Associate General Counsel
MIMLIC Asset Management Company
400 Robert Street North
St. Paul, Minnesota 55101
- -------------------------------------------------------------------------------
Tax Identification Number 41-0417830
===============================================================================
Annex 1-2
<PAGE>
ANNEX 2
PAYMENT INSTRUCTIONS; ADDRESS OF COMPANY FOR NOTICES
PAYMENT INSTRUCTIONS OF COMPANY AT CLOSING
ADDRESS OF COMPANY FOR NOTICES
TRAK International, Inc.
369 West Western Avenue
Port Washington, Wisconsin 53704
Attn: Chief Financial Officer
Annex 2-1
<PAGE>
EXHIBIT A
FORM OF NOTE
THE OBLIGATIONS EVIDENCED BY THIS NOTE ARE SUBORDINATED TO THE SENIOR DEBT
ON THE TERMS PROVIDED IN THAT CERTAIN NOTE PURCHASE AGREEMENT DATED
AS OF AUGUST __, 1995 BETWEEN TRAK INTERNATIONAL, INC. AND
THE MINNESOTA MUTUAL LIFE INSURANCE COMPANY
TRAK INTERNATIONAL, INC.
15% SUBORDINATED NOTE DUE AUGUST 31, 2003
No. R-______ PPN: ________
$___________ _________ __, ____
TRAK INTERNATIONAL, INC. (the "Company"), a Delaware corporation, for value
received, hereby promises to pay to ____________ or registered assigns the
principal sum of ___________________DOLLARS (U.S. $_____________) on August 31,
2003 and to pay interest (computed on the basis of a 360-day year of twelve
30-day months) on the unpaid principal balance thereof from the date of this
Note at the rate of fifteen percent (15%) PER ANNUM, quarterly on the last day
of each February, May, August and November in each year, commencing on the later
of August 31, 1995 or the payment date next succeeding the date hereof, until
the principal amount hereof shall become due and payable; and to pay on demand
interest on any overdue principal (including any overdue prepayment of
principal) and Make-Whole Amount, if any, and (to the extent permitted by
applicable law) on any overdue installment of interest (the due date of such
installment of interest to be determined without giving effect to any grace
period), at a rate PER ANNUM equal to the lesser of (a) the highest rate allowed
by applicable law or (b) the greater of (i) seventeen percent (17%), or (ii) the
rate of interest publicly announced by Morgan Guaranty Trust Company in New York
City from time to time as its prime rate.
Payments of principal, Make-Whole Amount, if any, and interest shall be
made in such coin or currency of the United States of America as at the time of
payment is legal tender for the payment of public and private debts to the
registered holder hereof at the address shown in the register maintained by the
Company for such purpose, in the manner provided in the Note Purchase Agreement
(defined below).
This Note is one of an issue of Notes of the Company issued in an aggregate
principal amount limited to Five Million Dollars ($5,000,000) pursuant to the
Company's Note Purchase
Exhibit A-1
<PAGE>
Agreement (as amended from time to time, the "Note Purchase Agreement"), dated
as of August __, 1995, with the purchaser listed on Annex 1 thereto, is entitled
to the benefits thereof, and the terms of which are incorporated herein by
reference. Capitalized terms used herein and not otherwise defined herein have
the meanings specified in the Note Purchase Agreement. As provided in the Note
Purchase Agreement, this Note is subject to prepayment, in whole or in part, in
certain cases without a Make-Whole Amount and in other cases with a Make-Whole
Amount. The Company agrees to make required prepayments of principal of the
Notes in accordance with the provisions of the Note Purchase Agreement.
This Note is a registered Note and is transferable only by surrender
thereof at the principal office of the Company as specified in the Note Purchase
Agreement, duly endorsed or accompanied by a written instrument of transfer duly
executed by the registered holder of this Note.
Under certain circumstances, as specified in the Note Purchase Agreement,
the principal of this Note (together with any applicable Make-Whole Amount) may
be declared due and payable in the manner and with the effect provided in the
Note Purchase Agreement.
The obligations of the Company under the Note Purchase Agreement and this
Note may from time to time have the benefit of guarantees of certain
subsidiaries of the Company.
The obligations evidenced by this Note are subordinated to the Senior Debt
on the terms provided in the Note Purchase Agreement.
THIS NOTE AND THE NOTE PURCHASE AGREEMENT ARE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAW OF THE STATE OF
WISCONSIN.
TRAK INTERNATIONAL, INC.
By:___________________________
Name:
Title:
Exhibit A-2
<PAGE>
FIRST AMENDMENT TO NOTE AGREEMENTS
THIS FIRST AMENDMENT dated as of July 18, 1996 (the or this "FIRST AMENDMENT")
to the Note Agreement dated as of August 16, 1995 is between Trak International,
Inc., a Delaware corporation (the "COMPANY"), and The Minnesota Mutual Life
Insurance Company ("MML").
RECITALS:
A. The Company and MML have heretofore entered into the Note Agreement
dated as of August 6, 1995 (the "NOTE AGREEMENT"). The Company has issued the
$5,000,000 15% Subordinated Notes Due August 23, 2000 (the "NOTES") dated August
16, 1995 pursuant to the Note Agreement.
B. The Company and MML now desire to amend the Note Agreement in the
respects, but only in the respects, hereinafter set forth.
C. Capitalized terms used herein shall have the respective meanings
ascribed thereto in the Note Agreement unless herein defined or the context
shall otherwise require.
D. All requirements of law have been fully complied with and all other
acts and things necessary to make this First Amendment a valid, legal and
binding instrument according to its terms for the purposes herein expressed have
been done or performed.
NOW, THEREFORE, the Company and MML, in consideration of good and valuable
consideration the receipt and sufficiency of which is hereby acknowledged, do
hereby agree as follows:
SECTION 1. AMENDMENTS.
1.1 Section 6.26(b) of the Note Agreements shall be and is hereby amended
in its entirety to read as follows:
(b) MINIMUM TANGIBLE NET WORTH -- the Company shall, at all times during
the periods set forth below, maintain a Tangible Net Worth of not less than the
amount set forth below opposite the applicable period:
<PAGE>
PERIOD AMOUNT
During the period beginning October 1,
1995 through April 30, 1996 $740,000
During the period beginning May 1,
1996 through September 30, 1996 $2,970,000
During the Company's 1997 fiscal year $3,870,000
During the Company's 1998 fiscal year $8,100,000
During the Company's 1999 fiscal year $9,000,000
From end of the Company's 1999 fiscal
year and thereafter $13,500,000
1.2 Section 6.26(e) of the Note Agreement shall be and is hereby amended
in its entirety to read as follows:
(e) DEBT SERVICE COVERAGE -- the Company shall maintain a minimum
Debt Service Coverage Ratio of at least 1.13 to 1.0 (measured at the end of each
fiscal quarter.)
1.3 Section 6.26(f) of the Note Agreement shall be and is hereby amended
in its entirety to read as follows:
(f) INDEBTEDNESS TO TANGIBLE NET WORTH RATIO -- the ratio of (i) the
sum of Senior Debt PLUS Subordinated Debt PLUS Junior Indebtedness to (ii)
Tangible Net Worth PLUS Senior Debt PLUS Subordinated Debt PLUS Junior
Indebtedness, calculated at the end of each fiscal quarter of the Company, shall
not be more than the ratio set forth below opposite the applicable period:
PERIOD RATIO
1995 fiscal year .90 to 1.0
During the period beginning October 1,
1995 through September 30, 1996 .90 to 1.0
During the period from October 1, 1996
through September 30, 1997 .80 to 1.0
1998 fiscal year .75 to 1.0
1999 fiscal year .70 to 1.0
2000 fiscal year .70 to 1.0
2001 fiscal year and thereafter .65 to 1.0
2
<PAGE>
SECTION 2. CONDITION TO EFFECTIVENESS OF THIS FIRST AMENDMENT.
2.1 This First Amendment shall not become effective until, and shall become
effective when, MML shall have received evidence satisfactory to MML that any
defaults under the Revolving Loan and Security Agreement by and between Firstar
Bank Milwaukee, NA through its Financial Lender Division ("Agent"), as Agent on
behalf of itself and each Lender, and Trak International, Inc. dated August 16,
1995 have been waived pursuant to the Letter Agreement from Firstar Bank
Milwaukee, W.A. dated July 18, 1996 and that all conditions to the effectiveness
of such waiver have been fulfilled.
SECTION 3. MISCELLANEOUS.
3.1 This First Amendment shall be construed in connection with and as part
of the Note Agreement, and except as modified and expressly amended by this
First Amendment, all terms, conditions and covenants contained in the Note
Agreement and the Notes are hereby satisfied and shall be and remain in full
force and effect.
3.2 Any and all notices, requests, certificates and other instruments
executed and delivered after the execution and delivery of this First Amendment
may refer to the Note Agreement without making specific reference to this First
Amendment but nevertheless all such differences shall include this First
Amendment unless the context otherwise requires.
3.3 The descriptive headings of the various Sections or parts of this
First Amendment are for convenience only and shall not affect the meaning or
construction of any of the provisions hereof.
3.4 This First Amendment shall be governed by and construed in accordance
with Wisconsin law.
3.5 The execution hereof by you shall constitute a contract between us for
the uses and purposes hereinabove set forth, and this First Amendment may be
executed in any number of counterparts, each executed counterpart constituting
an original, but all together only one Agreement.
TRAK INTERNATIONAL, INC.
By: /s/ James H. Hook
---------------------------------
Its: Vice President
----------------------------------
3
<PAGE>
Accepted and Agreed to:
THE MINNESOTA MUTUAL LIFE
INSURANCE COMPANY
By: /s/ Lynne M. Mills
---------------------------------------
Its: Lynne M. Mills, Second Vice President
---------------------------------------
4
<PAGE>
EXECUTION COPY
AMENDMENT NO. 2 TO NOTE PURCHASE AGREEMENT
This Amendment (this "AMENDMENT") is entered into and dated as of August
16, 1996 by and between TRAK International, Inc., a Delaware corporation (the
"COMPANY"), and The Minnesota Mutual Life Insurance Company (the "PURCHASER").
RECITALS
A. The Company and the Purchaser are party to that certain Note Purchase
Agreement dated as of August 16, 1995 (as amended, the "NOTE PURCHASE
AGREEMENT"). Unless otherwise specified herein, capitalized terms used in this
Amendment shall have the meanings ascribed to them by the Note Purchase
Agreement.
B. Contemporaneously herewith, the existing Senior Financing Agreement is
being replaced and refinanced (the "REFINANCING") in its entirety by that
certain Loan Agreement dated as of the date hereof among the Company and Lull
Lift Corporation ("LULL LIFT") as Borrowers and The Boatmen's National Bank of
St. Louis, as agent, and the lenders party thereto.
C. The Company and the Purchaser wish to amend the Note Purchase
Agreement on the terms and conditions set forth below, to, among other things,
accommodate the Refinancing and certain other transactions.
Now, therefore, in consideration of the mutual execution hereof and other
good and valuable consideration, the parties hereto agree as follows:
1. AMENDMENT TO NOTE PURCHASE AGREEMENT. Upon the "Effective Time" (as
defined below), the Note Purchase Agreement is hereby amended as follows:
(a) SECTION 4.1 of the Note Purchase Agreement is amended by deleting
such Section in its entirety and replacing it with the following:
"The Company shall pay, and there shall become due and payable,
on each of the dates set forth below, the principal amount of the
Notes set forth below opposite each such date (each a "REQUIRED
PRINCIPAL DATE"), as follows:
<TABLE>
<CAPTION>
Date of Required Principal Payment Amount of Required Principal Payment
<S> <C>
August 31, 2002 $1,250,000
February 28, 2003 $1,500,000
August 31, 2003 $1,250,000
<PAGE>
February 28, 2004 $1,000,000 or such lesser amount as shall
be the outstanding balance of the Notes.
</TABLE>
Each Required Principal Payment shall be made when due, together with
interest accrued thereon to the date of payment. The entire principal
of the Notes remaining outstanding on February 28, 2004, together with
interest accrued thereon, shall become due and payable on such date."
(b) SECTION 6.10 of the Note Purchase Agreement is amended by
deleting the words that appear after "except" through the end of the sentence
and inserting in lieu thereof the following: "with respect to (i) dividends or
transfers between the Company and Lull Lift, or from either or both of the
Company and Lull Lift to Holdings (but not from Holdings to its Shareholders),
(ii) dividends or distributions by any Subsidiary to the Company and (iii)
purchases by Holdings of its stock from terminated officers or employees of the
Company or Lull Lift."
(c) SECTION 6.11 of the Note Purchase Agreement is amended by (i)
deleting the word "and" appearing at the end of clause (g) thereof, (ii)
deleting the period at the end of end of clause (h) thereof and inserting ";"
in place thereof and (iii) inserting after clause (h)
the following new clauses (i), (j), (k) and (l):
"(i) the Junior Subordinated Debt evidenced by the Junior
Subordinated Note;
(j) Indebtedness permitted by Section 6.26(a) hereof;
(k) Indebtedness owing to the Company, Lull Lift or Holdings;
and."
(l) Indebtedness secured by Liens permitted by Section 15.5.5
of the Senior Financing Agreement as in effect on the Second
Amendment Date."
(d) SECTION 6.13 of the Note Purchase Agreement is amended by
deleting the references to "Installment Notes" appearing in clause (ii) of the
last sentence of such Section and replacing them with "Term 1 Advances or Term
2 Advances."
(e) SECTION 6.15 of the Note Purchase Agreement is amended by
deleting the word "and" appearing before clause (k) thereof and inserting at
the end of clause (k) the following: "and (l) other Contingent Obligations
permitted by Section 15.4 of the Senior Financing Agreement."
(f) SECTION 6.16 of the Note Purchase Agreement is amended by
deleting the word "and" appearing at the end of clause (e) thereof, (ii)
deleting the period at the end of end of clause (f) thereof and inserting ";"
in place thereof and (iii) inserting after clause (f) the following new clauses
(g) and (h):
-2-
<PAGE>
"(g) Liens permitted by Sections 15.5.5 and 15.5.7 of the Senior
Financing Agreement as in effect on Second Amendment Date; and
(h) Liens permitted by Section 6.26(a)."
(g) SECTION 6.17 of the Note Purchase Agreement is amended by
deleting such Section in its entirety and replacing it with the following:
"SECTION 6.17 CAPITAL EXPENDITURES.
The Company and its Subsidiaries shall not make Consolidated Capital
Expenditures which in the aggregate exceed: (i) $6,050,000 during the period
commencing with the Second Amendment Date and ending September 30, 1997; (ii)
$6,050,000 during fiscal year 1998; (iii) $9,680,000 during the period
commencing on the Second Amendment Date and ending September 30, 1998; or (iv)
$4,840,000 for fiscal year 1999 or any fiscal year thereafter, and such amounts
may not be carried over from period to period."
(h) Section 6.18 of the Note Purchase Agreement is amended by
deleting such Section in its entirety and replacing it with the following:
"SECTION 6.18 LEASE RENTALS.
Expenses incurred by the Company and its Subsidiaries as lessees under
leases of property (whether real, personal, tangible, intangible, or mixed
property), other than Capital Leases, shall not exceed $82,500 in the aggregate
during any fiscal year and the aggregate amount of all such expenses incurred
on a cumulative basis after the Second Amendment Date shall not exceed
$550,000."
(i) SECTION 6.19 of the Note Purchase Agreement is amended by (i)
adding the words "(b) payments of dividends and on Indebtedness permitted by
Section 6.10 and Section 6.11(k), respectively" after the second comma in line
7 of such Section and (ii) deleting "(b)" in line 7 of such Section and
replacing it with "(c)".
(j) SECTION 6.26 of the Note Purchase Agreement is amended by
deleting such Section in its entirety and replacing it with the following:
"SECTION 6.26 FINANCIAL COVENANTS. Subject to normal year-end and
closing audit adjustments for calculation or determination made in
accordance with Agreement Accounting Principles prior to the end of
their fiscal year, the Company and its Subsidiaries shall maintain, in
the aggregate for all Covered Persons on a consolidated basis, the
following:
(A) CAPITAL LEASES - The Company and its Subsidiaries shall not become
obligated as lessee(s) under any Capital Leases except Capital Leases existing
on the Second Amendment Date and disclosed in the Disclosure Schedule to the
-3-
<PAGE>
Senior Financing Agreement as in effect on the date hereof and Capital Leases
entered into by the Company and its Subsidiaries after the Second Amendment
Date for capital assets whose aggregate cost if purchased would not exceed
$27,500 in any fiscal year and $55,000 in the aggregate.
(B) MINIMUM CONSOLIDATED OPERATING CASH FLOW - Consolidated Operating Cash
Flow of the Company and its Subsidiaries as of each calculation date set forth
below, shall not be less than the amount set forth opposite such calculation
date:
<TABLE>
<CAPTION>
Calculation Dates Minimum Operating Cash Flow
<S> <C>
October 31, 1996 and the last day $2,610,000
of each month thereafter ending with
December 31, 1996.
January 31, 1997 and the last day of $7,020,000
each month thereafter ending with
March 31, 1997.
April 30, 1997 and the last day of each $13,410,000
month thereafter ending with June 30,
1997.
July 31, 1997 and the last day of each $17,820,000
month thereafter ending with September
30, 1997.
October 31, 1997 and the last day of each $19,260,000
month thereafter ending with September
30, 1998.
October 31, 1998 and the last day of each $19,800,000
month thereafter ending with September
30, 1999.
October 31, 1999 and the last day of each $20,700,000
month thereafter.
</TABLE>
(C) FIXED CHARGE COVERAGE - The ratio of (a) Consolidated Operating Cash
Flow as of each calculation date set forth below to (b) Consolidated Fixed
Charges as of such calculation date, shall not be less than the ratio set forth
opposite such calculation date:
<TABLE>
<CAPTION>
Calculation Dates Minimum Ratio
<S> <C>
October 31, 1996 and the last day of each .99 to 1.00
month thereafter
</TABLE>
(D) MINIMUM NET WORTH - Consolidated Net Worth shall at no time during any
fiscal period specified in the table below be less than the amount specified
for such period:
-4-
<PAGE>
<TABLE>
<CAPTION>
Period Minimum Net Worth
<S> <C>
Second Amendment Date through April 29, 1997 $9,900,000
April 30, 1997 through October 30, 1997 $11,790,000
October 31, 1997 through October 30, 1998 $14,400,000
October 31, 1998 and at any time thereafter $17,100,000
</TABLE>
(E) CONSOLIDATED TOTAL FUNDED DEBT TO CONSOLIDATED OPERATING CASH FLOW -
The ratio of (a) Consolidated Total Funded Debt outstanding on each calculation
date set forth below on such calculation date, to (b) Consolidated Operating
Cash Flow (for periods less than twelve months from the Second Amendment Date,
annualized) as of such calculation date, shall not exceed the ratio set forth
opposite such calculation date:
<TABLE>
<CAPTION>
Calculation Dates Maximum Ratio
<S> <C>
April 30, 1997 and the last day of each 3.56 to 1.00
month thereafter ending with March 31, 1998
April 30, 1998 and the last day of each 3.11 to 1.00
month thereafter ending with September 30, 1998
October 31, 1998 and the last day of each 2.78 to 1.00
month thereafter ending with March 31, 1999
April 30, 1999 and the last day of each 2.23 to 1.00
month thereafter
</TABLE>
(F) MINIMUM INTEREST COVERAGE - The ratio of (a) Consolidated Operating
Cash Flow as of each calculation date set forth below to (b) Consolidated
Interest Expense as of such calculation date, shall not be less than the ratio
set forth opposite such calculation date:
<TABLE>
<CAPTION>
Calculation Dates Minimum Ratio
<S> <C>
October 3, 1996 and the last day of each 2.07 to 1.00
month thereafter ending with March 31, 1997
April 30, 1997 and the last day of each 2.70 to 1.00
month thereafter ending with March 31, 1998
April 30, 1998 and the last day of each 2.97 to 1.00
month thereafter ending with September 30, 1999
October 31, 1999 and the last day of each 3.33 to 1.00
month thereafter
</TABLE>
-5-
<PAGE>
(k) SECTION 7.1 of the Note Purchase Agreement is amended by (i)
deleting the words "or" at the end of clauses (i) and (j) thereof, (ii)
deleting the period at the end of clause (k) thereof and inserting "; " in
place thereof and (iii) adding new clauses (l) and (m) at the end of such
Section as follows:
"(l) HOLDINGS/LULL LIFT GUARANTEE -- the Holdings/Lull Lift
Guarantee shall fail to remain in full force or effect or any action
shall be taken to discontinue or to assert the invalidity or
unenforceability of the Holdings/Lull Lift Guarantee, or Holdings or
Lull Lift shall fail to comply with any of the terms or provisions of
the Holdings/Lull Lift Guarantee, or Holdings or Lull Lift denies that
it has any further liability under the Holdings/Lull Lift Guarantee or
gives notice to such effect; or
(m) SUBORDINATION AGREEMENT -- the Subordination Agreement shall
fail to remain in full force and effect or any action shall be taken
to discontinue or to assert the invalidity or unenforceability of the
Subordination Agreement, or the Junior Creditor shall fail to comply
with any term or provisions of the Subordination Agreement, or the
Junior Creditor denies that it has any further obligation under the
Subordination Agreement or gives notice to such effect."
(l) SECTION 8.11 of the Note Purchase Agreement is amended by
deleting such Section in its entirety and replacing it with the following:
"Section 8.11 Amendment of Subordination Provisions.
Notwithstanding anything contained in this Agreement or any other
Financing Document to the contrary, no provision of this Section 8 or
the Holdings/Lull Lift Guarantee may be amended without the prior
written consent of the Agent (or, if there shall be no agent for the
holders of the Senior Debt at such time, each holder of Senior Debt)."
(m) New definitions are added to SECTION 9.1 of the Note
Purchase Agreement in the appropriate alphabetical order as follows:
"'CONSOLIDATED' or 'CONSOLIDATED' when used in connection with
any calculation, means a calculation to be determined on a
consolidated basis for Holdings and all of its Subsidiaries (including
the Company and Lull Lift) in accordance with Agreement Accounting
Principles."
"COVERED PERSONS -- means the Company, Lull Lift, Holdings and
each of their Subsidiaries."
"CURRENT ASSETS -- means current assets as determined in
accordance with Agreement Accounting Principles."
-6-
<PAGE>
"CURRENT LIABILITIES -- means current liabilities as determined
in accordance with Agreement Accounting Principles, excluding amounts
outstanding under the Aggregate Revolving Loan."
"FIXED CHARGES -- means, as of any date of calculation, the sum
of (i) Interest Expense (excluding for this purpose all interest
accrued as an expense with respect to the Junior Subordinated Debt to
the extent it is on the consolidated books of the Company and the
other Covered Persons), (ii) the sum of all payments on Total Funded
Debt to be made during the calculation period ending on such date,
(iii) federal, state and local income taxes accrued during the
calculation period ending on such date, and (iv) all Capital
Expenditures incurred during the calculation period ending on such
date (provided, however, that the parenthetical at the end of the
first sentence in the definition of "Capital Expenditures" shall not
apply when calculating Capital Expenditures for purposes of
calculating Fixed Charges, i.e, only the amount of all payments
actually made in connection with all such Capital Leases during the
applicable calculation period need to be accounted for in calculating
Capital Expenditures for the purposes of calculating Fixed Charges).
For the purposes of calculating Fixed Charges under this Agreement,
the calculation period for Fixed Charges shall be deemed to be the
period from the Second Amendment Date through any date of calculation
on or prior to July 31, 1997, and thereafter the calculation period
shall be the twelve month period immediately prior to the date of
calculation and Fixed Charges shall be calculated on a trailing twelve
month basis; PROVIDED, HOWEVER, that each scheduled payment on the
first of the month of interest and principal on any of the Senior
Notes shall be deemed to have been made on the immediately preceding
day."
"HOLDINGS/LULL LIFT GUARANTEE -- means that certain Guarantee
dated as of the Second Amendment Date made by Holdings and Lull Lift
in favor of the Purchaser as it may be amended, supplemented, modified
or restated from time to time pursuant to the terms hereof and
thereof."
"INTEREST EXPENSE -- means, for any period of calculation, all
interest accrued as an expense in accordance with Agreement Accounting
Principles on Total Funded Debt during such period."
"JUNIOR CREDITOR -- means collectively Harbour Group Investments
III, L.P., a Delaware limited partnership, and The Boatmen's National
Bank of St. Louis, a national banking association, together with any
of their respective successors and assigns."
"LULL LIFT -- means Lull Lift Corporation, a Delaware
corporation, together with any successors and assigns."
"NET INCOME -- means, for any period of calculation, "net income"
as determined in accordance with Agreement Accounting Principles."
-7-
<PAGE>
"OPERATING CASH FLOW -- means, as of any date of calculation, an
amount equal to the sum of (i) Net Income, (ii) federal, state and
local income tax expense, (iii) Interest Expense (including for this
purpose interest accrued with respect to the Junior Subordinated Debt
to the extent it is on the consolidated books of the Company and the
other Covered Persons), (iv) depreciation and amortization expense,
(v) losses on the sale or other disposition of assets, and (vi)
extraordinary losses, minus (a) gains on the sale or other disposition
of assets, and (b) extraordinary gains, all calculated for the
calculation period ending on such calculation date. For the purposes
of calculating Operating Cash Flow, the calculation period for
Operating Cash Flow shall be deemed to be the period from the Second
Amendment Date through any date of calculation on or prior to July 31,
1997 and thereafter the calculation period shall be the twelve month
period immediately prior to the date of calculation and Operating Cash
Flow shall be calculated on a trailing twelve month basis."
"SECOND AMENDMENT DATE -- means August 16, 1996."
"SUBORDINATION AGREEMENT -- means collectively that certain
Subordination Agreement dated as of the Second Amendment Date, by and
between the Purchaser and Harbour Group Investments III, L.P. and that
certain Subordination Agreement dated as of the Second Amendment Date,
by and between the Purchaser and The Boatmen's National Bank of St.
Louis."
"TERM 1 ADVANCES -- shall have the meaning ascribed thereto in
the Senior Financing Agreement."
"TERM 2 ADVANCES -- shall have the meaning ascribed thereto in
the Senior Financing Agreement."
"TOTAL ASSETS -- means the sum of all assets as presented in the
balance sheet in the Company's and Lull Lift's most recent
consolidated financial statements."
"TOTAL FUNDED DEBT -- means, as of any time, the sum of the
aggregate outstanding principal balance of the Company's Indebtedness
and its respective Subsidiaries' Indebtedness (including, without
limitation, the outstanding principal balance of the Senior Notes
and the Subordinated Debt) at such time, but excluding the outstanding
principal balance of the Junior Subordinated Note. For the purposes
of calculating Total Funded Debt under this Agreement, each scheduled
payment on the first of the month of interest and principal on the
Senior Indebtedness shall be deemed to have been made on the
immediately preceding day."
"TOTAL LIABILITIES -- means the sum of all liabilities as
presented in the balance sheet in the Company's and Lull Lift's most
recent consolidated financial statements."
-8-
<PAGE>
(n) The definition of "AGENT" in SECTION 9.1 of the Note
Purchase Agreement is amended by deleting "Firstar Financial Services, a
division of Firstar Bank Milwaukee, N.A." appearing in such Section and
replacing it with "The Boatmen's National Bank of St. Louis."
(o) The definition of "AGGREGATE REVOLVING CREDIT COMMITMENT" in
SECTION 9.1 of the Note Purchase Agreement is amended by deleting such
definition in its entirety and replacing it with the following:
"AGGREGATE REVOLVING CREDIT COMMITMENT -- shall have the meaning
ascribed to the term 'Aggregate Revolving Commitment' in the Senior
Financing Agreement."
(p) The definition of "AGREEMENT ACCOUNTING PRINCIPLES" in
SECTION 9.1 of the Note Purchase Agreement is amended by deleting such
definition in its entirety and replacing it with the following:
"AGREEMENT ACCOUNTING PRINCIPLES -- means generally accepted
accounting principles as in effect from time to time, applied in a
manner consistent with those in preparing the financial statements
referred to in Section 2.2(a)."
(q) The definition of "CAPITAL EXPENDITURE" in SECTION 9.1 of
the Note Purchase Agreement is amended by deleting such definition in its
entirety and replacing it with the following:
"CAPITAL EXPENDITURE -- means an expenditure for an asset that
must be depreciated or amortized under Agreement Accounting
Principles, for goodwill, or for any asset that under Agreement
Accounting Principles must be treated as a capital asset, including,
without limitation, payments under Capital Leases, the amount of which
must be recorded as an amortizable asset, but not including any such
expenditures to the extent made from insurance or condemnation
proceeds in the manner described in Section 6.3.4.3 of the Senior
Financing Agreement (the full amount of the payments so capitalized
under Agreement Accounting Principles to be made thereunder by the
Company and Lull Lift shall be taken into account in the calculation
period such Capital Lease is entered into)."
(r) The definition of "CHANGE IN CONTROL" in SECTION 9.1 of the
Note Purchase Agreement is amended (i) by substituting the words "Company
and Lull Lift" for the word "Company" in lines 5, 9 and 11 of such
definition and (ii) inserting the phase "other than pursuant to the Senior
Financing Documents" after the word "Liens" each time such word appears in
such definition.
-9-
<PAGE>
(s) The definition of "FINANCING DOCUMENTS" in SECTION 9.1 of
the Note Purchase Agreement is amended by adding the words "Holdings/Lull
Lift Guarantee" after the word "Notes" appearing in such definition.
(t) The definitions of "INSTALLMENT NOTES" and "LINE OF CREDIT"
in SECTION 9.1 of the Note Purchase Agreement are hereby deleted in its
entirety.
(u) The definition of "JUNIOR SUBORDINATED NOTE" in SECTION 9.1
of the Note Purchase Agreement is amended by deleting such definition in
its entirety and replacing it with the following:
"JUNIOR SUBORDINATED NOTE -- means collectively that certain
promissory note of the Company dated as of the Second Amendment Date in
the principal amount of $2,000,000 in favor of Harbour Group Investments
III, L.P. and that certain promissory note of Holdings dated as of the
Second Amendment Date in the principal amount of $14,000,000 in favor of
The Boatman's National Bank of St. Louis."
(v) The definition of "MAXIMUM SENIOR DEBT AMOUNT" in SECTION
9.1 of the Note Purchase Agreement is amended by deleting such definition
in its entirety and replacing it with the following:
"MAXIMUM SENIOR DEBT AMOUNT -- means the sum of (a) the
difference of (i) Eighty-Five Million Dollars ($85,000,000) principal
amount of Senior Debt MINUS (ii) on a dollar-for dollar basis, any and
all amounts of principal repaid by the Company or any other Person on
the Term 1 Advances or Term 2 Advances PLUS (b) up to Eight Million
Five Hundred Thousand Dollars ($8,500,000) in interest, fees, rate
hedging obligations, expenses and other obligations owing to the
Agent or the Senior Lenders in connection with the Senior Financing
Documents."
(w) The definition of "NET WORTH" -- in SECTION 9.1 of the Note
Purchase Agreement is amended by deleting such definition in its entirety
and replacing it with the following:
"NET WORTH means, as of any date, Total Assets MINUS Total
Liabilities."
(x) The definition of "SENIOR FINANCING AGREEMENT" in SECTION
9.1 of the Note Purchase Agreement is amended by deleting such definition
in its entirety and replacing it with the following:
"SENIOR FINANCING AGREEMENT -- means (i) that certain Loan
Agreement dated as of the Second Amendment Date among the Company,
Lull Lift, the Agent and the Senior Lenders, as such agreement is
amended, supplemented, modified or restated from time to time and (ii)
each agreement pursuant to which any Refunding Debt shall be issued
and any amendment, supplement, modification or restatement thereof."
-10-
<PAGE>
(y) The definition of "SENIOR FINANCING DOCUMENTS" in SECTION
9.1 of the Note Purchase Agreement is amended by deleting the phrase "the
Installment Notes," appearing in such Section.
(z) The definition of "SENIOR LENDERS" in SECTION 9.1 of the
Note Purchase Agreement is amended by deleting "Firstar Financial Services,
a division of Firstar Bank Milwaukee, N.A.", appearing in such Section and
replacing it with "The Boatmen's National Bank of St. Louis."
(aa) The definition of "SUBSIDIARY" in SECTION 9.1 of the Note
Purchase Agreement is amended by adding the following sentence at the end
thereof; "Notwithstanding the foregoing, (i) Lull Lift and its Subsidiaries
shall be deemed to be Subsidiaries of the Company for purposes of this
Agreement and (ii) the distributors of the Company listed on Section 12.18
to Schedule 12 to the Senior Financing Agreement shall not be deemed to be
Subsidiaries of the Company."
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants that:
(a) The execution, delivery and performance by the Company of
this Amendment have been duly authorized by all necessary corporate
action. This Amendment is a legal, valid and binding obligation of
the Company enforceable against the Company in accordance with its
terms, except as the enforcement thereof may be subject to (i) the
effect of any applicable bankruptcy, insolvency, reorganization,
moratorium or similar law affecting creditors' rights generally and
(ii) general principles of equity (regardless of whether such
enforcement is sought in a proceeding in equity or at law);
(b) The execution, delivery and performance by Holdings and Lull
Lift of the Holdings/Lull Lift Guarantee has been duly authorized by
all necessary corporate action and that the Holdings/Lull Lift
Guarantee is a legal, valid and binding obligation of Holdings and
Lull Lift, and is enforceable against Holdings and Lull Lift in
accordance with its terms, except as the enforcement thereof may be
subject to (i) the effect of any applicable bankruptcy, insolvency,
reorganization, moratorium or similar law affecting creditors' rights
generally and (ii) general principles of equity (regardless of whether
such enforcement is sought in a proceeding in equity or at law);
(c) The execution, delivery and performance by Harbour Group
Investments III, L.P. of the Subordination Agreement to which it is a
party has been duly authorized by all necessary partnership action
and that such Subordination Agreement is the legal, valid and binding
obligation of, and is enforceable against Harbour Group Investments
-11-
<PAGE>
III, L.P. in accordance with its terms, except as the enforcement
thereof may be subject to (i) the effect of any applicable bankruptcy,
insolvency, reorganization, moratorium or similar law affecting
creditors' rights generally and (ii) general principles of equity
(regardless of whether such enforcement is sought in a proceeding in
equity or at law);
(d) The execution, delivery and performance of this Amendment,
the Holdings/Lull Lift Guarantee and the Subordination Agreement to
which Harbour Group Investments III, L.P. is a party, and the
consummation of the transactions contemplated thereby, do not conflict
with or breach any term of any material contract, loan agreement,
indenture or other agreement or instrument to which the Company,
Holdings, Lull Lift, or Harbour Group Investments III, L.P. is a
party or is subject;
(e) As of the Effective Time (as defined below), after giving
effect to the consummation of the Transaction Documents and the Senior
Financing Documents, each of the Company, Holdings and Lull Lift is
Solvent;
(f) After giving effect to this Amendment, no Default or
Unmatured Default has occurred and is continuing; and
(g) Each of the representations and warranties of the Company
and Lull Lift contained in the Senior Financing Agreement (as defined
above) is true and correct in all material respects on and as of the
date hereof as if made on the date hereof.
3. EFFECTIVE TIME. Section 1 of this Amendment shall become
effective (the "EFFECTIVE TIME") upon the receipt by the Purchaser of the
following documents in form and substance satisfactory to the Purchaser and its
counsel:
(a) this Amendment duly executed by the Company;
(b) the Holdings/Lull Lift Guarantee duly executed by Holdings
and Lull Lift;
(c) the Subordination Agreement duly executed by the Junior
Creditor;
(d) an opinion of counsel in form and substance satisfactory to
the Purchaser;
(e) a certificate of the Secretary or Assistant Secretary from
each of Holdings and Lull Lift in substantially the form of
Exhibit D2 to the Note Purchase Agreement;
(f) a solvency certificate from each of the Company, Holdings
and Lull Lift;
(g) a copy of the executed Senior Financing Documents, the terms
of which shall be reasonably satisfactory to the Purchaser;
(h) a copy of the executed Junior Subordinated Note,
satisfactory to the Purchaser;
-12-
<PAGE>
(i) the Initial Financial Statements (as defined in the Senior
Financing Agreement);
(j) the Historical Financial Statements (as defined in the
Senior Financing Agreement);
(k) a copy of the executed Acquisition Documents (as defined in
the Senior Financing Agreement);
(l) the Acquisition (as defined in the Senior Financing
Agreement) shall have been consummated and the initial
funding under the Senior Financing Agreement shall have
occurred; and
(m) such other documents as the Purchaser or its counsel may
reasonably request.
4. REFERENCE TO AND EFFECT UPON THE NOTE PURCHASE AGREEMENT.
(a) Except as specifically amended above, the Note Purchase
Agreement and the Notes shall remain in full force and effect and are
hereby ratified and confirmed.
(b) The execution, delivery and effectiveness of this Amendment
shall not operate as a waiver of any right, power or remedy of the
Purchaser under the Note Purchase Agreement or the Notes, nor constitute a
waiver of any provision of the Note Purchase Agreement or the Notes, except
as specifically set forth herein. Upon the effectiveness of this
Amendment, each reference in the Note Purchase Agreement to "this
Agreement", "hereunder", "hereof", "herein" or words of similar import
shall mean and be a reference to the Note Purchase Agreement as amended
hereby.
5. COSTS AND EXPENSES. The Company hereby affirms its obligation
under SECTION 10.6 of the Note Purchase Agreement to reimburse the Purchaser
for all reasonable costs, internal counsel charges and out-of-pocket expenses
paid or incurred by the Purchaser in connection with the preparation,
negotiation, execution and delivery of this Amendment, including but not
limited to the reasonable attorneys' fees and time charges of attorneys for the
Purchaser with respect thereto.
6. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS (AS OPPOSED TO CONFLICTS OF
LAWS PROVISIONS) OF THE STATE OF WISCONSIN.
7. 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 purposes.
8. 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.
[signature page follows]
-13-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date and year first above written.
TRAK INTERNATIONAL, INC.
By:/s/ James H. Hook
----------------------------------------------
Its:/s/ Vice President and Assistant Secretary
----------------------------------------------
THE MINNESOTA MUTUAL LIFE INSURANCE COMPANY
By:/s/ Frederick Feuerherm
--------------------------------------------
Its:Second Vice President
--------------------------------------------
-14-
<PAGE>
Harbour Group Industries, Inc.
7701 Forsyth Boulevard
Suite 600
St. Louis, Missouri 63105
September 30, 1996
Omniquip International, Inc.
369 W. Western Avenue
Port Washington, Wisconsin 53704
Re: CORPORATE DEVELOPMENT CONSULTING AND ADVISORY SERVICES
Gentlemen:
This letter sets forth the agreement between Omniquip International, Inc.,
a Delaware corporation (the "Company"), and Harbour Group Industries, Inc., a
Missouri corporation ("HGI"), with respect to certain consulting and advisory
services to be provided by HGI to the Company from time to time.
HGI hereby agrees to provide the Company from time to time throughout the term
of this agreement, corporate development services, including the identification,
evaluation and negotiation of acquisitions, strategic planning, negotiation of
dispositions of components of the Company and such other similar services as the
Company may require from time to time.
The fee for services rendered by HGI (the "Hourly Fee") will be based on the
hours actually worked for the Company and upon HGI's regular established hourly
rates
<PAGE>
therefor of the staff performing such work as set forth on Schedule 1 attached
hereto and made a part hereof, which rates reflect the direct cost of the
services of such personnel and allocation of related overhead. Such rates may
be adjusted quarterly on the basis of actual cost experience and cost
projections of HGI.
In addition to the Hourly Fee, HGI is to be reimbursed by the Company for
out-of-pocket expenses ("Expenses") incurred for such matters as travel,
printing and reproduction, outside computer time charges, postage, secretarial
overtime, delivery services, facsimiles, outside expert and consultant fees,
long-distance telephone charges, local transportation and the like. Outstanding
disbursements will be identified and billed separately or upon billing for
consulting and advisory services. HGI in its discretion may require the advance
payment of Expenses. Amounts billed separately as Expenses will not be included
in overhead allocations utilized in the determination of the Hourly Fee.
HGI shall be entitled to a transaction fee (the "Transaction Fee") for each
completed acquisition or disposition by the Company during the term of this
agreement, based on the total amount paid by the acquiring party (the "Purchase
Price"), including payments for covenants not to compete and debt assumed in
connection therewith, and in the case of mergers and stock transfers, debt of
the acquired company. The Transaction Fee for each transaction completed shall
be equal to the greater of (A) one hundred twenty-five thousand dollars
($125,000) and (B) the sum of (i) two and one half percent (2.5%) of the first
one million dollars ($1,000,000) of the Purchase Price, (ii) two percent (2%) of
the
-2-
<PAGE>
portion of the Purchase Price in excess of one million dollars ($1,000,000) up
to and including two million dollars ($2,000,000) of the Purchase Price, (iii)
one and one half percent (1.5%) of the portion of the Purchase Price in excess
of two million dollars ($2,000,000) up to and including three million dollars
($3,000,000) of the Purchase Price, (iv) one percent (1%) of the portion of the
Purchase Price in excess of three million dollars ($3,000,000) up to and
including four million dollars ($4,000,000) of the Purchase Price, and (v) one
half of one percent (0.5%) of the portion of the Purchase Price in excess of
four million dollars ($4,000,000). Each Transaction Fee shall be payable upon
the closing of the transaction to which it relates. The sum of the Hourly Fee
and Transaction Fees within any year is herein referred to as "Fees."
The Company agrees to pay HGI an annual retainer for this engagement in the
amount of $100,000, payable in monthly installments of $8,334, due on the first
day of each month. The retainer shall be non-refundable and shall be applied
against the Hourly Fee.
In the event that Fees and Expenses at any time exceed the amount of the
retainer plus any payments of Transaction Fees in addition to the retainer and
any advance payment of Expenses, an invoice, payable upon receipt, will be
issued with respect to such excess. HGI reserves the right to charge interest
at the rate of 1.5% per month from the invoice date if invoices are not paid
within thirty (30) days.
-3-
<PAGE>
The term of this agreement shall be one year commencing on the date hereof
and shall continue thereafter from year to year until terminated by either party
upon the giving of thirty (30) days written notice thereof to the other.
This agreement shall be governed by and construed in accordance with the
laws of the State of Missouri, without giving effect to its conflicts of laws
principles.
No provision of this agreement may be modified, amended or waived except by
a writing signed by each party hereto.
IN WITNESS WHEREOF, the undersigned has caused this letter to be duly
executed and delivered by its duly authorized officer, intending to be bound by
the terms and conditions hereof.
HARBOUR GROUP INDUSTRIES, INC.
By:/s/ Francis M. Loveland
-----------------------------------------
Francis M. Loveland
Vice President and Chief Financial Officer
Accepted and agreed to this
30th day of September, 1996:
OMNIQUIP INTERNATIONAL, INC.
By: /s/ Philip G. Franklin
--------------------------------------------
Philip G. Franklin
Chief Financial Officer
-4-
<PAGE>
Schedule 1
FEES
Personnel/Position Hourly Rate
Samuel A. Hamacher Executive Vice President $341
Peter S. Finley Senior Vice President 261
Robert W. Hull Senior Vice President 200
James W. Cooper Vice President 171
Jeffrey C. Gentsch Vice President 173
Thomas V. Inglesby Vice President 168
Neal J. Berman Vice President 168
Vincent E. Warrick Director Corporate Development 153
-5-
<PAGE>
Harbour Group Ltd.
7701 Forsyth Boulevard
Suite 600
St. Louis, Missouri 63105
September 30, 1996
Omniquip International, Inc.
369 W. Western Avenue
Port Washington, Wisconsin 53704
Re: OPERATIONS CONSULTING AND ADVISORY SERVICES
-------------------------------------------
Gentlemen:
This letter sets forth the agreement between Omniquip International,
Inc., a Delaware corporation (the "Company"), and Harbour Group Ltd., a
Delaware corporation ("HGL"), with respect to certain consulting and advisory
services to be provided by HGL to the Company from time to time.
HGL hereby agrees to provide the Company from time to time throughout the
term of this agreement, corporate strategy, operations consulting, review and
analysis, asset management, financial analysis, risk management, management
information services and such other similar services as the Company may
require from time to time.
The fee for services rendered by HGL (the "Fee") will be based on the hours
actually worked for the Company and upon HGL's regular established hourly
rates therefor of the staff performing such work as set forth on Schedule 1
attached hereto and made a part
<PAGE>
hereof, which rates reflect the direct cost of the services of such personnel
and allocation of related overhead. Such rates may be adjusted quarterly on
the basis of actual cost experience and cost projections of HGL. Annually,
the Fee payable hereunder shall be adjusted so as to equal the actual cost of
the services provided to the Company under this agreement by HGL, which
actual cost includes direct cost and a pro rata share of actual related
overhead costs.
In addition to the Fee, HGL is to be reimbursed by the Company for
out-of-pocket expenses ("Expenses") incurred for such matters as travel,
printing and reproduction, outside computer time charges, postage,
secretarial overtime, delivery services, facsimiles, outside expert and
consultant fees, long-distance telephone charges, local transportation and
the like. Outstanding disbursements will be identified and billed separately
or upon billing for consulting and advisory services. HGL in its discretion
may require the advance payment of Expenses. Amounts billed separately as
Expenses will not be included in overhead allocations utilized in the
determination of the Fee.
The Company agrees to pay HGL an annual retainer for this engagement in
the amount of $150,000, payable in monthly installments of $12,500, due on
the first day of each month. The retainer shall be applied against the Fee.
In the event that the retainer amount plus any advance payments of Expenses
shall exceed the amount of the Fee (as adjusted to actual costs) and Expenses
for the term, such excess shall be refunded to the Company.
-2-
<PAGE>
In the event that the Fee and Expenses at any time exceed the retainer
amount plus any advance payments of Expenses, an invoice, payable upon
receipt, will be issued with respect to such excess. HGL reserves the right
to charge interest at the rate of 1.5% per month from the invoice date if any
invoice is not paid within thirty (30) days.
The term of this agreement shall be one year commencing on the date
hereof and shall continue thereafter from year to year until terminated by
either party upon the giving of thirty (30) days written notice thereof to
the other.
This agreement shall be governed by and construed in accordance with the
laws of the State of Missouri, without giving effect to its conflicts of laws
principles.
No provision of this agreement may be modified, amended or waived except
by a writing signed by each party hereto.
-3-
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this letter to be duly
executed and delivered by its duly authorized officer, intending to be bound
by the terms and conditions hereof.
HARBOUR GROUP LTD.
By: /s/ Francis M. Loveland
-------------------------------
Francis M. Loveland
Vice President - Finance
Accepted and agreed to this
30th day of September, 1996
OMNIQUIP INTERNATIONAL, INC.
By: /s/ Philip G. Franklin
---------------------------------------------
Philip G. Franklin
Chief Financial Officer
4
<PAGE>
Schedule 1
FEES
Personnel/Position Hourly Rate
- ------------------- -----------
William A. Schmalz Vice Chairman $105
James C. Janning President and Chief Operating Officer 284
Jeffrey L. Fox Group President 159
Gregory A. Fox Group President 157
Francis M. Loveland Vice President and Treasurer 180
Dean Harrison Corporate Director Manufacturing 151
Steven M. Fox Manager of Manufacturing 60
Steven H. Chesnut Manager of Environmental Affairs 95
William L. Willhite Operations Controller 91
Michael P. Santoni Director of Accounting 66
Terry LaPosha Sr. Project Manager 78
Lisa Stranc Manager of Systems Implementation 78
-5-
<PAGE>
RETAIL FINANCE AGREEMENT BETWEEN
LULL INDUSTRIES, INC. ("LULL") AND
DEERE CREDIT, INC. ("DEERE")
GENERAL PROVISIONS
Deere hereby agrees to finance the retail purchase of industrial equipment
manufactured by Lull pursuant to the following terms and conditions. Lull
accepts the terms and conditions set out below as to all loans or retail
installment contracts (collectively, "Contracts", or singularly, "Contract")
which its distributors ("Distributors" or, singularly, "Distributor") send
Deere after the effective date of this Agreement.
Deere will make its Lull equipment retail finance program available to each
Lull Distributor which meets certain minimum financial requirements set by
Deere. Lull will assist Deere in obtaining annual financial information from
each of Lull's Distributors.
TRAINING
Prior to the announcement of this program, Deere agrees to provide Lull sales
personnel with appropriate training regarding the fundamentals of the finance
programs. Lull agrees to make its sales personnel reasonably available for
such training. Each party will pay its own expenses for this training
program, but Deere will pay for the training materials.
Lull agrees that, after initial training by Deere, Lull will train each of
its Distributors to use Deere's finance program. Deere will assist Lull with
training support intermittently as needed. Lull will also provide ongoing
support for the program during the course of this Agreement.
ACCEPTANCE
Deere may accept or reject at its discretion any Contracts submitted by
Distributors, or may discontinue further acceptances from any Distributor at
any time.
Lull hereby agrees to provide to Deere, on a confidential basis, up to date
and accurate information regarding the suggested retail price and the
Distributor invoice or Lull's cost of equipment sold. Lull also agrees to
disclose to Deere any reduction in the Distributor invoice caused by any
incentive program(s) offered by Lull.
FINANCE INCENTIVE PROGRAMS
Deere will charge Lull monthly for any amounts Lull is obligated to pay Deere
under any finance incentive program offered by Lull to its customers. Lull
shall pay these amounts to Deere net 15 days from the date of Deere's
invoice. When a distributor contributes to the
<PAGE>
finance incentive program, the amount of the distributor's contribution will
be deducted from the note proceeds.
RENTAL FLEET FINANCE ("RFF") PLAN
Deere agrees, subject to Deere's normal credit criteria, to finance for
Lull's Distributors the Distributors' purchases of Lull equipment to be used
by the Distributors as rental inventory. Such RFF's will be installment
contracts the last installment of which is a balloon payment in an amount, or
percentage of the original Distributor invoice amount, as agreed to by Lull
and Deere. Upon retail sale or other disposition of the equipment by the
Distributor, any balance remaining on the contract will be immediately due
and payable.
If the Distributor does not elect to pay or refinance the balloon payment,
Lull agrees to pay to Deere the amount of the balloon payment as originally
disclosed on the RFF contract. Such payment will be made by Lull upon
request by Deere. Lull further agrees to pay Deere the entire unpaid balance
of the RFF contract if, for whatever reason, the subject equipment is no
longer in the Distributor's inventory and the Distributor has not paid such
balance to Deere. However, Lull shall not be responsible for paying Deere
for events covered by insurance the proceeds of which are paid to Deere.
If the Distributor defaults on an RFF contract prior to the due date of the
balloon payment, Deere may, but is not obligated to, offer to sell the RFF
contract to Lull at a price equal to the total outstanding balance on the
contract. Lull may or may not accept such offer.
ADVERTISING AND PROMOTION
Each November, Deere will pay Lull one tenth of one percent (.1%) of the
aggregate original Principal Balances of funded notes and RFFs during Deere's
past fiscal year. Deere's fiscal year starts on 1 November and ends 31
October. A John Deere Credit "tag line" will be used in all Lull
advertisements, literature, brochures and other promotional materials. Lull
agrees to submit to Deere for approval copies of all such advertising, etc.,
before they are printed.
RIGHT OF FIRST REFUSAL
Lull agrees that during the course of this Agreement Lull will endorse for
use by Lull's Distributors and retail customers Deere's finance program. If
Lull should offer any finance incentives to its customers during the term of
this Agreement, the incentives shall be available through the use of Deere's
finance products and will be available through other finance companies'
finance programs only if Deere declines to offer the customers credit.
2
<PAGE>
COLLECTIONS AND REPOSSESSIONS
Deere will take any collection or repossession action on defaulted contracts
as it, in its sole discretion, deems necessary and proper under the
circumstances. Lull hereby agrees to render friendly assistance without
charge to Deere in collection or repossession of these contracts or the
collateral securing them.
WARRANTIES
Lull warrants to Deere that Goods which are the subject of a Contract comply
with all state, federal and local laws and regulations in the jurisdictions
in which such Goods are to be offered for sale by its Distributors.
In the event of breach by Lull of any warranties or other representations
contained anywhere in this Agreement (except for in the two paragraphs that
immediately follow), upon demand by Deere, Lull will pay Deere on the
Contract(s) directly or indirectly affected by such breach, an amount equal
to the total unpaid balance of the Contract, (including unpaid finance
charges) plus all costs and expenses (including attorney's fees) reasonably
incurred by Deere as a result of the breach.
If any retail purchaser alleges that Lull has breached any warranty, whether
express, implied or constructive, and ceases to make payments to Deere
because of such breach, Deere will take whatever action it deems necessary
and proper in collecting such retail purchaser's account. If the equipment
is repossessed in such an instance, and if Lull determines that a warranty
has been breached, Lull will repair the equipment to remedy the breach.
Further, upon request by Deere, Lull will provide the purchaser at a
repossession sale with a written statement that either (1) there was no
breach; or (2) the alleged breach has been cured.
Moreover, if any court holds that Lull has, in fact, breached any warranty,
whether express, implied or constructive, to any retail purchaser, Lull shall
hold Deere harmless from any and all losses it incurs on that retail
purchaser's Contract.
Notwithstanding any other provision in this Agreement, Lull's failure to
fulfill its obligations outlined in the two preceding paragraphs shall
entitle Deere to terminate this Agreement upon ten (10) days written notice.
HOLD HARMLESS
Lull agrees to defend, indemnify, and hold harmless Deere, its affiliated
corporations, and their respective directors, officers, employees, and agents
against and from any and all claims, demands, suits, fines, and penalties,
and any expense pertaining thereto, which are brought by any person or entity
as a result of any death, personal injury, or property
3
<PAGE>
damage, whether direct or consequential, arising out of the use, possession,
or transportation of any Lull product.
VOLUME
The parties acknowledge that for this program to be successful, a minimum
volume (dollars financed) level must be reached.
1994 $ 2,000,000
1995 $ 9,000,000
1996 $12,000,000
ANNUAL REVIEW
This program will be reviewed annually to determine whether volume targets
have been or will be met and to consider changes to the program to make it
more beneficial to both Lull and Deere.
FINANCIAL INFORMATION
On a semi-annual basis, Lull will send to Deere financial information
consisting of a complete balance sheet and income statement. At least once
annually, such statements shall be audited by outside, certified public
accountants.
TERMINATION
This Agreement may be terminated by either party upon 365 days' written
notice to the other party. Upon breach of this Agreement by one party, the
other party may, at its option, terminate this Agreement after giving the
breaching party written notice that it has ten (10) days in which to begin
curing the breach and thirty (30) days within which to complete the cure.
Termination shall not affect each parties rights and obligations with respect
to Contracts accepted before the effective date of such termination.
CONTROLLING LAW
The construction and validity of this Agreement shall be governed by the law
of Iowa.
4
<PAGE>
EFFECTIVE DATE
The effective date of this Agreement shall be the 14th day of July, 1994.
LULL INDUSTRIES, INC. DEERE CREDIT, INC.
By: /s/ William F. Sharpe Jr. By: /s/ Steven E. Warren
-------------------------- ----------------------------
Title: CFO Title: Senior Vice President
----------------------------------- ----------------------
Date: 7-14-94 Date: 7-22-94
----------------------------------- ----------------------
5
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated November 1, 1996,
relating to the consolidated financial statements of Omniquip International,
Inc., which appears in such Prospectus. We also consent to the application of
such report to the Financial Statement Schedules for the period August 17,
1995 to September 30, 1995 and for the fiscal year ended September 30, 1996
listed under Item 16(b) of this Registration Statement when such schedules
are read in conjunction with the financial statements referred to in our
report. The audits referred to in such report also included these schedules.
We also consent to the references to us under the headings "Experts" and
"Selected Consolidated Financial Data" in such Prospectus. However, it should
be noted that Price Waterhouse LLP has not prepared or certified such
"Selected Consolidated Financial Data."
PRICE WATERHOUSE LLP
St. Louis, Missouri
November 8, 1996
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated July 15, 1996,
relating to the financial statements of TRAK International, Inc., which
appears in such Prospectus. We also consent to the application of such report
to the Financial Statement Schedules for the period October 1, 1994 to August
16, 1995 and for the fiscal year ended September 30, 1994,
respectively, listed under Item 16(b) of this Registration Statement when
such schedules are read in conjunction with the financial statements referred
to in our report. The audits referred to in such report also included these
schedules. We also consent to the references to us under the headings
"Experts" and "Selected Consolidated Financial Data" in such Prospectus.
However, it should be noted that Price Waterhouse LLP has not prepared or
certified such "Selected Consolidated Financial Data."
PRICE WATERHOUSE LLP
St. Louis, Missouri
November 8, 1996
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated November 1, 1996,
relating to the financial statements of Lull Industries, Inc., which appears
in such Prospectus. We also consent to the references to us under the
headings "Experts" and "Selected Consolidated Financial Data" in such
Prospectus. However, it should be noted that Price Waterhouse LLP has not
prepared or certified such "Selected Consolidated Financial Data."
PRICE WATERHOUSE LLP
St. Louis, Missouri
November 8, 1996
<PAGE>
October 1, 1996
Board of Directors
Omniquip International, Inc.
369 West Western Avenue
Port Washington, Wisconsin 53074
Gentlemen:
I hereby consent to be named as a director nominee in the Registration
Statement on Form S-1 pertaining to the proposed initial public offering of
shares of common stock, par value $.01 per share, of Omniquip International,
Inc.
Very truly yours,
/s/ Jerry E. Ritter
Jerry E. Ritter
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
SEPTEMBER 30, 1996 CONSOLIDATED FINANCIAL STATEMENTS OF OMNIQUIP
INTERNATIONAL, INC. AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> SEP-30-1996
<CASH> 53
<SECURITIES> 0
<RECEIVABLES> 22,029
<ALLOWANCES> (351)
<INVENTORY> 27,540
<CURRENT-ASSETS> 54,805
<PP&E> 17,745
<DEPRECIATION> (1,255)
<TOTAL-ASSETS> 139,580
<CURRENT-LIABILITIES> 41,412
<BONDS> 84,566
0
0
<COMMON> 100
<OTHER-SE> 12,325
<TOTAL-LIABILITY-AND-EQUITY> 139,580
<SALES> 124,861
<TOTAL-REVENUES> 124,861
<CGS> 92,688
<TOTAL-COSTS> 92,688
<OTHER-EXPENSES> 16,311
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,434
<INCOME-PRETAX> 10,416
<INCOME-TAX> 4,060
<INCOME-CONTINUING> 6,356
<DISCONTINUED> 0
<EXTRAORDINARY> (314)
<CHANGES> 0
<NET-INCOME> 6,042
<EPS-PRIMARY> .61
<EPS-DILUTED> .61
</TABLE>
