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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission File Number 0-21461
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OMNIQUIP INTERNATIONAL, INC.
[Exact name of registrant as specified in its charter]
DELAWARE 43-1721419
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
222 East Main Street
Port Washington, Wisconsin 53074
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (414) 268-8965
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Name of each exchange
Title of each class on which registered
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None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock
Preferred Stock Purchase Rights
Series A Preferred Stock, $.01 par value
(Title of class)
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Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes. X No.
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
As of December 18, 1998, the aggregate market value of the common stock
held by non-affiliates (13,474,639 shares) of the registrant was $176,854,637
(based on the closing price, on such date, of $13.125 per share).
As of December 18, 1998, there were 14,271,000 shares of common stock,
$0.01 par value, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Proxy Statement dated on or about December 31, 1998 (portion) (Part III)
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<PAGE>
OMNIQUIP INTERNATIONAL, INC.
INDEX TO FORM 10-K
Page
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Part I
Item 1. Business.................................................... 1
Item 2. Properties.................................................. 12
Item 3. Legal Proceedings........................................... 13
Item 4. Submission of Matters to a Vote of Security Holders......... 13
Part II
Item 5. Market for Registrant's Common Stock and Related
Stockholder Matters........................................ 13
Item 6. Selected Consolidated Financial Data........................ 14
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................ 15
Item 7a. Quantitative and Qualitative Disclosures about Market Risk.. 24
Item 8. Financial Statements and Supplementary Data................. 25
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure........................ 47
Part III
Item 10. Directors and Executive Officers of the Registrant.......... 47
Item 11. Executive Compensation...................................... 47
Item 12. Security Ownership of Certain Beneficial Owners and
Management................................................. 47
Item 13. Certain Relationships and Related Transactions.............. 47
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K................................................... 48
<PAGE>
Item 1. Business
General
OmniQuip International, Inc. (the "Company" or "OmniQuip") is the
largest North American manufacturer of telescopic material handlers and one of
the leading North American producers of aerial work platforms. Other products
manufactured by the Company include skid steer loaders and a range of other
material handling equipment. OmniQuip's highly versatile products are used in a
variety of applications for construction, industrial, maintenance, military and
agricultural markets. The Company's principal products are marketed under the
well-recognized and highly-regarded SKY TRAK, LULL, SNORKELIFT and WILDCAT brand
names.
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, straightmast
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 increased from approximately 950 units
in calendar 1990 to approximately 3,550 units in fiscal 1998. Based upon
industry reports, the Company believes that its North American market share of
fiscal 1998 shipments of telescopic material handlers was approximately 31%. In
addition, OmniQuip has been a principal supplier since 1988 of telescopic
material handlers to the military. The Company has a contract to supply the U.S.
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. Through September
30, 1998, the Company has sold approximately 248 vehicles under this contract.
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.
Aerial work platforms are mobile, versatile units designed to
position workers and materials easily in elevated work locations. Such highly
versatile products allow users to increase productivity in certain
labor-intensive tasks in an enhanced safety environment compared to equipment
traditionally used to reach elevated and difficult to reach positions such as
scaffolding and ladders. The Company's broad product line includes
self-propelled telescoping and/or articulating boom-type platforms, which have
maximum elevation capabilities ranging from 33 feet to 126 feet from ground to
platform height and self-propelled scissor-type platforms with maximum elevation
capabilities ranging from 15 feet to 40 feet from ground to platform height. The
Company also manufactures a small line of truck-mounted and trailer-mounted
booms with elevation capabilities ranging from 40 feet to 69 feet in height.
Shipments of aerial work platforms marketed under the SNORKELIFT and WILDCAT
brand names increased from approximately 1,900 units in 1990 to approximately
4,700 units in fiscal 1998.
OmniQuip sells and distributes its material handling and aerial
work platform products commercially through independent equipment dealers and
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 approximately
50 countries. To facilitate the sale of its material handling products, OmniQuip
offers its independent equipment dealers floor plan and rental fleet financing
assistance in connection with the purchase of the Company's
<PAGE>
products. Such assistance consists of limited, backup 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.
Industry Overview
OmniQuip competes principally in selected segments of the material
handling and light equipment markets which utilize engines of less than 130
horsepower. With limited exceptions, competitors with leading market shares in
these segments typically are not large full-line construction equipment
manufacturers.
North American shipments of construction and allied equipment grew
from $30.8 billion in 1990 to $43.1 billion in 1996, representing a nominal
compound annual growth rate of 5.8%. According to industry estimates, shipments
of telescopic material handlers in North America grew from approximately 2,400
units in 1990 to approximately 9,100 units in 1997, representing a real compound
annual growth rate of 20.8%, and shipments of aerial work platforms increased
from approximately 13,200 units in 1990 to approximately 40,900 units in 1997,
representing a real compound annual growth rate of 17.6%. For the twelve months
ended September 30, 1998, unit shipments of telescopic material handlers,
boom-type aerial work platforms and scissor-type aerial work platforms grew
approximately 32.9%, 6.1% and 33.1%, respectively, each as compared to the
twelve months ended September 30, 1997. The Company believes growth rates for
telescopic material handlers and aerial work platforms are attributable to a
number of factors, including the following:
Increased Productivity and Safety. Telescopic material
handlers and aerial work platforms enable users to reduce costs through
increased labor productivity 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.
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. Aerial work platforms provide distinct safety
and productivity advantages over alternative equipment and are
increasingly attractive in light of federal and state safety rules
requiring the use of tethers and other safety devices for workers in
elevated work environments.
Product Versatility. Telescopic material handlers are more
versatile than other material handling equipment such as cranes,
straightmast 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. Aerial work
platforms also offer increased versatility relative to more traditional
devices such as ladders and scaffolding.
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
equipment for either sale or rental, has grown significantly. A survey
conducted for an industry
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trade association estimates that construction equipment rental revenues
were approximately $6.6 billion in 1990 and increased to approximately
$16.2 billion in 1996. 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 can fulfill significant, but temporary,
needs of large end-users, supplementing capacity during peak activity
periods. Additionally, rental companies can rent a single unit 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 aerial work
platforms have been the construction and building maintenance markets.
In recent years, however, applications for each product line 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. Aerial work platforms are
increasingly used in the industrial and commercial market by automobile
and other manufacturers, airlines and ship builders, among others.
Business Strategy
The Company's strategy is to grow primarily within selected
segments of the material handling and light equipment markets which (i) are
growing faster than the construction equipment industry generally, (ii)
constitute core rental products for the construction equipment rental industry,
(iii) utilize engines of less than 130 horsepower, and (iv) are not typically
dominated by full-line construction equipment manufacturers.
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 one of the
Company's wholly-owned subsidiaries, Lull International, Inc. ("Lull"),
which permit higher precision, horizontal maneuvering of materials at
various lift heights, and the introduction by Snorkel International,
Inc. ("Snorkel") of industry-leading safety features, such as envelope
management, slope-level interlocks and pothole protection. Recently,
the Company introduced its 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.
Pursuing a multiple brand distribution strategy. The Company
is pursuing a strategy of marketing multiple light construction
equipment products with leading brand names through independently owned
distributors and increasingly through rapidly expanding national rental
fleets. While these national companies have grown primarily through
acquisition of many of the Company's formerly independent dealers and
rental houses, strong representation of one or more of the Company's
brands in these expanding fleets insures broad market coverage and the
opportunity to leverage the sale of other products and/or brands to
these customers. This strategy affords the Company the opportunity to
realize economies of scale in providing parts
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supply and other aftermarket services to its customers, while achieving
similar economies in component purchasing and manufacturing for the
Company. 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 and Snorkel in November 1997 reflects the Company's strategy of
acquiring businesses which utilize complementary distribution channels
or which manufacture and market products which complement the products
currently manufactured and sold by the Company. The Company has
identified numerous potential acquisition candidates in the relatively
fragmented under-130 horsepower market segment.
Achieving cost savings from the integration of acquired
operations. The Company believes that it can realize substantial
additional cost savings 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.
Penetrating international 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 telescopic material
handler products to increase their appeal in international markets. The
Company believes that its acquisition of Snorkel will help it improve
its distribution networks outside North America by utilizing Snorkel's
existing sales force, particularly in the Far East, and by enabling the
Company to offer a broader line of products to international
distributors.
Products
The Company designs, manufactures and markets telescopic material
handlers and aerial work platforms as its principal product lines. 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 (Unaudited) Net Sales By Product Category1
(in thousands)
<TABLE>
<CAPTION>
Fiscal Year Ended September 30,
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1998 1997 1996 1995 1994
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<S> <C> <C> <C> <C> <C>
Telescopic material handlers................ $263,005 $225,778 $166,041 $121,464 $ 75,245
Aerial work platforms....................... 151,778 142,889 146,780 103,998 70,400
Other2...................................... 56,762 52,486 54,237 45,047 29,362
-------- -------- -------- -------- --------
Total.................................. $471,545 $421,345 $367,058 $270,509 $175,007
</TABLE>
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(1) The information in the foregoing table reflects the pro forma net sales by
product category of TRAK International, Inc. ("TRAK"), a wholly-owned
subsidiary of the Company, Lull and Snorkel for the applicable periods as
if the acquisitions of these companies had occurred on October 1, 1993.
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(2) Includes parts and service, skid steer loaders and other miscellaneous
equipment lines and attachments.
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 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.
Suggested list prices for these products range from approximately $70,000 to
approximately $135,000 per unit.
Each of the Company's two brands of telescopic material 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 United States military. Such products are used by the
United States 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. 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 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.
Aerial Work Platforms
Aerial work platforms are mobile, versatile units designed to
position workers and materials easily in elevated work locations. These
platforms are used primarily by building contractors
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and commercial and industrial end-users to enable workers to quickly and easily
reach elevated work sites and to perform tasks inside and outside of buildings
at heights up to 126 feet. Aerial work platforms compete with ladders and
scaffolding, but provide superior flexibility and improved safety features. For
example, the Occupational Safety and Health Administration mandates that
individuals working above a certain height be tethered to prevent potential
accidents. Aerial work platforms allow such workers to comply with the
regulation while at the same time being highly mobile and efficient. The Company
manufactures and markets a full line of boom-type telescoping aerial work
platforms. The Company also manufactures and markets scissor-type aerial work
platforms and a limited range of truck- and trailer-mounted equipment.
The Company manufactures 22 models of boom-type work platforms.
The Company's products include units with straight telescoping booms,
telescoping booms with articulating jib, units with articulating booms and
articulated booms with articulating jib. Telescoping boom aerial work platforms
can place workers from 37 feet to 126 feet high. Units with articulating booms
and articulating jibs can place work platforms from 33 feet to 60 feet high.
List prices of the Company's boom-type aerial work platforms range from
approximately $40,000 to $270,000.
The Company also manufactures 12 scissor-type aerial work
platforms. Finished-surface ("slab") scissor-type aerial work platforms can lift
workers 15 feet to 40 feet from ground to maximum platform height. Rough-terrain
scissor-type aerial work platforms have a maximum range of 25 feet to 40 feet
from ground to platform height. The list prices of the Company's scissor-type
aerial work platforms range from approximately $13,000 to $56,000.
Other
Other products manufactured and marketed by the Company include
(i) skid steer loaders (under the SCAT TRAK name), which are compact and
versatile material handling machines used to dig, lift and transport bulk
materials, (ii) specialized material handling equipment, such as crucible
transporters (under the ERICKSON brand name) and, (iii) a limited range of
self-propelled power haulers and power lifters (under the WORKPRO brand name)
and articulated forklifts and loaders, all of which are used primarily in the
masonry industry. In addition, the Company markets a limited line of
straightmast forklifts and mini-excavators. 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
has a multiple brand strategy in its telescopic material handler product line to
appeal to customers' differing price, performance and support needs. This
strategy provides wider coverage of the available customer base while affording
the Company the opportunity to realize economies of scale in providing parts
supply, service, attachments, dealer finance, component purchasing and
manufacturing. In addition, current customer consolidation initiatives being
driven by the national rental companies are rapidly increasing the overlap of
several of the Company's products among common customers, again increasing the
opportunity for economies of scale, particularly in providing aftermarket
services. SKY TRAK and LULL brand telescopic material handlers, SNORKELIFT and
WILDCAT brand aerial work platforms, and SCAT TRAK skid steer loaders and
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WORKPRO material handlers are marketed to a mix of independent retail dealers,
rental centers and national rental fleets.
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. National rental fleets are
large equipment rental companies which, through company-owned stores or
franchises, carry out rental activities nationwide.
During fiscal 1998, the light construction equipment industry
began undergoing a dramatic shift as independent dealers and distributors were
acquired by fast-growing national rental companies. As the national rental
companies continue to purchase more distributors, the consolidation of the
industry will result in fewer, but larger customers. During fiscal 1998,
OmniQuip net sales to Rental Service Corporation and United Rentals, Inc. were
each greater than 10% of total net sales (after giving effect to acquisitions
made by each such company).
The Company employs a sales and service force of field and factory
based managers and representatives to support the sales, service and rental
activities of its customers 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 goal in cooperation with a network of distributors and
rental companies who 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, rental companies,
end-users and major vendors for failure analysis of products both in and out of
warranty.
International sales represented approximately 12%, 10% and 11% of
pro forma consolidated net sales, including the acquisitions of Lull and
Snorkel, for the fiscal years ended September 30, 1996, 1997 and 1998,
respectively. All of the Company's products are primarily marketed
internationally through dealers and rental companies, with the exception of the
LULL brand of telescopic material handlers, which is marketed internationally
primarily through an exclusive distribution agreement with a single United
States exporter. Most of Snorkel's international sales for such periods were
made through Snorkel's Australian subsidiary to Australian and other customers
principally located in the Far East.
Financing
The Company supports its independent dealers in obtaining
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 backup
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, 1998, approximately $62.4 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.
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Aggregate losses under substantially all of the Company's guarantee obligations
to third party lenders with respect to the Company's dealers in each of calendar
years 1997 and 1998 are limited to the greater of $1.5 million or 5% of the loan
balance at the previous calendar year end (approximately $47.2 million and $55.0
million at December 31, 1996 and 1997, respectively). To the extent that
independent lenders providing financing for the Company's dealers do not have
(or do not exercise) direct recourse against the Company under backup
guarantees, the Company is committed to perform its repurchase undertaking to
reacquire 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. At September
30, 1998, past due principal and interest as a percentage of the total portfolio
on a pro forma consolidated basis was less than one-half of one percent. The
Company's loss experience in recent years has been insignificant.
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 aerial work platforms. During the past three years, the
Company has made significant capital investments in its principal 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.
Recent strong demand for telescopic material handlers has pushed
the limits of the Company's manufacturing capacity. As a result, in September
1998, the Company launched a two-year, $20 million capacity expansion program to
expand telescopic material handler capacity and improve production efficiencies
by moving to focused factories and lean manufacturing processes. The Company
believes that these integrated manufacturing approaches will shorten the lead
time to deliver superior, lower cost products through the elimination of waste.
A key element of this program will be the consolidation of SKY TRAK and LULL
telescopic boom production into a dedicated 150,000 square foot leased facility
in Port Washington. Other important elements of this program are expansion of
the light fabrication facility in Oakes, North Dakota and the main LULL facility
in St. Paul as well as re-layout of the main Port Washington facility, which is
now dedicated to SKY TRAK production. The objective of the new and expanded
facilities is to create focused factories that concentrate on specific elements
of the manufacturing process such as light fabrication, boom manufacturing and
LULL and SKY TRAK vehicle fabrication and assembly. It is expected that this
program will result in significant increases in telescopic material handler
capacity. It is expected that fiscal year 1999 capital spending related to this
capacity expansion program will be approximately $16 million with the remaining
$4 million to be spent in fiscal year 2000.
As part of this strategy of focused factories, in fiscal year
1998, assembly of skid steer loaders was relocated from the main Port Washington
factory to a separate dedicated facility. In addition, key fabrications for skid
steer loaders, which were also being made in the main Port Washington facility,
have been outsourced.
In early 1995, the Company completed registration under ISO 9001
of its Port Washington, Wisconsin quality systems, becoming the first telescopic
material handler manufacturer in North America to achieve this recognition. In
early 1998, Snorkel completed registration under ISO 9001 for its Elwood, Kansas
facilities. Registration under ISO 9001 represents the achievement of an
internationally recognized standard of quality systems implementation and is
important for competing in
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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 its other facilities.
The Company is pursuing opportunities to reduce costs of purchased
components primarily by developing strategic sourcing alliances with key
suppliers. As part of this program, the Company will consolidate vendor sources
and enter into long-term agreements, typically five years or more, with the
suppliers that are selected. Agreements have been reached with suppliers of
axles and transmissions and others are in the process of being negotiated.
Potential annual savings from these alliances are expected to be in the range of
$10-15 million.
The principal raw materials and components used in the
manufacturing of the Company's products are steel, aluminum, 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
its 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 76 employees with experience in
the design of products. On a pro forma basis, including the acquisitions of Lull
and Snorkel, for the fiscal years ended September 30, 1996, 1997 and 1998, the
Company spent approximately $5.2 million, $5.8 million, and $7.7 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, beyond the
base period, are available for purchase. Warranty work is performed only by
authorized distributors. Distributors submit claims for warranty reimbursement
to the Company and are credited for the cost of repairs so long as the repairs
meet prescribed standards.
9
<PAGE>
Trademarks and Patents
The Company owns and maintains U.S. trademark registrations for
all of its principal trademarks. The Company owns or otherwise has the right to
use these trademarks in other countries where a significant volume of its
products are sold and where such ownership or right to use 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. Currently, the Company possesses a
patent on three-stage telescopic booms used in the LULL brand of telescopic
material handlers, which expires in 2007. The Company believes this patent
provides it with a competitive advantage in selected markets, but does not
believe that the expiration of this patent 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 fiscal 1998
shipments of telescopic material handlers of approximately 31%, and its
principal competitors include Gradall Industries, Inc. and JCB International
Co., Ltd. Other competitors in the North American market include Case
Corporation, Caterpillar Inc., Gehl Company, Ingersoll-Rand Company, Manitou
S.A., Pettibone Corporation and Traverse Lift. Competitors in this market
outside the United States include Caterpillar Inc., FDI/Sambron, JCB
International Co., Ltd., Manitou S.A. and Merlo S.p.A. The largest manufacturer
of aerial work platforms is JLG Industries, Inc. Other principal competitors
include Genie Industries, Grove Worldwide, Skyjack Inc., Terex Corporation and
UpRight, Inc.
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, local and foreign
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 Occupational Safety and Health Act and similar state, local and foreign
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
10
<PAGE>
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 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 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. During the year ended September
30, 1998, the Company identified a defect in its LULL brand of telescopic
material handlers and established reserves of approximately $1.4 million for the
cost of retrofitting such telescopic material handlers. It is expected that this
retrofit program will be substantially complete by the end of fiscal year 1999.
There can be no assurance, however, that the ultimate cost of the retrofit
program will not exceed the amount of reserves established by the Company or
that the retrofit program will not adversely affect the Company's reputation and
result in a decline in sales of the Company's products.
In connection with the acquisition of Snorkel, the Company assumed
responsibility for a recall program involving HUNTERLIFT scissor lifts
manufactured by Snorkel between 1979 and 1992. The recall was prompted by a
compliance issue with certain voluntary industry standards. The Company has
established a reserve in connection with the recall program. There can be no
assurance, however, that the ultimate cost of the HUNTERLIFT recall will not
exceed the amount of reserves established by the Company or that the recall will
not adversely affect the Company's reputation and result in a decline in sales
of the Company's products. In connection with the assumption of the recall, the
Company has assumed responsibility for a lawsuit relating to the recall. The
lawsuit currently includes approximately 25 plaintiffs and alleges damages in
connection with the recall. The Company is defending the lawsuit vigorously.
Employees
At September 30, 1998, the Company employed approximately 1,750
persons. Approximately 330 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
November 2003. This is the only collective bargaining agreement to which the
Company is a party. Substantially all of the approximately 280 employees at the
Company's St. Paul, Minnesota facility and the approximately 75 employees of the
Company's Oakes, North Dakota 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
11
<PAGE>
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.
Item 2. Properties
The Company's headquarters are located in Port Washington,
Wisconsin, and the Company maintains manufacturing facilities in Minnesota,
North Dakota, Kansas, and New Zealand. Set forth below is certain information
with respect to the Company's manufacturing and warehouse facilities.
<TABLE>
<CAPTION>
Square
Footage Owned/
Location (Approximate) Leased Activities/Products
- ----------------------------- ------------------ ----------- ------------------------------------------------------------
<S> <C> <C> <C>
Port Washington, Wisconsin 150,000 Owned Telescopic material handlers; research and development
Port Washington, Wisconsin 165,000 Leased(1) Boom fabrication and assembly; office and storage
Port Washington, Wisconsin 45,000 Leased(2) Skid steer loader assembly
St. Paul, Minnesota 100,000 Owned Telescopic material handlers; research and development
Eagan, Minnesota 40,000 Leased(3) Parts warehouse; office space
Oakes, North Dakota 30,000 Leased(4) Miscellaneous products and component parts
Elwood, Kansas 77,000 Owned Aerial work platform assembly
Elwood, Kansas 182,000 Leased(5) Aerial work platform fabrication
Wathena, Kansas 50,000 Leased(6) Aerial work platform assembly
Levin, New Zealand 15,000 Leased(7) Aerial work platforms
</TABLE>
- ---------------------
(1) The lease is on a month-to-month basis.
(2) The initial term of the lease expires on July 14, 2002. The Company has
two options to renew the lease for successive three-year terms.
(3) The initial term of the lease expires on October 1, 2004. The Company has
the option to renew the lease for two additional five-year terms.
(4) The initial term of the lease 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.
(5) The initial term of the lease expires on February 1, 1999. The Company has
the option to renew the lease for three additional terms of five years.
(6) The lease expires on June 30, 2002.
(7) The lease expires on November 17, 2007.
The Company also maintains other leased office and warehouse space
in Port Washington, Wisconsin, St. Joseph, Missouri, Wootton Bassett, United
Kingdom, Sydney and Melbourne, Australia and Auckland, New Zealand. The Company
anticipates no significant difficulty in leasing alternative space at reasonable
rates in the event of the expiration, cancellation or termination of a lease
relating to any of the Company's material leased properties. Certain
manufacturing facilities have experienced capacity constraints which have
limited production output and have caused manufacturing inefficiencies during
fiscal 1998. It is expected that these capacity constraints will continue to
affect the material
12
<PAGE>
handling business in fiscal 1999. The Company is addressing these capacity
constraints through the capacity expansion program described in Item 7 of this
Report under "Capital Resources and Liquidity."
Item 3. Legal Proceedings
Product liability and personal injury 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. Product
liability and personal injury claims are covered by the Company's comprehensive
general liability insurance policies, subject to certain deductible amounts and
maximum coverage limits. The Company has 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 and
personal injury claims in the future will not have a material adverse effect on
the Company.
In addition to product liability and personal injury claims, from
time to time, the Company is the subject of legal proceedings, including claims
involving employee matters, commercial 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.
Item 4. Submission of Matters to a Vote of Security Holders
None.
PART II
Item 5. Market for Registrant's Common Stock and Related Stockholder Matters
The Company's common stock is quoted on the Nasdaq National Market
under the symbol "OMQP." As of December 18, 1998, there were 201 record owners
of the Company's Common Stock. The following table sets forth, for the fiscal
quarters indicated, the high and low bid prices for the Company's Common Stock
as reported by the Nasdaq National Market since March 21, 1997, the day trading
commenced and dividends declared per share for the periods indicated.
Dividends
High Low Per Share
- -------------------------------------------------------------------------------
Fiscal 1997
- -----------
Second quarter (beginning March 21, 1997) $14 5/8 $14 1/4 --
Third quarter 24 1/4 11 7/8 --
Fourth quarter 25 3/8 18 1/8 $0.01
Fiscal 1998
- -----------
First quarter $21 1/4 $15 1/2 $0.01
Second quarter 26 5/8 19 1/2 0.01
Third quarter 25 3/4 17 1/4 0.01
Fourth quarter 19 1/4 9 0.01
13
<PAGE>
Item 6. Selected Consolidated Financial Data
The following table sets forth consolidated financial data derived from
the consolidated financial statements of the Company or TRAK, as the predecessor
to the Company.
<TABLE>
<CAPTION>
Company Predecessor(1)
----------------------------------------------------------------------------------
Fiscal Year Ended Aug. 17, 1995 Oct. 1, 1994 Fiscal Year Ended
September 30, through through September 30,
-------------------------------- Sept. 30, 1995 Aug. 16, 1995 1994
1998 (2) 1997 (3) 1996 (4)
--------- --------- ------------ -------------------------- ----------------------
(dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net sales........................... $455,653 $264,213 $124,861 $ 12,723 $ 75,401 $60,973
Cost of sales....................... 349,584 192,270 92,688 9,787 57,707 47,208
--------- --------- ------------ -------------------------- -----------------
Gross profit........................ 106,069 71,943 32,173 2,936 17,694 13,765
Selling, general and administrative 47,365 27,717 16,311 1,670 10,903 9,502
expenses............................
--------- --------- ------------ -------------------------- -----------------
Operating income ................... 58,704 44,226 15,862 1,266 6,791 4,263
Interest expense.................... 10,261 6,106 3,434 353 1,379 1,363
Other finance charges............... 2,553 2,182 2,012 269 1,121 699
--------- --------- ------------ -------------------------- -----------------
Income before income taxes.......... 45,890 35,938 10,416 644 4,291 2,201
Provision for income taxes......... 18,547 14,556 4,060 262 1,762 876
--------- --------- ------------ -------------------------- -----------------
Income before extraordinary item and
change in accounting principles..... 27,343 21,382 6,356 382 2,529 1,325
Extraordinary item, net(5).......... (545) (782) (314) --- --- ---
Cumulative effect of change in
accounting principles............... --- --- --- --- (241)(6) ---
--------- --------- ------------ -------------------------- -----------------
Net income.......................... $ 26,798 $ 20,600 $ 6,042 $ 382 $ 2,288 $ 1,325
--------- --------- ------------ -------------------------- -----------------
Basic Earnings Per Share: (7)(8)
Income before extraordinary item $ 1.92 $ 1.66 $ 0.56 $ 0.03
Extraordinary item(5).......... (0.04) (0.06) (0.03) ---
--------- --------- ------------ -------------
Net income..................... $ 1.88 $ 1.60 $ 0.53 $ 0.03
--------- --------- ------------ -------------
Diluted Earnings Per Share: (7)(8)
Income before extraordinary item $ 1.90 $ 1.66 $ 0.56 $ 0.03
Extraordinary item(5).......... (0.04) (0.06) (0.03) ---
--------- --------- ------------ -------------
Net income..................... $ 1.86 $ 1.60 $ 0.53 $ 0.03
--------- --------- ------------ -------------
Dividends Per Share ................ $ 0.04 $ 0.01 $ 0.00 $ 0.00
--------- --------- ------------ -------------
</TABLE>
<TABLE>
<CAPTION>
Company Predecessor (1)
---------------------------------------------------- ----------------------
As of September 30, As of September 30,
---------------------------------------------------- ----------------------
1998 (2) 1997 (3) 1996 (4) 1995 (9) 1994 (9)
----------- ----------- ------------ ------------- ----------------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Balance Data Sheet:
Working capital $ 58,892 $ 14,402 $ 13,393 $10,699 $ 260
Total assets........................ 316,462 144,298 139,580 48,332 28,651
Short-term debt..................... 13,750 8,625 3,875 540 9,436
Long-term debt...................... 124,250 25,609 84,566 23,781 2,966
Mandatorily redeemable preferred stock --- --- --- --- 3,262
Stockholders' equity................ 94,969 70,398(10) 12,425(10) 6,383 1,783
</TABLE>
14
<PAGE>
- -----------------
(1) The Company was organized in 1995 for the purpose of acquiring TRAK, the
predecessor company.
(2) Amounts as of and for the fiscal year ended September 30, 1998 reflect the
acquisition of Snorkel on November 17, 1997.
(3) Amounts as of and for the fiscal year ended September 30, 1997 reflect the
effects of the Company's initial public offering of common shares on March
20, 1997.
(4) Amounts as of and for the fiscal year ended September 30, 1996 reflect the
acquisition of Lull on August 15, 1996.
(5) Amount in fiscal year 1998 reflects the write-off of deferred finance
charges, net of $371 of income tax benefits, in connection with the
refinancing of debt. Amount in fiscal 1997 reflects the write-off of
deferred finance charges, net of $521 of income tax benefits, in connection
with the refinancing of debt. Amount in fiscal year 1996 reflects the
write-off of deferred finance charges, net of $200 of income tax benefits,
in connection with the refinancing of debt.
(6) 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.
(7) Basic and diluted earnings per share is based on weighted-average shares
outstanding of 14,261,000 and 14,392,000, respectively, for the fiscal year
ended September 30, 1998, 12,845,000 and 12,905,000, respectively, for the
fiscal year ended September 30, 1997 and 11,250,000 in 1996 and 1995.
(8) 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.
(9) 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.
(10) The change in stockholders' equity as of September 30, 1997 versus
September 30, 1996 includes $37,516 of proceeds from the Company's initial
public offering of common stock which was completed in March 1997.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
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 and Snorkel in November 1997. Set forth below is certain
information with respect to these acquisitions:
Acquisition Date of Acquisition Business Year Founded
- ----------- ------------------- -------- ------------
TRAK August 1995 Manufacturer of telescopic material 1954
handlers and skid steer loaders
Lull August 1996 Manufacturer of telescopic material 1956
handlers
Snorkel November 1997 Manufacturer of aerial work platforms 1959
15
<PAGE>
The Company accounted 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 market value of the net
assets acquired has been allocated to goodwill, resulting in approximately
$120.7 million of goodwill at September 30, 1998. The amortization of such
goodwill over 40 years will result in an annual noncash charge to future
operations of approximately $3.1 million.
On November 17, 1997, the Company completed the acquisition of
substantially all of the assets of Snorkel. The purchase price paid by the
Company for Snorkel was $100 million in cash at closing plus the assumption of
certain liabilities. The funds were obtained by the Company pursuant to a
secured credit facility which replaced the Company's existing credit facility.
The Company is also required to pay an additional purchase price of up to $50
million. Any additional payment will be equal to the amount of the net sales of
Snorkel for the twelve-month period commencing on April 1, 1998 and ending on
March 31, 1999 (the "Earn-Out Period") in excess of $140 million, such
additional amount not to exceed $20 million, plus 70% of the amount of the net
sales of Snorkel during the Earn-Out Period in excess of $160 million, such
additional amount not to exceed $30 million. The acquisition has been accounted
for under the purchase method of accounting with the excess of purchase price
over the estimated fair value of net assets acquired recorded as goodwill. Any
additional purchase price determined as described above is expected to be
recorded as additional goodwill when such amounts are determined.
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 national rental centers for
rental and to independent equipment dealers for sale and rental. The Company
supports its independent equipment dealers in obtaining 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, $2.3
million and $2.6 million for the Company for the fiscal years ended September
30, 1996, 1997 and 1998, respectively.
Certain manufacturing facilities have experienced capacity
constraints which have limited production output and have caused manufacturing
inefficiencies during the last nine months affecting sales and gross margins. A
major capacity expansion program, which was launched in September 1998 and is
described in more detail under "Capital Resources and Liquidity," is expected to
address these issues. However, it is expected that these capacity constraints
will continue to affect the material handling business in fiscal 1999.
The following discussion summarizes the significant factors
affecting the consolidated operating results and financial condition of the
Company for the year ended September 30, 1998 compared to the year ended
September 30, 1997, and the year ended September 30, 1997 as compared
16
<PAGE>
to the year ended September 30, 1996. The discussion should be read in
conjunction with the consolidated financial statements referenced in Item 14(1)
herein.
Sales
<TABLE>
<CAPTION>
Fiscal Year Ended September 30,
1998 1997 1996
--------------- --------------- ---------------
<S> <C> <C> <C>
Commercial telescopic material handlers $242,033 $221,269 $ 96,174
Military telescopic material handlers 20,972 4,510 675
Compact products (1) 23,803 22,327 20,674
Aerial work platforms 137,550 --- ---
Parts and other products 31,295 16,107 7,338
--------------- --------------- ---------------
$455,653 $264,213 $124,861
--------------- --------------- ---------------
</TABLE>
(1) Compact products includes skid steer loaders, mini-excavators, power
haulers and power lifters and articulated forklifts and loaders.
Results of Operations
The following table sets forth for the fiscal years indicated the
percentage of net sales represented by certain items reflected in the Company's
consolidated statement of income:
<TABLE>
<CAPTION>
Fiscal Year Ended September 30,
1998 1997 1996
--------------- --------------- ---------------
<S> <C> <C> <C>
Net sales................................... 100.0% 100.0% 100.0%
Cost of sales............................... 76.7% 72.8% 74.2%
-------------------------------------------------
Gross profit................................ 23.3% 27.2% 25.8%
Selling, general and administrative expenses 10.4% 10.5% 13.1%
-------------------------------------------------
Operating income............................ 12.9% 16.7% 12.7%
Interest expense............................ 2.2% 2.3% 2.8%
Other finance charges....................... 0.6% 0.8% 1.6%
-------------------------------------------------
Income before income taxes and extraordinary 10.1% 13.6% 8.3%
item........................................
Provision for income taxes.................. 4.1% 5.5% 3.2%
-------------------------------------------------
Income before extraordinary item............ 6.0% 8.1% 5.1%
Extraordinary item.......................... -0.1% -0.3% -0.3%
-------------------------------------------------
Net income.................................. 5.9% 7.8% 4.8%
-------------------------------------------------
</TABLE>
Fiscal Year Ended September 30, 1998 Compared to Fiscal
Year Ended September 30, 1997
Net sales for fiscal year 1998 were $455.7 million, an increase of
$191.4 million over net sales of $264.2 million for fiscal year 1997. Net sales
from Snorkel, acquired on November 17, 1997, accounted for $150.5 million of the
$191.4 million increase, while net sales for the existing OmniQuip business
increased by $40.9 million, or 15.5%.
Commercial sales of telescopic material handlers for fiscal year
1998 were $242.0 million, an increase of $20.8 million, or 9.4%, over fiscal
year 1997 reflecting continued strong market growth partially offset by
constraints on manufacturing output due to capacity limitations. Military sales
were $21.0 million for fiscal 1998 compared to $4.5 million for fiscal 1997 as a
result of increased production
17
<PAGE>
under the U.S. Army ATLAS contract. Sales of compact products for fiscal year
1998 were $23.8 million, up $1.5 million, or 6.6%, compared to fiscal year 1997
due to the introduction of a new line of mini-excavators in the second fiscal
quarter. Sales of parts and other products for fiscal year 1998 were $31.3
million, an increase of $15.2 million, or 94%, over the 1997 period. Of the
$15.2 million increase in parts and other products, $12.9 million resulted from
the acquisition of Snorkel and the remaining $2.2 million reflected increased
demand for parts driven by the increased population of TRAK and Lull units
operating in the field.
Gross profit for fiscal year 1998 was $106.1 million, an increase
of $34.2 million over gross profit of $71.9 million for fiscal year 1997. The
increase in gross profit primarily reflected the increase in net sales discussed
above. The gross margin decreased to 23.3% for fiscal year 1998 from 27.2% for
fiscal year 1997. The decline in gross margin was due to the addition of Snorkel
sales at significantly lower gross margin than existing OmniQuip sales, and, to
a lesser extent, increased mix of lower margin military sales. Also contributing
to the margin decline were manufacturing inefficiencies related to capacity
constraints and unsuccessful union organizing activities during the middle of
fiscal 1998, higher costs related to the new Millennia series telescopic
material handler and higher volume discounts reflecting increased sales to the
large national rental companies. It is anticipated that the increased proportion
of sales to large national rental companies, including the associated volume
discounts, will continue in the foreseeable future.
Selling, general and administrative ("SG&A") expenses for fiscal
year 1998 were $47.4 million, an increase of $19.6 million over SG&A expenses of
$27.7 million for fiscal year 1997. Of the $19.6 million increase, $14.9 million
resulted from the acquisition of Snorkel. The remainder was a result of higher
research and development expenses and increased SG&A expenses to support higher
levels of sales. SG&A expenses as a percentage of net sales declined slightly
from 10.4% for fiscal year 1998 compared to 10.5% for fiscal year 1997.
Operating income for fiscal year 1998 was $58.7 million, an
increase of $14.5 million, or 32.7%, over operating income of $44.2 million for
fiscal year 1997 due to the factors discussed above. Operating margin decreased
to 12.9% for fiscal year 1998 from 16.7% for fiscal year 1997. The decline in
operating margin reflected the factors described above.
Interest expense for fiscal year 1998 was $10.3 million, an
increase of $4.2 million over interest expense of $6.1 million for fiscal year
1997. The increase in interest expense was due to additional debt incurred to
finance the November 1997 acquisition of Snorkel partially offset by a lower
average interest rate.
Other finance charges, which are primarily comprised of
dealer-related finance charges, were $2.6 million for fiscal year 1998 compared
to $2.2 million for fiscal year 1997. The increase in finance charges was
related to increased financing activity at TRAK and Lull primarily resulting
from increased sales volume. Other finance charges as a percentage of net sales
decreased from 0.8% to 0.6%. The reduction in finance charges as a percentage of
sales primarily reflected the fact that, until recently, Lull and Snorkel have
not historically incurred such charges.
Provision for income taxes for fiscal year 1998 was $18.5 million
compared to $14.6 million for fiscal year 1997. The increase reflected the
increase in income before income taxes of $10.0 million. The Company's effective
tax rate was 40.4% for fiscal year 1998 compared to 40.5% for fiscal year 1997.
Income from continuing operations for fiscal year 1998 was $27.3
million, an increase of $5.9 million over income from continuing operations of
$21.4 million for fiscal year 1997, as a result of the factors described above.
18
<PAGE>
In November 1997, in connection with the refinancing related to
the Snorkel acquisition, the Company incurred an extraordinary charge of $0.5
million, net of $0.4 million of income tax benefits, for the write-off of
deferred financing charges. In March 1997, in connection with its initial public
offering and the application of the proceeds therefrom to repay indebtedness,
the Company incurred an extraordinary charge of $0.8 million, net of $0.5
million of income tax benefits, related to pre-payment penalties and write-off
of deferred financing charges.
Net income for fiscal year 1998 was $26.8 million, an increase of
$6.2 million from net income of $20.6 million for fiscal year 1997, as a result
of the factors described above.
Basic and diluted earnings per share, before the effect of the
extraordinary item discussed above, were $1.92 and $1.90, respectively, for
fiscal year 1998. Basic and diluted earnings per share, before the effect of the
extraordinary item discussed above, were $1.66 for fiscal year 1997.
Fiscal Year Ended September 30, 1997 Compared to Fiscal Year Ended
September 30, 1996
Net sales for fiscal year 1997 were $264.2 million, an increase of
$139.4 million over net sales of $124.9 million for fiscal year 1996. Sales of
commercial telescopic material handlers for fiscal year 1997 were $221.3
million, an increase of $125.1 million over fiscal year 1996. Military sales
were $4.5 million for fiscal 1997 compared to $0.7 million for fiscal 1996 due
to the start-up of sales under the U.S. Army ATLAS contract, which had only
prototype sales in the 1996 period. Sales of compact products for fiscal year
1997 were $22.3 million, up $1.7 million compared to fiscal year 1996. Sales of
parts and other products for fiscal year 1997 were $16.1 million, an increase of
$8.8 million over the 1996 period. Of the $125.1 million increase in telescopic
material handlers, $93.4 million was due to the acquisition of Lull, and the
remaining $31.7 million reflected continued strong growth in TRAK's commercial
telescopic business. Increased compact products sales were due partly to the
acquisition of Lull and increased demand in North America and internationally
outside of Europe, offset by reduced shipments to Europe due to the Company's
European distributor being acquired by a competitor. Of the $8.8 million
increase in parts and other products, $6.6 million resulted from the acquisition
of Lull and $2.2 million reflected increased demand for parts driven by the
increased population of TRAK units operating in the field.
Gross profit for fiscal year 1997 was $71.9 million, an increase
of $39.8 million over gross profit of $32.2 million for fiscal year 1996. The
increase in gross profit primarily reflected the increase in net sales discussed
above. The gross margin increased to 27.2% for fiscal year 1997 from 25.8% for
fiscal year 1996. The improvement in gross margin was due to improved
manufacturing efficiencies at all three Company plants, price increases that
were implemented in early 1997, economies due to higher volumes and increased
mix of telescopic material handlers which carry higher margins than other
products. Partially offsetting these improvements was the effect of the
acquisition of Lull, whose gross margin has historically been lower than that of
TRAK.
Selling, general and administrative expenses for fiscal year 1997
were $27.7 million, an increase of $11.4 million over SG&A expenses of $16.3
million for fiscal year 1996. Of the $11.4 million increase, $7.3 million
resulted from the acquisition of Lull. SG&A expenses as a percentage of net
sales decreased to 10.5% for fiscal year 1997 from 13.1% for fiscal year 1996.
This decrease in the SG&A percentage primarily reflected the effect of the
acquisition of Lull, whose SG&A percentage has historically been lower than that
of TRAK.
Operating income for fiscal year 1997 was $44.2 million, an
increase of $28.4 million over operating income of $15.9 million for fiscal year
1996. Operating margin increased to 16.7% for fiscal year 1997 from 12.7% for
fiscal year 1996. The improvements in operating income and operating margin
reflected the factors described above.
19
<PAGE>
Interest expense for fiscal year 1997 was $6.1 million, an
increase of $2.7 million over interest expense of $3.4 million for fiscal year
1996. The increase in interest expense was due primarily to the increased debt
incurred to finance the August 1996 acquisition of Lull, partially offset by
subsequent reduction of debt with proceeds from the initial public offering in
March 1997 and with cash flow from operations.
Other finance charges, which are primarily comprised of
dealer-related finance charges, were $2.3 million for fiscal year 1997 compared
to $2.0 million for fiscal year 1996. The increase in finance charges was
related to increased financing activity at TRAK primarily resulting from
increased sales volume. Other finance charges as a percentage of net sales
decreased from 1.6% to 0.9%. The reduction in finance charges as a percentage of
sales primarily reflected the fact that Lull has not historically incurred such
charges.
Provision for income taxes for fiscal year 1997 was $14.6 million
compared to $4.1 million for fiscal year 1996. The increase reflected the
increase in income before income taxes of $25.5 million and, to a lesser extent,
an increase in the effective tax rate between these periods. The Company's
effective tax rate was 40.5% for fiscal year 1997 compared to 39.0% for fiscal
year 1996.
Income from continuing operations for fiscal year 1997 was $21.4
million, an increase of $15.0 million over income from continuing operations of
$6.4 million for fiscal year 1996, as a result of the factors described above.
In March 1997, in connection with the initial public offering and
the application of the proceeds therefrom to repay indebtedness, the Company
incurred an extraordinary charge of $0.8 million, net of $0.5 million of income
tax benefits, related to prepayment penalties and write-off of deferred
financing charges. In August 1996, in connection with refinancing of debt
associated with the Lull acquisition, the Company incurred an extraordinary
charge of $0.3 million, net of $0.2 million of income tax benefits, related to
write-off of deferred financing charges.
Net income for fiscal year 1997 was $20.6 million, an increase of
$14.6 million from net income of $6.0 million for fiscal year 1996, as a result
of the factors described above.
Diluted earnings per share for fiscal year 1997 were $1.60, an
increase of $1.07 from diluted earnings per share of $0.53 for fiscal year 1996
as a result of the increase in net income described above partially offset by an
increase in the weighted average shares outstanding from 11.3 million to 12.8
million.
Capital Resources and Liquidity
Net cash provided by operating activities of the Company was $17.7
million for fiscal year 1998. Working capital (excluding the effects of changes
in cash and current portions of long-term debt) increased by $19.9 million in
the period, primarily reflecting a $28.1 million increase in accounts
receivable, and a $9.8 million increase in inventories, partially offset by a
$15.1 million increase in accounts payable and a $3.7 million increase in
accrued liabilities. Accounts receivable increased primarily due to increased
sales levels and timing of shipments at the end of the year. Inventories
increased due to higher sales volume and capacity constraints which prevented
manufacturing operations from achieving the planned production schedules. The
increase in accounts payable primarily reflected increased inventory purchases
resulting from increases in production schedules. The increase in accrued
liabilities primarily reflected increases in accruals related to customer volume
rebate programs. Application of customer volume rebates subsequent to September
30, 1998 will adversely impact cash flows in the first and second quarters of
fiscal 1999. Net cash used in investing activities was $112.8 million, including
$9.9 million for capital expenditures and $102.1 million for acquisition of
20
<PAGE>
the net assets of Snorkel. Capital expenditures in fiscal 1998 were primarily
for information systems and capacity improvements. These cash requirements were
financed with a new credit facility as described below. The cash balance as of
September 30, 1998 primarily reflected cash balances of the Company's Australian
subsidiary.
Net cash provided by operating activities of the Company was
$21.6 million for fiscal year 1997. Working capital (excluding the effects of
changes in cash and current portions of long-term debt) increased by $5.4
million in the period, primarily reflecting increases in accounts receivable and
inventories related to growth in sales volume. Cash provided by operating
activities of the Company for the period was used primarily to finance capital
expenditures of $3.0 million, to make payments to former TRAK shareholders of
$1.0 million tied to receipt of orders under contracts with the U.S. Army and to
repay existing indebtedness.
Net cash provided by operating activities of the Company was $8.6
million for the fiscal year 1996. Working capital (excluding the effects of
changes in cash and current portions of long-term debt) decreased by $1.4
million in the period which primarily reflected increases in accounts payable
and other current liabilities partially offset by increases in accounts
receivable and inventories. Cash provided by operating activities of the Company
for the period was used primarily to finance capital expenditures of $1.4
million, to make payments to former TRAK shareholders of $0.4 million tied to
receipt of orders under contracts with the U.S. Army and to repay existing
indebtedness. 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.
On March 20, 1997, the Company completed its initial public
offering of common stock, selling 3 million primary and 6.2 million secondary
shares (including shares issued upon exercise of the underwriters' overallotment
option) for $14 per share, before underwriting discounts and commissions.
Proceeds to the Company from the offering of $37.6 million (net of expenses of
the offering of $1.7 million) were used to repay $22.6 million of subordinated
debt (including accrued interest and prepayment fees) and $15.0 million of bank
term debt.
On March 11, 1998, a secondary public offering of the common stock
of the Company became effective, in which Harbour Group Investments III, L.P.
and an affiliate sold an aggregate of 3.6 million shares of common stock at an
offering price of $25.50 per share, less underwriting discounts and commissions.
No proceeds from the secondary public offering were received by the Company.
During November 1997, in connection with the acquisition of
Snorkel, the Company entered into a new credit facility which replaced the
existing loan and security agreement. The new agreement provides for a $165.0
million credit facility consisting of a $40.0 million revolving credit facility
and a $125.0 million term loan. The term loan requires quarterly principal
payments ranging from $2.5 million to $6.25 million commencing on February 28,
1998 with the final maturity on November 17, 2004. Borrowings under the
agreement bear interest at a rate that is determined from a pricing grid based
on the Company's leverage ratio (debt / EBITDA). At September 30, 1998, the
interest rate under this agreement was prime or LIBOR plus 1.0%. In conjunction
with entering into the new credit facility, the Company recognized an
extraordinary loss in November 1997 of $0.5 million attributable to the
write-off of $0.9 million of unamortized deferred financing fees, net of related
tax benefits.
Amounts outstanding under the credit facility at September 30,
1998 were $138 million. In addition the Company had $0.2 million in outstanding
letters of credit under this revolving credit facility. At September 30, 1998,
the Company had unused borrowing capacity of $15.8 million under
21
<PAGE>
this facility. The Company was in compliance with the financial covenants of its
facilities as of September 30, 1998.
Pursuant to the Snorkel acquisition, the Company will be required
to pay an additional purchase price of up to $50 million in May 1999. The
additional payment will be equal to the amount of the net sales of Snorkel for
the twelve-month period commencing on April 1, 1998 and ending on March 31, 1999
in excess of $140 million, such additional amount not to exceed $20 million,
plus 70% of the amount of the net sales of Snorkel during the Earn-Out Period in
excess of $160 million, such additional amount not to exceed $30 million. Based
on the performance of Snorkel since April 1, 1998, the Company expects this
payment to be material and intends to finance such payment through an increase
in the existing credit facility. Such an increase in the credit facility would
be subject to approval by the banks and will likely result in a higher interest
rate.
As the result of a major capacity expansion program for telescopic
material handlers launched in September 1998, the Company's capital expenditures
for fiscal year 1999 will be higher than normal. It is expected that total
capital expenditures for the year ending September 30, 1999 will be
approximately $22 million, approximately $16 million of which is related to the
capacity expansion program. These capital expenditures are expected to be
financed through internal cash flow and existing credit lines, with the
exception of approximately $4 million related to the Oakes, North Dakota
building expansion which will most likely be financed through a capital lease.
It is anticipated that approximately 75% of the capital spending for fiscal year
1999 will occur in the first half of the fiscal year.
Backlog
The Company's backlog as of September 30, 1998 was $172.7 million,
of which $36.3 million relates to the ATLAS military contract. It is expected
that substantially all of the commercial backlog and approximately 80% of the
military backlog will be shipped before September 30, 1999.
Market Risk
In the ordinary course of business, the Company is exposed to
foreign currency and interest rate risks, which the Company does not currently
consider to be material. These exposures primarily relate to having investments
denominated in foreign currencies and to changes in interest rates. Fluctuations
in currency exchange rates can impact operating results, including net sales and
operating expenses. The Company may utilize derivative financial instruments,
including forward exchange contracts and swap agreements, to manage certain of
its foreign currency and interest rate risks that it considers practical to do
so. The Company currently has $67.5 million outstanding under an interest rate
swap agreement which fixes LIBOR at 6.24% through November 2004. The Company
does not enter into derivative financial instruments for trading purposes.
Market risks that the Company currently has elected not to hedge relate to
foreign currency exposure and the portion of the floating rate debt not covered
by the interest rate swap.
New Accounting Pronouncements
In June 1997 the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" ("SFAS 130"). The statement establishes standards for
reporting and display of comprehensive income and components in a financial
statement that is displayed with the same prominence as other financial
statements. SFAS 130 is effective for years beginning after December 15, 1997.
The Company is continuing to analyze SFAS 130 and does not currently expect it
to have a significant impact on its financial statement presentation.
22
<PAGE>
In June 1997 the FASB issued Statement of Financial Accounting
Standards No. 131, "Disclosures about Segments of an Enterprise and Related
Information" ("SFAS 131"). The statement requires that the Company report
certain information if specific requirements are met about operating segments of
the Company including information about services, geographic areas of operation
and major customers. SFAS 131 is effective for years beginning after December
15, 1997. The Company is reviewing the applicability of SFAS 131 on its future
reporting requirements.
In June 1998 the FASB issued Statement of Financial Accounting
Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities" ("SFAS 133"). The statement establishes accounting and reporting
standards for derivative instruments and for hedging activities and requires
recognition of all derivatives on the balance sheet measured at fair value. SFAS
133 is effective for all fiscal quarters beginning after June 15, 1999. The
Company is continuing to evaluate the provisions of SFAS 133 to determine its
impact on financial position and results of operations.
Year 2000
The Company utilizes software and related computer technologies essential to its
operations that use two digits rather than four to specify the year, which could
result in a date recognition problem with the transition to the year 2000. The
Company has established a plan, utilizing third-party consultants where
necessary, to assess the potential impact of the year 2000 on the Company's
systems and operations and to implement solutions to address this issue. The
Company has substantially completed the assessment of its internal systems for
year 2000 compliance issues. The Company's plan for remediation includes a
combination of repair and replacement of affected systems. For the Company's
internal systems at TRAK and Lull, this remediation is an incidental consequence
of the ongoing implementation of a new integrated core business system. The
Company expects the remediation phase to be completed by June 1999 and for
testing to be conducted in July 1999. For the Company's internal systems at
Snorkel, this remediation is a software patch for the existing system which has
been implemented and is currently being tested. The Company expects that all
critical systems will be year 2000 compliant by July 31, 1999. Substantially all
of the costs incurred, and expected to be incurred, to achieve year 2000
compliance have been and are a part of ongoing expenditures to upgrade systems.
The Company is dependent upon various third parties, including certain product
suppliers, to conduct its business operations. The failure of mission-critical
third parties to achieve year 2000 compliance could have a material effect on
the Company's operations. The Company is presently in the assessment phase of
its year 2000 plan with respect to the Company's suppliers, vendors and service
providers for year 2000 compliance. The Company expects to complete the
assessment phase by March 1999. The Company plans to develop a contingency plan
by June 1999 in the event its systems or its mission-critical vendors do not
achieve year 2000 compliance. However, there can be no assurance that the
Company will not experience unanticipated costs and/or business interruptions
due to year 2000 problems in its internal systems or its supply chain, or that
such costs and/or interruptions will not have a material adverse effect on the
Company's consolidated results of operations.
Cautionary Statements Regarding Forward-Looking Statements
Certain statements included herein are forward-looking statements
concerning the Company's operations, economic performance and financial
condition. 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 cyclical fluctuations in demand, manufacturing
capacity constraints and production inefficiencies, stiffer competition from
larger and better capitalized companies, the effects on price and margin of the
rapid consolidation of distributors, field warranty campaigns for certain
products, loss of, or reduced orders under, the Company's contract for the sale
of ATLAS vehicles, issues related to year 2000 compliance, the inability to make
complementary
23
<PAGE>
acquisitions, or to integrate any such acquisitions, and risks associated with
the substantial borrowings that may be necessary to finance acquisitions.
Item 7a. Quantitative and Qualitative Disclosures about Market Risk
The information required by this item is set forth under the
caption "Market Risk" of Item 7 of this Report, which information is
incorporated herein by reference thereto.
24
<PAGE>
Item 8. Financial Statements and Supplementary Data
Report of Independent Accountants
To the Board of Directors
and Stockholders of
OmniQuip International, Inc.
In our opinion, the accompanying consolidated balance sheets 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,
1998 and 1997 and the results of their operations and their cash flows for each
of the three fiscal years in the period ended September 30, 1998, 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.
PricewaterhouseCoopers LLP
St. Louis, Missouri
November 3, 1998
25
<PAGE>
OMNIQUIP INTERNATIONAL, INC.
Consolidated Balance Sheet
September 30, 1998
(Dollars in thousands, except per share data)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
September 30,
1998 1997
<S> <C> <C>
Assets
Current assets:
Cash $ 4,684 $ 5
Accounts receivable, net 66,580 22,689
Inventories 71,065 30,956
Prepaid expenses and other current assets 10,020 6,640
----------- ------------
Total current assets 152,349 60,290
Property, plant and equipment, net 41,375 17,130
Goodwill 120,746 65,359
Other assets, net 1,992 1,519
$ 316,462 $ 144,298
=========== ===========
Liabilities and stockholders' equity
Current liabilities:
Current portion of long-term debt $ 13,750 $ 8,625
Accounts payable 47,834 20,433
Accrued liabilities 31,873 16,830
----------- -----------
Total current liabilities 93,457 45,888
----------- -----------
Long-term debt 124,250 25,609
Other noncurrent liabilities, net 418 422
Deferred income taxes 3,368 1,981
----------- -----------
128,036 28,012
----------- -----------
Commitments and contingencies (Notes 4, 7, 13 and 15)
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; 14,270,000 and 14,250,000
shares issued and outstanding, respectively 143 143
Additional paid-in capital 44,128 43,726
Other (754) (352)
Cumulative translation adjustment (1,657) ---
Retained earnings 53,109 26,881
----------- -----------
Total stockholders' equity 94,969 70,398
----------- -----------
$ 316,462 $ 144,298
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
26
<PAGE>
OMNIQUIP INTERNATIONAL, INC.
Consolidated Statement of Income
September 30, 1998
(In thousands, except per share data)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Fiscal Year Ended September 30,
1998 1997 1996
<S> <C> <C> <C>
Net sales $ 455,653 $ 264,213 $ 124,861
Cost of sales 349,584 192,270 92,688
-------------- ---------------- ---------------
Gross profit 106,069 71,943 32,173
Selling, general and administrative expenses 47,365 27,717 16,311
-------------- ---------------- ---------------
Operating income 58,704 44,226 15,862
-------------- ---------------- ---------------
Other expenses:
Interest on indebtedness 10,261 5,578 2,384
Interest on indebtedness - related parties - 528 1,050
Other finance charges 2,597 2,259 1,981
Other, net (44) (77) 31
-------------- ---------------- ---------------
12,814 8,288 5,446
-------------- ---------------- ---------------
Income before income taxes and extraordinary item 45,890 35,938 10,416
Provision for income taxes 18,547 14,556 4,060
-------------- ---------------- ---------------
Income before extraordinary item 27,343 21,382 6,356
Extraordinary item - loss on refinancing of long-term
debt, net of income tax benefit of $371, $521 and
$200 in 1998, 1997 and 1996, respectively (545) (782) (314)
-------------- ---------------- ---------------
Net income $ 26,798 $ 20,600 $ 6,042
============== ================ ===============
Basic earnings per share:
Income before extraordinary item $ 1.92 $ 1.66 $ 0.56
Extraordinary item (0.04) (0.06) (0.03)
-------------- ---------------- ---------------
Net income $ 1.88 $ 1.60 $ 0.53
============== ================ ===============
Weighted average shares 14,261 12,845 11,250
============== ================ ===============
Diluted earnings per share:
Income before extraordinary item $ 1.90 $ 1.66 $ 0.56
Extraordinary item (0.04) (0.06) (0.03)
-------------- ---------------- ---------------
Net income $ 1.86 $ 1.60 $ 0.53
============== ================ ===============
Weighted average shares 14,392 12,905 11,250
============== ================ ===============
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
27
<PAGE>
OMNIQUIP INTERNATIONAL, INC.
Consolidated Statement of Changes in Stockholders' Equity
September 30, 1998
(Dollars in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Additional Cumulative
Common paid-in translation Retained
Stock capital Other adjustment Earnings Total
<S> <C> <C> <C> <C> <C> <C>
Balance, September 30, 1995 $ 113 $ 6,240 $ (352) $ - $ 382 $ 6,383
Net income - - - - 6,042 6,042
----------- ------------- --------------- ------------- ------------- -------------
Balance, September 30, 1996 113 6,240 (352) - 6,424 12,425
Common stock issued 30 37,486 - - - 37,516
Net income - - - - 20,600 20,600
Dividends paid - - - - (143) (143)
----------- ------------- --------------- ------------- ------------- -------------
Balance, September 30, 1997 143 43,726 (352) - 26,881 70,398
Issuance of restricted stock - 402 (402) - - -
Cumulative translation adjustment - - - (1,657) - (1,657)
Net income - - - - 26,798 26,798
Dividends paid - - - - (570) (570)
----------- ------------- --------------- ------------- ------------- -------------
Balance, September 30, 1998 $ 143 $ 44,128 $ (754) $ (1,657) $ 53,109 $ 94,969
=========== ============= =============== ============= ============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
28
<PAGE>
OMNIQUIP INTERNATIONAL, INC.
Consolidated Statement of Cash Flows
September 30, 1998
(Dollars in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Fiscal Year Ended September 30,
1998 1997 1996
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 26,798 $ 20,600 $ 6,042
Adjustments to reconcile net income to net cash
provided by operating activities, excluding the
effect of acquisitions:
Depreciation 4,618 2,022 1,175
Amortization 3,285 1,996 571
Deferred income tax provision (benefit) 1,983 804 (712)
Loss on refinancing of long-term debt 916 1,303 514
(Increase) decrease in current assets:
Accounts receivable, net (28,090) (1,011) (1,264)
Inventories (9,846) (3,416) (3,628)
Prepaid expenses and other current assets (742) (670) (39)
Increase (decrease) in current liabilities:
Accounts payable 15,106 (462) 2,397
Other current liabilities 3,709 188 3,946
Other (22) 241 (433)
-------------- -------------- --------------
Net cash provided by operating activities 17,715 21,595 8,569
-------------- -------------- --------------
Cash flows from investing activities:
Acquisition of net assets of Lull Industries, Inc. - - (69,007)
Acquisition of net assets of Snorkel Division of
Figgie International Inc., net (102,111) - -
Capital expenditures, net (9,921) (3,021) (1,404)
Payments to former TRAK shareholders for
ATLAS program (527) (1,025) (446)
Other (274) 247 (133)
-------------- -------------- --------------
Net cash used in investing activities (112,833) (3,799) (70,990)
-------------- -------------- --------------
Cash flows from financing activities:
Proceeds from issuance of long-term debt 125,000 - 74,000
Proceeds from initial public offering - 37,516 -
Net borrowings (payments) on revolver 20,891 (4,332) (3,542)
Payments on long-term debt (42,125) (50,885) (6,500)
Payments of dividends (570) (143) -
Financing costs incurred (1,742) - (1,485)
-------------- -------------- --------------
Net cash provided by (used in) financing activities 101,454 (17,844) 62,473
-------------- -------------- --------------
Effect of exchange rate changes on cash (1,657) - -
-------------- -------------- --------------
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
29
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Net change in cash 4,679 (48) 52
Cash at beginning of period 5 53 1
-------------- -------------- --------------
Cash at end of period $ 4,684 $ 5 $ 53
============== ============== ==============
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Cash paid during the period for:
Interest on indebtedness $ 10,156 $ 5,622 $ 2,619
============== ============== ==============
Income taxes $ 10,342 $ 14,543 $ 3,672
============== ============== ==============
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
30
<PAGE>
OMNIQUIP INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
September 30, 1998
(Dollars in thousands, except per share data)
- --------------------------------------------------------------------------------
1. Organization
OmniQuip owns 100% of the outstanding common stock of its subsidiaries,
TRAK International, Inc. (TRAK), Lull International, Inc. (Lull) and
Snorkel International, Inc. (Snorkel). The consolidated financial
statements include the accounts of the Company and its wholly-owned
subsidiaries. All significant intercompany transactions have been
eliminated.
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. On February 19, 1997, OmniQuip's Board of Directors
authorized OmniQuip to further split its shares at a rate of 1.125 to
1, thereby increasing issued and outstanding shares from 10,000,000 to
11,250,000. All shares and per share amounts in the accompanying
consolidated financial statements and notes have been adjusted to give
retroactive effect to the stock splits.
2. Initial Public Offering
On March 21, 1997, an initial public offering (Offering) of common
stock of OmniQuip International, Inc. (OmniQuip or the Company) was
completed. The Company sold 3,000,000 newly issued shares at an
offering price of $14.00 per share, less underwriting discounts and
commissions. The net proceeds to the Company of $37,516 were used to
repay a portion of the Company's outstanding indebtedness. Pursuant to
the Offering, Harbour Group Investments III, L.P. (HGI III, L.P.), a
significant shareholder of the Company, and an affiliate of HGI III,
L.P. sold an additional 5,524,200 and 675,800 shares, respectively
(including a total of 1,200,000 shares related to an over-allotment
option), at $14.00 per share, less underwriting discounts and
commissions. The net proceeds of approximately $72,312 and $8,846,
respectively, therefrom were paid directly to HGI III, L.P. and an
affiliate of HGI III, L.P.
3. Secondary Public Offering
On March 11, 1998, a secondary public offering of the common stock of
the Company became effective, in which HGI III, L.P. and an affiliate
sold an aggregate of 3,600,000 shares of common stock at an offering
price of $25.50 per share, less underwriting discounts and commissions.
No proceeds from the secondary public offering were received by the
Company.
4. Acquisitions
The following table summarizes certain information regarding the
Company's acquisitions during the past three years:
Date Name Business
---- ---- --------
August 16, 1995 TRAK International, Inc. Manufacturer of telescopic
material handlers and
skid steer loaders
August 15, 1996 Lull Industries, Inc. Manufacturer of telescopic
material handlers
November 17, 1997 Snorkel Division of Figgie Manufacturer of aerial work
International Inc. platforms
During the past three years, the Company has made acquisitions which
have significantly expanded its product lines. These acquisitions were
each accounted for using the purchase method of accounting and
31
<PAGE>
OMNIQUIP INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
September 30, 1998
(Dollars in thousands, except per share data)
- --------------------------------------------------------------------------------
financed primarily through bank borrowings, resulting in an increase in
the Company's outstanding debt. Results of operations of each acquired
company have been included in the Company's consolidated financial
statements from the date of acquisition. The purchase price of each
acquisition was allocated to the assets acquired and liabilities
assumed based on their estimated fair value at the date of acquisition.
The excess of purchase price over the estimated fair value of net
assets acquired was, in each instance, recorded as goodwill.
The purchase price for Lull and Snorkel were allocated as follows:
Lull Snorkel
--------------- ---------------
Accounts receivable, net $ 7,572 $ 15,801
Inventories 11,232 30,263
Prepaid expenses and other current assets 1,937 3,234
Property, plant and equipment 7,050 18,924
Goodwill 55,841 57,518
Accounts payable (7,392) (12,295)
Accrued liabilities (7,233) (11,334)
--------------- ---------------
$ 69,007 $ 102,111
--------------- ---------------
The following table sets forth pro forma information for the Company as
if the acquisition of Snorkel had taken place on October 1, 1996 (after
giving effect to certain pro forma adjustments and including the pro
forma effects of the Offering). This information is unaudited and does
not purport to represent actual revenue, net income and earnings per
share had the acquisition and the Offering actually occurred on October
1, 1996.
<TABLE>
<CAPTION>
PRO FORMA INFORMATION
(UNAUDITED)
FOR THE FISCAL YEAR ENDED
SEPTEMBER 30,
1998 1997
-------------- --------------
<S> <C> <C>
Net sales $ 471,545 $ 421,345
Income before extraordinary loss 26,473 27,320
Diluted earnings per common share before extraordinary loss 1.84 1.92
</TABLE>
Under the TRAK acquisition agreement, the purchase price was increased
for orders received from the U.S. Army under contracts for the delivery
of rough terrain telescopic material handlers (the ATLAS Program) for a
period of five years from August 17, 1995. Amounts paid to TRAK's
former owners totaling $1,998 have been reflected as additional
goodwill in the accompanying consolidated financial statements. No
further payments under the earn-out provisions of the TRAK acquisition
agreement will be made to the former TRAK owners.
32
<PAGE>
OMNIQUIP INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
September 30, 1998
(Dollars in thousands, except per share data)
- --------------------------------------------------------------------------------
Under the Snorkel acquisition agreement, the purchase price may be
increased by up to $50,000 based on Snorkel's net sales between April
1, 1998 and March 31, 1999; such additional purchase price
consideration, which is required to be paid in May 1999, is expected to
result in additional goodwill for financial reporting purposes. Based
on the performance of Snorkel since April 1, 1998, the Company expects
this payment to be material and intends to finance such payment through
an increase in the existing credit facility. Such an increase in the
credit facility would be subject to approval by the banks and will
likely result in a higher interest rate.
5. 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, aerial work platforms and skid
steer loaders to commercial customers, national rental fleets and the
U.S. Government.
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 shipments under the contract commenced in fiscal
1997. As discussed in Note 4, the purchase price for TRAK has been
adjusted for orders received under the contract.
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.
Foreign currency translation
The accounts of the Company's foreign subsidiaries are maintained in
their respective local currencies. The accompanying consolidated
financial statements have been translated and adjusted to reflect U.S.
dollars on the basis presented below.
Assets and liabilities are translated into U.S. dollars at year-end
exchange rates. Income and expense items are translated at average
exchange rates prevailing during the period. Adjustments resulting from
the process of translating the consolidated amounts into U.S. dollars
are accumulated in a separate translation adjustment account, included
in stockholders' equity. Common stock and additional paid-in capital
are translated at the historical U.S. dollar equivalent in effect at
the date of acquisition. Foreign currency transaction gains and losses
are included in earnings currently. The foreign currency transaction
gains and losses for the year ended September 30, 1998 were not
material.
Cash and cash equivalents
For purposes of the consolidated statement of cash flows, the Company
considers all highly liquid investments with an original maturity of
three months or less to be cash equivalents.
33
<PAGE>
OMNIQUIP INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
September 30, 1998
(Dollars in thousands, except per share data)
- --------------------------------------------------------------------------------
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.
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, Lull and Snorkel as described in Note 4. 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 4 is stated
at cost and is being amortized on a straight-line basis over 40 years.
Amortization expense for the fiscal years ended September 30, 1998,
1997 and 1996 was approximately $2,952, $1,664 and $400, respectively.
Accumulated amortization totaled $5,043 and $2,091 at September 30,
1998 and 1997, 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, 1998.
Other noncurrent assets
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, 1998 and 1997 were $1,522 and $941,
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 $5,130, $1,996 and $1,572 for the fiscal
years ended September 30, 1998, 1997 and 1996, respectively.
34
<PAGE>
OMNIQUIP INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
September 30, 1998
(Dollars in thousands, except per share data)
- --------------------------------------------------------------------------------
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.
Earnings per share
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128 (SFAS 128),
"Earnings Per Share," which changed the method of computation of
earnings per share (EPS). SFAS 128, which was adopted by the Company in
fiscal 1998, requires the computation of Basic EPS and Diluted EPS.
Basic EPS is based on the weighted average number of outstanding common
shares during the period but does not consider dilution for potentially
dilutive securities. Diluted EPS reflects the dilutive potential common
shares consisting of certain shares subject to stock options. The
dilutive potential common shares arising from the effect of outstanding
stock options were computed using the treasury stock method, if
dilutive. Earnings per share for fiscal 1997 and 1996 have been
restated in accordance with SFAS 128. See Note 17 for additional
information.
Fair value of financial instruments
The Company records all financial instruments, including cash and cash
equivalents, accounts receivable, accounts payable, other accruals and
debt, at cost which approximates fair value.
Employee stock-based compensation
The Company accounts for employee stock options in accordance with
Accounting Principles Board No. 25, "Accounting for Stock Issued to
Employees" (APB 25). Under APB 25, the Company applies the intrinsic
value method of accounting. For employee stock options accounted for
using the intrinsic value method, no compensation expense is recognized
because the options are granted with an exercise price equal to the
market value of the stock on the date of grant.
During fiscal 1997, Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation" (SFAS 123), became
effective for the Company. SFAS 123 prescribed the recognition of
compensation expense based on the fair value of options or stock awards
determined on the date of grant. However, SFAS 123 allows companies to
continue to apply the valuation methods set forth in APB 25. For
companies that continue to apply the valuation methods set forth in APB
25, SFAS 123 mandates certain pro forma disclosures as if the fair
value method had been utilized. See Note 10 for additional discussion.
35
<PAGE>
OMNIQUIP INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
September 30, 1998
(Dollars in thousands, except per share data)
- --------------------------------------------------------------------------------
6. Financing
Long-term debt consists of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
1998 1997
------------- ------------
<S> <C> <C>
Revolving line of credit - principal due November 17, 2004; interest
due quarterly at either prime, or LIBOR, plus an additional rate
determined from a pricing grid based on the Company's leverage
ratio; secured by substantially all assets of the Company $ 24,000 $ ---
Term loan - principal due in quarterly installments with the final
payment due on November 17, 2004; interest due quarterly at either
prime, or LIBOR, plus an additional rate determined from a pricing grid
based on the Company's leverage ratio; secured by substantially
all assets of the Company 114,000 ---
Revolving line of credit - principal due August 16, 2003; interest due
monthly at either LIBOR plus 2.25% or the bank's corporate base rate
plus 1.0%; secured by substantially all assets of the Company;
repaid November 17, 1997 --- 3,109
Term loan - principal due in installments with the final payment due
August 16, 2003; interest due monthly at either LIBOR plus 2.50% or the
bank's corporate base rate plus 1.25%; secured by substantially all
assets of the Company; $15,000 repaid in 1997 with proceeds from
the Offering; balance repaid on November 17, 1997 --- 31,125
-------------- ------------
138,000 34,234
Less - Current portion of long-term debt 13,750 8,625
-------------- ------------
$ 124,250 $ 25,609
-------------- ------------
</TABLE>
During November 1997, in connection with the acquisition of Snorkel,
the Company entered into a new credit facility which replaced the Loan
and Security Agreement described below. The new agreement provides for
a $165,000 credit facility consisting of a $40,000 revolving credit
facility and a $125,000 term loan. The term loan requires quarterly
principal payments ranging from $2,500 to $6,250 commencing on February
28, 1998 with final maturity on November 17, 2004. Borrowings under the
agreement bear interest at prime, or LIBOR, plus an additional rate
(ranging from 0.0% to 1.125%) based on the Company's leverage ratio
(debt/EBITDA). At September 30, 1998, the interest rate on the
Company's borrowings ranged from 6.4% to 8.3%. Amounts outstanding
under this credit facility totaled $138,000 at September 30, 1998. In
addition, the Company had approximately $200 in outstanding letters of
credit and had unused borrowing capacity of approximately $15,800 under
this facility.
In conjunction with entering into the new credit facility, the Company
recognized an extraordinary loss in November 1997 of $545 attributable
to the write-off of $916 unamortized deferred financing fees, net of a
related $371 tax benefit.
36
<PAGE>
OMNIQUIP INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
September 30, 1998
(Dollars in thousands, except per share data)
- --------------------------------------------------------------------------------
The prior Loan and Security Agreement provided for a revolving line of
credit facility and two term loans. The revolving line of credit
facility provided 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 were due August
16, 2003 and bore interest either at the bank's corporate base rate
plus 1.00% or LIBOR plus 2.25%. Borrowings under the term loan were due
in quarterly installments which commenced in October 1996 with a final
payment in August 2003 and bore interest either at the bank's corporate
base rate plus 1.25% or LIBOR plus 2.25%. As discussed above, the Loan
and Security Agreement was replaced in November 1997.
In connection with the repayment of certain debt with proceeds of the
Offering described in Note 2, in fiscal 1997, the Company recognized a
$782 after-tax extraordinary loss resulting from prepayment fees paid
on certain debt and the write-off of applicable capitalized deferred
financing costs.
The Company has entered into an interest rate swap agreement to reduce
the impact of changes in interest rates on its floating rate debt. At
September 30, 1998, the interest rate swap agreement had a total
notional principal amount of $67,500. This agreement fixes the
Company's interest rate on $67,500 of its debt at 6.24% and matures in
November 2004.
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 fixed charge and
interest ratios and maximum leverage ratios, among others. At September
30, 1998, the Company was in compliance with such covenants.
Maturities of long-term debt for subsequent fiscal years are as
follows:
1999 $ 13,750
2000 15,000
2001 18,750
2002 20,000
2003 20,000
Thereafter 50,500
--------------
$138,000
--------------
7. Lease Commitments
The Company leases certain of its facilities, 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, 1998 are as follows:
1999 $ 2,992
2000 2,303
2001 1,577
2002 1,226
2003 883
--------------
37
<PAGE>
OMNIQUIP INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
September 30, 1998
(Dollars in thousands, except per share data)
- --------------------------------------------------------------------------------
Total minimum lease payments $ 8,981
--------------
Rent expense under all operating leases for the fiscal years ended
September 30, 1998, 1997 and 1996 was approximately $2,757, $753 and
$513, respectively.
8. Income Taxes
Income before provision for income taxes and extraordinary losses was
taxed under the following jurisdictions:
FOR THE FISCAL YEAR ENDED
SEPTEMBER 30,
1998 1997 1996
-------------- --------------- ----------------
Domestic $ 44,435 $ 35,938 $ 10,416
Foreign 1,455 --- ---
-------------- --------------- ----------------
$ 45,890 $ 35,938 $ 10,416
-------------- --------------- ----------------
The provision for income taxes, including tax benefits associated with
extraordinary charges in 1998, 1997 and 1996, is summarized as follows:
FOR THE FISCAL YEAR ENDED
SEPTEMBER 30,
1998 1997 1996
-------------- --------------- ----------------
Current:
Federal $ 13,329 $ 11,206 $ 3,890
State 2,341 2,025 682
Foreign 523 --- ---
-------------- --------------- ----------------
Total current 16,193 13,231 4,572
-------------- --------------- ----------------
Deferred:
Federal 1,694 655 (661)
State 289 149 (51)
-------------- --------------- ----------------
Total deferred 1,983 804 (712)
-------------- --------------- ----------------
Provision for $ 18,176 $ 14,035 $ 3,860
income taxes -------------- --------------- ----------------
38
<PAGE>
OMNIQUIP INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
September 30, 1998
(Dollars in thousands, except per share data)
- --------------------------------------------------------------------------------
Deferred taxes are comprised of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
1998 1997
-------------- ---------------
<S> <C> <C>
Deferred tax assets:
Accruals and other reserves $ 5,069 $ 3,959
Inventories 2,017 1,799
Other 935 69
-------------- ---------------
Gross deferred tax assets 8,021 5,827
-------------- ---------------
Deferred tax liabilities:
Property, plant and equipment (1,355) (1,121)
Goodwill amortization (2,049) (1,125)
Other 36 (292)
-------------- ---------------
(3,368) (2,538)
-------------- ---------------
Net deferred tax asset $ 4,653 $ 3,289
-------------- ---------------
Current deferred tax asset $ 8,021 $ 5,270
Long-term deferred tax liability (3,368) (1,981)
-------------- ---------------
Net deferred tax asset $ 4,653 $ 3,289
-------------- ---------------
</TABLE>
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 fiscal
years ended:
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED
SEPTEMBER 30,
1998 1997 1996
-------------- -------------- --------------
<S> <C> <C> <C>
Statutory rate $ 15,741 $ 12,122 $ 3,445
Non-temporary differences:
State tax provision, net 1,799 1,342 169
Other 636 571 246
-------------- -------------- --------------
Total provision $ 18,176 $ 14,035 $ 3,860
-------------- -------------- --------------
</TABLE>
9. 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
39
<PAGE>
OMNIQUIP INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
September 30, 1998
(Dollars in thousands, except per share data)
- --------------------------------------------------------------------------------
the Internal Revenue Code. For the fiscal years ended September 30,
1998, 1997 and 1996, Company contributions totaled $1,317, $666 and
$310, respectively.
The Company offers an incentive program to all salaried employees based
upon a formula related to the Company'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, 1998 and 1997, the Company had accrued liabilities of
$1,383 and $1,759, respectively, relative to such incentive programs.
For the fiscal years ended September 30, 1998, 1997 and 1996, expenses
relating to these plans were $1,486, $1,785 and $875, respectively.
10. Stock Option Plans
The Company has two stock option plans: the 1996 Long-Term Incentive
Plan and the 1996 Directors Non-Qualified Stock Option Plan (the
Directors Plan). A summary of the status of the Company's stock option
plans as of September 30, 1998 and 1997 and the changes during the
fiscal years then ended is presented below:
<TABLE>
<CAPTION>
1998 1997
------------------------------- -------------------------------
Weighted- Weighted-
average average
exercise exercise
Shares price Shares price
-------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
Outstanding at beginning of year 438,752 $13.98 - -
Granted 440,500 $15.97 448,752 $13.87
Exercised - - - -
Forfeited (62,002) $16.85 (10,000) $14.00
-------------- --------------
Outstanding at end of year 817,250 $14.84 438,752 $13.98
============== ==============
Exercisable at end of year - -
============== ==============
</TABLE>
No options were granted as of September 30, 1996.
The 1996 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, non-qualified stock options,
restricted shares and performance stock awards, to the Company's
executive officers and key employees. The incentive stock option plan
allows such employees to purchase shares of common stock at prices
equal to the fair market value of the stock on the date of grant.
Options to purchase up to 1,600,000 shares of common stock may be
granted under the incentive stock option plan. Options outstanding at
September 30, 1998 totaling 732,250 entitle the holders to purchase
common stock at prices ranging between $10.75 and $24.50 per share.
Options become exercisable with respect to one-fourth of the shares
covered thereby on each anniversary of the date of grant, commencing on
the second anniversary of the date granted. The right to exercise the
options expires 10 years from the date of grant or earlier if an option
holder ceases to be employed by the Company. During the year ended
September 30, 1998, 20,000 shares of restricted stock were granted. No
performance stock awards have been granted by the Company at September
30, 1998.
40
<PAGE>
OMNIQUIP INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
September 30, 1998
(Dollars in thousands, except per share data)
- --------------------------------------------------------------------------------
The Directors Plan provides for the granting of options to the
Company's directors, who are not employees of the Company, to purchase
share of common stock at prices equal to the fair market value of the
stock on the date of grant. Options to purchase up to 250,000 shares of
common stock may be granted under the Directors Plan. Options
outstanding at September 30, 1998 totaling 85,000 entitle the holders
to purchase common stock at prices ranging between $13.25 and $14.00
per share. Options become exercisable over a five-year period from the
date of grant. All options granted under the Directors Plan expire 10
years from the date of grant.
The following table summarizes information for options currently
outstanding and exercisable at September 30, 1998:
<TABLE>
<CAPTION>
Options outstanding Options exercisable
------------------------------------------------ -------------------------------
Weighted
average Weighted Weighted
Range of remaining average average
exercise Number contractual exercise Number exercise
prices outstanding life price exercisable price
----------------- --------------- --------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
$10-13.25 228,750 10 $ 11.24 - $ -
$14-14 361,750 8 $ 14.00 - -
$17-25 226,750 9 $ 19.81 - -
--------------- --------------
$10-25 817,250 9 $ 14.84 - $ -
--------------- --------------
</TABLE>
In conjunction with the Offering, the Company adopted the 1996
Executive Stock Option Plan (Executive Plan) pursuant to which
non-qualified stock options were granted to certain existing executive
shareholders as of the date the registration statement relating to the
Offering became effective to acquire an aggregate 562,500 shares of the
Company's common stock, subject to adjustment, by tendering existing
common stock in payment thereof. The options were exercised immediately
after the Offering and the Executive Plan was subsequently terminated.
The exercise price of all options was the current market price on the
date of exercise and all options were exercised by exchanging shares of
previously owned common stock. The grant and exercise of options under
the Executive Plan did not result in any increase in the beneficial
ownership of common stock by the plan participants from the number of
shares owned at the time of the Offering. Under the terms of the
Executive Plan, the shares of common stock issued pursuant to the
exercise of the options became freely transferable, subject to the
restriction of the Stockholder Agreements with each of the executive
shareholders, on the last day of the sixth full month following the
date of exercise of such options. 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, an aggregate 50% of such shares two years after the Offering,
an aggregate 75% of such shares three years after the Offering and 100%
of such shares four years after the Offering. The shares tendered in
exercise of options granted under the Executive Plan were issued under
promissory notes due in September 2005 as discussed in Note 12.
Pro forma disclosures
The Company applies APB 25 and related interpretations in accounting
for its stock option plans. Accordingly, no compensation cost has been
recognized for the stock options because the options were granted with
an exercise price equal to the stock price on the date of grant. Had
compensation costs for the Company's stock option plans been determined
based on the fair value of the options on the grant dates consistent
with the methodology prescribed by SFAS 123, the Company's net income
and earnings per
41
<PAGE>
OMNIQUIP INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
September 30, 1998
(Dollars in thousands, except per share data)
- --------------------------------------------------------------------------------
share would have been reduced to the pro forma amounts indicated below.
Due to the adoption of the methodology prescribed by SFAS 123, the pro
forma results shown below only reflect the impact of stock option
awards granted in fiscal 1998 and 1997. Because future stock option
awards may be granted, the pro forma impact for fiscal 1998 and 1997 is
not necessarily indicative of the impact in future years.
FOR THE FISCAL YEAR ENDED
SEPTEMBER 30,
1998 1997
-------------- --------------
Net income:
As reported $ 26,798 $ 20,600
Pro forma $ 25,828 $ 20,199
Diluted earnings per common share:
As reported $ 1.86 $ 1.60
Pro forma $ 1.79 $ 1.58
The fair value of the options granted (which is amortized over the
option vesting period in determining the pro forma impact), is
estimated on the date of grant using the Black-Scholes multiple
option-pricing model with the following weighted average assumptions:
FOR THE FISCAL YEAR ENDED
SEPTEMBER 30,
1998 1997
-------------- --------------
Expected life of options 6 years 6 years
Risk-free interest rates 4.64 - 5.84% 6.29 - 6.85%
Expected volatility of stock 57% 65%
Expected dividend yield 0.2%-0.3% 0.1%
The weighted average fair value of options granted during the fiscal
years ended September 30, 1998 and 1997, was $8.06 and $8.99 per share,
respectively.
11. 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 30
retirees at September 30, 1998). Management plans to fund the premiums
as incurred, net of reimbursements received by plan participants. At
September 30, 1998 and 1997,
42
<PAGE>
OMNIQUIP INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
September 30, 1998
(Dollars in thousands, except per share data)
- --------------------------------------------------------------------------------
respectively, the Company had a $418 and $422 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 7.5% and 8.5% annual rate of
increase in health care premiums was assumed for 1998 and 1997,
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 7.0% and 7.5% at September 30, 1998 and 1997,
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, 1998, July 1, 1997 and July 1, 1996 is immaterial.
12. Related parties
Under terms of a management consulting and advisory services agreement,
an affiliate of HGI III, L.P. charges the Company for direct management
and administrative services provided to the Company based on actual,
direct costs for such services. Charges of $141, $601 and $668 were
recorded by the Company during the fiscal years ended September 30,
1998, 1997 and 1996, respectively.
Under terms of a management consulting and advisory services agreement,
the Company has paid fees totaling $1,224 to affiliates of HGI III,
L.P. in consideration of services provided in identifying, negotiating
and consummating the acquisitions of TRAK, Lull and Snorkel (as
described in Note 4); such amount has been capitalized as acquisition
costs and is included in goodwill.
In periods prior to the Offering in March 1997, certain members of
management have purchased shares of the Company'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 the Company
with the shares pledged as security. Such notes are included in
stockholders' equity in the accompanying consolidated financial
statements.
13. Customer financing arrangements
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
at September 30, 1998 and 1997 approximated $62,351 and $74,994,
respectively. Under the Company's agreements, the Company either
provides a back-up guarantee of a dealer's credit or an undertaking to
repurchase equipment at a discounted price at specified times and under
specified circumstances. The Company'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 the
Company's dealers in each of the calendar years 1998 and 1997 are
limited to the greater of $1,500 or 5% of the outstanding loan balance
at the previous calendar year end (approximately $55,000 and $47,157 at
December 31, 1997 and 1996, respectively).
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 $909
and $949 at September 30, 1998 and 1997, respectively. Historically,
losses under the repurchase provisions of the floor plan arrangements
have not been material and have been within management's expectations.
43
<PAGE>
OMNIQUIP INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
September 30, 1998
(Dollars in thousands, except per share data)
- --------------------------------------------------------------------------------
In conjunction with these floor plan arrangements, the Company incurs
dealer-related financing charges at varying rates for a maximum period
of six months. The financing charges incurred by the Company for the
fiscal years ended September 30, 1998, 1997 and 1996 for all
outstanding customer financing arrangements totaled $2,597, $2,259 and
$1,981, respectively.
14. Concentrations of credit
The Company principally sells its products through a distribution
network and through national rental fleets. 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. Including the effects of the
consolidation of certain of the Company's customers in fiscal 1998, at
September 30, 1998 and 1997, the Company's five largest customers
represented approximately 29% and 17%, respectively, of trade
receivables. In addition, sales to such customers for the fiscal years
ended September 30, 1998, 1997 and 1996 approximated 46%, 22% and 21%,
respectively, of the Company's net sales. In the fiscal year ended
September 30, 1998, two individual customers each accounted for more
than 10% of net sales. No individual customer accounted for more than
10% of net sales for the fiscal years ended September 30, 1997 and
1996.
15. 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, cash flows or results of
operations of the Company.
16. Supplemental balance sheet information
September 30,
1998 1997
-------------- --------------
Accounts receivable:
Trade receivables $ 67,610 $ 22,040
Less allowance for doubtful accounts (1,295) (504)
Other receivables 265 1,153
-------------- --------------
$ 66,580 $ 22,689
============== ==============
September 30,
1998 1997
-------------- --------------
Inventories:
Finished goods $ 15,651 $ 6,090
Work in process 11,751 3,694
Raw materials 43,521 18,313
Unbilled government contract costs 142 2,859
-------------- --------------
$ 71,065 $ 30,956
============== ==============
44
<PAGE>
OMNIQUIP INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
September 30, 1998
(Dollars in thousands, except per share data)
- --------------------------------------------------------------------------------
Prepaid expenses and other current assets:
Deferred income taxes $ 8,021 $ 5,270
Other 1,999 1,370
-------------- --------------
$ 10,020 $ 6,640
============== ==============
Property, plant and equipment:
Machinery and equipment $ 35,040 $ 11,265
Buildings and building improvements 11,814 7,465
Land and land improvements 1,010 851
Construction in progress 1,294 763
-------------- --------------
Total property, plant and equipment,
at cost 49,158 20,344
Less: accumulated depreciation (7,783) (3,214)
-------------- --------------
$ 41,375 $ 17,130
============== ==============
Accrued liabilities:
Accrued employee compensation and benefits,
including related taxes $ 4,648 $ 2,314
Accrued customer rebates 8,747 5,043
Other accrued warranty 6,470 3,306
Accrued incentive compensation 1,383 1,571
Product liability reserves 1,639 1,118
Accrued income taxes 4,072
Other 4,914 3,478
-------------- --------------
$ 31,873 $ 16,830
============== ==============
17. Earnings per share of common stock
In accordance with SFAS 128, the following represents reconciliations
of income before extraordinary loss and weighted average shares
outstanding between basic and diluted earnings per share for the fiscal
years ended September 30, 1998, 1997 and 1996:
<TABLE>
<CAPTION>
For the fiscal year ended September 30, (in thousands)
1998 1997 1996
Income before Income before Income before
extraordinary extraordinary extraordinary
loss Shares loss Shares loss Shares
<S> <C> <C> <C> <C> <C> <C>
Basic $ 27,343 14,261 $ 21,382 12,845 $ 6,356 11,250
Effect of dilutive securities:
Stock options - 131 - 60 - -
-------------------------- ---------------------------- ---------------------------
Diluted $ 27,343 14,392 $ 21,382 12,905 $ 6,356 11,250
========================== ============================ ===========================
</TABLE>
45
<PAGE>
OMNIQUIP INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
September 30, 1998
(Dollars in thousands, except per share data)
- --------------------------------------------------------------------------------
18. Quarterly financial data (unaudited)
Summarized, unaudited quarterly financial data for fiscal 1998, 1997
and 1996 appears below:
<TABLE>
<CAPTION>
For the fiscal year ended
September 30,
1998 1997 1996
-------------- -------------- --------------
<S> <C> <C> <C>
Net Sales
First Quarter $ 84,575 $ 59,166 $ 23,487
Second Quarter 119,378 63,452 27,578
Third Quarter 119,654 74,708 30,449
Fourth Quarter 132,046 66,887 43,347
-------------- -------------- --------------
$ 455,653 $ 264,213 $ 124,861
============= ============== ==============
Gross Profit
First Quarter $ 21,142 $ 15,279 $ 6,156
Second Quarter 27,493 17,107 7,234
Third Quarter 27,496 20,413 7,745
Fourth Quarter 29,938 19,144 11,038
-------------- -------------- --------------
$ 106,069 $ 71,943 $ 32,173
============= ============== ==============
Net Income
First Quarter $ 4,995 $ 3,978 $ 963
Second Quarter 6,899 4,015 1,352
Third Quarter 6,939 6,643 1,573
Fourth Quarter 7,965 5,964 2,154
-------------- -------------- --------------
$ 26,798 $ 20,600 $ 6,042
============= ============== ==============
Diluted Earnings Per Share
First Quarter $ 0.35 $ 0.35 $ 0.09
Second Quarter 0.48 0.35 0.12
Third Quarter 0.48 0.46 0.13
Fourth Quarter 0.56 0.41 0.19
</TABLE>
46
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
A definitive proxy statement is expected to be filed with the
Securities and Exchange Commission (the "Commission") on or about January 7,
1999. The information required by this item is set forth under the caption
"Election of Directors", under the caption "Executive Officers" and under the
caption "Section 16(a) Beneficial Ownership Reporting Compliance" of the
definitive proxy statement, which information is incorporated herein by
reference thereto.
Item 11. Executive Compensation
The information required by this item is set forth under the
caption "Executive Compensation" of the definitive proxy statement, which
information is incorporated herein by reference thereto.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by this item is set forth under the
caption "Security Ownership of Certain Beneficial Owners and Management" of the
definitive proxy statement, which information is incorporated herein by
reference thereto.
Item 13. Certain Relationships and Related Transactions
The information required by this item is set forth under the
caption "Certain Transactions" of the definitive proxy statement, which
information is incorporated herein by reference thereto.
47
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
1. Financial Statements
The following consolidated financial statements of the Company and
its subsidiaries and report of independent accountants are filed as a part of
this Report:
Report of Independent Accountants
Consolidated Balance Sheets at September 30, 1998 and 1997
Consolidated Statements of Income for the fiscal years ended
September 30, 1998, 1997 and 1996
Consolidated Statements of Changes in Stockholders' Equity for the fiscal
years ended September 30, 1998, 1997 and 1996
Consolidated Statements of Cash Flows for the fiscal years ended September
30, 1998, 1997 and 1996
Notes to Consolidated Financial Statements
2. Financial Statement Schedules
Report of Independent Accountants on Financial Statement Schedule S-1
Schedule II - Rule 12-09 Valuation and Qualifying Accounts and S-2
Reserves for the Fiscal Years Ended September 30, 1998 and 1997
All other schedules are omitted because they are not applicable or
the required information is shown in the financial statements or notes thereto.
3. Exhibits
The exhibits listed on the accompanying Index to Exhibits are
filed as part of this Report.
4. Reports on Form 8-K
On August 21, 1998, a Current Report on Form 8-K was filed to
report, pursuant to Item 5 thereof, the adoption of a Rights Agreement and
declaration by the Board of Directors of the Company of a dividend distribution
of one Right for each outstanding share of Common Stock of the Company to
stockholders of record at the close of business on August 31, 1998.
48
<PAGE>
INDEX TO EXHIBITS
Exhibit Description
- ------- -----------
2.1 Asset Purchase Agreement, dated as of July 19, 1997, by and among
Figgie International Inc., Figgie International Real Estate Inc.,
Figgie Properties Inc., Figgie Licensing Corporation, Figgie Risk
Management Co. and SKL Lift, Inc. (filed as Exhibit 2.1 to the
Company's Current Report on Form 8-K filed with the Commission on
December 2, 1997 (the "December 1997 8-K") and incorporated herein by
reference thereto)
2.2 Amendment, dated as of November 9, 1997, by and between Figgie
International Inc. and SKL Lift, Inc. (filed as Exhibit 2.2 to the
December 1997 8-K and incorporated herein by reference thereto)
3.1 Restated Certificate of Incorporation of the Registrant (filed as
Exhibit 3.1 to the Company's Registration Statement on Form S-1
(Registration No. 333-13181), filed with the Commission on October 1,
1996, as amended on November 12, 1996 and February 20, 1997 (the
"Registration Statement") and incorporated herein by reference thereto)
3.2 Amended By-laws of the Registrant (filed as Exhibit 3.2 to the
Company's Current Report on Form 8-K filed with the Commission on
October 2, 1998 (the "October 1998 8-K") and incorporated herein by
reference thereto)
4.1 Rights Agreement, dated as of August 21, 1998, by and between OmniQuip
International, Inc. and First Chicago Trust Company of New York, as
Rights Agent. The Rights Agreement includes as Exhibit A thereto the
Certificate of Designations, Preferences and Rights of Series A
Preferred Stock of OmniQuip International, Inc., as Exhibit B thereto
the Form of Rights Certificate and as Exhibit C thereto the Summary of
Rights to Purchase Series A Preferred Stock (filed as Exhibit 4 to the
Company's Current Report on Form 8-K filed with the Commission on
August 21, 1998 and incorporated herein by reference thereto)
4.2 Amendment No. 1 to Rights Agreement, dated as of October 2, 1998, by
and between OmniQuip International, Inc. and First Chicago Trust
Company of New York, as Rights Agent (filed as Exhibit 4 to the October
1998 8-K and incorporated herein by reference thereto)
*10.1 Purchase and Stockholder Agreement, dated September 20, 1995, by and
between Uniquip Corporation and P. Enoch Stiff (filed as Exhibit 10.1
to the Registration Statement and incorporated herein by reference
thereto)
*10.2 Stock Pledge Agreement, dated September 20, 1995, by and between P.
Enoch Stiff and Uniquip Corporation (filed as Exhibit 10.2 to the
Registration Statement and incorporated herein by reference thereto)
*10.3 $126,859 Promissory Note, dated September 20, 1995, by P. Enoch Stiff
to Uniquip Corporation (filed as Exhibit 10.3 to the Registration
Statement and incorporated herein by reference thereto)
*10.4 Letter Agreement, dated September 20, 1995, by and between P. Enoch
Stiff and Uniquip Corporation (filed as Exhibit 10.4 to the
Registration Statement and incorporated herein by reference thereto)
*10.5 Amendment to Promissory Note and Stock Pledge Agreement, dated
September 30, 1996, by and between OmniQuip International, Inc. and P.
Enoch Stiff (filed as Exhibit 10.5 to the Registration Statement and
incorporated herein by reference thereto)
*10.6 Investment Agreement, dated August 16, 1995, by and between P. Enoch
Stiff and Harbour Group Investments III, L.P. (filed as Exhibit 10.6 to
the Registration Statement and incorporated herein by reference
thereto)
*10.7 Participation Agreement, dated August 16, 1995, by and between P. Enoch
Stiff and Harbour Group Investments III, L.P. (filed as Exhibit 10.7 to
the Registration Statement and incorporated herein by reference
thereto)
*10.8 Purchase and Stockholder Agreement, dated September 20, 1995, by and
between Uniquip Corporation and James H. Hook (filed as Exhibit 10.8 to
the Registration Statement and incorporated herein by reference
thereto)
*10.9 Stock Pledge Agreement, dated September 20, 1995, by and between James
H. Hook and
49
<PAGE>
Uniquip Corporation (filed as Exhibit 10.9 to the Registration
Statement and incorporated herein by reference thereto)
*10.10 $47,572 Promissory Note, dated September 20, 1995, by James H. Hook to
Uniquip Corporation (filed as Exhibit 10.10 to the Registration
Statement and incorporated herein by reference thereto)
*10.11 Letter Agreement, dated September 20, 1995, by and between James H.
Hook and Uniquip Corporation (filed as Exhibit 10.11 to the
Registration Statement and incorporated herein by reference thereto)
*10.12 Amendment to Promissory Note and Stock Pledge Agreement, dated
September 30, 1996, by and between OmniQuip International, Inc. and
James H. Hook (filed as Exhibit 10.12 to the Registration Statement and
incorporated herein by reference thereto)
*10.13 Purchase and Stockholder Agreement, dated September 20, 1995, by and
between Uniquip Corporation and Curtis J. Laetz (filed as Exhibit 10.13
to the Registration Statement and incorporated herein by reference
thereto)
*10.14 Stock Pledge Agreement, dated September 20, 1995, by and between Curtis
J. Laetz and Uniquip Corporation (filed as Exhibit 10.14 to the
Registration Statement and incorporated herein by reference thereto)
*10.15 $47,572 Promissory Note, dated September 20, 1995, by Curtis J. Laetz
to Uniquip Corporation (filed as Exhibit 10.15 to the Registration
Statement and incorporated herein by reference thereto)
*10.16 Letter Agreement, dated September 20, 1995, by and between Curtis J.
Laetz and Uniquip Corporation (filed as Exhibit 10.16 to the
Registration Statement and incorporated herein by reference thereto)
*10.17 Amendment to Promissory Note and Stock Pledge Agreement, dated
September 30, 1996, by and between OmniQuip International, Inc. and
Curtis J. Laetz (filed as Exhibit 10.17 to the Registration Statement
and incorporated herein by reference thereto)
*10.18 Purchase and Stockholder Agreement, dated September 20, 1995, by and
between Uniquip Corporation and Robert D. Melin (filed as Exhibit 10.18
to the Registration Statement and incorporated herein by reference
thereto)
*10.19 Stock Pledge Agreement, dated September 20, 1995, by and between Robert
D. Melin and Uniquip Corporation (filed as Exhibit 10.19 to the
Registration Statement and incorporated herein by reference thereto)
*10.20 $47,572 Promissory Note, dated September 20, 1995, by Robert D. Melin
to Uniquip Corporation (filed as Exhibit 10.20 to the Registration
Statement and incorporated herein by reference thereto)
*10.21 Letter Agreement, dated September 20, 1995, by and between Robert D.
Melin and Uniquip Corporation (filed as Exhibit 10.21 to the
Registration Statement and incorporated herein by reference thereto)
*10.22 Amendment to Promissory Note and Stock Pledge Agreement, dated
September 30, 1996, by and between OmniQuip International, Inc. and
Robert D. Melin (filed as Exhibit 10.22 to the Registration Statement
and incorporated herein by reference thereto)
*10.23 Purchase and Stockholder Agreement, dated September 20, 1995, by and
between Uniquip Corporation and Paul D. Roblee (filed as Exhibit 10.23
to the Registration Statement and incorporated herein by reference
thereto)
*10.24 Stock Pledge Agreement, dated September 20, 1995, by and between Paul
D. Roblee and Uniquip Corporation (filed as Exhibit 10.24 to the
Registration Statement and incorporated herein by reference thereto)
*10.25 $47,572 Promissory Note, dated September 20, 1995, by Paul D. Roblee to
Uniquip Corporation (filed as Exhibit 10.25 to the Registration
Statement and incorporated herein by reference thereto)
*10.26 Letter Agreement, dated September 20, 1995, by and between Paul D.
Roblee and Uniquip Corporation (filed as Exhibit 10.26 to the
Registration Statement and incorporated herein by reference thereto)
*10.27 Amendment to Promissory Note and Stock Pledge Agreement, dated
September 30, 1996, by
50
<PAGE>
and between OmniQuip International, Inc. and Paul D. Roblee (filed as
Exhibit 10.27 to the Registration Statement and incorporated herein by
reference thereto)
*10.28 OmniQuip International, Inc. 1996 Executive Stock Option Plan (filed as
Exhibit 10.28 to the Registration Statement and incorporated herein by
reference thereto)
*10.29 Form of Option Agreement pursuant to the OmniQuip International, Inc.
1996 Executive Stock Option Plan (filed as Exhibit 10.29 to the
Registration Statement and incorporated herein by reference thereto)
*10.30 OmniQuip International, Inc. 1996 Long Term Incentive Plan (filed as
Exhibit 10.30 to the Registration Statement and incorporated herein by
reference thereto)
*10.31 OmniQuip International, Inc. 1996 Directors Non-Qualified Stock Option
Plan (filed as Exhibit 10.31 to the Registration Statement and
incorporated herein by reference thereto)
*10.32 Form of Option Agreement pursuant to the OmniQuip International, Inc.
1996 Directors Non-Qualified Stock Option Plan (filed as Exhibit 10.32
to the Registration Statement and incorporated herein by reference
thereto)
10.33 Insurance Agreement, dated September 27, 1996, by and between Harbour
Group Ltd. and Uniquip Corporation (filed as Exhibit 10.39 to the
Registration Statement and incorporated herein by reference thereto)
10.34 Corporate Development Consulting and Advisory Services Letter
Agreement, dated September 30, 1996, by and between OmniQuip
International, Inc. and Harbour Group Industries, Inc. (filed as
Exhibit 10.40 to the Registration Statement and incorporated herein by
reference thereto)
10.35 Operations Consulting and Advisory Services Letter Agreement, dated
September 30, 1996, by and between OmniQuip International, Inc. and
Harbour Group Ltd. (filed as Exhibit 10.41 to the Registration
Statement and incorporated herein by reference thereto)
10.36 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 (filed as Exhibit 10.48 to the Registration Statement
and incorporated herein by reference thereto)
10.37 Contract No. DAAE0795DR012 between TRAK International, Inc. and U.S.
Army Tank-Automotive Command (filed as Exhibit 10.49P to the
Registration Statement and incorporated herein by reference thereto)
10.38 Floorplan Repurchase Agreement, dated October 2, 1990, by and between
TRAK International, Inc. and Deutsche Financial Services and Addendum
to Floorplan Repurchase Agreement, dated June 14, 1993, by and between
TRAK International, Inc. and Deutsche Financial Services (Deutsche
Financial Services as successor to ITT Commercial Finance Corp. and ITT
Commercial Finance, a division of ITT Industries of Canada Ltd.) (filed
as Exhibit 10.50 to the Registration Statement and incorporated herein
by reference thereto)
10.39 Letter Agreement, dated August 21, 1996, by and between TRAK
International, Inc. and Deutsche Financial Services (filed as Exhibit
10.51 to the Registration Statement and incorporated herein by
reference thereto)
10.40 Agreement, dated January 19, 1995, between CBM Industries, Inc., d/b/a
RJ Associates and Lull Industries, Inc. (filed as Exhibit 10.53 to the
Registration Statement and incorporated herein by reference thereto)
10.41 Industrial Park Lease, dated April 1, 1995, by and between the City of
Oakes and Lull Industries, Inc. (filed as Exhibit 10.54 to the
Registration Statement and incorporated herein by reference thereto)
10.42 Indemnification Agreement by and among OmniQuip International, Inc.,
Harbour Group Investments III, L.P. and Uniquip-HGI Associates, L.P.
(filed as Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q
filed with the Commission on May 15, 1997 (the "May 1997 10-Q") and
incorporated herein by reference thereto)
10.43 Underwriting Agreement, dated March 20, 1997, by and among OmniQuip
International, Inc., Harbour Group Investments III, L.P., Uniquip-HGI
Associates, L.P., and Morgan Stanley & Co. Incorporated, Credit Suisse
First Boston Corporation, Schroder Wertheim & Co. Incorporated and
Robert W. Baird & Co. Incorporated, as representatives of the several
U.S. underwriters, and
51
<PAGE>
Morgan Stanley & Co. International Limited, Credit Suisse First Boston
(Europe) Limited, J. Henry Schroder & Co. Limited and Robert W. Baird &
Co. Incorporated, as representatives of the several international
underwriters (filed as Exhibit 10.1 to the May 1997 10-Q and
incorporated herein by reference thereto)
10.44 Credit Agreement, dated November 17, 1997, by and among OmniQuip
International, Inc., the certain lending institutions party thereto
from time to time, Morgan Stanley Senior Funding, Inc. as Syndication
Agent and Arranger, and First Union National Bank, as Administrative
Agent and Co-Arranger (filed as Exhibit 10 to the December 1997 8-K and
incorporated herein by reference thereto)
10.45 Business Premises Lease Agreement, dated October 27, 1997, by and
between Garden Way Incorporated and TRAK International, Inc. (filed as
Exhibit 10.55 to the Company's Annual Report on Form 10-K filed with
the Commission on December 24, 1997 (the "1997 Form 10-K") and
incorporated herein by reference thereto)
10.46 Lease Agreement, dated May 15, 1997, by and between B.M.S. Management,
Inc. and Snorkel, a division of Figgie International Inc. (filed as
Exhibit 10.56 to the 1997 Form 10-K and incorporated herein by
reference thereto)
10.47 Lease Agreement, dated February 1, 1994, by and between SJ Associates,
L.P. and Snorkel-Economy, a division of Figgie International Inc.
(filed as Exhibit 10.57 to the 1997 Form 10-K and incorporated herein
by reference thereto)
10.48 Land Lease, dated as of November 17, 1997, by and between SKL Lift,
Inc. and Figgie International Real Estate Inc. (filed as Exhibit 10.58
to the 1997 Form 10-K and incorporated herein by reference thereto)
10.49 Deed of Lease, dated as of November 17, 1997, by and between Snorkel
Elevating Work Platforms Limited and Figgie International Real Estate
Inc. (filed as Exhibit 10.59 to the 1997 Form 10-K and incorporated
herein by reference thereto)
10.50 Agreement for Trademark Assignment and License-Back, dated as of
November 17, 1997, by and between Iveco Magirus Brandschutztechnik
GmbH, Figgie International Inc. and SKL Lift, Inc. (filed as Exhibit
10.60 to the 1997 Form 10-K and incorporated herein by reference
thereto)
*10.51 Amended and Restated Management Agreement dated as of June 9, 1997
between Figgie International Inc. and Richard A. Solon (filed as
Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q filed with
the Commission on February 17, 1998 (the "February 1998 10-Q") and
incorporated herein by reference thereto)
10.52 Non-Competition Agreement dated as of June 9, 1997 between Figgie
International Inc. and Richard A. Solon (filed as Exhibit 10.2 to the
February 1998 10-Q and incorporated herein by reference thereto)
10.53 Underwriting Agreement, dated March 11, 1998, by and among OmniQuip
International, Inc., P. Enoch Stiff, Harbour Group Investments III,
L.P., Uniquip-HGI Associates, L.P. and Morgan Stanley & Co.
Incorporated, Credit Suisse First Boston Corporation, Schroder & Co.
Inc. and Robert W. Baird & Co. Incorporated, as representatives of the
several U.S. underwriters, and Morgan Stanley & Co. International
Limited, Credit Suisse First Boston (Europe) Limited, J. Henry Schroder
& Co. Limited and Robert W. Baird & Co. Incorporated, as
representatives of the several international underwriters (filed as
Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q filed with
the Commission on May 15, 1998 (the "May 1998 10-Q") and incorporated
herein by reference thereto)
10.54 Indemnification Agreement, dated March 11, 1998, by and among OmniQuip
International, Inc., Harbour Group Investments III, L.P., Uniquip-HGI
Associates, L.P. and P. Enoch Stiff (filed as Exhibit 10.2 to the May
1998 10-Q and incorporated herein by reference thereto)
10.55 Lease, dated as of June 30, 1998, between PW Investment LLC and TRAK
International, Inc. (filed as Exhibit 10 to the Company's Quarterly
Report on Form 10-Q filed with the Commission on August 10, 1998 and
incorporated herein by reference thereto)
10.56 Lease Agreement, dated August 19, 1998, by and between Duke Realty
Minnesota, LLC and Lull International, Inc.
10.57 Collective Bargaining Agreement, effective from November 1, 1998 to
October 31, 2003, by and between TRAK International, Inc. and Local
1430, District No. 10 International Association of Machinists and
Aerospace Workers
52
<PAGE>
*10.58 Letter Agreement, dated October 1, 1998, by and between OmniQuip
International, Inc. and P. Enoch Stiff
*10.59 Letter Agreement, dated October 1, 1998, by and between OmniQuip
International, Inc. and Curtis J. Laetz
*10.60 Letter Agreement, dated October 1, 1998, by and between OmniQuip
International, Inc. and Richard G. Mueller
*10.61 Letter Agreement, dated October 1, 1998, by and between OmniQuip
International, Inc. and Richard A. Solon
21 Subsidiaries of the Registrant
23 Consent of PricewaterhouseCoopers LLP
24 Powers of Attorney
27 Financial Data Schedule
*Management contract or compensatory plan or arrangement.
53
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) the Securities
Exchange Act of 1934, as amended, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
OmniQuip International, Inc.
By:/s/ Philip G. Franklin
------------------------
Philip G. Franklin
Vice President-Finance, Chief Financial
Officer, Treasurer and Secretary
December 28, 1998
Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, this report has been signed below by the following persons on
behalf of the registrant and in the capacities indicated on December 28, 1998.
* President, Chief Executive Officer and Director
________________________ (Principal executive officer)
P. Enoch Stiff
/s/ Philip G. Franklin Vice President - Finance, Chief Financial Officer,
________________________ Treasurer and Secretary (Principal financial and
Philip G. Franklin accounting officer)
* Director and Chairman of the Board
- ------------------------
Donald E. Nickelson
* Director
- ------------------------
Peter S. Finley
* Director
- ------------------------
Jeffrey L. Fox
* Director
- ------------------------
Samuel A. Hamacher
* Director
- ------------------------
Paul W. Jones
* Director
- ------------------------
Jerry E. Ritter
54
<PAGE>
* Director
- ------------------------
Joseph F. Shaughnessy
* Director
- ------------------------
Robert L. Virgil
By: /s/ Philip G. Franklin
-----------------------
Philip G. Franklin
Attorney-in-Fact
- ------------------
* Such signature has been affixed pursuant to the following Power of Attorney:
55
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature
appears below constitutes and appoints P. Enoch Stiff, Philip G. Franklin,
Curtis J. Laetz and Glenda Moehlenpah, 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 1998 Annual Report
on Form 10-K of OmniQuip International, Inc., and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto each said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary as fully to all intents and purposes as he might or
could do in person, and 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.
56
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors and
Stockholders of OmniQuip International, Inc.
Our audits of the consolidated financial statements referred to in our report
dated November 3, 1998, listed at Item 14. 1. of the Annual Report on Form 10-K
of OmniQuip International, Inc. for the fiscal year ended September 30, 1998
also included an audit of the Financial Statement Schedule listed at Item 14. 2.
of such Form 10-K. In our opinion, the Financial Statement Schedule presents
fairly, in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements.
PricewaterhouseCoopers LLP
St. Louis, Missouri
November 3, 1998
S-1
<PAGE>
SCHEDULE II
<TABLE>
<CAPTION>
OMNIQUIP INTERNATIONAL, INC.
Rule 12-09 Valuation and Qualifying Accounts and Reserves
for the Fiscal Year Ended September 30, 1998
(in thousands)
Column A Column B Column C Column D Column E
- -------------------------------------------- ------------ -------------------------- ------------ -----------
Additions
--------------------------
Balance at Charged to Balance at
Beginning Costs and Charged to End of
of Expenses Other Period
Valuation and Reserve Accounts Period Accounts(1) Deductions
- -------------------------------------------- ------------ ------------ ------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Accounts receivable reserve............ $ 504 $153 $ 753 $ 115 $1,295
======= ==== ====== ===== ======
Excess and obsolete inventory
reserves............................ $2,273 $ 7 $1,808 $ 439 $3,649
====== ==== ====== ===== ======
</TABLE>
(1) Relates to the acquisition of Snorkel on November 17, 1997.
<TABLE>
<CAPTION>
Rule 12-09 Valuation and Qualifying Accounts and Reserves
for the Fiscal Year Ended September 30, 1997
(in thousands)
Column A Column B Column C Column D Column E
- -------------------------------------------- ------------ ------------------------- ------------ -----------
Additions
-------------------------
Balance at Charged to Balance at
Beginning Costs and Charged to End of
of Expenses Other Period
Valuation and Reserve Accounts Period Accounts Deductions
- -------------------------------------------- ------------ ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
Accounts receivable reserve............ $ 351 $164 $ -- $ 11 $ 504
======= ==== ====== ===== =======
Excess and obsolete inventory
reserves............................ $2,482 $420 $ -- $629 $2,273
====== ==== ====== ==== ======
</TABLE>
S-2
PHG/JKB/kk
7/18/98
LEASE AGREEMENT
THIS LEASE is executed this 19th day of August, 1998, by and between
DUKE REALTY MINNESOTA, LLC, a Minnesota limited liability company ("Landlord"),
and LULL INTERNATIONAL, INC., a Delaware corporation ("Tenant").
WITNESSETH:
ARTICLE 1 - LEASE OF PREMISES
Section 1.01. Basic Lease Provisions and Definitions.
A. Leased Premises Address: 2444 Enterprise Drive, Mendota Heights,
Minnesota 55120 (the "Building"); located in Enterprise Industrial
Center (the "Park");
B. Rentable Area: approximately 39,648 square feet;
Landlord shall use commercially reasonable standards, consistently
applied, in determining the Rentable Area and the rentable area of the
Building. The Rentable Area shall include the area within the Leased
Premises plus a pro rata portion of the area covered by the common
areas within the Building, as reasonably determined by Landlord from
time to time. Landlord's determination of Rentable Area made in good
faith shall conclusively be deemed correct for all purposes hereunder,
including without limitation the calculation of Tenant's Proportionate
Share and Tenant's Minimum Annual Rent.
C. Tenant's Proportionate Share: 23.92%;
D. Annual Base Rent:
10/01/98 - 09/30/99 $119,736.96
10/01/99 - 09/30/01 $151,058.88 per year
10/01/01 - 09/30/04 $160,970.88 per year;
E. Monthly Rental Installments:
10/01/98 - 09/30/99 $ 9,978.08 per month
10/01/99 - 09/30/01 $ 12,588.24 per month
10/01/01 - 09/30/04 $ 13,414.24 per month;
F. Term: Six (6) years;
G. Commencement Date: October 1, 1998;
H. Security Deposit: $13,400.00;
I. Guarantor: None;
J. Broker: Duke Realty Services Limited Partnership representing
Landlord;
Duke Realty Services Limited Partnership will not share the broker's
compensation with other brokers who may represent Tenant. Landlord is
solely responsible for Duke Realty Services Limited Partnership's
brokerage compensation and will hold Tenant harmless therefrom.
<PAGE>
K. Permitted Use: Office and Warehouse Use including for example and
without limitation for stocking, service training, light
manufacturing, painting and subassembly operations (provided, however,
that in the event Tenant uses the Leased Premises for painting, the
same shall be done in a paint booth in a location mutually agreed upon
by both Landlord and Tenant);
L. Addresses for notices:
Landlord: Duke Realty Minnesota, LLC
856 Fifth Street South
Hopkins, MN 55343-7750
Tenant: Lull International, Inc.
2444 Enterprise Drive
Mendota Heights, MN 55120
With a
Copy to: OmniQuip International, Inc.
222 East Main Street
Port Washington, WI 53074
Address for rental and other payments:
Duke Realty Minnesota, LLC
NW 7210
P.O. Box 1450
Minneapolis, MN 55485-7210
Section 1.02. Leased Premises. Landlord hereby leases to Tenant and
Tenant leases from Landlord, subject to all of the terms and conditions set
forth herein, that portion of the Building described in the Basic Lease
Provisions consisting of approximately 39,648 rentable square feet and outlined
on Exhibit A attached hereto (the "Leased Premises"). Landlord also grants to
Tenant, together with and subject to the rights granted from time to time by
Landlord to other tenants and occupants of the Building, the right to use the
common areas and parking area adjoining the Building. Notwithstanding the
foregoing sentence, Landlord grants to Tenant and its customers and invitees the
right to exclusive use of not less than fifty percent (50%) of the parking area
to the east of the Leased Premises. In the event parking issues arise, Landlord
and Tenant hereby agree to work together in good faith to resolve said parking
issues.
ARTICLE 2 - TERM AND POSSESSION
Section 2.01. Term. The term of this Lease ("Lease Term") shall be the
period of time specified in the Basic Lease Provisions and shall commence on the
Commencement Date described in the Basic Lease Provisions. Upon tender of
possession of the Leased Premises to Tenant, Tenant shall have the right to
inspect the same and provided the Leased Premises are in the condition required
by the Lease, Tenant agrees to execute a letter of understanding acknowledging
(i) the Commencement Date of this Lease, and (ii) that Tenant has accepted the
Leased Premises for occupancy and that the condition of the Leased Premises
(including any tenant finish improvements constructed thereon) and the Building
was at the time satisfactory and in conformity with the provisions of this Lease
in all respects.
-2-
<PAGE>
Such letter of understanding shall become a part of this Lease. If Tenant takes
possession of and occupies the Leased Premises, Tenant shall be deemed to have
accepted the Leased Premises as described above, even though Tenant may not have
executed the letter of understanding.
Section 2.02. Construction of Tenant Improvements. Tenant has
personally inspected the Leased Premises and accepts the same "as is" without
representation or warranty by Landlord of any kind, except Landlord shall
construct in a good and workmanlike manner the improvements in the Leased
Premises in accordance with Tenant's plans and specifications which shall be
mutually agreed upon by both Landlord and Tenant and attached hereto as Exhibit
B, in an amount not to exceed Fifty-nine Thousand Dollars ($59,000.00)
("Landlord's Allowance"). Landlord agrees to competitively bid such
improvements. In the event Landlord receives a bid from a qualified, reputable
general contractor capable of performing the work on the improvements as
provided herein, and such bid is less than Fifty Thousand Dollars ($50,000.00),
Tenant shall be entitled to add additional work to the improvements set forth in
Exhibit B up to a total cost of Fifty Thousand Dollars ($50,000.00). Tenant
hereby acknowledges and agrees that all costs in excess of Landlord's Allowance
(in an amount not to exceed Twenty-five Thousand Dollars ($25,000.00))
("Amortized Amount") will be amortized at an interest rate of eleven percent
(11%) per annum and paid by Tenant as Additional Rent over the Lease Term;
provided, that such excess costs shall be in conformity with Exhibit B and
mutually agreed upon by both Landlord and Tenant. Any costs in excess of the
Amortized Amount shall be paid by Tenant to Landlord within thirty (30) days of
Tenant's receipt of Landlord's invoice therefor. In addition, Landlord hereby
agrees to upgrade the existing sprinkler system in the Building, at Landlord's
sole expense.
Section 2.03. Surrender of the Premises. Upon the expiration or
earlier termination of this Lease, or upon the exercise by Landlord of its right
to re-enter the Leased Premises (as a result of Tenant's default) without
terminating this Lease, Tenant shall immediately surrender the Leased Premises
to Landlord, in broom-clean condition and in good order, condition and repair,
except for ordinary wear and tear and damage which Tenant is not obligated to
repair. Tenant shall also remove its personal property, trade fixtures and any
of Tenant's alterations designated by Landlord; promptly repair any damage
caused by such removal; and restore the Leased Premises to the condition
existing prior to the installation of the items so removed. If Tenant fails to
do so, Landlord may restore the Leased Premises to such condition at Tenant's
expense, and Landlord may cause all of said property to be removed at Tenant's
expense, and Tenant hereby agrees to pay all the costs and expenses thereby
reasonably incurred. All property of Tenant which is not removed within ten (10)
days following Landlord's written demand therefor shall be conclusively deemed
to have been abandoned by Tenant, and Landlord shall be entitled to dispose of
such property without thereby incurring any liability to Tenant. The provisions
of this section shall survive the expiration or other termination of this Lease.
-3-
<PAGE>
Section 2.04. Holding Over. If Tenant retains possession of the Leased
Premises after the expiration or earlier termination of this Lease, Tenant shall
become a tenant from month to month at 200% of the Monthly Rental Installment in
effect at the end of the Lease Term (plus Additional Rent as provided in Article
3 hereof), and otherwise upon the terms, covenants and conditions herein
specified, so far as applicable. Acceptance by Landlord of rent after such
expiration or earlier termination shall not result in a renewal of this Lease,
and Tenant shall vacate and surrender the Leased Premises to Landlord upon
Tenant being given thirty (30) days prior written notice from Landlord to
vacate.
ARTICLE 3 - RENT
Section 3.01. Base Rent. Tenant shall pay to Landlord as Annual Base
Rent for the Leased Premises the sum specified in the Basic Lease Provisions,
payable in equal consecutive Monthly Rental Installments, in advance, without
deduction or offset, beginning on the Commencement Date and on or before the
first day of each and every calendar month thereafter during the Lease Term. The
Monthly Rental Installment for partial calendar months shall be prorated based
on the number of days during the month this Lease was in effect in relation to
the total number of days in such month.
Section 3.02. Additional Rent. In addition to the Annual Base Rent
specified in this Lease, Tenant agrees to pay to Landlord for each calendar year
during the Lease Term, as "Additional Rent," Tenant's Proportionate Share (as
described in the Basic Lease Provisions) of all costs, charges and expenses
incurred by Landlord during the Lease Term for Real Estate Taxes and Operating
Expenses for the Building and appurtenant common areas (collectively "Common
Area Charges").
"Operating Expenses" shall mean all of Landlord's expenses for
operation, repair, replacement and maintenance as necessary to keep the Building
and appurtenant common areas in good order, condition and repair (including all
additional direct costs and expenses of operation and maintenance of the
Building which Landlord reasonably determines it would have paid or incurred
during such year if the Building had been fully occupied), including, but not
limited to, service and other charges incurred in the operation and maintenance
of the electrical systems, heating, ventilation and air conditioning systems and
sprinkler and plumbing systems; management fees; utilities; stormwater discharge
fees; license, permit, inspection and other fees; environmental and pollution
testing and consultation fees related thereto; fees and assessments imposed by
any covenants or owners' association; tools and supplies; security services;
insurance premiums; and maintenance and repair of the driveways and parking
areas (including snow removal), exterior lighting facilities, landscaped areas,
walkways, curbs, drainage strips, sewer lines, exterior walls, foundation,
structural frame, roof and gutters.
"Real Estate Taxes" shall include any form of real estate tax or
assessment, general, special, ordinary or extraordinary, and any license fee,
commercial rental tax, improvement bond or bonds, levy or tax (other than
inheritance, personal income or estate taxes) imposed upon the Building and
common areas (or against Landlord's business of leasing the Building, provided
-4-
<PAGE>
such taxes are in lieu of standard Real Estate Taxes) by any authority having
the direct or indirect power to tax, together with costs and expenses of
contesting the validity or amount of Real Estate Taxes.
Tenant shall pay, prior to delinquency, all taxes assessed against and
levied upon trade fixtures, furnishings, equipment and all other personal
property of Tenant contained in the Leased Premises or elsewhere. Tenant shall
cause such trade fixtures, furniture, equipment and all other personal property
to be assessed and billed separately from the Leased Premises.
Section 3.03. Payment of Additional Rent. Landlord shall estimate the
total amount of Additional Rent to be paid by Tenant during each calendar year
of the Lease Term, whereupon commencing on the Commencement Date, Tenant shall
pay to Landlord each month, at the same time the Monthly Rental Installment is
due, an amount equal to one-twelfth (1/12) of the estimated Additional Rent for
such year. Within ninety (90) days after the end of each calendar year, or as
soon afterward as is practicable, Landlord shall submit to Tenant a statement of
the actual amount of such Additional Rent and within thirty (30) days after
receipt of such statement, Tenant shall pay any deficiency between the actual
amount owed and the estimates paid during such calendar year, or in the event of
overpayment, Landlord shall credit the amount of such overpayment toward the
next installments of Base Rent. To the extent that the Lease Term includes any
partial calendar years, the Additional Rent included in this section shall be
prorated based upon the number of days in such calendar year included within the
Lease Term divided by 360. Tenant may, by notice to Landlord within thirty (30)
days after Landlord's notice of the actual amount of Additional Rent, require an
audit of Landlord's books and records relating to Additional Rent for the
preceding calendar year. Landlord shall have the option of either providing
Tenant with an audit prepared by an independent certified public accountant or
allowing Tenant access to Landlord's books and records for purposes of
performing the audit. If the audit indicates Landlord has overstated Additional
Rent by more than five percent (5%), Landlord shall pay the cost of the audit in
an amount not to exceed Five Thousand Dollars ($5,000.00).
Section 3.04. Late Charges. Tenant acknowledges that Landlord may
incur certain additional unanticipated costs and expenses, including
administrative costs and attorneys' fees, if Tenant fails to timely pay any
payment required hereunder. Therefore, as compensation for such additional
expenses, and in addition to the other remedies available to Landlord hereunder,
if any payment of Minimum Rent or any other sum or charge required to be paid by
Tenant to Landlord hereunder shall become overdue for a period of ten (10) days,
a late charge of three percent (3%) of the payment so due shall be paid by
Tenant as additional rent. In addition, if Tenant fails to pay within thirty
(30) days after the same is due and payable any sum or charge required to be
paid by Tenant to Landlord, such unpaid amount shall bear interest from the due
date thereof to the date of payment at the rate of fifteen percent (15%) per
annum.
-5-
<PAGE>
ARTICLE 4 - SECURITY DEPOSIT
Tenant, upon execution of this Lease, shall deposit with Landlord the
Security Deposit as specified in the Basic Lease Provisions as security for the
full and faithful performance by Tenant of all of the terms, conditions and
covenants contained in this Lease on the part of Tenant to be performed,
including but not limited to the payment of the rent. In the event of a default
by Tenant of any term, condition or covenant herein contained, Landlord may
apply all or any part of such security deposit to curing all or any part of such
default; and Tenant agrees to promptly, upon demand, deposit such additional sum
with Landlord as may be required to maintain the full amount of the security
deposit. All sums held by Landlord pursuant to this section shall be without
interest. At the end of the Lease Term, provided that there is then no uncured
default, Landlord shall return the security deposit to Tenant.
ARTICLE 5 - USE
Section 5.01. Use of Leased Premises. The Leased Premises are to be
used by Tenant solely as provided in the Basic Lease Provisions, and for no
other purposes without the prior written consent of Landlord.
Section 5.02. Covenants of Tenant Regarding Use. In connection with
its use of the Leased Premises, Tenant agrees to do the following:
(a) Tenant shall (i) use and maintain the Leased Premises and conduct
its business thereon in a safe, careful, reputable and lawful manner, (ii)
comply with all laws, rules, regulations, orders, ordinances, directions and
requirements of any governmental authority or agency, now in force or which may
hereafter be in force, including without limitation those which shall impose
upon Landlord or Tenant any duty with respect to or triggered by a change in the
use or occupation of, or any improvement or alteration to, the Leased Premises,
and (iii) comply with and obey all reasonable directions of the Landlord,
including any Rules and Regulations that may be adopted by Landlord from time to
time.
(b) Tenant shall not (i) use the Leased Premises for any unlawful
purpose or act, (ii) commit or permit any waste or damage to the Leased
Premises, (iii) store any inventory, equipment or any other materials outside
the Leased Premises (except as otherwise provided herein), or (iv) do or permit
anything to be done in or about the Leased Premises or appurtenant common areas
which constitutes a nuisance or which will in any way obstruct or interfere with
the rights of other tenants or occupants of the Building or injure or annoy
them. Landlord acknowledges that Tenant may, from time to time, use the areas
outside of the Leased Premises for temporary staging of equipment, inventory or
other materials and Landlord consents to such use, provided that (i) Tenant
gives Landlord prior written notice thereof, and (ii) such activities are
conducted in a location mutually agreed upon by Landlord and Tenant and are in
compliance with all other terms of the Lease. Landlord shall not be responsible
to Tenant for the nonperformance by any other tenant or occupant of the Building
of its lease or of any Rules and Regulations.
-6-
<PAGE>
(c) Tenant shall not overload the floors of the Leased Premises as to
cause damage to the floor. The designed floor load capacity is 3,000 pounds per
square foot. All damage to the floor structure or foundation of the Building due
to improper positioning or storage of items or materials shall be repaired by
Landlord at the sole expense of Tenant, who shall reimburse Landlord immediately
therefor upon demand.
(d) Tenant shall not use the Leased Premises, or allow the Leased
Premises to be used, for any purpose or in any manner which would, in Landlord's
opinion, invalidate any policy of insurance now or hereafter carried on the
Building or increase the rate of premiums payable on any such insurance policy.
Should Tenant fail to comply with this covenant, Landlord may, at its option,
require Tenant to stop engaging in such activity or to reimburse Landlord as
Additional Rent for any increase in premiums charged during the term of this
Lease on the insurance carried by Landlord on the Leased Premises and
attributable to the use being made of the Leased Premises by Tenant.
(e) Tenant may, at its own expense, erect a sign concerning its
business which shall be in keeping with the decor and other signs on the
Building, provided that such sign is first approved by Landlord in writing,
which approval shall not be unreasonably withheld. Landlord's approval, if
given, may be conditioned upon such reasonable criteria as Landlord deems
appropriate to maintain the area in a neat and attractive manner. Tenant agrees
to maintain any sign in good state of repair, and upon expiration of the Lease
Term, Tenant shall promptly remove the sign and repair any resulting damage to
the Leased Premises or Building.
Section 5.03. Landlord's Rights Regarding Use. In addition to the
rights specified elsewhere in this Lease, Landlord shall have the following
rights regarding the use of the Leased Premises or the appurtenant common areas
by Tenant, its employees, agents, customers and invitees, each of which may be
exercised without notice or liability to Tenant:
(a) Landlord may install such signs, advertisements, notices or tenant
identification information as it shall deem necessary or proper.
(b) Landlord shall have the right at any time to change or otherwise
alter the appurtenant common areas. Landlord may control the appurtenant common
areas in such manner as it deems necessary or proper, provided that the same
shall not materially impair Tenant's rights under the Lease. Landlord agrees to
use commercially reasonable efforts not to interrupt Tenant's business
operations in the exercise of its rights hereunder.
(c) Landlord or Landlord's agent shall be permitted to inspect or
examine the Leased Premises at any reasonable time and upon prior reasonable
notice to Tenant, except in the event of an emergency in which case no notice
shall be required, and Landlord shall have the right to make any repairs to the
Leased Premises which are necessary for its preservation; provided, however,
that any repairs made by Landlord shall be at Tenant's expense, except as
provided in Section 7.01 hereof. If Tenant is not present to open and permit
such entry into the Leased Premises at any time when such entry is necessary or
permitted hereunder, Landlord and its employees and agents may enter the
-7-
<PAGE>
Leased Premises by means of a master or pass key or otherwise, provided Landlord
has used reasonable efforts to notify Tenant as required hereunder. Except for
loss or damage caused by its gross negligence or intentional misconduct,
Landlord shall incur no liability to Tenant for such entry, nor shall such entry
constitute an eviction of Tenant or a termination of this Lease, or entitle
Tenant to any abatement of rent therefor. Landlord agrees to use commercially
reasonable efforts not to interrupt or interfere with Tenant's business
operations in the exercise of its rights hereunder.
ARTICLE 6 - UTILITIES AND SERVICES
Tenant shall obtain in its own name and shall pay directly to the
appropriate supplier the cost of all utilities and services serving the Leased
Premises, including but not limited to: natural gas, heat, light, electrical
power, telephone, janitorial service, refuse disposal and other utilities and
services. However, if any services or utilities are jointly metered with other
property, Landlord shall make a reasonable determination of Tenant's
proportionate share of the cost of such utilities and services and Tenant shall
pay such share to Landlord within fifteen (15) days after receipt of Landlord's
written statement. Except for damage or interruption caused by the gross
negligence or intentional misconduct of Landlord, its agents or employees,
Landlord shall not be liable in damages or otherwise for any failure or
interruption of any utility service or other service furnished to the Leased
Premises; and no such failure or interruption shall entitle Tenant to terminate
this Lease or withhold sums due hereunder.
ARTICLE 7 - MAINTENANCE AND REPAIRS
Section 7.01. Landlord's Responsibility. During the term of this
Lease, Landlord shall maintain in good condition and repair the electrical
systems, heating and air conditioning systems, sprinkler and plumbing systems,
roof, exterior walls, foundation and structural frame of the Building and the
parking and landscaped areas, the costs of which shall be included in Operating
Expenses; provided, however, that to the extent any of the foregoing items
require repair because of the negligence, misuse, or default of Tenant, its
employees, agents, customers or invitees, Landlord shall make such repairs at
Tenant's expense.
Section 7.02. Alterations. Tenant shall not permit structural or
non-structural alterations or additions in or to the Leased Premises unless and
until the plans have been approved by Landlord in writing, which approval shall
not be unreasonably withheld. As a condition of such approval, Landlord may
require Tenant to remove the alterations and restore the Leased Premises upon
termination of this Lease; otherwise, all such alterations or improvements,
except movable office furniture and equipment and trade fixtures, shall at
Landlord's option become a part of the realty and the property of Landlord, and
shall not be removed by Tenant. If Landlord consents to Tenant's performance of
alterations or additions to the Leased Premises, Tenant shall ensure that all
alterations and improvements which are made or necessitated thereby shall be
made in accordance with all applicable laws, regulations and building codes, in
a good and workmanlike manner and in quality equal to or better than the
original construction of the
-8-
<PAGE>
Building. Landlord's approval of the plans, specifications and working drawings
for Tenant's alterations shall create no responsibility or liability on the part
of Landlord for their completeness, design sufficiency, or compliance with all
laws, rules and regulations of governmental agencies or authorities. Tenant
shall indemnify and save harmless Landlord from all costs, loss or expense in
connection with any construction or installation. No person shall be entitled to
any lien directly or indirectly derived through or under Tenant or through or by
virtue of any act or omission of Tenant upon the Leased Premises for any
improvements or fixtures made thereon or installed therein or for or on account
of any labor or material furnished to the Leased Premises or for or on account
of any matter or thing whatsoever; and nothing in this Lease contained shall be
construed to constitute a consent by Landlord to the creation of any lien. If
any lien is filed against the Leased Premises for work claimed to have been done
for, or material claimed to have been furnished to, Tenant, Tenant shall cause
such lien to be discharged of record within thirty (30) days after filing by
bonding or in any other lawful manner. Tenant shall indemnify and save harmless
Landlord from all costs, losses, expenses, and attorneys' fees in connection
with any such lien.
ARTICLE 8 - CASUALTY
Section 8.01. Casualty. In the event of total or partial destruction
of the Building or the Leased Premises by fire or other casualty, Landlord
agrees to promptly restore and repair the Building and the Leased Premises;
provided, however, that Landlord's obligation as to the interior finishing of
the Leased Premises shall be consistent with and limited in amount to Landlord's
Allowance regarding the tenant finish improvements as were originally required
to be made by Landlord, if any. Any insurance proceeds not used by Landlord in
restoring or repairing the Leased Premises shall be the sole property of
Landlord. Rent shall proportionately abate during the time that the Leased
Premises or part thereof are unusable because of any such damage thereto.
Notwithstanding the foregoing, if the Leased Premises are (i) so destroyed that
they cannot be repaired or rebuilt within one hundred eighty (180) days from the
date on which the insurance claim is adjusted or one (1) year from the date of
the incident causing damage, whichever is earlier; or (ii) destroyed by a
casualty which is not covered by the insurance required hereunder or, if
covered, such insurance proceeds are not released by any mortgagee entitled
thereto or are insufficient to rebuild the Building and the Leased Premises;
then, in case of a clause (i) casualty, either Landlord or Tenant may, or, in
the case of a clause (ii) casualty, then Landlord may, upon thirty (30) days
written notice to the other party, terminate and cancel this Lease; and all
further obligations hereunder shall thereupon cease and terminate.
Section 8.02. Fire and Extended Coverage Insurance. During the term of
this Lease, Landlord shall maintain fire and extended coverage insurance on the
Building, but shall not protect Tenant's property on the Leased Premises; and,
notwithstanding the provisions of Section 9.01, Landlord shall not be liable for
any damage to Tenant's property, regardless of cause, including the negligence
of Landlord and its employees, agents, and invitees. Tenant hereby expressly
waives any right of recovery against Landlord (or any other tenant of the
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<PAGE>
Building) for damage to any property of Tenant located in or about the Leased
Premises, however caused, including the negligence of Landlord and its
employees, agents, and invitees; and, notwithstanding the provisions of Section
9.01 below, Landlord hereby expressly waives any rights of recovery against
Tenant for damage to the Leased Premises or the Building which is insured
against under Landlord's fire and extended coverage insurance. All insurance
policies maintained by Landlord or Tenant as provided in this Lease shall
contain an agreement by the insurer waiving the insurer's right of subrogation
against the other party to this Lease and agreeing not to acquire any rights of
recovery which the insured has expressly waived prior to loss.
ARTICLE 9 - LIABILITY INSURANCE
Section 9.01. Tenant's Responsibility. Landlord shall not be liable to
Tenant or to any other person for (i) damage to property or injury or death to
persons due to the condition of the Leased Premises, the Building or the
appurtenant common areas, or (ii) the occurrence of any accident in or about the
Leased Premises or the appurtenant common areas, or (iii) any act or neglect of
Tenant or any other tenant or occupant of the Building or of any other person,
unless such damage, injury or death is directly and solely the result of
Landlord's negligence; and Tenant hereby releases Landlord from any and all
liability for the same. Tenant shall be liable for, and shall indemnify and
defend Landlord and hold it harmless from, any and all liability for (i) any act
or neglect of Tenant and any person coming on the Leased Premises or appurtenant
common areas by the license of Tenant, express or implied, (ii) any damage to
the Leased Premises, and (iii) any loss of or damage or injury to any person
(including death resulting therefrom) or property occurring in, on or about the
Leased Premises, regardless of cause, except for any loss or damage from fire or
casualty insured as provided in Section 8.02 and except for that caused solely
and directly by Landlord's negligence. Notwithstanding the foregoing, Tenant
shall bear the risk of any loss or damage to its property as provided in Section
8.02.
Section 9.02. Tenant's Insurance. Tenant, in order to insure against
the liabilities specified in this Lease, shall at all times during the term of
this Lease carry, at its own expense, one or more policies of general public
liability and property damage insurance, issued by one or more insurance
companies acceptable to Landlord, with the following minimum coverages:
A. Worker's Compensation: minimum statutory amount.
B. Comprehensive General Liability Insurance, including blanket,
contractual liability, broad form property damage, personal injury,
completed operations, products liability, and fire damage: Not less
than $1,000,000 Combined Single Limit for both bodily injury and
property damage.
C. Fire and Extended Coverage, Vandalism and Malicious Mischief, and
Sprinkler Leakage insurance, if applicable, for the full cost of
replacement of Tenant's property.
D. Business interruption insurance.
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The insurance policy or policies shall protect Tenant and Landlord as their
interests may appear, naming Landlord and Landlord's managing agent and
mortgagee as additional insureds, and shall provide that they may not be
cancelled on less than thirty (30) days prior written notice to Landlord. Tenant
shall furnish Landlord with Certificates of Insurance evidencing all required
coverage. Should Tenant fail to carry such insurance and furnish Landlord with
such Certificates of Insurance after a request to do so, Landlord shall have the
right to obtain such insurance and collect the cost thereof from Tenant as
additional rent.
ARTICLE 10 - EMINENT DOMAIN
If all or any substantial part of the Building or appurtenant common
areas shall be acquired by the exercise of eminent domain, Landlord may
terminate this Lease by giving written notice to Tenant within fifteen (15) days
after possession thereof is so taken. If all or any part of the Leased Premises
shall be acquired by the exercise of eminent domain in such a manner that the
Leased Premises shall become unusable by Tenant for the purpose for which it is
then being used, Tenant may terminate this Lease by giving written notice to
Landlord within fifteen (15) days after possession of the Leased Premises or
part thereof is so taken. Tenant shall have no claim against Landlord on account
of any such acquisition for the value of any unexpired lease term remaining
after possession of the Leased Premises is taken. All damages awarded shall
belong to and be the sole property of Landlord; provided, however, that Tenant
shall be entitled to any award expressly made to Tenant by any governmental
authority for the cost of or the removal of Tenant's property, including without
limitation its stock, equipment and fixtures and other moving expenses.
ARTICLE 11 - ASSIGNMENT AND SUBLEASE
Tenant shall not assign this Lease or sublet the Leased Premises in
whole or in part without Landlord's prior written consent, which consent shall
not be unreasonably withheld. In the event of any assignment or subletting,
Tenant shall remain primarily liable to perform all of the covenants and
conditions contained in this Lease, including but not limited to payment of Base
Rent and Additional Rent as provided herein. The acceptance of rent from any
other person shall not be deemed to be a waiver of any of the provisions of this
Lease or to be a consent to the assignment of this Lease or the subletting of
the Leased Premises.
Without in any way limiting Landlord's right to refuse to consent to
any assignment or subletting of this Lease, Landlord reserves the right to
refuse to give such consent if in Landlord's discretion and opinion (i) the use
of the Leased Premises is or may be in any way adversely affected; (ii) the
business reputation of the proposed assignee or subtenant is deemed
unacceptable; or (iii) the financial worth of the proposed assignee or subtenant
is insufficient to meet the obligations hereunder or is less than that of
Tenant. Landlord further expressly reserves the right to refuse to give its
consent to any subletting if (i) the proposed rent is to be less than the then
current rent for similar premises in the Building, or (ii) the proposed rent is
to be less than the current rent
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payable by Tenant under the Lease. Tenant agrees to reimburse Landlord for
reasonable accounting and attorneys' fees incurred in conjunction with the
processing and documentation of any such requested transfer, assignment,
subletting or any other hypothecation of this Lease or Tenant's interest in and
to the Leased Premises.
ARTICLE 12 - TRANSFERS BY LANDLORD
Section 12.01. Sale and Conveyance of the Building. Landlord shall
have the right to sell and convey the Building at any time during the term of
this Lease, subject only to the rights of Tenant hereunder; and such sale and
conveyance shall operate to release Landlord from liability hereunder after the
date of such conveyance.
Section 12.02. Subordination and Estoppel Certificate. Landlord shall
have the right to subordinate this Lease to any mortgage presently existing or
hereafter placed upon the Building by so declaring in such mortgage; and the
recording of any such mortgage shall make it prior and superior to this Lease
regardless of the date of execution or recording of either document. Within ten
(10) days following receipt of a written request from Landlord, Tenant shall
execute and deliver to Landlord, without cost:
(a) any instrument which Landlord may deem necessary or desirable to
confirm the subordination of this Lease. If Tenant fails or refuses to do so,
Landlord may execute such instrument in the name and as the act of Tenant.
(b) an estoppel certificate in such form as Landlord may reasonably
request certifying (i) that this Lease is in full force and effect and
unmodified (or, if modified, stating the nature of such modification), (ii) the
date to which rent has been paid, (iii) that there are not, to Tenant's
knowledge, any uncured defaults (or specifying such defaults if any are
claimed), and (iv) any other matters or state of facts reasonably required
respecting the Lease or Tenant's occupancy of the Leased Premises. Such estoppel
may be relied upon by Landlord and by any purchaser or mortgagee of all or any
part of the Building. Tenant's failure to deliver such statement within such
period shall be conclusive upon Tenant that this Lease is in full force and
effect and unmodified and that there are no uncured defaults in Landlord's
performance hereunder.
(c) Notwithstanding the foregoing, if the mortgagee shall take title
to the Leased Premises through foreclosure or deed in lieu of foreclosure,
Tenant shall be allowed to continue in possession of the Leased Premises as
provided for in this Lease so long as Tenant shall not be in default. Tenant
shall, in the event any proceedings are brought to foreclose any such mortgage,
attorn to the purchaser upon any such foreclosure and recognize such purchaser
as the landlord under this Lease.
Section 12.03. Lender's Rights. Landlord shall have the right, at any
time and from time to time, to notify Tenant in writing that Landlord has placed
a mortgage on the Building, specifying the identity of the Lender ("Lender").
Following receipt of such notice, Tenant agrees to give such Lender a copy of
any notice of default served by Tenant on Landlord. Tenant further agrees that
if Landlord fails to cure any default as
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provided in Section 13.03 herein, Lender shall have an additional thirty (30)
days within which to cure such default; provided, however, that if the term,
condition, covenant or obligation to be performed by Landlord is of such nature
that the same cannot reasonably be performed within such thirty-day period, such
default shall be deemed to have been cured if Lender commences such performance
within said thirty-day period and thereafter diligently completes the same.
ARTICLE 13 - DEFAULT AND REMEDY
Section 13.01. Default. The occurrence of any of the following shall
be deemed an "Event of Default":
(a) Tenant shall fail to pay any Monthly Rental Installment or
Additional Rent within five (5) days after the same shall be due and payable, or
Tenant shall fail to pay any other amounts due Landlord from Tenant within ten
(10) days after the same shall be due and payable.
(b) Tenant shall fail to perform or observe any term, condition,
covenant or obligation as required under this Lease for a period of ten (10)
days after notice thereof from Landlord; provided, however, that if the nature
of Tenant's default is such that more than ten days are reasonably required to
cure, then such default shall be deemed to have been cured if Tenant commences
such performance within said ten-day period and thereafter diligently completes
the required action within a reasonable time.
(c) Tenant shall vacate or abandon the Leased Premises for any
period, or fail to occupy the Leased Premises or any substantial portion thereof
for a period of thirty (30) days.
(d) All or substantially all of Tenant's assets in the Leased Premises
or Tenant's interest in this Lease are attached or levied under execution (and
Tenant does not discharge the same within sixty (60) days thereafter); a
petition in bankruptcy, insolvency, or for reorganization or arrangement is
filed by or against Tenant (and Tenant fails to secure a stay or discharge
thereof within sixty (60) days thereafter); Tenant shall be insolvent and unable
to pay its debts as they become due; Tenant makes a general assignment for the
benefit of creditors; Tenant takes the benefit of any insolvency action or law;
the appointment of a receiver or trustee in bankruptcy for Tenant or its assets
if such receivership has not been vacated or set aside within thirty (30) days
thereafter; dissolution or other termination of Tenant's corporate charter if
Tenant is a corporation.
Section 13.02. Remedies. Except as otherwise provided by law regarding
Tenant's rights and Landlord's obligations upon default, upon the occurrence of
any Event of Default, Landlord shall have the following rights and remedies, in
addition to those allowed by law, any one or more of which may be exercised
without further notice to or demand upon Tenant:
(a) Landlord may apply the security deposit or re-enter the Leased
Premises and cure any default of Tenant, and Tenant shall reimburse Landlord as
additional rent for any costs and expenses which Landlord thereby incurs; and
Landlord shall not be liable to Tenant for any loss or damage which Tenant may
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sustain by reason of Landlord's action, except for loss or damage caused by
Landlord's gross negligence or intentional misconduct.
(b) Landlord may terminate this Lease or, without terminating this
Lease, terminate Tenant's right to possession of the Leased Premises as of the
date of such default, and thereafter (i) neither Tenant nor any person claiming
under or through Tenant shall be entitled to possession of the Leased Premises,
and Tenant shall immediately surrender the Leased Premises to Landlord; and (ii)
Landlord may re-enter the Leased Premises and dispossess Tenant and any other
occupants of the Leased Premises by any lawful means and may remove their
effects, without prejudice to any other remedy which Landlord may have. Upon the
termination of this Lease, Landlord may declare the present value (as determined
by Landlord) of all rent which would have been due under this Lease for the
balance of the Lease Term to be immediately due and payable, whereupon Tenant
shall be obligated to pay the same to Landlord, together with all loss or damage
which Landlord may sustain by reason of Tenant's default ("Default Damages"),
which shall include without limitation expenses of preparing the Leased Premises
for re-letting, demolition, repairs, tenant finish improvements, and brokers'
and attorneys' fees, it being expressly understood and agreed that the
liabilities and remedies specified in this subsection (b) shall survive the
termination of this Lease.
(c) Landlord may, without terminating this Lease, re-enter the Leased
Premises and re-let all or any part thereof for a term different from that which
would otherwise have constituted the balance of the Lease Term and for rent and
on terms and conditions different from those contained herein, whereupon Tenant
shall be immediately obligated to pay to Landlord as liquidated damages the
difference between the rent provided for herein and that provided for in any
lease covering a subsequent re-letting of the Leased Premises, for the period
which would otherwise have constituted the balance of the Lease Term, together
with all of Landlord's Default Damages.
(d) Landlord may sue for injunctive relief or to recover damages for
any loss resulting from the breach.
(e) In addition to the defaults and remedies described above, the
parties hereto agree that if Tenant defaults in the performance of any (but not
necessarily the same) term or condition of this Lease three (3) or more times
during any twelve (12) month period, regardless of whether such defaults are
ultimately cured, then such conduct shall, at Landlord's option, represent a
separate Event of Default. Tenant acknowledges that (i) Landlord will incur
additional unanticipated costs as a result of such repetitive defaults,
including but not limited to administrative costs and legal fees, and (ii) the
purpose of this provision is to adequately compensate Landlord for those costs,
which would be difficult to determine with certainty. Therefore, Tenant agrees
to pay to Landlord upon a default under this habitual default provision the
amount of One Thousand Dollars ($1,000.00) as liquidated damages to cure such
default, payable within ten (10) days after written demand therefor to Tenant by
Landlord.
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Section 13.03. Landlord's Default and Tenant's Remedies. Landlord
shall be in default if it shall fail to perform or observe any term, condition,
covenant or obligation as required under this Lease for a period of thirty (30)
days after written notice thereof from Tenant to Landlord and to Lender, if any;
provided, however, that if the term, condition, covenant or obligation to be
performed by Landlord is of such nature that the same cannot reasonably be
performed within such thirty-day period, such default shall be deemed to have
been cured if Landlord commences such performance within said thirty-day period
and thereafter diligently undertakes to complete the same. Upon the occurrence
of any such default, Tenant may sue for injunctive relief or to recover damages
for any loss resulting from the breach, but Tenant shall not be entitled to
terminate this Lease (unless otherwise ordered by a court of competent
jurisdiction) or withhold, offset or abate any rent due hereunder.
Section 13.04. Limitation of Landlord's Liability. If Landlord shall
fail to perform or observe any term, condition, covenant or obligation required
to be performed or observed by it under this Lease and if Tenant shall, as a
consequence thereof, recover a money judgment against Landlord (whether
compensatory or punitive in nature), Tenant agrees that it shall look solely to
Landlord's right, title and interest in and to the Building for the collection
of such judgment; and Tenant further agrees that no other assets of Landlord
shall be subject to levy, execution or other process for the satisfaction of
Tenant's judgment and that Landlord shall not be personally liable for any
deficiency.
The references to "Landlord" in this Lease shall be limited to mean
and include only the owner or owners, at the time, of the fee simple interest in
the Building. In the event of a sale or transfer of such interest (except a
mortgage or other transfer as security for a debt), the "Landlord" named herein,
or, in the case of a subsequent transfer, the transferor, shall, after the date
of such transfer, be automatically released from all liability for the
performance or observance of any term, condition, covenant or obligation
required to be performed or observed by Landlord hereunder; and the transferee
shall be deemed to have assumed all of such terms, conditions, covenants and
obligations.
Section 13.05. Nonwaiver of Defaults. Neither party's failure or delay
in exercising any of its rights or remedies or other provisions of this Lease
shall be construed to be a waiver thereof or affect its right thereafter to
exercise or enforce each and every such right or remedy or other provision. No
waiver of any default shall be deemed to be a waiver of any other default.
Landlord's receipt of less than the full rent due shall not be construed to be
other than a payment on account of rent then due, nor shall any statement on
Tenant's check or any letter accompanying Tenant's check be deemed an accord and
satisfaction, and Landlord may accept such payment without prejudice to
Landlord's right to recover the balance of the rent due or to pursue any other
remedies provided in this Lease. No act or omission by Landlord or its employees
or agents during the term of this Lease shall be deemed an acceptance of a
surrender of the Leased Premises, and no agreement to accept such a surrender
shall be valid unless in writing and signed by Landlord.
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Section 13.06. Attorneys' Fees. If either party defaults in the
performance or observance of any of the terms, conditions, covenants or
obligations contained in this Lease and the non-defaulting party obtains a
judgment against the defaulting party, then the defaulting party agrees to
reimburse the non-defaulting party for the attorneys' fees incurred thereby.
ARTICLE 14 - LANDLORD'S RIGHT TO RELOCATE TENANT
Intentionally Omitted.
ARTICLE 15 - NOTICE AND PLACE OF PAYMENT
Section 15.01. Notices. Any notice required or permitted to be given
under this Lease or by law shall be deemed to have been given if it is written
and delivered in person or by overnight courier or mailed by certified mail,
postage prepaid, to (i) the party who is to receive such notice at the address
specified in the Basic Lease Provisions and (ii) in the case of a default notice
from Tenant to Landlord, any Lender designated by Landlord. When so mailed, the
notice shall be deemed to have been given as of the date it was mailed. Either
party may change its address by giving written notice thereof to the other
party.
Section 15.02. Place of Payment. All payments required to be made by
Tenant to Landlord shall be delivered or mailed to Landlord's management agent
at the address specified in the Basic Lease Provisions or any other address
Landlord may specify from time to time by written notice to Tenant.
ARTICLE 16 - TENANT'S RESPONSIBILITY REGARDING
ENVIRONMENTAL LAWS AND HAZARDOUS SUBSTANCES.
Section 16.01. Definitions.
a. "Environmental Laws" - All federal, state and municipal laws,
ordinances, rules and regulations applicable to the environmental and ecological
condition of the Leased Premises, including, without limitation, the Federal
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended; the Federal Resource Conservation and Recovery Act; the Federal Toxic
Substance Control Act; the Clean Air Act; the Clean Water Act; the rules and
regulations of the Federal Environmental Protection Agency, or any other
federal, state or municipal agency or governmental board or entity having
jurisdiction over the Leased Premises.
b. "Hazardous Substances" - Includes:
(i) Those substances included within the definitions of "hazardous
substances," "hazardous materials," "toxic substances" "solid waste" or
"infectious waste" in any of the Environmental Laws; and
(ii) Such other substances, materials and wastes which are or
become regulated under applicable local, state or federal law, or which are
classified as hazardous, toxic or infectious under present or future
Environmental Laws or other federal, state, or local laws or regulations.
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Section 16.02. Compliance. Tenant, at its sole cost and expense, shall
promptly comply with the Environmental Laws which shall impose any duty upon
Tenant with respect to the use, occupancy, maintenance or alteration of the
Leased Premises. Tenant shall promptly comply with any notice from any source
issued pursuant to the Environmental Laws or with any notice from any insurance
company pertaining to Tenant's use, occupancy, maintenance or alteration of the
Leased Premises, whether such notice shall be served upon Landlord or Tenant.
Section 16.03. Restrictions on Tenant. Tenant shall not cause or
permit to occur:
a. Any violation of the Environmental Laws related to environmental
conditions on, under, or about the Leased Premises, or arising from Tenant's use
or occupancy of the Leased Premises, including, but not limited to, soil and
ground water conditions.
b. The use, generation, release, manufacture, refining, production,
processing, storage or disposal of any Hazardous Substances on, under, or about
the Leased Premises, or the transportation to or from the Leased Premises of any
Hazardous Substances, except as necessary and appropriate for general office use
in which case the use, storage or disposal of such Hazardous Substances shall be
performed in compliance with the Environmental Laws and the highest standards
prevailing in the industry. Landlord understands that Tenant may stock at the
Leased Premises, materials falling within the definition of Hazardous
Substances, including but not limited to paint, oil, grease, sealants, friction
modifiers, calcium chloride, lubricants, adhesives, cleansers, nitrogen and
other materials commonly used in connection with servicing and maintenance of
construction equipment. Tenant understands and agrees to use, store and dispose
of such materials only in accordance with applicable law. Landlord consents to
the stocking of such materials, provided same is in accordance with applicable
law and the provisions of this Lease.
Section 16.04. Notices, Affidavits, Etc.
a. Tenant shall immediately notify Landlord of (i) any violation by
Tenant, its employees, agents, representatives, customers, invitees or
contractors of the Environmental Laws on, under or about the Leased Premises, or
(ii) the presence or suspected presence of any Hazardous Substances on, under or
about the Leased Premises and shall immediately deliver to Landlord any notice
received by Tenant relating to (i) and (ii) above from any source.
b. Tenant shall execute affidavits, representations and the like from
time to time, within five (5) days of Landlord's request therefor, concerning
Tenant's best knowledge and belief regarding the presence of any Hazardous
Substances on, under or about the Leased Premises.
Section 16.05. Landlord's Rights.
a. Landlord and its agent shall have the right, but not the duty, upon
advance notice (except in the case of emergency when no notice shall be
required) to inspect the Leased Premises and conduct tests thereon at any time
to determine whether or the extent to which there has been a violation of
Environmental Laws
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by Tenant or whether there are Hazardous Substances on, under or about the
Leased Premises. In exercising its rights herein, Landlord shall use reasonable
efforts to minimize interference with Tenant's business but such entry shall not
constitute an eviction of Tenant, in whole or in part, and Landlord shall not be
liable for any interference, loss, or damage to Tenant's property or business
caused thereby.
b. If Landlord, any lender or governmental agency shall ever require
testing to ascertain whether there has been a release of Hazardous Substances
on, under or about the Leased Premises or a violation of the Environmental Laws,
and such requirement arose in whole or in part because of an act or omission on
the part of Tenant, then the reasonable costs thereof shall be reimbursed by
Tenant to Landlord upon demand as Additional Rent.
Section 16.06. Tenant's Indemnification. Tenant shall indemnify and
hold harmless Landlord and Landlord's managing agent from any and all claims,
loss, liability, costs, expenses or damage, including reasonable attorneys' fees
and costs of remediation, incurred by Landlord in connection with any breach by
Tenant of its obligations under this Article 16. The covenants and obligations
of Tenant under this Article 16 shall survive the expiration or earlier
termination of this Lease.
Section 16.07. Landlord's Indemnification. Landlord shall indemnify
and hold Tenant harmless from and against any and all claims, loss, liability,
costs, expenses or damage, including reasonable attorneys' fees and costs of
remediation, incurred by Tenant as a result of any Hazardous Substances existing
on or in the Leased Premises or the Building prior to the Commencement Date,
except to extent caused by or exacerbated by Tenant.
ARTICLE 17 - MISCELLANEOUS
Section 17.01. Benefit of Landlord and Tenant. This Lease and all of
the terms and provisions hereof shall inure to the benefit of and be binding
upon Landlord and Tenant and their respective successors and assigns.
Section 17.02. Governing Law. This Lease shall be governed in
accordance with the laws of the State of Minnesota.
Section 17.03. Guaranty. In consideration of Landlord's leasing the
Leased Premises to Tenant, Tenant shall provide Landlord with a Guaranty of
Lease executed by the guarantor(s) described in the Basic Lease Provisions, if
any.
Section 17.04. Force Majeure. Landlord and Tenant (except as to the
payment of rent) shall be excused for the period of any delay in the performance
of any obligation hereunder when such delay is occasioned by causes beyond its
control, including, but not limited to, war, invasion or hostility; work
stoppages, boycotts, slowdowns or strikes; shortages of materials, equipment,
labor or energy; man-made or natural casualties; unusual weather conditions;
acts or omissions of governmental or political bodies; or civil disturbances or
riots.
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Section 17.05. Condition of Premises. Tenant acknowledges that neither
Landlord nor any agent of Landlord has made any representation or warranty with
respect to the Leased Premises or the Building or with respect to the
suitability or condition of any part thereof for the conduct of Tenant's
business except as provided in this Lease.
Section 17.06. Examination of Lease. Submission of this instrument for
examination or signature to Tenant does not constitute a reservation of or
option for Lease, and it is not effective as a Lease or otherwise until
execution by and delivery to both Landlord and Tenant.
Section 17.07. Indemnification for Leasing Commissions. The parties
hereby represent and warrant that the only real estate brokers involved in the
negotiation and execution of this Lease are those named in the Basic Lease
Provisions and that no other broker or person is entitled to any leasing
commission or compensation as a result of the negotiation or execution of this
Lease. Each party shall indemnify and hold the other harmless from any and all
liability for the breach of this representation and warranty on its part and
shall pay any compensation to any other broker or person who may be deemed or
held to be entitled thereto.
Section 17.08. Quiet Enjoyment. If Tenant shall perform all of the
covenants and agreements herein provided to be performed by Tenant, Landlord
covenants that Tenant shall, at all times during the Lease Term, have the quiet
enjoyment and peaceful possession of the Leased Premises without hindrance from
Landlord or any persons lawfully claiming under Landlord, except as may be
provided in Section 12.02 hereunder.
Section 17.09. Severability of Invalid Provisions. If any provision of
this Lease shall be held to be invalid, void or unenforceable, the remaining
provisions hereof shall not be affected or impaired, and such remaining
provisions shall remain in full force and effect.
Section 17.10. Financial Statements. During the Lease Term and any
extensions thereof, Tenant shall provide to Landlord on an annual basis, within
ninety (90) days following the end of Tenant's fiscal year, a copy of Tenant's
most recent certified and audited financial statements prepared as of the end of
Tenant's most recent fiscal year. Such financial statements shall be prepared in
conformity with generally accepted accounting principles, consistently applied.
Section 17.11. Tenant's Representations and Warranties. The
undersigned represents and warrants to Landlord that (i) Tenant is duly
organized, validly existing and in good standing in accordance with the laws of
the state under which it was organized; (ii) all action necessary to authorize
the execution of this Lease has been taken by Tenant; and (iii) the individual
executing and delivering this Lease on behalf of Tenant has been authorized to
do so, and such execution and delivery shall bind Tenant. Tenant, at Landlord's
request, shall provide Landlord with evidence of such authority.
Section 17.12. Representations and Indemnifications. Any
representations and indemnifications of Landlord contained in the Lease shall
not be binding upon (i) any mortgagee having a
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mortgage presently existing or hereafter placed on the Building, or (ii) a
successor to Landlord which has obtained or is in the process of obtaining fee
title interest to the Building as a result of a foreclosure of any mortgage or a
deed in lieu thereof.
Section 17.13. Early Occupancy. In the event the Leased Premises
become available and are ready for occupancy prior to the Commencement Date,
Landlord may elect to allow Tenant to take possession of the Leased Premises
prior to the Commencement Date for fixturing purposes. Tenant agrees to
coordinate its fixturing work with the work of Landlord such that Tenant's work
does not interfere with or delay Landlord's work; provided, however, that
neither Landlord nor any of Landlord's affiliates shall have any responsibility
or liability whatsoever for any injury (including death) to persons or loss or
damage to any of Tenant's leasehold improvements, fixtures, equipment or any
other materials installed or left in the Leased Premises prior to the
Commencement Date. All of the terms and conditions of this Lease will become
effective upon Tenant taking possession of the Leased Premises except for the
payment of Annual Base Rent and Additional Rent which will commence on the
Commencement Date.
Section 17.14. Option to Extend.
A. Grant and Exercise of Option. Provided that (i) Tenant has not been
in default hereunder at any time during the Term of this Lease (the "Original
Term"), (ii) the creditworthiness of Tenant is then acceptable to Landlord,
(iii) Tenant originally named herein remains in possession of and has been
continuously operating in the entire Leased Premises throughout the Original
Term and (iv) the current use of the Leased Premises is a Permitted Use pursuant
to Section 1.01.K., Tenant shall have two (2) options to extend the Original
Term for additional periods of five (5) years each (the "Extension Terms"). The
Extension Terms shall be upon the same terms and conditions contained in the
Lease for the Original Term except (i) Tenant shall not have any further options
to extend and (ii) the Annual Base Rent shall be adjusted as set forth herein
("Rent Adjustment"). Tenant shall exercise such option by delivering to
Landlord, no later than one hundred twenty (120) days prior to the expiration of
the then current Term, written notice of Tenant's desire to extend the then
current Term. Tenant's failure to properly exercise such option shall waive it.
If Tenant properly exercises its option to extend, Landlord shall notify Tenant
of the Rent Adjustment no later than ninety (90) days prior to the commencement
of the Extension Term. Tenant shall be deemed to have accepted the Rent
Adjustment if it fails to deliver to Landlord a written objection thereto within
ten (10) business days after receipt thereof. If Tenant properly exercises its
option to extend, Landlord and Tenant shall execute an amendment to the Lease
(or, at Landlord's option, a new lease on the form then in use for the Building)
reflecting the terms and conditions of the Extension Term, within thirty (30)
days after Tenant's acceptance of the Rent Adjustment.
B. Market Rent Adjustment. The Annual Base Rent for the Extension Term
shall be an amount equal to the Annual Base Rent then being quoted by Landlord
to prospective new tenants of the Building for space of comparable size and
quality and with
-20-
<PAGE>
similar or equivalent improvements as are found in the Building, and if none,
then in similar buildings in the Park, excluding free rent and other
concessions; provided, however, that in no event shall the Annual Base Rent
during the Extension Term be less than the highest Annual Base Rent payable
during the Original Term. The Minimum Monthly Rent shall be an amount equal to
one-twelfth (1/12) of the Annual Base Rent for the Extension Term and shall be
paid at the same time and in the same manner as provided in the Lease.
IN WITNESS WHEREOF, the parties hereto have executed this Lease as of
the day and year first above written.
LANDLORD:
DUKE REALTY MINNESOTA, LLC,
a Minnesota limited liability
company
By:/s/ Robert H. Johnson
-------------------------------
Robert H. Johnson
Chief Manager
TENANT:
LULL INTERNATIONAL, INC.,
a Delaware corporation
By:/s/ Dianna I. Herman
-------------------------------
Printed: Dianna I. Herman
--------------------------
Title: Controller
----------------------------
STATE OF _______________)
) SS:
COUNTY OF ______________)
Before me, a Notary Public in and for said County and State,
personally appeared _________________________, by me known and by me known to be
the ________________________ of Lull International, Inc., a Delaware
corporation, who acknowledged the execution of the above and foregoing Lease
Agreement for and on behalf of said corporation.
WITNESS my hand and Notarial Seal this 19th day of August, 1998.
/s/ Lee Ann Verbovanec
---------------------------------
Notary Public
Lee Ann Verbovanec
---------------------------------
(Printed Signature)
My Commission Expires: January 31, 2000
------------------
My County of Residence: Washington
-----------------
-21-
[OMNIQUIP/SKY TRAK LOGOS]
LABOR AGREEMENT
Entered into by:
TRAK International Inc.
369 W. Western Avenue
Port Washington, WI 53074
And
Local 1430
District No. 10
International Association of Machinist and Aerospace Workers
November 1, 1998
To
October 31, 2003
[HANDSHAKE LOGO]
<PAGE>
TABLE OF CONTENTS
Management Clause------------------------------------------------- 2
Grievance Procedure----------------------------------------------- 3
Seniority
Temporary Layoffs---------------------------------------- 5
Job Postings--------------------------------------------- 6
Loss of ------------------------------------------------- 7
Temporary Transfers-------------------------------------- 9
Vacation---------------------------------------------------------- 9
Hours & Overtime------------------------------------------------- 11
Double Time--------------------------------------------- 12
Shift Premium------------------------------------------- 13
Holidays--------------------------------------------------------- 14
Pay Provisions--------------------------------------------------- 14
Jury Duty----------------------------------------------- 15
Funeral/Bereavement------------------------------------- 15
Safety----------------------------------------------------------- 16
Benefits
Group Insurance (Health, Life, S&A, etc.)--------------- 18
401 (k) Savings Plan------------------------------------ 20
No Strike - No Lockout------------------------------------------- 20
Plant Closing---------------------------------------------------- 22
<PAGE>
AGREEMENT
This Agreement made and entered into this 1st day of November 1998 by and
between TRAK International Inc. in Port Washington, Wisconsin, hereinafter
referred to as the company and District 10 of the International Association of
Machinists and Aerospace Workers, Milwaukee, Wisconsin, hereinafter referred to
as the Union is set forth to establish principles and harmonious labor relations
for the exclusive use of the contracting parties.
ARTICLE I
RECOGNITION
1.00 The Company hereby recognizes District No.10 of the International
Association of Machinists and Aerospace Workers as the exclusive
bargaining agent for all production and maintenance employees of the
Company's plants in the Port Washington, Wisconsin area in the
Milwaukee, Wisconsin area, but excluding office and clerical employees,
and supervisors as defined in the National Labor Relations Act as
amended. Supervisors must have full authority to hire, fire, and
recommend wage increases subject to the regular Company policies, and
shall not work on the jobs normally performed by production employees,
except to the extent necessary in instructing employees during job
runs, provided, however, that any such overall work performed shall not
exceed 20% of the normal work week. If development of prototype parts
or machines is performed on site, bargaining unit employees will be
used for the majority of the activities. Salaried personnel will
participate as needed up to 20% of the work to assist training
bargaining unit employees, performing sample trials, and evaluations
including test.
1.01 As a condition of employment, all employees covered by this Agreement
shall no later that the 61st work day after the date of the execution
of this Agreement, or in the case of new employees, no later than the
61st work day after the date of hiring, becoming members of the Union
and remain members of the Union in good standing during the term of
this Agreement.
1.02 Check-off. For the duration of this Agreement, the Company
agrees to deduct the regular monthly Union dues and/or initiation fee
from the pay of each employee who executes and delivers to the Company
a written authorization for such deductions, which authorization shall
be in a form acceptable to the Company and such authorization shall be
irrevocable for the period of one (1) year, or until the termination of
the Agreement, whichever occurs sooner; such authorization shall be
automatically renewed and shall be irrevocable for successive periods
of one (1) year each or for the period of each succeeding applicable
collective agreement between the Company and the Union, whichever
occurs sooner, unless written notice is given by the employee to the
Company and the Union at least thirty (30) days prior to the expiration
of each period of one (1) year, or of each applicable collective
bargaining agreement between the Company and the Union, whichever
occurs sooner.
1
<PAGE>
All deductions shall be made from the second paycheck to be delivered
to the employee each month, beginning with the month following receipt
by the Company of his authorization. All amounts deducted each month
shall be paid by the Company to the Union official certified by the
Union as authorized to receive them on the Union's behalf.
1.03 The Union agrees to indemnify and hold the Company harmless against any
and all claims, suits, orders or judgments brought or issued against
the Company as a result of any action taken or not taken by the Company
under the provisions of Section 1.02.
1.04 The parties mutually agree that there will be no discrimination to any
employee or applicant for employment based on race, creed, color,
religion, sex, age, national origin, disability, disabled veteran and
Vietnam era veterans, or other area of prohibitive discrimination.
Throughout this Agreement, a masculine pronoun shall be deemed to
include the feminine. All employment decisions shall be based on the
principles of equal opportunity and affirmation action. All acts of
discrimination and/or harassment (including sexual harassment) shall be
subject to disciplinary action up to and including discharge.
ARTICLE II
MANAGEMENT CLAUSE
2.00 Except as otherwise expressly limited by this Agreement, the management
of the Company's plant and business and the direction of the working
force, including the rights to plan, direct, and control operations in
the use of all equipment and other property of the Company are vested
exclusively in the Company and include, but are not limited to: hiring,
suspending, or discharging of employees for proper cause, transferring
or relieving employees from duty for lack of work or other legitimate
reasons, right to study or introduce improved production methods,
facilities, and the right to establish reasonable rules. Such rights
shall be exercised in accordance with the terms of this Agreement,
subject to the grievance procedure. The Company shall have the sole
right to make such technical and other changes in operations, as it
deems necessary and as a result of the introduction of new work or the
installation of new machinery or processing or for any other reasons.
All functions of management not herein relinquished or limited shall
remain vested in the Company.
2
<PAGE>
ARTICLE III
GRIEVANCE PROCEDURE
3.00 Should differences arise between the Company and its employees either
individually or collectively as to the meaning and application of the
provisions of this Agreement or should differences arise about matters
within the framework of this agreement an earnest effort shall be made
to settle such differences at the earliest possible time by use of the
following procedures.
3.01 Step #1. An aggrieved employee or employees shall present his or their
grievances to his or their department supervisor accompanied, if the
employee or employees so desire, by a committee person within two (2)
working days of union knowledge of the event causing the grievance. The
supervisor shall respond with an answer within two (2) days during the
regular work week.
3.02 Step #2. If not settled at Step #1, the grievance shall be presented in
writing and signed by the aggrieved employee(s) to a member of the
Union Committee, who will in turn present two copies of the grievance
to the Director of Manufacturing, Human Resources Manager or a duly
appointed Company representative within three (3) working days
following Step #1.
Grievances will be dated and should refer to a specific article and
section number and the corrective action desired.
Management will have three (3) working days to write an answer to the
grievance and return it to the Union Committee.
The final disposition will be written in the place provided on the
front of the grievance form.
3.03 Step #3. If the grievance is not settled in the second step, the
grievance shall then be taken up by the Union Committee and
representative of the Union and a designated representative or
representatives of the Company, within thirty (30) calendar days of the
second step response.
3.04 Step #4. In the event the parties cannot agree in the third step, the
dispute may then be referred to arbitration. This must be done within
twenty (20) working days from the completion of Step #3 or the
grievance will be deemed resolved.
The arbitration procedure shall be as follows:
a) The party raising the issue shall notify the other party by
certified mail, return receipt requested, informing them that they
are carrying the grievance to arbitration. The notification shall
include the identity of the grievant(s), the identification of the
issue(s), the remedy desired, and the claimed violation(s), if
any, of the Labor Agreement.
3
<PAGE>
b) The party desiring arbitration shall request the Federal Mediation
and Conciliation service to submit to the parties a panel. Within
ten (10) working days after receipt of such panel the parties
shall meet for the purpose of selecting an arbitrator from such
panel. Each of the parties shall alternately strike one name from
the panel until the name of only one person remains and such
person shall be the arbitrator. The determination of the party to
strike the first name shall be made by the flip of a coin. The
foregoing procedure for the selection of an arbitrator may be
waived if the parties mutually agree upon an arbitrator.
(c) The arbitrator's decision shall be rendered in writing and
shall be final and binding upon the Company and the Union.
(d) The Arbitrator shall not have the power to add to, or change
any of the provisions of the Agreement.
(e) Each party will bear its cost of the arbitration. The expenses
and fee of the arbitrator will be shared equally by the Union
and the Company.
All time limits set forth in the foregoing steps may be
extended by mutual agreement of the parties.
3.05 Any employee facing suspension or discharge will be granted Union
Representation with management prior to the suspension or discharge
being effected. Should a grievance result from a suspension or
discharge, it will be introduced at and as provided in Step #3 of the
Grievance Procedure.
3.06 Grievances involving disciplinary action against employees that result
in loss of work or disqualification for job opportunity resulting in
loss of pay or benefits shall not be initiated more than six (6)
working days from the date the action first became the Union's
knowledge.
3.07 General wage negotiations, agreement negotiations and including
amendments to the Agreement are excluded from the grievance procedure
above set forth and, therefore, are not arbitrable. Arbitration is not
intended and shall not be construed in any way so as to qualify or
change any of the terms or provisions of the Agreement.
4
<PAGE>
Article IV
SENIORITY
4.00 An employee's seniority is based upon the length of continuous
employment both with the Company and the predecessor company, shall
begin from the date of hiring after completion of sixty (60) working
days, which shall constitute the probationary period. Seniority
includes the accumulated time an employee is on the payroll of the
Company whether working or laid off, for a period of absence due to an
injury or illness and for period of approved leaves of absence, all
subject to the other provisions of the seniority clause. Seniority for
employees with the identical dates of hire will be determined through
the use of the last six digits of their social security number.
Comparison of those numbers will produce a lowest sequential number and
that employee will be senior. Seniority will apply on a company wide
basis for the unit covered by this Agreement and will govern the
process of layoff and recall only provided the senior employee
processes the necessary skills to do the available job in an acceptable
manner.
Employees, if transferred from this bargaining unit to jobs outside the
bargaining unit, shall have his or her Accumulated seniority frozen as
of the date of transfer for one year, and may return to the bargaining
unit one time to any available job. For the purpose of promotions,
transfers, and job posting, seniority will apply on a company wide
basis for the unit covered by this Agreement provided the senior
employee possesses the necessary skills to perform the job in an
acceptable manner.
4.01 Layoffs. In the reduction of the working force, the following
procedure will be followed:
(a) The Company and Union will discuss pending layoff/recalls before
notification.
(b) Temporary Layoffs. Temporary layoffs of five (5) days (Monday thru
Friday inclusive) are allowed within department and classification
without Company-wide seniority or notice restrictions provided:
(1) Employees affected are notified and given the option
to volunteer for temporary layoff and/or:
(2) That in the event the volunteer option above does not
satisfy the reduction requirement, seniority shall be
honored but only within the departments and
classifications affected after all possible temporary
transfers are filled.
5
<PAGE>
(3) This provision does not exceed three (3) occurrences
per year per department and classification.
(4) Temporary layoff will not be applied in any way to
affect the employee's benefits and holidays otherwise
set forth in this Agreement.
(c) Indefinite Layoff
(1) Before layoff of any employee, the Committee and
affected employees will be given five (5) working
days notice of a forthcoming layoff.
(2) Senior employees will be transferred or moved from
one job classification to another consistent with the
employee's skills provided:
(a) The employee has successfully performed the
job in the past, or the Company has
determined the employee can do the job after
a maximum of five (5) days of training and
evaluation, or
(b) The job is a lower labor grade.
(d) The applicable job rate will apply with first Monday of job
change, due to force reduction.
(e) An employee may refuse a transfer to a job two or more labor
grades lower than his home base labor grade and upon layoff
shall retain his seniority, but must report as provided in
4.05 ( c ) below upon recall to a job within one (1) labor
grade of his home base grade of his home base grade.
4.02 Recall. In the event of an increase in the work force, the Company
shall follow the procedures listed in Section 4.01 in reverse.
Thereafter-new employees may be hired.
4.03 Job Posting. All job vacancies, including new jobs, will be posted for
two (2) working days. Bids for these jobs will be on a Company-wide
basis. Job posting bid sheets shall indicate the maximum number of job
openings. Any jobs not awarded or filled by new hire thirty (30) days
from the date of posting shall be reposted. The following procedure
will be observed:
(a) Employees may make an application stating why they want to
change and state their skills. The Company agrees to give such
applicant careful consideration and to make such changes
provided the employee possesses the skills to do the job in an
acceptable manner.
(b) When bids are posted, before award is made, the Supervisor,
Team leader and Union Steward for that area will meet to
decide either (a) who gets the award (b) the order in which
the bidders receive a trial bid. If this team is unable to
decide, the matter will be referred to the Mutual Interest
Group. When skills to perform the job in an acceptable manner
are relatively equal, seniority will prevail subject to
provisions of the seniority article.
6
<PAGE>
(c) In the event the employee does not qualify during the trial
period of ten (10) working days, he shall be returned to the
former job he bid from provided he possesses more seniority
than an employee in that former classification. If not, the
employee may exercise his seniority within the company on
existing vacancies provided he/she has the appropriate skills.
The employee shall not be allowed to bid on any other job for
six (6) months following disqualification of himself or three
(3) months if the Company disqualifies the employee.
(d) Two (2) weeks after job bidding, the selected employee and
Union will be advised as to his/her selection for the job.
Every effort will be made to move the successful bidder to the
new position within sixty (60) days. This does not guarantee a
job until such job is available. After thirty (30) days if the
selected employee is not moved he shall receive the pay of the
job awarded.
(e) When employees bid down, said employees cannot bid for six
months.
(f) Employees shall be limited to one successful job bid in any
six (6) month period.
4.04 The above sections shall be administered by the following rules:
(a) In downgrading, the affected employee will retain his relative
position in the new rate schedule.
(b) In upgrading or lateral movement, the affected employee's base
hourly wage will be reduced by twenty-five cents ($.25) for a
period of thirty (30) days. During this period, the employee
will improve his skill and knowledge in his new
classification. After thirty (30) days, the employee will
receive $0.25 and move to the next level in the wage matrix
for that labor grade.
4.05 Seniority shall cease upon:
(a) Justifiable discharge.
(b) Voluntary quitting.
(c) Failure to comply with recall policy.
(1) It is the obligation of every employee, including those
on layoff,to keep the Company informed in writing of
their correct home address and telephone number. The
Company's obligation in connection with recall shall end
with a notice of recall sent by the Company by certified
mail to the employee's current address as shown on the
records of the Company.
7
<PAGE>
(2) Employees on layoff must report within three (3) working
days, to their regular job or any job in the next lower
labor grade compared to their home base labor grade,
after receiving written notice by certified mail,
receipt requested. This does not apply to an employee,
who by reason of illness or other good cause, is not
able to report and so advises the Company within the
three (3) day period.
(3) Employees on layoff who are offered employment, and are
not working elsewhere, on jobs other than his regular
job prior to lay off, or within one (1) labor grade of
his home base grade shall be given three (3) work days
to accept such job. If the employee is not working
elsewhere and such job offer is not accepted, the
employee will be denied Unemployment Compensation
benefits by TRAK International, Inc.
(4) In contrast to number 3 above, if the employee is
working elsewhere, and such job offer (other than his
regular or within one (1) labor grade of his home base)
is refused, the employee will retain his seniority and
Unemployment Compensation benefit rights.
(d) Absence from work for three (3) consecutive days without
notifying the Company.
(e) For failure to return to work after a Leave of absence has
expired unless proper notification to the Company has been
made and an extension granted subject to Section 11.00.
4.06 Employees shall retain seniority for recall from layoff based upon
their seniority at time of layoffs as follows:
a) 170 Hours to one year seniority: One year seniority for
recall.
b) One year to five years seniority: Equal to seniority time for
recall.
c) Five years or more seniority: One-half (1/2) of seniority time
minimum five years for recall.
4.07 Shop Committeemen shall head the seniority list. Their employment in
their respective classification, department, and plant shall remain in
effect so long as their classification, department, and the plant is in
operation. These employees shall be compensated at their current hourly
rate for all time consumed (up to a maximum of their scheduled shift
hours) in Union activity with the Company or its representatives during
the regular work schedule at the plant.
8
<PAGE>
Should the Committeeman be required to leave his department, their
supervisor will be notified accordingly, as to where he is going, who
he is going to see, and why. Upon arrival the employee(s) involved will
also receive an appropriate card on which shall be noted the time
started Union activity. When the Committeeman and employee are
finished, their time of return to work shall be on the card. Such time
charged for Union activity shall continue until the card is returned to
the supervisor.
4.08 Employees returning from military service shall be reinstated under
Government rules and regulations.
4.09 When necessary to either downgrade or remove an employee from the job
due to some physical impairment, both parties to this Agreement shall
decide this issue as favorable as is possible for the individual
through the terms of the Labor Agreement.
4.10 Temporary transfers shall not exceed three(3) terms of thirty (30) days
each or one (1) term of ninety (90) consecutive days. If the job then
appears to be permanent, it shall be posted in accordance with Section
4.03 of this Agreement. The term, temporary transfer, does not apply
where employees are absent, on vacation, or out of work in the
employee's classification. Temporary transfer pay will be handled as
follows: When an employee is assigned work in a higher paying
classification, the employee will immediately be paid the higher rate
of pay. However, should an employee be assigned to a lower rated
classification, the employee would retain his present rate of pay.
ARTICLE V
VACATIONS
5.00 Subject to the following requirements, each of the Company's employees
to whom this Agreement is applicable shall be granted a vacation with
pay, including night shift premium.
Earned Vacation Schedule:
<TABLE>
<CAPTION>
Length of Employee's Minimum Number Percent Vacation Minimum Vacation
Seniority to of Vacation Days Pay of All Hours
Anniversary Date Earned Earnings
<S> <C> <C> <C>
0 but less than 1 year 5 days 2.10% 0
1 but less than 2 years 5 days 2.10% 40
2 but less than 3 years 6 days 2.52% 48
3 but less than 4 years 7 days 2.94% 56
4 but less than 7 years 10 days 4.20% 80
7 but less than 8 years 11 days 4.62% 88
8 but less than 10 years 12 days 5.04% 96
10 but less than 16 years 15 days 6.30% 120
16 but less than 17 years 16 days 6.72% 128
17 but less than 18 years 17 days 7.14% 136
18 but less than 19 years 20 days 8.40% 160
19 but less than 20 years 21 days 8.82% 168
20 but less than 21 years 22 days 9.24% 176
21 but less than 22 years 23 days 9.66% 184
22 years or more 25 days 10.50% 200
</TABLE>
9
<PAGE>
5.01 Employees may arrange for prepaid vacations which are five (5) days or
longer by completing a Request for Prepaid Vacation form and submitting
it to their supervisor at least seven (7) days prior to the Monday of
the vacation period.
5.02 The employee's W-2 form last issued by the Company with the Federal
Government shall be used in computing the employee's vacation benefits
in accordance with the above schedule. Employees shall be paid the
amount of the percent vacation pay of all earnings or the minimum
vacation hours earned, whichever is greater as provided in this
Article.
5.03 An Employee's Percentage Vacation Pay as provided for above shall be
derived by computing his total earnings together with any bonus,
vacation pay, and holiday pay granted. Time lost due to illness of one
(1) week or more duration but not more than (10) weeks in any
anniversary year and time lost due to a compensable accident shall be
counted as time worked in computing vacation pay on the basis of eight
(8) hours per day and forty (40) hours per week.
5.04 An employee who is laid off indefinitely shall be paid vacation pay at
the appropriate percentage of his previous year's W-2 form. Employees
will not be paid the minimum hours. Employees who were laid off have
the option to take pro-rated vacation or not after recall. Employees
not recalled during the year may request their vacation pay.
5.05 In the event the company designates a specific week(s) as a general
shutdown, notice will be posted as soon as possible or a minimum of
three(3) months advance notice will be given.
5.06 Vacation shall be granted at such time during the year as the
management finds most suitable, considering both the wishes of the
employee and the efficient operation of the department concerned.
Insofar as practical, employees with the highest seniority shall be
given preference of date.
5.07 Vacation Choice Slips will be distributed to employees the first (1st)
Monday in February on the vacation year.
By the third (3rd) Monday in February, all employees shall select, by
seniority, up to two (2) weeks of their vacation, for approval, after
which the selection of the third (3rd) and fourth (4th) weeks shall be
in the same manner.
Employees who do not respond with vacation choices by the third (3rd)
Monday in February loose their right of exercising seniority preference
for vacation time off for the rest of the vacation year.
Employees will be informed by the fourth (4th) Monday in February as to
the status of their vacation requests. Should employees' original
requests be denied, they will be allowed other choices providing their
first requests were filed timely.
10
<PAGE>
5.08 Vacations should be taken in multiples of five (5) consecutive working
days. Employees with more than one (1) week may take odd days at a time
other than the full week period. However, employees shall be allowed to
schedule single days of vacation up to a maximum of ten (10) days.
Whenever possible, three (3) days advance notice should be given.
Employees may schedule up to 4 1/2 days of vacation provided they
obtain approval from their supervisors at least 24 hours in advance
which may be taken, using the same criteria as single days in 5.09 with
24 hour approval. Single vacations days will be granted in accordance
with Section 5.07 above and section 7.04, maintaining the efficient
operation of the department concerned.
Half-days vacation pay. When four (4) hours of vacation are used, all
hours in excess of the standard eight (8) will be paid at the
appropriate rate.
a) In cases of absence due to emergency, the employee will report
his absence and request one(1) day vacation from his supervisor.
b) When the Supervisor can spare the employee with no upset to
production, the employee and Supervisor may agree to less than
three (3) days, 24 hours, advance notice, whichever applies.
5.09 No employee shall be required to work on the Saturday or Sunday prior
to his vacation nor on the Saturday or Sunday immediately following his
vacation.
5.10 Armed Services. Any employee who is drafted or enlists for military
duty by the United States Government shall be paid such vacation pay as
he is entitled to at the time of leaving the employment of the Company
to enter such service. Such employees returning from the Armed Forces
within ninety (90) day after honorable discharge shall be given their
vacation in the year that they return to work and accorded their
accumulated seniority while they were in the service.
5.11 An employee who has completed one or more years service with the
Company who is terminated for any reason whatsoever, such employees
shall be paid any vacation benefits due such employee.
5.12 In the case of death, the vacation pay will be paid to the employee's
lawful heir or beneficiary.
ARTICLE VI
HOURS AND OVERTIME
6.00 Eight (8) consecutive hours with an assigned lapse period for lunch
shall constitute a normal day's work. Lunch periods shall be determined
by mutual agreement between the parties.
6.01 Five (5) days, Monday through Friday inclusive, shall constitute a
normal weeks work.
11
<PAGE>
6.02 The normal shift hours will be as follows, except when overtime
requires departure therefrom:
1st Shift - 7:00 a.m. to 3:30 p.m.
2nd Shift - 3:30 p.m. to 12:00 Midnight
3rd shift - 11:00 p.m. to 7:00 a.m. (starts Sunday evening)
Included in this schedule is a thirty (30) minute unpaid lunch period for the
1st and 2nd shifts and a 15 minute paid lunch period for the
3rd shift. The paid lunch period is at the employee's personal hourly rate for
the job in which he is working immediately prior to the designated lunch period.
Stated times may be adjusted to accommodate changes in production schedules when
agreed upon by the Mutual Interest Group.
The Summer Shift Hours will be from the first Monday in May to the last Friday
in October as follows, except when overtime requires departure therefrom:
1st Shift - 6:00 a.m. to 2:30 p.m.
2nd Shift - 2:30 p.m. to 11:00 p.m.
3rd Shift - 10:00 p.m. to 6:00 a.m.
Included in this schedule is a thirty (30) minute unpaid lunch period.
Stated times may be adjusted to accommodate changes in production schedules when
agreed upon by the Mutual Interest Group.
6.03 In the event a second and/or third shift operation is created,
employees with the most seniority within their classification will have
the preference of shift.
6.04 All hours worked in excess or outside of the normal scheduled eight (8)
hour shift, or the normal scheduled forty (40) hour work week shall be
paid for at the rate of time and one-half (1-1/2) the regular hourly
rate of the employee.
6.05 All employees shall be allowed a three (3) minute wash-up time before
their assigned mid-day lunch period and at the end of each shift,
except for employees in classifications granted additional time due to
the nature of their work.
Break periods will be as follows: A ten (10) minute break for regular
eight (8) hours shifts and Saturdays. A five (5) minute break to be
taken during the ninth (9th) hour of a ten (10) hour or more shift.
6.06 Double time (2x) the rate shall be paid for all hour worked:
a) Over ten (10) hours in any twenty-four (24) hour period (except
as it applies to second shift employees working Saturday overtime
commencing at 11:00 a.m. or third shift employees starting at
11:30 p.m.).
b) Over five (5) hours on Saturday.
c) Sunday.
d) Designated Holidays (in addition employees working on such
Holiday shall receive Holiday pay).
12
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6.07 An employee reporting for work on a regularly scheduled work day or as
instructed shall be guaranteed a minimum of four (4) hours work and/or
for (4) hours pay at their regular rate with overtime provisions stated
above applying for Saturdays, Sundays and Holidays, unless notified not
to report, at least twelve (12) hours in advance of the shift start
time. The provisions of the Section shall not apply at acts of God,
during inventory, or any act beyond the Company's control.
6.08 Insofar as is practical without reducing the efficiency of the plant,
all overtime worked in each classification within a department shall be
divided as equally as possible among the employees within the
classification with the department.*
Employees entering a classification in a department by hire, bid or
other means will be credited with the maximum amount of overtime hours
worked by an incumbent employee in that classification and department.
*Overtime records of work performed or refused shall be kept to
maintain such division and made available to the Union
Committee.
6.09 Scheduled overtime shall be when the Company notifies the employees
within one hour after lunch break of any day prior to daily overtime,
or within one our after lunch break on Thursday preceding weekend
overtime. A minimum work force of 66-2/3% of the employees in the
classification, department, and shift shall work to assure efficient
operation during scheduled overtime. On full department work scheduled
other than the normal work-week, a minimum of 66-2/3% of the overtime
in a normal week (Monday-Friday) must be worked by each employee in the
department. If an employee agrees to work overtime and then fails to
report for such overtime work, such failure shall be treated as an
unexcused absence.
6.10 All non-scheduled daily or weekend overtime shall be optional with the
individual employee.
6.11 A minimum premium rate per hour above the employee's regular hourly
rate will be paid to second and third shift workers according to the
following schedule:
Second Shift (Cents per hour) .45
Third Shift (Cents per hour) .50
6.12 Labor Agreement provisions regarding hours and overtime will apply for
all time worked (including minimum hours pay) for employees agreeing to
offsite work.
6.13 The Schedule for Overtime hours will be determined by the team
consisting of the Union Representative and the Supervisor of the area
with consent of the Mutual Interest Group.
6.14 On operations involving continuous processes or critical work center,
the Company may assign someone to that operation on a staggered time
basis to cover for breaks and lunch time, with at least 24 hours notice
or by mutual agreement.
13
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ARTICLE VII
HOLIDAYS
7.00 Holidays will be celebrated according to the attached schedule, Exhibit
C.
7.01 All eligible employees covered by this Agreement, except those on
non-emergency leave of Absence or Military Service and Layoff shall
receive Holiday Pay including shift premium, if applicable.
7.02 Employees on a bona-fide Sick Leave and Absence and drawing disability
compensation during the period in which a Holiday occurs will be paid
Holiday pay which will be reported as income to the payer of the
disability benefit.
7.03 The Company will not schedule layoffs prior to Holidays to avoid
payment of Holiday pay. Any employee laid off two (2) weeks prior to a
Holiday will receive Holiday pay.
7.04 To receive Holiday pay, an employee must have completed 340 hours of
employment and must have worked the regularly scheduled hours on the
work day immediately preceding and following the Holiday except when
absent because of an excused absence, excused tardiness, scheduled
vacation (including 1 day call in), jury service, being subpoenaed as a
witness, due to a death in the family or documented circumstances
and/or circumstances reasonably acceptable to Management. Tardiness
equal to 1-1/2 hours or less will not affect eligibility for Holiday
Pay.
7.05 When Holidays occur consecutively and an employee fails to report
either the day before and/or the day after eligibility requirements, as
provided for in 7.04 above, he shall lose the holiday pay which
corresponds to the day of absence.
ARTICLE VIII
PAY PROVISIONS
8.00 The classification of any job existing as of the date of execution of
this Agreement, or established during the term of the Agreement as
provided in 8.01, shall remain unchanged for the duration of this
Agreement unless the job content is changed. No one shall be downgraded
during the term of this Agreement subject to Section 4.09 except for
just cause.
8.01 When the need for a new job occurs or an existing job is changed, the
job content/description will be the sole responsibility of the Company
not subject to the Grievance procedure or bargaining. In the event a
new job is created or an existing job is changed, the Union shall be
notified of same and the Company may operate same with the temporary
classification and rate. As soon as practical, but in no event more
than thirty (30) days thereafter, the Company shall prepare a
description for the job and a permanent classification and rate, which
shall be submitted to the Union. In the event such classification and
rate are not acceptable to the Union, they may be placed in effect, but
this shall be a matter for the grievance and arbitration procedure.
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When the classification and rate are finalized, either by agreement
between the parties or through the grievance and arbitration procedure,
they shall be incorporated in the job classification manual and the
rate shall be made retroactive to the date the new or changed job was
first placed in effect.
8.02 Should a machine operator be required to operate more than one machine
simultaneously.
No. of Machines Operated Increase in Rate While Operating
------------------------ --------------------------------
2 $ .75
3 $1.00
4 $1.25
8.03 The Company will pay its employees on a weekly basis on the regular
designated pay day, unless mutually agreed to otherwise.
8.04 Job and wage rate classifications shall be attached hereto and marked
Exhibit A and shall by this reference become part of this Agreement.
ARTICLE IX
JURY DUTY - MAKE UP PAY AND FUNERAL PAY
9.00 When an employee is selected to serve on a local or community jury
panel, the Company will make up a portion of the wages according to
certain conditions as follows:
(a) To qualify for make-up wages, an employee must either have
served on a trial or consumed more than a half day in court
before dismissal which would make it impractical to return to
work.
(b) Make-up wages will be based upon a maximum of eight (8) hours
of total wages less jury panel daily fee in any one day,
Saturday, Sundays and Holidays to be excluded. The plant must
be operating in whole or part and the employee regularly at
work to be paid make-up wages.
(c) A form provided by the Company with signature affixed by an
official of the court will be necessary before make-up wages
can be granted.
9.01 Funeral Pay. In the event of the death of an employee's relative, such
employees shall be permitted to take time off as necessary according to
the following schedule:
(a) Employee's Mother, Father, Brother, Sister, Spouse, or
Children, or Step-Children - eight (8) hours at regular
straight time rate not to exceed three (3) consecutive days of
work.
(b) Employee's Grandparents, Grandchildren, Step-Mother,
Step-Father, Step-Brother, Step-Sister, Mother-in-Law,
Father-in-Law, Sister-in-Law, Brother-in-Law, Son-in-Law, and
Daughter-in-Law eight (8) hours at regular straight time rate
not to exceed two (2) consecutive days of work.
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(c) Employees' vacation will be extended equal to appropriate days
during his vacation.
ARTICLE X
SAFETY AND HEALTH
10.00 There shall not be less than two (2) employees working in a facility at
a time.
10.01 The Company will furnish gloves to Plate and Weld shop personnel for
their use in normal day-to-day functions. Replacement new gloves will
be issued upon return of the used, worn gloves to the Tool Room
attendant.
10.02 The wearing of safety shoes shall be mandatory for all employees
covered by this Agreement. The Company will pay fifty percent (50%)
towards the cost of two (2) pair of safety shoes per year to be worn at
and for work and $50.00 for prescription exam for first or changed
prescription for safety glasses.
ARTICLE XI
LEAVE OF ABSENCE
11.00 Leave of absence may be applied for by filling out a leave of absence
form as provided by management.
Leaves of Absence may be granted upon the mutual agreement between the
Company and the Employee for a period not exceeding sixty (60) working
days except for Union activity. Leave of Absence shall be granted for
full time Union activity for a two (2) year renewal upon thirty (30)
days written notice. Union Leaves of Absence, not to exceed two (2)
employees at a time (for Union schools, conventions, etc.) except for a
three day overlap shall be granted for a maximum for thirty (30)
working days per calendar year. Company agrees to notify the Union of
all granted leaves
11.01 All Leaves of Absence shall be without pay. All employees granted
Leaves of Absence shall be returned to work with full retention of
their seniority rights and at the prevailing rate of pay at the time of
their return consistent with the other provisions of this Agreement.
11.02 Employees returning from Sick Leave of Absence wherein surgery or
serious illness was involved are to advise the Company with a written
release from their physician at least (3) working days in advance of
their intended return day. This will allow scheduling within the
department and review, if necessary, of the employee's condition by a
physician(s) of the Company's choice, at the Company's expense.
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ARTICLE XII
MISCELLANEOUS PROVISIONS
12.00 The authorized representative or his duly appointed substitute of the
Union, shall have access to the Company's plants, buildings, and
grounds during business hours upon approval of Management or its duly
appointed representative.
12.01 The Company will furnish chronological seniority listings showing
clock number, name, birthdate, seniority date, job title, shift and
rate of pay every three (3) months to the Committee.
12.02 When hiring new employees, the Company agrees to notify the Union
committee chairman with the name of each employee, wage rate, and
classification before or no later than the first day of employment.
12.03 Bulletin boards shall be made available by the Company upon request
by the Mutual Interest Group at convenient places as near as possible
to the time clock for the posting of Union notices approved by
Management.
12.04 The Union Bargaining Committee shall be made up of no more than six
(6) employees. Stewards will not apply to this section.
12.05 Representatives of the Company and Union will meet within five (5)
working days of receipt of a written (verbal by mutual agreement)
request by either party. The request is to include the agenda to be
discussed and such meetings not to exceed one (1) per month unless
mutually agreed otherwise.
12.06 Should any State or Federal court decide that any given clause of
this Agreement is not in accordance with a State or Federal Statute,
this shall not nullify the remaining clauses of this agreement.
12.07 Credit Union deductions will be implemented when requested.
12.08 Any assignment to new start times other than those worked by the
majority of employees the following prorated premium allowance will
be paid. This does not supersede Section 6.04.
One hour after shift start time .10/Hr Two hours after shift start
time .10/Hr. Three hours after shift start time .12/Hr. Four hours
after shift start time .16/Hr. Five hours after shift start time
.20/Hr.
12.09 Before any work is outsourced, except for emergencies, the Union will
be notified by Management fourteen (14) days in advance of actual
outsource date.
12.10 The Mutual Interest Group will meet to discuss outsourcing
alternatives. Management reserves the right to a final decision.
17
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ARTICLE XIII
GROUP INSURANCE
Health Insurance: The company shall provide to all active employees a Group
comprehensive Health Plan, which applies to covered medical expenses.
The employee shall pay:
PPO
IN NETWORK OUT OF NETWORK
SINGLE FAMILY SINGLE FAMILY
------ ------ ------ ------
PAYROLL DEDUCTION 0 0 0 0
DEDUCTIBLE $ 100 $ 300 $ 200 $ 600
CO-INSURANCE 90/10 90/10 75/25 75/25
MAXIMUM OUT OF POCKET $ 350 $ 800 $1,200 $2,600
In and Out of Network
---------------------
Co-Pays: Drugs $5 Generic / $10 Branded
Office Visit $10 per occurrence
Emergency Room $25 per occurrence
Participants enrolled in this PPO plan may move in and out of network
throughout the enrollment period. Complete details are available in
the insurance booklet.
13.01 Life Insurance
a) Life - $20,000 Year
b) AD&D - one half to full amount of life insurance as specified in
insurance handbook.
c) Life insurance and AD&D will be reduced 8% per year beginning at
age 65 for employees who elect to continue working.
13.02 Accident and Sickness: The Company will provide accident and sickness
insurance of $265.00 Year 1 ($270.00 in Year 2); ($280.00 in Year 3);
($285.00 in Year 4) and ($295.00 in Year 5) to a maximum of 26 weeks
for regular active employees with eligibility for benefits, beginning
the first day of disability caused by an accident or hospitalization
(as defined within the policy) and the fourth day for illness not
requiring hospitalization as certified by his physician. Weekly
accident and sickness benefits will continue to be provided for
actively working employees over the age of 65 until retirement.
Employees will have the choice as to whether taxes will be withheld or
not, however, employee must choose when applying for A&S Benefits.
An employee unable to work due to sickness or accident will be granted
a Leave of Absence upon presentation of medical documentation. Such
leave is subject to extension based on medical reports submitted but
not to exceed time of employment with the Company or eighteen (18)
months, whichever us greater. Group insurance coverage will continue
to be provided to the employee while drawing A & S benefits up to
twenty-six (26)
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weeks. At the expiration of the employee's A & S benefits (26 weeks),
the employee can remain in the Group Health, Dental and Prescription
Drug Plan for another eighteen (18) months (COBRA coverage) by paying
advance monthly to the Company for such coverage except weekly A & S
benefits.
13.03 The company will provide Dental Insurance (Comprehensive Plan).
13.04 The Group Insurance Plan shall be continued for employees laid off
for a period of time equal the employee's active employment during
the six (6) months prior to layoff provided the employee pays one
half (1/2) the cost of insurance during the first three (3) months
and full premium during the next fifteen (15) months, excluding A&S
weekly benefits, and life insurance benefits.
Agreed upon principles concerning group insurance coverage:
(1) General Rules:
(A) Group Insurance coverage becomes effective on the
first day of the month in which the employee
completes their probationary period.
(B) All group insurance coverage ceases on the last day
of the month an individual's employment terminates
with the exception of laid off employees covered as
above.
(2) Specific Applications:
(A) Employees laid off during a month, lose coverage at
the end of that month unless they elect to continue
coverage under COBRA.
(B) Employees recalled from layoff during the first
fifteen (15) days of a month will be covered by group
insurance from the first (1st) day of the month.
(1) Those employees who paid their share of the
premiums coverage during layoff and are
recalled during the first fifteen-(15) days
of a month shall have that month's COBRA
premium refunded.
(C) Employees recalled from layoff after the fifteenth
(15th) day of the month will be covered beginning the
first (1st) day of the succeeding/following month.
(1) Those employees who paid their share of the
COBRA premium during layoff and are recalled
after the fifteenth (15) day of the month
will continue to be covered by group
insurance with no premium refund.
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ARTICLE XIV
401K SAVINGS PLAN
14.00 The company will maintain a 401K Savings Plan for employee
participation on an elective salary deferral basis. Furthermore, the
Company will contribute, to each eligible employee's account, cents
per hour as listed below up to a maximum of 2,080 hours in a calendar
year. Further, for those who defer part of their pay the Company will
provide a matching contribution of 33 1/3% up to a 3% maximum of the
weekly gross wages.
Contract Year 1 $.32 cents
Contract Year 2 $.32 cents
Contract Year 3 $.32 cents
Contract Year 4 $.34 cents
Contract Year 5 $.36 cents
ARTICLE XIV
NO STRIKE - NO LOCKOUT
15.00 The state of Wisconsin guidelines will apply in the event of a plant
closing, that gives rise to a permanent layoff/termination of all
bargaining unit personnel, the Company and the Union will promptly
meet to discuss the impact of the closing upon the effected employees.
The parties shall negotiate over the effects of such closing in an
effort to establish severance pay and benefit allowances based on
seniority.
a) Notice has been served requesting negotiations for general wage
rates in accordance with the terms of this Agreement and no
agreement has been reached.
b) Notice has been served requesting negotiations for modification
and/or termination or renewal of this Agreement and no agreement
has been reached.
c) Notice has been served requesting arbitration or this stipulation
to arbitrate a grievance according to the procedure in Paragraph
3.00. The party upon whom notice was served has refused either to
arbitrate and/or to stipulate, or has refused to abide by the
decision of the arbitration board.
15.01 Should a strike, concerted slowdown or stoppage of work by employees
of the company occur which is in violation of 15.00 above, during the
term of this Agreement. The Union before the next scheduled workday
after receipt of the written notice from the Company shall be
obligated to the following things only:
a) Advise the Company in writing that the strike or stoppage has not
been called or sanctioned by the Union.
b) Post copies of the following notice on bulletin boards in the
plant or use other acceptable methods of notifications:
20
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We have been advised by TRAK International, Inc.
that a strike, or stoppage or slowdown has
occurred in the plant. Inasmuch as no strike,
slowdown or stoppage has been called by the union,
IF YOU ARE ENGAGED IN ANY SUCH STRIKE, SLOWDOWN OR
STOPPAGE, YOU ARE HEREBY INSTRUCTED TO RETURN TO
WORK IMMEDIATELY.
INTERNATIONAL ASSOCIATION OF MACHINISTS AND
AEROSPACE WORKERS, DISTRICT NO. 10.
THIS NOTICE IS POSTED IN ACCORDANCE WITH THE
PROVISIONS OF THE AGREEMENT BETWEEN THE COMPANY
AND THE UNION."
15.02 The obligation of the Union shall be limited to the performance of
the acts required by Paragraph 15.01 of this Article and upon
compliance by the Union with the provisions of Paragraph 15.01 of
this Article, the Union and its officers and members shall have no
further liability during the term of this Agreement or thereafter,
for any damage suffered by the company arising from or out of any
stoppage or strike.
15.03 Should Management comply with the terms and conditions of this
Agreement, its officers and representatives shall have no further
liability during the term of this Agreement or thereafter, for any
losses suffered by the Union or employees arising from any
unauthorized strike or work stoppage.
15.04 The Company shall have the right to discipline any or all employees
engaged in an unauthorized strike, slowdown, or stoppage of work
during the life of this Agreement by suspension or discharge provided
there is no discrimination.
15.05 In the event an employee believes he has been unjustly discharged
from employment, the said employee may request the difference be
resolved under the grievance procedure as long as the grievance is
submitted within ten (10) working days from date of discharge.
ARTICLE XVI
PAST PRACTICE
16.01 TRAK International, Inc. hereby agrees that all past practices
initiated, or followed by it since its acquisition and not
specifically mentioned in this Agreement shall nevertheless by
binding upon both parties during the term of this Agreement. This
Agreement does not include various past practices initiated by any
predecessor companies, if these practices are not followed by TRAK
International, Inc.
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ARTICLE XVII
PLANT CLOSING
17.00 In the event of a plant closing that gives rise to a permanent
layoff/termination of all bargaining unit personnel, the Company and
the Union will promptly meet to discuss the impact of the closing upon
the effected employees. The parties shall negotiate over the effects of
such closing in an effort to establish severance pay and benefit
allowances based on seniority.
Nothing in this section shall obligate either party to arbitrate any
dispute over severance pay or severance benefits in accordance with our
grievance provisions.
ARTICLE XVIII
TERMINATION
18.01 During the period of this Agreement if both of the parties agree to
bargain collectively with regard to any of the provisions of this
Agreement, or any other matter not contained in this Agreement, then
any Agreement reached as a result of such bargaining shall be reduced
to writing and be signed by the parties hereto, and only thereupon
shall be a part of this Agreement as an amendment thereof.
18.02 This Agreement becomes effective on November 1,1998 and remains in
effect until Midnight October 31,2003 unless notice in writing is
filed by either the Company or the Union of a desire for change,
modification, or termination, thereof at least sixty (60) days prior
to, but not more than ninety (90) days prior to the expiration of any
said period. The parties agree that negotiation for modification of
change in this Agreement will be undertaken once the above notice has
been served.
22
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For the Union: District No. 10 For the Company:
International Association of TRAK International, Inc.
Machinists & Aerospace Workers: Port Washington, WI
By:/s/ Joseph F. Develice By:/s/ Thomas Rice
----------------------------- --------------------------------
Joseph F. Develice, Bus. Rep. Thomas Rice, VP Human Resources.
By:/s/ Jason Adams By:/s/ Phillip Christiansen
----------------------------- --------------------------------
Jason Adams, Chairman Phillip Christiansen, VP Skytrak
By:/s/ James Fitzpatrick By:/s/ Terrence Hernesman
----------------------------- --------------------------------
James Fitzpatrick, Committeeman Terrence Hernesman, VP.Compact Tech.
By:/s/ Sean Young By:/s/ Glenda Moehlenpah
----------------------------- --------------------------------
Sean Young, Committeeman Glenda Moehlenpah, Dir.Fin. Rep.
By:/s/ Jim Schmalz By:/s/ Dennis Cherne
----------------------------- --------------------------------
Jim Schmalz, Committeeman Dennis Cherne, Mgr. Mfg. Eng.
By:/s/ Michael Brey
-----------------------------
Michael Brey, Committeeman
OMNIQUIP INTERNATIONAL, INC.
222 East Main Street
Port Washington, Wisconsin 53074
October 1, 1998
P. Enoch Stiff
720 E. Newark Drive
West Bend, WI 53095
Dear Mr. Stiff:
OmniQuip International, Inc. (the "Company") considers the establishment
and maintenance of a sound and vital management to be essential to protecting
and enhancing the best interests of the Company and its shareholders. In this
regard, the Company recognizes that, as is the case with many publicly held
corporations, the possibility of a change in control may exist and that such
possibility, and the uncertainty and questions which it may raise among
management, may result in the departure or distraction of management personnel
to the detriment of the Company and its shareholders. Accordingly, the Company's
Board of Directors has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of members of the
Company's management, including yourself, to their assigned duties without
distraction in the face of the potentially disturbing circumstances arising from
the possibility of a change in control of the Company.
In order to induce you to remain in the employ of the company, this letter
agreement sets forth the severance benefits which the Company agrees will be
provided to you in the event your employment with the Company is terminated
subsequent to a "change in control of the Company" (as defined in Section 2
hereof) under the circumstances described below.
1. TERM. This Agreement shall commence on the date hereof and shall
continue until December 31, 2000; provided, however, that commencing on January
1, 2001 and each January 1st thereafter, the term of this Agreement shall
automatically be extended for one additional year unless at least 30 days prior
to such January 1st date, the Company shall have given notice that it does not
wish to extend this Agreement, and provided, further, that following a change in
control of the Company (as hereinafter defined) the term of this Agreement shall
automatically extend to the date which is two years following such change in
control.
2. CHANGE IN CONTROL. No benefits shall be payable hereunder unless there
shall have been a change in control of the Company, as set forth below, and your
employment by the Company shall thereafter have been terminated in accordance
with Section 3 below. For purposes of this Agreement, a "change in control of
the Company" shall mean a change in control of a nature that would be required
to be reported in response to Item 1 of Form 8-K promulgated under the
Securities Exchange Act of 1934, as amended ("Exchange Act"); provided that,
without limitation, such a change in control shall be deemed to have occurred if
(a) any "person" (as such term is used in Section
<PAGE>
October 1, 1998
Page 2
13(d) and 14(d)(2) of the Exchange Act) is or becomes the beneficial owner,
directly or indirectly, of securities of the Company representing a majority of
the combined voting power of the Company's then outstanding securities; or (b)
during any period of two consecutive years (including periods commencing prior
to the date hereof), individuals who at the beginning of such period constitute
the Board of Directors of the Company (the "Board") cease for any reason to
constitute at least a majority thereof unless the election, or the nomination
for election by the Company's shareholders, of each new director was approved by
a vote of at least two-thirds of the directors then still in office who were
directors at the beginning of the period.
3. TERMINATION FOLLOWING CHANGE OF CONTROL. If any of the events described
in Section 2 hereof constituting a change in control of the Company shall have
occurred, you shall be entitled to the benefits provided in Section 4 hereof
upon the subsequent termination of your employment within a period of two (2)
years following such change in control unless such termination is because of
your death or Retirement, by the Company for Cause or Disability or by you other
than for Good Reason.
(a) Disability; Retirement.
(i) If, as a result of your incapacity due to physical or mental
illness, you shall have been absent from your duties with the Company on a full
time basis for 130 consecutive business days, and within thirty (30) days after
written notice of termination is given you shall not have returned to the full
time performance of your duties, the Company may terminate this Agreement for
"Disability."
(ii) Termination by the Company or you of your employment based
on "Retirement" shall mean termination in accordance with the Company's
retirement policy, including early retirement, generally applicable to its
salaried employees or in accordance with any retirement arrangement established
with your consent with respect to you.
(b) Cause. The Company may terminate your employment for Cause. For
the purposes of this Agreement, the Company shall have "Cause" to terminate your
employment hereunder upon (i) the willful and continued failure by you to
substantially perform your duties with the Company (other than any such failure
resulting from your incapacity due to physical or mental illness), after a
demand for substantial performance is delivered to you by the Board which
specifically identifies the manner in which the Board believes that you have not
substantially performed you duties, or (ii) the willful engaging by you in gross
misconduct materially and demonstrably injurious to the Company. For purposes of
this paragraph, no act, or failure to act, on your part shall be considered
"willful" unless done, or omitted to be done, by you not in good faith and
without reasonable belief that your action or omission was in the best interest
of the Company. Notwithstanding the foregoing, you shall not be deemed to have
been terminated for Cause unless and until there shall have been delivered to
you a copy of a resolution duly adopted by the affirmative vote of not less than
two-thirds of the entire membership of the Board at a meeting of the Board
called and held for the purpose (after reasonable notice to you and an
opportunity for you, together with your counsel, to be heard before the
2
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October 1, 1998
Page 3
Board), finding that in the good faith opinion of the Board you were guilty of
conduct set forth above in clauses (i) or (ii) of the first sentence of this
paragraph and specifying the particulars thereof in detail.
(c) Good Reason. You may terminate your employment for Good Reason.
For purposes of this Agreement "Good Reason" shall mean:
(i) without your express written consent, the assignment to you
of any duties materially inconsistent with your positions, duties,
responsibilities and status with the Company immediately prior to a change in
control;
(ii) a reduction by the Company in your base salary as in effect
on the date hereof or as the same may be increased from time to time;
(iii) without your express written consent, the Company's
requiring you to be based anywhere other than the Company's facility where you
performed your duties for the Company immediately prior to a change in control;
and;
(iv) the failure by the Company to continue in effect any benefit
or compensation plan, pension plan, life insurance plan, health and accident
plan or disability plan in which you are participating at the time of a change
in control of the Company (or plans providing you with substantially similar
benefits), the taking of any action by the Company which would adversely affect
your participation in or materially reduce your benefits under any of such plans
or deprive you of any material fringe benefit enjoyed by you at the time of the
change in control, or the failure by the Company to provide you with the number
of paid vacation days to which you are then entitled on the basis of years of
service with the Company in accordance with the Company's normal vacation policy
in effect on the date hereof;
(v) the failure of the Company to obtain the assumption of the
agreement to perform this Agreement by any successor as contemplated in Section
6 hereof; or
(vi) any purported termination of your employment which is not
effected pursuant to a Notice of Termination satisfying the requirements of
subparagraph (d) below (and, if applicable, subparagraph (b) above); and for
purposes of this Agreement, no such purported termination shall be effective.
(d) Notice of Termination. Any termination by the Company pursuant to
subparagraphs (a) or (b) above or by you pursuant to subparagraph (c) above
shall be communicated by written Notice of Termination to the other party
hereto. For purposes of this Agreement, a "Notice of Termination" shall mean a
notice which shall indicate the specific termination provision in this Agreement
relied upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of your employment under the
provision so indicated.
3
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October 1, 1998
Page 4
(e) Date of Termination. "Date of Termination" shall mean (i) if this
Agreement is terminated for Disability, thirty (30) days after Notice of
Termination is given (provided that you shall not have returned to the
performance of your duties on a full-time basis during such thirty (30) day
period), (ii) if your employment is terminated pursuant to subparagraph (c)
above, the date specified in the Notice of Termination, and (iii) if your
employment is terminated for any other reason, the date on which a Notice of
Termination is given; provided that if within thirty (30) days after any Notice
of Termination one party notifies the other party that a dispute exists
concerning the termination, the Date of Termination shall be the date on which
the dispute is finally determined, either by mutual written agreement of the
parties, by a binding and final arbitration award or by a final judgment, order
or decree of a court of competent jurisdiction (the time for appeal therefrom
having expired and no appeal having been perfected).
4. COMPENSATION UPON TERMINATION OR DURING DISABILITY.
(a) During any period that you fail to perform your duties hereunder
as a result of incapacity due to physical or mental illness, you shall continue
to receive your full base salary at the rate then in effect until this Agreement
is terminated pursuant to Section 3(a) hereof. Thereafter, your benefits shall
be determined in accordance with the Company's long term disability plan, or a
substitute plan then in effect.
(b) If your employment shall be terminated for Cause, the Company
shall pay you your full base salary through the Date of Termination at the rate
in effect at the time Notice of Termination is given and the Company shall have
no further obligations to you under this Agreement.
(c) If the Company shall terminate your employment other than pursuant
to Section 3(a) or 3(b) hereof or if you shall terminate your employment for
Good Reason, then the Company shall pay to you as severance pay in a lump sum on
the fifth day following the Date of Termination, the following amounts:
(i) your full base salary through the Date of Termination at the
rate in effect at the time Notice of Termination is given;
(ii) if the Date of Termination occurs on or prior to the first
anniversary date of the change in control of the Company, then in lieu of any
further salary payments to you for periods subsequent to the Date of
Termination, an amount equal to two (2) times your annual base salary in effect
as of the Date of Termination;
(iii) if the Date of Termination occurs after the first
anniversary date of the change in control of the Company, then in lieu of any
further salary payments to you for periods subsequent to the Date of
Termination, an amount equal to (A) two (2) times your annual base salary in
effect as of the Date of Termination less (B) an amount equal to one-twelfth
(1/12) of your annual base salary in effect as of the Date of Termination for
each month (or portion of a month) which has elapsed between the first
anniversary of the date of the change in control and the Date of Termination.
For
4
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October 1, 1998
Page 5
example, if a change in control occurs on January 1, 1999 and the Date of
Termination occurs on January 10, 2000, a portion of one month shall have
elapsed between the first anniversary of the date of the change in control and
the Date of Termination, and you would be eligible to receive an amount equal to
approximately 1.917 (or 23/12ths) of your annual base salary in effect as of the
Date of Termination. If the Date of Termination occurs on November 10, 2000, ten
months and a portion of one additional month shall have elapsed between the
first anniversary of the date of the change in control and the Date of
Termination, and you would be eligible to receive an amount equal to
approximately 1.083 (or 13/12ths) of your annual base salary in effect as of the
Date of Termination;
(iv) in lieu of a bonus under the Company's executive incentive
plan (or any successor bonus plan or arrangement), an amount in cash equal to
50% of the average bonus payment awarded under such plan (or any predecessor
bonus plan or arrangement) for the three years prior to the Date of Termination
(or such lesser period of years as you have been employed by the Company);
(v) in lieu of shares of common stock of the Company, par value
$.01 per share ("Company Shares"), issuable under the Company's 1996 Long-Term
Incentive Plan, as amended, or any other stock option plan adopted from time to
time by the Company for its key executives (the "Plan"), issuable upon exercise
of options ("Options") granted to you under the Company's Plan, (which Options
shall be cancelled upon the making of the payment referred to below), you shall
receive an amount in cash equal to the aggregate spread between the exercise
prices of all Options held by you whether or not then fully exercisable, and the
higher of (a) the closing price of Company Shares as reported on the National
Association of Securities Dealers Automatic Quotation System National Market
System ("NASDAQ") on the Date of Termination (or the closing price on any
exchange on which the Company Shares are then traded, if applicable), or (b) the
highest price per Company Share actually paid in connection with any change in
control of the Company;
(vi) the Company shall also pay all legal fees and expenses
incurred by you as a result of such termination (including all such fees and
expenses, if any, incurred in contesting or disputing any such termination or in
seeking to obtain or enforce any right or benefit provided by this Agreement).
(d) Unless you are terminated for Cause, the Company shall maintain in
full force and effect, for the continued benefit of you for one year after the
Date of Termination, all employee benefit plans and programs or arrangements in
which you were entitled to participate immediately prior to the Date of
Termination provided that your continued participation is possible under the
general terms and provisions of such plans and programs. In the event that your
participation in any such plan or program is barred, the Company shall arrange
to provide you with benefits substantially similar to those which you are
entitled to receive under such plans and programs. At the end of the period of
coverage, you shall have the option to have assigned to you at no cost and with
no apportionment of prepaid premiums, any assignable insurance policy owned by
the Company and relating specifically to you.
5
<PAGE>
October 1, 1998
Page 6
(e) You shall not be required to mitigate the amount of any payment
provided for in this Section 4 by seeking other employment or otherwise, nor
shall the amount of any payment provided for in this Section 4 be reduced by any
compensation earned by you as the result of employment by another employer after
the Date of Termination, or otherwise.
5. OTHER AGREEMENTS. Until the occurrence of a change in control of the
Company as defined herein, the Company's obligation for the payment of severance
or other benefits upon termination of your employment shall be governed by such
other agreement, if any, between you and the Company or any subsidiary thereof.
Following the occurrence of a change in control of the Company, as defined
herein, this Agreement shall supersede any such other agreement and such other
agreement shall have no further force or effect.
6. SUCCESSORS, BINDING AGREEMENT.
(a) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, by agreement in
form and substance satisfactory to you, to expressly assume and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place. Failure of the
Company to obtain such agreement prior to the effectiveness of any such
succession shall be a breach of this Agreement and shall entitle you to
compensation from the Company in the same amount and on the same terms as you
would be entitled hereunder if you terminated your employment for Good Reason,
except that for purposes of implementing the foregoing, the date on which any
such succession becomes effective shall be deemed the Date of Termination. As
used in this Agreement, "Company" shall mean the Company as hereinbefore defined
and any successor to its business and/or assets as aforesaid which executes and
delivers the agreement provided for in this Section 6 or which otherwise becomes
bound by all the terms and provisions of this Agreement by operation of law.
(b) This Agreement shall inure to the benefit of and be enforceable by
your personal or legal representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees. If you should die while any amounts
would still be payable to you hereunder if you had continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to your devisee, legatee, or other designee or, if there
be no such designee, to your estate.
7. NOTICE. For the purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the first page of this Agreement, provided
that all notices to the Company shall be directed to the attention of the Chief
Executive Officer of the Company with a copy to the Secretary of the Company, or
to such other address as either party may have furnished to the other in
6
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October 1, 1998
Page 7
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
8. MISCELLANEOUS. No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in writing
signed by you and such officer as may be specifically designated by the Board of
Directors of the Company. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not set forth expressly in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of Wisconsin.
9. VALIDITY. The invalidity or unenforceability of any provisions of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
10. COUNTERPARTS. This Agreement may be executed in two counterparts, each
of which shall be deemed to be an original but both of which together will
constitute one and the same instrument. Any such counterpart may be executed by
facsimile signature with only verbal confirmation, and when so executed and
delivered shall be deemed an original and such counterpart(s) together shall
constitute only one original.
11. ARBITRATION. Any dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by arbitration in Milwaukee,
Wisconsin in accordance with the rules of the American Arbitration Association
then in effect. Notwithstanding the pendency of any such dispute or controversy,
the Company will continue to pay you your full compensation in effect when the
notice giving rise to the dispute was given (including, but not limited to, base
salary) and continue you as a participant in all compensation, benefit and
insurance plans in which you were participating when the notice giving rise to
the dispute was given, until the dispute is finally resolved in accordance with
Section 3(e) hereof. Amounts paid under this Section 11 are in addition to all
other amounts due under this Agreement and shall not be offset against or reduce
any other amounts due under this Agreement. Judgment may be entered on the
arbitrator's award in any court having jurisdiction; provided, however, that you
shall be entitled to seek specific performance of your right to be paid until
the Date of Termination during the pendency of any dispute or controversy
arising under or in connection with this Agreement.
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7
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October 1, 1998
Page 8
If this letter correctly sets forth our agreement on the subject matter
hereof, kindly sign and return to the Company the enclosed copy of this letter
which will then constitute our agreement on this subject.
Sincerely,
OMNIQUIP INTERNATIONAL, INC.
By: /s/ Donald E. Nickelson
-------------------------
Donald E. Nickelson
Chairman of the Board
AGREED TO THIS 1ST DAY
OF OCTOBER, 1998
/s/ P. Enoch Stiff
- ----------------------------------
8
OMNIQUIP INTERNATIONAL, INC.
222 East Main Street
Port Washington, Wisconsin 53074
October 1, 1998
Curtis J. Laetz
4108 N. Lake Drive
Shorewood, WI 53211
Dear Mr. Laetz:
OmniQuip International, Inc. (the "Company") considers the establishment
and maintenance of a sound and vital management to be essential to protecting
and enhancing the best interests of the Company and its shareholders. In this
regard, the Company recognizes that, as is the case with many publicly held
corporations, the possibility of a change in control may exist and that such
possibility, and the uncertainty and questions which it may raise among
management, may result in the departure or distraction of management personnel
to the detriment of the Company and its shareholders. Accordingly, the Company's
Board of Directors has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of members of the
Company's management, including yourself, to their assigned duties without
distraction in the face of the potentially disturbing circumstances arising from
the possibility of a change in control of the Company.
In order to induce you to remain in the employ of the company, this letter
agreement sets forth the severance benefits which the Company agrees will be
provided to you in the event your employment with the Company is terminated
subsequent to a "change in control of the Company" (as defined in Section 2
hereof) under the circumstances described below.
1. TERM. This Agreement shall commence on the date hereof and shall
continue until December 31, 2000; provided, however, that commencing on January
1, 2001 and each January 1st thereafter, the term of this Agreement shall
automatically be extended for one additional year unless at least 30 days prior
to such January 1st date, the Company shall have given notice that it does not
wish to extend this Agreement, and provided, further, that following a change in
control of the Company (as hereinafter defined) the term of this Agreement shall
automatically extend to the date which is two years following such change in
control.
2. CHANGE IN CONTROL. No benefits shall be payable hereunder unless there
shall have been a change in control of the Company, as set forth below, and your
employment by the Company shall thereafter have been terminated in accordance
with Section 3 below. For purposes of this Agreement, a "change in control of
the Company" shall mean a change in control of a nature that would be required
to be reported in response to Item 1 of Form 8-K promulgated under the
Securities Exchange Act of 1934, as amended ("Exchange Act"); provided that,
without limitation, such a change in control shall be deemed to have occurred if
(a) any "person" (as such term is used in Section
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October 1, 1998
Page 2
13(d) and 14(d)(2) of the Exchange Act) is or becomes the beneficial owner,
directly or indirectly, of securities of the Company representing a majority of
the combined voting power of the Company's then outstanding securities; or (b)
during any period of two consecutive years (including periods commencing prior
to the date hereof), individuals who at the beginning of such period constitute
the Board of Directors of the Company (the "Board") cease for any reason to
constitute at least a majority thereof unless the election, or the nomination
for election by the Company's shareholders, of each new director was approved by
a vote of at least two-thirds of the directors then still in office who were
directors at the beginning of the period.
3. TERMINATION FOLLOWING CHANGE OF CONTROL. If any of the events described
in Section 2 hereof constituting a change in control of the Company shall have
occurred, you shall be entitled to the benefits provided in Section 4 hereof
upon the subsequent termination of your employment within a period of two (2)
years following such change in control unless such termination is because of
your death or Retirement, by the Company for Cause or Disability or by you other
than for Good Reason.
(a) Disability; Retirement.
(i) If, as a result of your incapacity due to physical or mental
illness, you shall have been absent from your duties with the Company on a full
time basis for 130 consecutive business days, and within thirty (30) days after
written notice of termination is given you shall not have returned to the full
time performance of your duties, the Company may terminate this Agreement for
"Disability."
(ii) Termination by the Company or you of your employment based
on "Retirement" shall mean termination in accordance with the Company's
retirement policy, including early retirement, generally applicable to its
salaried employees or in accordance with any retirement arrangement established
with your consent with respect to you.
(b) Cause. The Company may terminate your employment for Cause. For
the purposes of this Agreement, the Company shall have "Cause" to terminate your
employment hereunder upon (i) the willful and continued failure by you to
substantially perform your duties with the Company (other than any such failure
resulting from your incapacity due to physical or mental illness), after a
demand for substantial performance is delivered to you by the Board which
specifically identifies the manner in which the Board believes that you have not
substantially performed you duties, or (ii) the willful engaging by you in gross
misconduct materially and demonstrably injurious to the Company. For purposes of
this paragraph, no act, or failure to act, on your part shall be considered
"willful" unless done, or omitted to be done, by you not in good faith and
without reasonable belief that your action or omission was in the best interest
of the Company. Notwithstanding the foregoing, you shall not be deemed to have
been terminated for Cause unless and until there shall have been delivered to
you a copy of a resolution duly adopted by the affirmative vote of not less than
two-thirds of the entire membership of the Board at a meeting of the Board
called and held for the purpose (after reasonable notice to you and an
opportunity for you, together with your counsel, to be heard before the
2
<PAGE>
October 1, 1998
Page 3
Board), finding that in the good faith opinion of the Board you were guilty of
conduct set forth above in clauses (i) or (ii) of the first sentence of this
paragraph and specifying the particulars thereof in detail.
(c) Good Reason. You may terminate your employment for Good Reason.
For purposes of this Agreement "Good Reason" shall mean:
(i) without your express written consent, the assignment to you
of any duties materially inconsistent with your positions, duties,
responsibilities and status with the Company immediately prior to a change in
control;
(ii) a reduction by the Company in your base salary as in effect
on the date hereof or as the same may be increased from time to time;
(iii) without your express written consent, the Company's
requiring you to be based anywhere other than the Company's facility where you
performed your duties for the Company immediately prior to a change in control;
and;
(iv) the failure by the Company to continue in effect any benefit
or compensation plan, pension plan, life insurance plan, health and accident
plan or disability plan in which you are participating at the time of a change
in control of the Company (or plans providing you with substantially similar
benefits), the taking of any action by the Company which would adversely affect
your participation in or materially reduce your benefits under any of such plans
or deprive you of any material fringe benefit enjoyed by you at the time of the
change in control, or the failure by the Company to provide you with the number
of paid vacation days to which you are then entitled on the basis of years of
service with the Company in accordance with the Company's normal vacation policy
in effect on the date hereof;
(v) the failure of the Company to obtain the assumption of the
agreement to perform this Agreement by any successor as contemplated in Section
6 hereof; or
(vi) any purported termination of your employment which is not
effected pursuant to a Notice of Termination satisfying the requirements of
subparagraph (d) below (and, if applicable, subparagraph (b) above); and for
purposes of this Agreement, no such purported termination shall be effective.
(d) Notice of Termination. Any termination by the Company pursuant to
subparagraphs (a) or (b) above or by you pursuant to subparagraph (c) above
shall be communicated by written Notice of Termination to the other party
hereto. For purposes of this Agreement, a "Notice of Termination" shall mean a
notice which shall indicate the specific termination provision in this Agreement
relied upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of your employment under the
provision so indicated.
3
<PAGE>
October 1, 1998
Page 4
(e) Date of Termination. "Date of Termination" shall mean (i) if this
Agreement is terminated for Disability, thirty (30) days after Notice of
Termination is given (provided that you shall not have returned to the
performance of your duties on a full-time basis during such thirty (30) day
period), (ii) if your employment is terminated pursuant to subparagraph (c)
above, the date specified in the Notice of Termination, and (iii) if your
employment is terminated for any other reason, the date on which a Notice of
Termination is given; provided that if within thirty (30) days after any Notice
of Termination one party notifies the other party that a dispute exists
concerning the termination, the Date of Termination shall be the date on which
the dispute is finally determined, either by mutual written agreement of the
parties, by a binding and final arbitration award or by a final judgment, order
or decree of a court of competent jurisdiction (the time for appeal therefrom
having expired and no appeal having been perfected).
4. COMPENSATION UPON TERMINATION OR DURING DISABILITY.
(a) During any period that you fail to perform your duties hereunder
as a result of incapacity due to physical or mental illness, you shall continue
to receive your full base salary at the rate then in effect until this Agreement
is terminated pursuant to Section 3(a) hereof. Thereafter, your benefits shall
be determined in accordance with the Company's long term disability plan, or a
substitute plan then in effect.
(b) If your employment shall be terminated for Cause, the Company
shall pay you your full base salary through the Date of Termination at the rate
in effect at the time Notice of Termination is given and the Company shall have
no further obligations to you under this Agreement.
(c) If the Company shall terminate your employment other than pursuant
to Section 3(a) or 3(b) hereof or if you shall terminate your employment for
Good Reason, then the Company shall pay to you as severance pay in a lump sum on
the fifth day following the Date of Termination, the following amounts:
(i) your full base salary through the Date of Termination at the
rate in effect at the time Notice of Termination is given;
(ii) if the Date of Termination occurs on or prior to the first
anniversary date of the change in control of the Company, then in lieu of any
further salary payments to you for periods subsequent to the Date of
Termination, an amount equal to two (2) times your annual base salary in effect
as of the Date of Termination;
(iii) if the Date of Termination occurs after the first
anniversary date of the change in control of the Company, then in lieu of any
further salary payments to you for periods subsequent to the Date of
Termination, an amount equal to (A) two (2) times your annual base salary in
effect as of the Date of Termination less (B) an amount equal to one-twelfth
(1/12) of your annual base salary in effect as of the Date of Termination for
each month (or portion of a month) which has elapsed between the first
anniversary of the date of the change in control and the Date of Termination.
For
4
<PAGE>
October 1, 1998
Page 5
example, if a change in control occurs on January 1, 1999 and the Date of
Termination occurs on January 10, 2000, a portion of one month shall have
elapsed between the first anniversary of the date of the change in control and
the Date of Termination, and you would be eligible to receive an amount equal to
approximately 1.917 (or 23/12ths) of your annual base salary in effect as of the
Date of Termination. If the Date of Termination occurs on November 10, 2000, ten
months and a portion of one additional month shall have elapsed between the
first anniversary of the date of the change in control and the Date of
Termination, and you would be eligible to receive an amount equal to
approximately 1.083 (or 13/12ths) of your annual base salary in effect as of the
Date of Termination;
(iv) in lieu of a bonus under the Company's executive incentive
plan (or any successor bonus plan or arrangement), an amount in cash equal to
50% of the average bonus payment awarded under such plan (or any predecessor
bonus plan or arrangement) for the three years prior to the Date of Termination
(or such lesser period of years as you have been employed by the Company);
(v) in lieu of shares of common stock of the Company, par value
$.01 per share ("Company Shares"), issuable under the Company's 1996 Long-Term
Incentive Plan, as amended, or any other stock option plan adopted from time to
time by the Company for its key executives (the "Plan"), issuable upon exercise
of options ("Options") granted to you under the Company's Plan, (which Options
shall be cancelled upon the making of the payment referred to below), you shall
receive an amount in cash equal to the aggregate spread between the exercise
prices of all Options held by you whether or not then fully exercisable, and the
higher of (a) the closing price of Company Shares as reported on the National
Association of Securities Dealers Automatic Quotation System National Market
System ("NASDAQ") on the Date of Termination (or the closing price on any
exchange on which the Company Shares are then traded, if applicable), or (b) the
highest price per Company Share actually paid in connection with any change in
control of the Company;
(vi) the Company shall also pay all legal fees and expenses
incurred by you as a result of such termination (including all such fees and
expenses, if any, incurred in contesting or disputing any such termination or in
seeking to obtain or enforce any right or benefit provided by this Agreement).
(d) Unless you are terminated for Cause, the Company shall maintain in
full force and effect, for the continued benefit of you for one year after the
Date of Termination, all employee benefit plans and programs or arrangements in
which you were entitled to participate immediately prior to the Date of
Termination provided that your continued participation is possible under the
general terms and provisions of such plans and programs. In the event that your
participation in any such plan or program is barred, the Company shall arrange
to provide you with benefits substantially similar to those which you are
entitled to receive under such plans and programs. At the end of the period of
coverage, you shall have the option to have assigned to you at no cost and with
no apportionment of prepaid premiums, any assignable insurance policy owned by
the Company and relating specifically to you.
5
<PAGE>
October 1, 1998
Page 6
(e) You shall not be required to mitigate the amount of any payment
provided for in this Section 4 by seeking other employment or otherwise, nor
shall the amount of any payment provided for in this Section 4 be reduced by any
compensation earned by you as the result of employment by another employer after
the Date of Termination, or otherwise.
5. OTHER AGREEMENTS. Until the occurrence of a change in control of the
Company as defined herein, the Company's obligation for the payment of severance
or other benefits upon termination of your employment shall be governed by such
other agreement, if any, between you and the Company or any subsidiary thereof.
Following the occurrence of a change in control of the Company, as defined
herein, this Agreement shall supersede any such other agreement and such other
agreement shall have no further force or effect.
6. SUCCESSORS, BINDING AGREEMENT.
(a) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, by agreement in
form and substance satisfactory to you, to expressly assume and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place. Failure of the
Company to obtain such agreement prior to the effectiveness of any such
succession shall be a breach of this Agreement and shall entitle you to
compensation from the Company in the same amount and on the same terms as you
would be entitled hereunder if you terminated your employment for Good Reason,
except that for purposes of implementing the foregoing, the date on which any
such succession becomes effective shall be deemed the Date of Termination. As
used in this Agreement, "Company" shall mean the Company as hereinbefore defined
and any successor to its business and/or assets as aforesaid which executes and
delivers the agreement provided for in this Section 6 or which otherwise becomes
bound by all the terms and provisions of this Agreement by operation of law.
(b) This Agreement shall inure to the benefit of and be enforceable by
your personal or legal representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees. If you should die while any amounts
would still be payable to you hereunder if you had continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to your devisee, legatee, or other designee or, if there
be no such designee, to your estate.
7. NOTICE. For the purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the first page of this Agreement, provided
that all notices to the Company shall be directed to the attention of the Chief
Executive Officer of the Company with a copy to the Secretary of the Company, or
to such other address as either party may have furnished to the other in
6
<PAGE>
October 1, 1998
Page 7
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
8. MISCELLANEOUS. No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in writing
signed by you and such officer as may be specifically designated by the Board of
Directors of the Company. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not set forth expressly in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of Wisconsin.
9. VALIDITY. The invalidity or unenforceability of any provisions of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
10. COUNTERPARTS. This Agreement may be executed in two counterparts, each
of which shall be deemed to be an original but both of which together will
constitute one and the same instrument. Any such counterpart may be executed by
facsimile signature with only verbal confirmation, and when so executed and
delivered shall be deemed an original and such counterpart(s) together shall
constitute only one original.
11. ARBITRATION. Any dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by arbitration in Milwaukee,
Wisconsin in accordance with the rules of the American Arbitration Association
then in effect. Notwithstanding the pendency of any such dispute or controversy,
the Company will continue to pay you your full compensation in effect when the
notice giving rise to the dispute was given (including, but not limited to, base
salary) and continue you as a participant in all compensation, benefit and
insurance plans in which you were participating when the notice giving rise to
the dispute was given, until the dispute is finally resolved in accordance with
Section 3(e) hereof. Amounts paid under this Section 11 are in addition to all
other amounts due under this Agreement and shall not be offset against or reduce
any other amounts due under this Agreement. Judgment may be entered on the
arbitrator's award in any court having jurisdiction; provided, however, that you
shall be entitled to seek specific performance of your right to be paid until
the Date of Termination during the pendency of any dispute or controversy
arising under or in connection with this Agreement.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
7
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October 1, 1998
Page 8
If this letter correctly sets forth our agreement on the subject matter
hereof, kindly sign and return to the Company the enclosed copy of this letter
which will then constitute our agreement on this subject.
Sincerely,
OMNIQUIP INTERNATIONAL, INC.
By: /s/ P. Enoch Stiff
--------------------------------
P. Enoch Stiff
President and Chief Executive Officer
AGREED TO THIS 14TH DAY
OF OCTOBER, 1998
/s/ Curtis J. Laetz
- ----------------------------------
8
OMNIQUIP INTERNATIONAL, INC.
222 East Main Street
Port Washington, Wisconsin 53074
October 1, 1998
Richard Mueller
9357 Wedgewood Drive
Woodbury, MN 55125
Dear Mr. Mueller:
OmniQuip International, Inc. (the "Company") considers the establishment
and maintenance of a sound and vital management to be essential to protecting
and enhancing the best interests of the Company and its shareholders. In this
regard, the Company recognizes that, as is the case with many publicly held
corporations, the possibility of a change in control may exist and that such
possibility, and the uncertainty and questions which it may raise among
management, may result in the departure or distraction of management personnel
to the detriment of the Company and its shareholders. Accordingly, the Company's
Board of Directors has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of members of the
Company's management, including yourself, to their assigned duties without
distraction in the face of the potentially disturbing circumstances arising from
the possibility of a change in control of the Company.
In order to induce you to remain in the employ of the company, this letter
agreement sets forth the severance benefits which the Company agrees will be
provided to you in the event your employment with the Company is terminated
subsequent to a "change in control of the Company" (as defined in Section 2
hereof) under the circumstances described below.
1. TERM. This Agreement shall commence on the date hereof and shall
continue until December 31, 2000; provided, however, that commencing on January
1, 2001 and each January 1st thereafter, the term of this Agreement shall
automatically be extended for one additional year unless at least 30 days prior
to such January 1st date, the Company shall have given notice that it does not
wish to extend this Agreement, and provided, further, that following a change in
control of the Company (as hereinafter defined) the term of this Agreement shall
automatically extend to the date which is two years following such change in
control.
2. CHANGE IN CONTROL. No benefits shall be payable hereunder unless there
shall have been a change in control of the Company, as set forth below, and your
employment by the Company shall thereafter have been terminated in accordance
with Section 3 below. For purposes of this Agreement, a "change in control of
the Company" shall mean a change in control of a nature that would be required
to be reported in response to Item 1 of Form 8-K promulgated under the
Securities Exchange Act of 1934, as amended ("Exchange Act"); provided that,
without limitation, such a change in control shall be deemed to have occurred if
(a) any "person" (as such term is used in Section
<PAGE>
October 1, 1998
Page 2
13(d) and 14(d)(2) of the Exchange Act) is or becomes the beneficial owner,
directly or indirectly, of securities of the Company representing a majority of
the combined voting power of the Company's then outstanding securities; or (b)
during any period of two consecutive years (including periods commencing prior
to the date hereof), individuals who at the beginning of such period constitute
the Board of Directors of the Company (the "Board") cease for any reason to
constitute at least a majority thereof unless the election, or the nomination
for election by the Company's shareholders, of each new director was approved by
a vote of at least two-thirds of the directors then still in office who were
directors at the beginning of the period.
3. TERMINATION FOLLOWING CHANGE OF CONTROL. If any of the events described
in Section 2 hereof constituting a change in control of the Company shall have
occurred, you shall be entitled to the benefits provided in Section 4 hereof
upon the subsequent termination of your employment within a period of two (2)
years following such change in control unless such termination is because of
your death or Retirement, by the Company for Cause or Disability or by you other
than for Good Reason.
(a) Disability; Retirement.
(i) If, as a result of your incapacity due to physical or mental
illness, you shall have been absent from your duties with the Company on a full
time basis for 130 consecutive business days, and within thirty (30) days after
written notice of termination is given you shall not have returned to the full
time performance of your duties, the Company may terminate this Agreement for
"Disability."
(ii) Termination by the Company or you of your employment based
on "Retirement" shall mean termination in accordance with the Company's
retirement policy, including early retirement, generally applicable to its
salaried employees or in accordance with any retirement arrangement established
with your consent with respect to you.
(b) Cause. The Company may terminate your employment for Cause. For
the purposes of this Agreement, the Company shall have "Cause" to terminate your
employment hereunder upon (i) the willful and continued failure by you to
substantially perform your duties with the Company (other than any such failure
resulting from your incapacity due to physical or mental illness), after a
demand for substantial performance is delivered to you by the Board which
specifically identifies the manner in which the Board believes that you have not
substantially performed you duties, or (ii) the willful engaging by you in gross
misconduct materially and demonstrably injurious to the Company. For purposes of
this paragraph, no act, or failure to act, on your part shall be considered
"willful" unless done, or omitted to be done, by you not in good faith and
without reasonable belief that your action or omission was in the best interest
of the Company. Notwithstanding the foregoing, you shall not be deemed to have
been terminated for Cause unless and until there shall have been delivered to
you a copy of a resolution duly adopted by the affirmative vote of not less than
two-thirds of the entire membership of the Board at a meeting of the Board
called and held for the purpose (after reasonable notice to you and an
opportunity for you, together with your counsel, to be heard before the
2
<PAGE>
October 1, 1998
Page 3
Board), finding that in the good faith opinion of the Board you were guilty of
conduct set forth above in clauses (i) or (ii) of the first sentence of this
paragraph and specifying the particulars thereof in detail.
(c) Good Reason. You may terminate your employment for Good Reason.
For purposes of this Agreement "Good Reason" shall mean:
(i) without your express written consent, the assignment to you
of any duties materially inconsistent with your positions, duties,
responsibilities and status with the Company immediately prior to a change in
control;
(ii) a reduction by the Company in your base salary as in effect
on the date hereof or as the same may be increased from time to time;
(iii) without your express written consent, the Company's
requiring you to be based anywhere other than the Company's facility where you
performed your duties for the Company immediately prior to a change in control;
and;
(iv) the failure by the Company to continue in effect any benefit
or compensation plan, pension plan, life insurance plan, health and accident
plan or disability plan in which you are participating at the time of a change
in control of the Company (or plans providing you with substantially similar
benefits), the taking of any action by the Company which would adversely affect
your participation in or materially reduce your benefits under any of such plans
or deprive you of any material fringe benefit enjoyed by you at the time of the
change in control, or the failure by the Company to provide you with the number
of paid vacation days to which you are then entitled on the basis of years of
service with the Company in accordance with the Company's normal vacation policy
in effect on the date hereof;
(v) the failure of the Company to obtain the assumption of the
agreement to perform this Agreement by any successor as contemplated in Section
6 hereof; or
(vi) any purported termination of your employment which is not
effected pursuant to a Notice of Termination satisfying the requirements of
subparagraph (d) below (and, if applicable, subparagraph (b) above); and for
purposes of this Agreement, no such purported termination shall be effective.
(d) Notice of Termination. Any termination by the Company pursuant to
subparagraphs (a) or (b) above or by you pursuant to subparagraph (c) above
shall be communicated by written Notice of Termination to the other party
hereto. For purposes of this Agreement, a "Notice of Termination" shall mean a
notice which shall indicate the specific termination provision in this Agreement
relied upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of your employment under the
provision so indicated.
3
<PAGE>
October 1, 1998
Page 4
(e) Date of Termination. "Date of Termination" shall mean (i) if this
Agreement is terminated for Disability, thirty (30) days after Notice of
Termination is given (provided that you shall not have returned to the
performance of your duties on a full-time basis during such thirty (30) day
period), (ii) if your employment is terminated pursuant to subparagraph (c)
above, the date specified in the Notice of Termination, and (iii) if your
employment is terminated for any other reason, the date on which a Notice of
Termination is given; provided that if within thirty (30) days after any Notice
of Termination one party notifies the other party that a dispute exists
concerning the termination, the Date of Termination shall be the date on which
the dispute is finally determined, either by mutual written agreement of the
parties, by a binding and final arbitration award or by a final judgment, order
or decree of a court of competent jurisdiction (the time for appeal therefrom
having expired and no appeal having been perfected).
4. COMPENSATION UPON TERMINATION OR DURING DISABILITY.
(a) During any period that you fail to perform your duties hereunder
as a result of incapacity due to physical or mental illness, you shall continue
to receive your full base salary at the rate then in effect until this Agreement
is terminated pursuant to Section 3(a) hereof. Thereafter, your benefits shall
be determined in accordance with the Company's long term disability plan, or a
substitute plan then in effect.
(b) If your employment shall be terminated for Cause, the Company
shall pay you your full base salary through the Date of Termination at the rate
in effect at the time Notice of Termination is given and the Company shall have
no further obligations to you under this Agreement.
(c) If the Company shall terminate your employment other than pursuant
to Section 3(a) or 3(b) hereof or if you shall terminate your employment for
Good Reason, then the Company shall pay to you as severance pay in a lump sum on
the fifth day following the Date of Termination, the following amounts:
(i) your full base salary through the Date of Termination at the
rate in effect at the time Notice of Termination is given;
(ii) if the Date of Termination occurs on or prior to the first
anniversary date of the change in control of the Company, then in lieu of any
further salary payments to you for periods subsequent to the Date of
Termination, an amount equal to two (2) times your annual base salary in effect
as of the Date of Termination;
(iii) if the Date of Termination occurs after the first
anniversary date of the change in control of the Company, then in lieu of any
further salary payments to you for periods subsequent to the Date of
Termination, an amount equal to (A) two (2) times your annual base salary in
effect as of the Date of Termination less (B) an amount equal to one-twelfth
(1/12) of your annual base salary in effect as of the Date of Termination for
each month (or portion of a month) which has elapsed between the first
anniversary of the date of the change in control and the Date of Termination.
For
4
<PAGE>
October 1, 1998
Page 5
example, if a change in control occurs on January 1, 1999 and the Date of
Termination occurs on January 10, 2000, a portion of one month shall have
elapsed between the first anniversary of the date of the change in control and
the Date of Termination, and you would be eligible to receive an amount equal to
approximately 1.917 (or 23/12ths) of your annual base salary in effect as of the
Date of Termination. If the Date of Termination occurs on November 10, 2000, ten
months and a portion of one additional month shall have elapsed between the
first anniversary of the date of the change in control and the Date of
Termination, and you would be eligible to receive an amount equal to
approximately 1.083 (or 13/12ths) of your annual base salary in effect as of the
Date of Termination;
(iv) in lieu of a bonus under the Company's executive incentive
plan (or any successor bonus plan or arrangement), an amount in cash equal to
50% of the average bonus payment awarded under such plan (or any predecessor
bonus plan or arrangement) for the three years prior to the Date of Termination
(or such lesser period of years as you have been employed by the Company);
(v) in lieu of shares of common stock of the Company, par value
$.01 per share ("Company Shares"), issuable under the Company's 1996 Long-Term
Incentive Plan, as amended, or any other stock option plan adopted from time to
time by the Company for its key executives (the "Plan"), issuable upon exercise
of options ("Options") granted to you under the Company's Plan, (which Options
shall be cancelled upon the making of the payment referred to below), you shall
receive an amount in cash equal to the aggregate spread between the exercise
prices of all Options held by you whether or not then fully exercisable, and the
higher of (a) the closing price of Company Shares as reported on the National
Association of Securities Dealers Automatic Quotation System National Market
System ("NASDAQ") on the Date of Termination (or the closing price on any
exchange on which the Company Shares are then traded, if applicable), or (b) the
highest price per Company Share actually paid in connection with any change in
control of the Company;
(vi) the Company shall also pay all legal fees and expenses
incurred by you as a result of such termination (including all such fees and
expenses, if any, incurred in contesting or disputing any such termination or in
seeking to obtain or enforce any right or benefit provided by this Agreement).
(d) Unless you are terminated for Cause, the Company shall maintain in
full force and effect, for the continued benefit of you for one year after the
Date of Termination, all employee benefit plans and programs or arrangements in
which you were entitled to participate immediately prior to the Date of
Termination provided that your continued participation is possible under the
general terms and provisions of such plans and programs. In the event that your
participation in any such plan or program is barred, the Company shall arrange
to provide you with benefits substantially similar to those which you are
entitled to receive under such plans and programs. At the end of the period of
coverage, you shall have the option to have assigned to you at no cost and with
no apportionment of prepaid premiums, any assignable insurance policy owned by
the Company and relating specifically to you.
5
<PAGE>
October 1, 1998
Page 6
(e) You shall not be required to mitigate the amount of any payment
provided for in this Section 4 by seeking other employment or otherwise, nor
shall the amount of any payment provided for in this Section 4 be reduced by any
compensation earned by you as the result of employment by another employer after
the Date of Termination, or otherwise.
5. OTHER AGREEMENTS. Until the occurrence of a change in control of the
Company as defined herein, the Company's obligation for the payment of severance
or other benefits upon termination of your employment shall be governed by such
other agreement, if any, between you and the Company or any subsidiary thereof.
Following the occurrence of a change in control of the Company, as defined
herein, this Agreement shall supersede any such other agreement and such other
agreement shall have no further force or effect.
6. SUCCESSORS, BINDING AGREEMENT.
(a) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, by agreement in
form and substance satisfactory to you, to expressly assume and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place. Failure of the
Company to obtain such agreement prior to the effectiveness of any such
succession shall be a breach of this Agreement and shall entitle you to
compensation from the Company in the same amount and on the same terms as you
would be entitled hereunder if you terminated your employment for Good Reason,
except that for purposes of implementing the foregoing, the date on which any
such succession becomes effective shall be deemed the Date of Termination. As
used in this Agreement, "Company" shall mean the Company as hereinbefore defined
and any successor to its business and/or assets as aforesaid which executes and
delivers the agreement provided for in this Section 6 or which otherwise becomes
bound by all the terms and provisions of this Agreement by operation of law.
(b) This Agreement shall inure to the benefit of and be enforceable by
your personal or legal representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees. If you should die while any amounts
would still be payable to you hereunder if you had continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to your devisee, legatee, or other designee or, if there
be no such designee, to your estate.
7. NOTICE. For the purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the first page of this Agreement, provided
that all notices to the Company shall be directed to the attention of the Chief
Executive Officer of the Company with a copy to the Secretary of the Company, or
to such other address as either party may have furnished to the other in
6
<PAGE>
October 1, 1998
Page 7
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
8. MISCELLANEOUS. No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in writing
signed by you and such officer as may be specifically designated by the Board of
Directors of the Company. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not set forth expressly in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of Wisconsin.
9. VALIDITY. The invalidity or unenforceability of any provisions of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
10. COUNTERPARTS. This Agreement may be executed in two counterparts, each
of which shall be deemed to be an original but both of which together will
constitute one and the same instrument. Any such counterpart may be executed by
facsimile signature with only verbal confirmation, and when so executed and
delivered shall be deemed an original and such counterpart(s) together shall
constitute only one original.
11. ARBITRATION. Any dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by arbitration in Milwaukee,
Wisconsin in accordance with the rules of the American Arbitration Association
then in effect. Notwithstanding the pendency of any such dispute or controversy,
the Company will continue to pay you your full compensation in effect when the
notice giving rise to the dispute was given (including, but not limited to, base
salary) and continue you as a participant in all compensation, benefit and
insurance plans in which you were participating when the notice giving rise to
the dispute was given, until the dispute is finally resolved in accordance with
Section 3(e) hereof. Amounts paid under this Section 11 are in addition to all
other amounts due under this Agreement and shall not be offset against or reduce
any other amounts due under this Agreement. Judgment may be entered on the
arbitrator's award in any court having jurisdiction; provided, however, that you
shall be entitled to seek specific performance of your right to be paid until
the Date of Termination during the pendency of any dispute or controversy
arising under or in connection with this Agreement.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
7
<PAGE>
October 1, 1998
Page 8
If this letter correctly sets forth our agreement on the subject matter
hereof, kindly sign and return to the Company the enclosed copy of this letter
which will then constitute our agreement on this subject.
Sincerely,
OMNIQUIP INTERNATIONAL, INC.
By: /s/ P. Enoch Stiff
----------------------------------
P. Enoch Stiff
President and Chief Executive Officer
AGREED TO THIS 5TH DAY
OF OCTOBER, 1998
/s/ Richard G. Mueller
- ---------------------------------
8
OMNIQUIP INTERNATIONAL, INC.
222 East Main Street
Port Washington, Wisconsin 53074
October 1, 1998
Richard A. Solon
6101 SE Riverside Terrace
St. Joseph, MO 64507
Dear Mr. Solon:
OmniQuip International, Inc. (the "Company") considers the establishment
and maintenance of a sound and vital management to be essential to protecting
and enhancing the best interests of the Company and its shareholders. In this
regard, the Company recognizes that, as is the case with many publicly held
corporations, the possibility of a change in control may exist and that such
possibility, and the uncertainty and questions which it may raise among
management, may result in the departure or distraction of management personnel
to the detriment of the Company and its shareholders. Accordingly, the Company's
Board of Directors has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of members of the
Company's management, including yourself, to their assigned duties without
distraction in the face of the potentially disturbing circumstances arising from
the possibility of a change in control of the Company.
In order to induce you to remain in the employ of the company, this letter
agreement sets forth the severance benefits which the Company agrees will be
provided to you in the event your employment with the Company is terminated
subsequent to a "change in control of the Company" (as defined in Section 2
hereof) under the circumstances described below.
1. TERM. This Agreement shall commence on the date hereof and shall
continue until December 31, 2000; provided, however, that commencing on January
1, 2001 and each January 1st thereafter, the term of this Agreement shall
automatically be extended for one additional year unless at least 30 days prior
to such January 1st date, the Company shall have given notice that it does not
wish to extend this Agreement, and provided, further, that following a change in
control of the Company (as hereinafter defined) the term of this Agreement shall
automatically extend to the date which is two years following such change in
control.
2. CHANGE IN CONTROL. No benefits shall be payable hereunder unless there
shall have been a change in control of the Company, as set forth below, and your
employment by the Company shall thereafter have been terminated in accordance
with Section 3 below. For purposes of this Agreement, a "change in control of
the Company" shall mean a change in control of a nature that would be required
to be reported in response to Item 1 of Form 8-K promulgated under the
Securities Exchange Act of 1934, as amended ("Exchange Act"); provided that,
without limitation, such a change in control shall be deemed to have occurred if
(a) any "person" (as such term is used in Section
<PAGE>
October 1, 1998
Page 2
13(d) and 14(d)(2) of the Exchange Act) is or becomes the beneficial owner,
directly or indirectly, of securities of the Company representing a majority of
the combined voting power of the Company's then outstanding securities; or (b)
during any period of two consecutive years (including periods commencing prior
to the date hereof), individuals who at the beginning of such period constitute
the Board of Directors of the Company (the "Board") cease for any reason to
constitute at least a majority thereof unless the election, or the nomination
for election by the Company's shareholders, of each new director was approved by
a vote of at least two-thirds of the directors then still in office who were
directors at the beginning of the period.
3. TERMINATION FOLLOWING CHANGE OF CONTROL. If any of the events described
in Section 2 hereof constituting a change in control of the Company shall have
occurred, you shall be entitled to the benefits provided in Section 4 hereof
upon the subsequent termination of your employment within a period of two (2)
years following such change in control unless such termination is because of
your death or Retirement, by the Company for Cause or Disability or by you other
than for Good Reason.
(a) Disability; Retirement.
(i) If, as a result of your incapacity due to physical or mental
illness, you shall have been absent from your duties with the Company on a full
time basis for 130 consecutive business days, and within thirty (30) days after
written notice of termination is given you shall not have returned to the full
time performance of your duties, the Company may terminate this Agreement for
"Disability."
(ii) Termination by the Company or you of your employment based
on "Retirement" shall mean termination in accordance with the Company's
retirement policy, including early retirement, generally applicable to its
salaried employees or in accordance with any retirement arrangement established
with your consent with respect to you.
(b) Cause. The Company may terminate your employment for Cause. For
the purposes of this Agreement, the Company shall have "Cause" to terminate your
employment hereunder upon (i) the willful and continued failure by you to
substantially perform your duties with the Company (other than any such failure
resulting from your incapacity due to physical or mental illness), after a
demand for substantial performance is delivered to you by the Board which
specifically identifies the manner in which the Board believes that you have not
substantially performed you duties, or (ii) the willful engaging by you in gross
misconduct materially and demonstrably injurious to the Company. For purposes of
this paragraph, no act, or failure to act, on your part shall be considered
"willful" unless done, or omitted to be done, by you not in good faith and
without reasonable belief that your action or omission was in the best interest
of the Company. Notwithstanding the foregoing, you shall not be deemed to have
been terminated for Cause unless and until there shall have been delivered to
you a copy of a resolution duly adopted by the affirmative vote of not less than
two-thirds of the entire membership of the Board at a meeting of the Board
called and held for the purpose (after reasonable notice to you and an
opportunity for you, together with your counsel, to be heard before the
2
<PAGE>
October 1, 1998
Page 3
Board), finding that in the good faith opinion of the Board you were guilty of
conduct set forth above in clauses (i) or (ii) of the first sentence of this
paragraph and specifying the particulars thereof in detail.
(c) Good Reason. You may terminate your employment for Good Reason.
For purposes of this Agreement "Good Reason" shall mean:
(i) without your express written consent, the assignment to you
of any duties materially inconsistent with your positions, duties,
responsibilities and status with the Company immediately prior to a change in
control;
(ii) a reduction by the Company in your base salary as in effect
on the date hereof or as the same may be increased from time to time;
(iii) without your express written consent, the Company's
requiring you to be based anywhere other than the Company's facility where you
performed your duties for the Company immediately prior to a change in control;
and;
(iv) the failure by the Company to continue in effect any benefit
or compensation plan, pension plan, life insurance plan, health and accident
plan or disability plan in which you are participating at the time of a change
in control of the Company (or plans providing you with substantially similar
benefits), the taking of any action by the Company which would adversely affect
your participation in or materially reduce your benefits under any of such plans
or deprive you of any material fringe benefit enjoyed by you at the time of the
change in control, or the failure by the Company to provide you with the number
of paid vacation days to which you are then entitled on the basis of years of
service with the Company in accordance with the Company's normal vacation policy
in effect on the date hereof;
(v) the failure of the Company to obtain the assumption of the
agreement to perform this Agreement by any successor as contemplated in Section
6 hereof; or
(vi) any purported termination of your employment which is not
effected pursuant to a Notice of Termination satisfying the requirements of
subparagraph (d) below (and, if applicable, subparagraph (b) above); and for
purposes of this Agreement, no such purported termination shall be effective.
(d) Notice of Termination. Any termination by the Company pursuant to
subparagraphs (a) or (b) above or by you pursuant to subparagraph (c) above
shall be communicated by written Notice of Termination to the other party
hereto. For purposes of this Agreement, a "Notice of Termination" shall mean a
notice which shall indicate the specific termination provision in this Agreement
relied upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of your employment under the
provision so indicated.
3
<PAGE>
October 1, 1998
Page 4
(e) Date of Termination. "Date of Termination" shall mean (i) if this
Agreement is terminated for Disability, thirty (30) days after Notice of
Termination is given (provided that you shall not have returned to the
performance of your duties on a full-time basis during such thirty (30) day
period), (ii) if your employment is terminated pursuant to subparagraph (c)
above, the date specified in the Notice of Termination, and (iii) if your
employment is terminated for any other reason, the date on which a Notice of
Termination is given; provided that if within thirty (30) days after any Notice
of Termination one party notifies the other party that a dispute exists
concerning the termination, the Date of Termination shall be the date on which
the dispute is finally determined, either by mutual written agreement of the
parties, by a binding and final arbitration award or by a final judgment, order
or decree of a court of competent jurisdiction (the time for appeal therefrom
having expired and no appeal having been perfected).
4. COMPENSATION UPON TERMINATION OR DURING DISABILITY.
(a) During any period that you fail to perform your duties hereunder
as a result of incapacity due to physical or mental illness, you shall continue
to receive your full base salary at the rate then in effect until this Agreement
is terminated pursuant to Section 3(a) hereof. Thereafter, your benefits shall
be determined in accordance with the Company's long term disability plan, or a
substitute plan then in effect.
(b) If your employment shall be terminated for Cause, the Company
shall pay you your full base salary through the Date of Termination at the rate
in effect at the time Notice of Termination is given and the Company shall have
no further obligations to you under this Agreement.
(c) If the Company shall terminate your employment other than pursuant
to Section 3(a) or 3(b) hereof or if you shall terminate your employment for
Good Reason, then the Company shall pay to you as severance pay in a lump sum on
the fifth day following the Date of Termination, the following amounts:
(i) your full base salary through the Date of Termination at the
rate in effect at the time Notice of Termination is given;
(ii) if the Date of Termination occurs on or prior to the first
anniversary date of the change in control of the Company, then in lieu of any
further salary payments to you for periods subsequent to the Date of
Termination, an amount equal to two (2) times your annual base salary in effect
as of the Date of Termination;
(iii) if the Date of Termination occurs after the first
anniversary date of the change in control of the Company, then in lieu of any
further salary payments to you for periods subsequent to the Date of
Termination, an amount equal to (A) two (2) times your annual base salary in
effect as of the Date of Termination less (B) an amount equal to one-twelfth
(1/12) of your annual base salary in effect as of the Date of Termination for
each month (or portion of a month) which has elapsed between the first
anniversary of the date of the change in control and the Date of Termination.
For
4
<PAGE>
October 1, 1998
Page 5
example, if a change in control occurs on January 1, 1999 and the Date of
Termination occurs on January 10, 2000, a portion of one month shall have
elapsed between the first anniversary of the date of the change in control and
the Date of Termination, and you would be eligible to receive an amount equal to
approximately 1.917 (or 23/12ths) of your annual base salary in effect as of the
Date of Termination. If the Date of Termination occurs on November 10, 2000, ten
months and a portion of one additional month shall have elapsed between the
first anniversary of the date of the change in control and the Date of
Termination, and you would be eligible to receive an amount equal to
approximately 1.083 (or 13/12ths) of your annual base salary in effect as of the
Date of Termination;
(iv) in lieu of a bonus under the Company's executive incentive
plan (or any successor bonus plan or arrangement), an amount in cash equal to
50% of the average bonus payment awarded under such plan (or any predecessor
bonus plan or arrangement) for the three years prior to the Date of Termination
(or such lesser period of years as you have been employed by the Company);
(v) in lieu of shares of common stock of the Company, par value
$.01 per share ("Company Shares"), issuable under the Company's 1996 Long-Term
Incentive Plan, as amended, or any other stock option plan adopted from time to
time by the Company for its key executives (the "Plan"), issuable upon exercise
of options ("Options") granted to you under the Company's Plan, (which Options
shall be cancelled upon the making of the payment referred to below), you shall
receive an amount in cash equal to the aggregate spread between the exercise
prices of all Options held by you whether or not then fully exercisable, and the
higher of (a) the closing price of Company Shares as reported on the National
Association of Securities Dealers Automatic Quotation System National Market
System ("NASDAQ") on the Date of Termination (or the closing price on any
exchange on which the Company Shares are then traded, if applicable), or (b) the
highest price per Company Share actually paid in connection with any change in
control of the Company;
(vi) the Company shall also pay all legal fees and expenses
incurred by you as a result of such termination (including all such fees and
expenses, if any, incurred in contesting or disputing any such termination or in
seeking to obtain or enforce any right or benefit provided by this Agreement).
(d) Unless you are terminated for Cause, the Company shall maintain in
full force and effect, for the continued benefit of you for one year after the
Date of Termination, all employee benefit plans and programs or arrangements in
which you were entitled to participate immediately prior to the Date of
Termination provided that your continued participation is possible under the
general terms and provisions of such plans and programs. In the event that your
participation in any such plan or program is barred, the Company shall arrange
to provide you with benefits substantially similar to those which you are
entitled to receive under such plans and programs. At the end of the period of
coverage, you shall have the option to have assigned to you at no cost and with
no apportionment of prepaid premiums, any assignable insurance policy owned by
the Company and relating specifically to you.
5
<PAGE>
October 1, 1998
Page 6
(e) You shall not be required to mitigate the amount of any payment
provided for in this Section 4 by seeking other employment or otherwise, nor
shall the amount of any payment provided for in this Section 4 be reduced by any
compensation earned by you as the result of employment by another employer after
the Date of Termination, or otherwise.
5. OTHER AGREEMENTS. Until the occurrence of a change in control of the
Company as defined herein, the Company's obligation for the payment of severance
or other benefits upon termination of your employment shall be governed by such
other agreement, if any, between you and the Company or any subsidiary thereof.
Following the occurrence of a change in control of the Company, as defined
herein, this Agreement shall supersede any such other agreement and such other
agreement shall have no further force or effect.
6. SUCCESSORS, BINDING AGREEMENT.
(a) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, by agreement in
form and substance satisfactory to you, to expressly assume and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place. Failure of the
Company to obtain such agreement prior to the effectiveness of any such
succession shall be a breach of this Agreement and shall entitle you to
compensation from the Company in the same amount and on the same terms as you
would be entitled hereunder if you terminated your employment for Good Reason,
except that for purposes of implementing the foregoing, the date on which any
such succession becomes effective shall be deemed the Date of Termination. As
used in this Agreement, "Company" shall mean the Company as hereinbefore defined
and any successor to its business and/or assets as aforesaid which executes and
delivers the agreement provided for in this Section 6 or which otherwise becomes
bound by all the terms and provisions of this Agreement by operation of law.
(b) This Agreement shall inure to the benefit of and be enforceable by
your personal or legal representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees. If you should die while any amounts
would still be payable to you hereunder if you had continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to your devisee, legatee, or other designee or, if there
be no such designee, to your estate.
7. NOTICE. For the purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the first page of this Agreement, provided
that all notices to the Company shall be directed to the attention of the Chief
Executive Officer of the Company with a copy to the Secretary of the Company, or
to such other address as either party may have furnished to the other in
6
<PAGE>
October 1, 1998
Page 7
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
8. MISCELLANEOUS. No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in writing
signed by you and such officer as may be specifically designated by the Board of
Directors of the Company. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not set forth expressly in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of Wisconsin.
9. VALIDITY. The invalidity or unenforceability of any provisions of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
10. COUNTERPARTS. This Agreement may be executed in two counterparts, each
of which shall be deemed to be an original but both of which together will
constitute one and the same instrument. Any such counterpart may be executed by
facsimile signature with only verbal confirmation, and when so executed and
delivered shall be deemed an original and such counterpart(s) together shall
constitute only one original.
11. ARBITRATION. Any dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by arbitration in Milwaukee,
Wisconsin in accordance with the rules of the American Arbitration Association
then in effect. Notwithstanding the pendency of any such dispute or controversy,
the Company will continue to pay you your full compensation in effect when the
notice giving rise to the dispute was given (including, but not limited to, base
salary) and continue you as a participant in all compensation, benefit and
insurance plans in which you were participating when the notice giving rise to
the dispute was given, until the dispute is finally resolved in accordance with
Section 3(e) hereof. Amounts paid under this Section 11 are in addition to all
other amounts due under this Agreement and shall not be offset against or reduce
any other amounts due under this Agreement. Judgment may be entered on the
arbitrator's award in any court having jurisdiction; provided, however, that you
shall be entitled to seek specific performance of your right to be paid until
the Date of Termination during the pendency of any dispute or controversy
arising under or in connection with this Agreement.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
7
<PAGE>
October 1, 1998
Page 8
If this letter correctly sets forth our agreement on the subject matter
hereof, kindly sign and return to the Company the enclosed copy of this letter
which will then constitute our agreement on this subject.
Sincerely,
OMNIQUIP INTERNATIONAL, INC.
By: /s/ P. Enoch Stiff
---------------------------------
P. Enoch Stiff
President and Chief Executive Officer
AGREED TO THIS 9TH DAY
OF OCTOBER, 1998
/s/ Richard A. Solon
- ----------------------------------
8
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
Subsidiary Jurisdiction of Incorporation
- ---------- -----------------------------
TRAK International, Inc. Delaware
Lull International, Inc. Delaware
Snorkel International, Inc. Delaware
OmniQuip U.K. Limited England and Wales
Subsidiaries of Snorkel International, Inc.:
Snorkel Elevating Work Platforms Pty Limited Australia
Snorkel Elevating Work Platforms Limited New Zealand
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (No. 333-24777, No. 333-24811 and No. 333-24827) of
OmniQuip International, Inc. of our report dated November 3, 1998 listed at Item
14. 1. of this Annual Report on Form 10-K of OmniQuip International, Inc. for
the fiscal year ended September 30, 1998. We also consent to the incorporation
by reference of our report on the Financial Statement Schedule, which is listed
at Item 14. 2. of this Form 10-K.
PricewaterhouseCoopers LLP
St. Louis, Missouri
December 28, 1998
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears
below constitutes and appoints P. Enoch Stiff, Philip G. Franklin, Curtis J.
Laetz and Glenda Moehlenpah, and each of them, as 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 1998 Annual Report
on Form 10-K of OmniQuip International, Inc., and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto each said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary as fully to all intents and purposes as he might or
could do in person, and 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.
Dated: December 24, 1998 /s/ Donald E. Nickelson
---------------------------
Donald E. Nickelson
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears
below constitutes and appoints P. Enoch Stiff, Philip G. Franklin, Curtis J.
Laetz and Glenda Moehlenpah, and each of them, as 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 1998 Annual Report
on Form 10-K of OmniQuip International, Inc., and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto each said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary as fully to all intents and purposes as he might or
could do in person, and 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.
Dated: December 18, 1998 /s/ Peter S. Finley
---------------------------
Peter S. Finley
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears
below constitutes and appoints P. Enoch Stiff, Philip G. Franklin, Curtis J.
Laetz and Glenda Moehlenpah, and each of them, as 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 1998 Annual Report
on Form 10-K of OmniQuip International, Inc., and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto each said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary as fully to all intents and purposes as he might or
could do in person, and 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.
Dated: December 24, 1998 /s/ Jeffrey L. Fox
---------------------------
Jeffrey L. Fox
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears
below constitutes and appoints P. Enoch Stiff, Philip G. Franklin, Curtis J.
Laetz and Glenda Moehlenpah, and each of them, as 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 1998 Annual Report
on Form 10-K of OmniQuip International, Inc., and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto each said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary as fully to all intents and purposes as he might or
could do in person, and 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.
Dated: December 24, 1998 /s/ Samuel A. Hamacher
---------------------------
Samuel A. Hamacher
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears
below constitutes and appoints P. Enoch Stiff, Philip G. Franklin, Curtis J.
Laetz and Glenda Moehlenpah, and each of them, as 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 1998 Annual Report
on Form 10-K of OmniQuip International, Inc., and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto each said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary as fully to all intents and purposes as he might or
could do in person, and 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.
Dated: November 3, 1998 /s/ Paul W. Jones
---------------------------
Paul W. Jones
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears
below constitutes and appoints P. Enoch Stiff, Philip G. Franklin, Curtis J.
Laetz and Glenda Moehlenpah, and each of them, as 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 1998 Annual Report
on Form 10-K of OmniQuip International, Inc., and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto each said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary as fully to all intents and purposes as he might or
could do in person, and 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.
Dated: November 2, 1998 /s/ Jerry E. Ritter
---------------------------
Jerry E. Ritter
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears
below constitutes and appoints P. Enoch Stiff, Philip G. Franklin, Curtis J.
Laetz and Glenda Moehlenpah, and each of them, as 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 1998 Annual Report
on Form 10-K of OmniQuip International, Inc., and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto each said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary as fully to all intents and purposes as he might or
could do in person, and 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.
Dated: October 26, 1998 /s/ Joseph F. Shaughnessy
---------------------------
Joseph F. Shaughnessy
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears
below constitutes and appoints P. Enoch Stiff, Philip G. Franklin, Curtis J.
Laetz and Glenda Moehlenpah, and each of them, as 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 1998 Annual Report
on Form 10-K of OmniQuip International, Inc., and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto each said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary as fully to all intents and purposes as he might or
could do in person, and 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.
Dated: November 8, 1998 /s/ Robert L. Virgil
---------------------------
Robert L. Virgil
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears
below constitutes and appoints Philip G. Franklin, Curtis J. Laetz and Glenda
Moehlenpah, and each of them, as 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 1998 Annual Report on Form 10-K of OmniQuip
International, Inc., and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto each said attorney-in-fact and agent full power and authority to
do and perform each and every act and thing requisite and necessary as fully to
all intents and purposes as he might or could do in person, and 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.
Dated: December 24, 1998 /s/ P. Enoch Stiff
---------------------------
P. Enoch Stiff
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This document contains summary financial information extracted from the
financial statements contained in the attached Annual Report on Form 10-K for
the fiscal year ended September 30, 1998 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
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<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> SEP-30-1998
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<CASH> 4,684
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<RECEIVABLES> 67,875
<ALLOWANCES> 1,295
<INVENTORY> 71,065
<CURRENT-ASSETS> 152,349
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0
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