<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 18, 1998
REGISTRATION NO. 333-62845
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
CLARK MATERIAL HANDLING COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------
BLUE GIANT CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 3537 52206283
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
------------------------
HYDROLECTRIC LIFT TRUCKS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
OHIO 3537 311509886
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
------------------------
172 TRADE STREET
LEXINGTON, KENTUCKY 40511
(606) 288-1200
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANTS' PRINCIPAL EXECUTIVE OFFICES)
------------------------
JOSEPH F. LINGG
VICE PRESIDENT, FINANCE AND TREASURER
CLARK MATERIAL HANDLING COMPANY
172 TRADE STREET
LEXINGTON, KENTUCKY 40511
(606) 288-1200
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
WITH COPIES TO:
CHRISTOPHER G. KARRAS, ESQ.
DECHERT PRICE & RHOADS
4000 BELL ATLANTIC TOWER
1717 ARCH STREET
PHILADELPHIA, PENNSYLVANIA 19103
(215) 994-2412
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER UNIT(1) PRICE(1) REGISTRATION FEE
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
10 3/4% Senior Notes due 2006.... $150,000,000 100% $150,000,000 $45,455(2)
- ----------------------------------------------------------------------------------------------------------------------------
13% Senior Exchangeable Preferred
Stock due 2007................. $40,000,000 $1,000 $40,000,000 $12,121(2)
- ----------------------------------------------------------------------------------------------------------------------------
Guarantee of 10 3/4% Senior Notes
Due 2006 of CLARK Material
Handling Company............... $150,000,000 -- -- $0(3)
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated pursuant to Rule 457(f) solely for purposes of calculating the
registration fee. This Registration Statement also relates to and covers an
indeterminate amount of 13% Senior Exchangeable Series B Preferred Stock due
2007 that may be issued in payment of dividends on the 13% Senior
Exchangeable Series B Preferred Stock due 2007 in accordance with its terms.
(2) Paid in connection with the Registration Statement on Form S-4 (Registration
No. 333-62845) filed by CLARK Material Handling Company on September 3,
1998.
(3) Pursuant to Rule 457(n), no separate fee is payable for the guarantee.
------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
OFFER TO EXCHANGE
10 3/4% SERIES D SENIOR NOTES DUE 2006
FOR ALL OUTSTANDING
10 3/4% SERIES C SENIOR NOTES DUE 2006
AND
10 3/4% SERIES D SENIOR NOTES DUE 2006
FOR ALL OUTSTANDING
10 3/4% SERIES B SENIOR NOTES DUE 2006
AND
13% SENIOR EXCHANGEABLE SERIES B PREFERRED STOCK DUE 2007
FOR ALL OUTSTANDING
13% SENIOR EXCHANGEABLE SERIES A PREFERRED STOCK DUE 2007
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME ON OCTOBER 23, 1998, UNLESS EXTENDED
CLARK Material Handling Company, a Delaware corporation ("CLARK" or the
"Company"), hereby offers to exchange (i) an aggregate principal amount of up to
$20,000,000 of its 10 3/4% Series D Senior Notes due 2006 (the "New Notes") for
a like principal amount of its 10 3/4% Series C Senior Notes due 2006 (the
"Series C Notes") outstanding on the date hereof (the "C Note Exchange Offer"),
(ii) an aggregate principal amount of up to $130,000,000 of its New Notes for a
like principal amount of its 10 3/4% Series B Senior Notes due 2006 (the "Series
B Notes" and, together with the Series C Notes, the "Existing Notes")
outstanding on the date hereof (the "B Note Exchange Offer") and (iii) an
aggregate liquidation preference of up to $20,000,000 of its 13% Senior
Exchangeable Series B Preferred Stock due 2007 (the "New Preferred Stock") for a
like liquidation preference amount of its 13% Senior Exchangeable Series A
Preferred Stock due 2007 (the "Existing Preferred Stock") outstanding on the
date hereof (the "Preferred Stock Exchange Offer") upon the terms and subject to
the conditions set forth in this Prospectus and in the accompanying letters of
transmittal (each, a "Letter of Transmittal" and collectively the "Letters of
Transmittal"). The C Note Exchange Offer, the B Note Exchange Offer and the
Preferred Stock Exchange Offer are hereinafter individually referred to as an
"Exchange Offer" and collectively as the "Exchange Offers". The New Notes and
the Existing Notes are hereinafter collectively referred to as the "Notes", the
New Preferred Stock and the Existing Preferred Stock are hereinafter
collectively referred to as the "Senior Preferred Stock," the New Notes and the
New Preferred Stock are hereinafter collectively referred to as the "New
Securities" and the Existing Notes and the Existing Preferred Stock are
sometimes collectively referred to as the "Existing Securities."
The terms of the New Notes are identical in all material respects to those
of the Series C Notes, except that (i) interest on the New Notes shall accrue
from the most recent date to which interest has been paid on the Series C Notes
surrendered in exchange therefor or, if no interest has been paid on the Series
C Notes, from May 15, 1998 and (ii) the New Notes are being registered under the
Securities Act of 1933, as amended (the "Securities Act"), and will not bear any
legends restricting their transfer. The terms of the New Notes are identical in
all material respects to those of the Series B Notes, except that interest on
the New Notes shall accrue from the most recent date to which interest has been
paid on the Series B Notes surrendered in exchange therefor. The terms of the
New Preferred Stock are identical in all material respects to the terms of the
Existing Preferred Stock, except that (i) dividends on the New Preferred Stock
shall accrue from the most recent date to which dividends have been paid on the
Existing Preferred Stock surrendered in exchange therefor or, if no dividends
have been paid on the Existing Preferred Stock, from the date of issuance of the
Existing Preferred Stock and (ii) the New Preferred Stock is being registered
under the Securities Act and will not bear any legend restricting its transfer.
The New Notes will evidence the same debt as the Existing Notes and will be
issued pursuant to, and entitled to the benefits of, the indenture governing the
Series C Notes. The New Preferred Stock will evidence the same equity as the
Existing Preferred Stock and will be issued pursuant to, and entitled to the
benefits of, the Certificate of Designation (as defined). The Exchange Offers
are being made in order to satisfy certain contractual obligations of the
Company.
(continued on next page)
---------------------
SEE "RISK FACTORS" COMMENCING ON PAGE 20 FOR A DISCUSSION OF
CERTAIN MATTERS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is September 18, 1998
<PAGE> 3
Interest on the New Notes will be payable semi-annually on November 15 and
May 15 of each year, commencing November 15, 1998 at a rate of 10 3/4% per
annum. Dividends on the New Preferred Stock will accrue in each period ending on
January 15, April 15, July 15 and October 15 of each year at a rate of 13% per
annum of the liquidation preference.
The New Notes will mature on November 15, 2006. The New Notes will be
redeemable at the option of the Company, in whole or in part, on or after
November 15, 2001, at the redemption prices set forth herein, plus accrued and
unpaid interest, if any, to the date of redemption. At any time or from time to
time prior to November 15, 1999, the Company may redeem up to one third of the
aggregate principal amount of the Notes issued on or after the Issue Date (as
defined) at the redemption price of 110.75% of the principal amount thereof,
plus accrued and unpaid interest, if any, to the date of redemption, with the
net cash proceeds of one or more Public Equity Offerings (as defined); provided,
that at least two thirds of the aggregate principal amount of Notes issued on or
after the Issue Date remains outstanding immediately thereafter. See
"Description of Notes -- Redemption." The shares of New Preferred Stock will be
redeemable at the option of the Company, in whole or in part, on or after July
15, 2003, at the redemption prices set forth herein, plus accrued dividends, if
any, to the date of redemption. In addition, at the option of the Company, the
New Preferred Stock may be redeemed in whole, but not in part, at any time prior
to July 15, 2003 at the redemption price set forth herein, plus accrued and
unpaid dividends, if any, to the date of redemption, with the net cash proceeds
of one or more Public Equity Offerings. See "Description of Preferred Stock --
Redemption."
Upon a Change of Control (as defined), the Company will be required to
offer to purchase all of the outstanding New Notes at 101% of the principal
amount thereof, plus accrued and unpaid interest, if any, to the date of
purchase and all of the outstanding shares of New Preferred Stock at 101% of the
liquidation preference thereof, plus accrued and unpaid dividends, if any, to
the date of purchase. See "Description of Notes -- Change of Control" and
"Description of Preferred Stock -- Change of Control."
On any scheduled dividend payment date, the Company may, at its option,
exchange all but not less than all of the shares of New Preferred Stock then
outstanding for the Company's Preferred Stock Exchange Notes (as defined). See
"Description of Preferred Stock -- Exchange."
Holders whose Existing Notes or Existing Preferred Stock are accepted for
exchange will be deemed to have waived the right to receive any interest or
dividends accrued on the Existing Notes or Existing Preferred Stock.
The New Notes will be senior unsecured obligations of the Company, pari
passu in right of payment with all existing and future senior indebtedness of
the Company and senior to all subordinated indebtedness of the Company. The New
Notes will be effectively subordinated to all senior secured indebtedness of the
Company, to the extent of the assets securing such indebtedness, and to all
existing and future indebtedness and other obligations of the Company's Foreign
Subsidiaries (as defined). As of June 30, 1998 the Company had approximately
$10.5 million of senior secured indebtedness outstanding (exclusive of unused
commitments of $20.6 million which may be borrowed by the Company under the
Revolving Credit Facility (as defined)) and the Company's Foreign Subsidiaries
had approximately $43.3 million of liabilities reflected on the Company's
consolidated balance sheet. See "Description of Notes -- General." The New
Senior Preferred Stock will rank senior in right of payment with respect to all
Junior Securities (as defined), pari passu with respect to Parity Securities (as
defined) and junior with respect to all indebtedness and other obligations of
the Company and its subsidiaries. See "Risk Factors -- Ranking; Subsidiary
Operations" and "Description of Preferred Stock -- Ranking."
The Company is offering the New Securities in reliance on certain
interpretive letters issued by the staff of the Securities and Exchange
Commission (the "Commission") to third parties in unrelated transactions. Based
on such interpretive letters, the Company is of the view that holders of
Existing Securities (other than any holder who is an "affiliate" of the Company
or any Guarantor (as defined) within the meaning of Rule 405 under the
Securities Act of 1933, as amended (the "Securities Act")) who exchange their
Existing Securities for New Securities pursuant to the Exchange Offer generally
may offer such New Securities for resale, resell such New Securities and
otherwise transfer such New Securities without compliance with the
<PAGE> 4
registration and prospectus delivery provisions of the Securities Act, provided
such New Securities are acquired in the ordinary course of the holders' business
and such holders have no arrangement with any person to participate in a
distribution of such New Securities. Each broker-dealer that receives New
Securities for its own account pursuant to the Exchange Offer must acknowledge
that it will deliver a prospectus in connection with any resale of such New
Securities. The Letters of Transmittal state that by so acknowledging and by
delivery of a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. This Prospectus, as
it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of New Securities received in exchange
for Existing Securities where such Existing Securities were acquired by such
broker-dealer as a result of market-making activities or other trading
activities. The Company has agreed that, for a period of 180 days after the
Expiration Date, it will make this Prospectus available to any broker-dealer for
use in connection with any such resale. See "Plan of Distribution."
Prior to the Exchange Offers there has been no public market for the Series
C Notes and the Existing Preferred Stock. If a market for the New Securities
should develop, such New Securities could trade at a discount from their
principal amount or liquidation preference amount, whichever applicable. The
Company currently does not intend to list the New Securities on any securities
exchange or to seek approval for quotation through any automated quotation
system, and no active public market for the New Securities is currently
anticipated. There can be no assurance that an active public market for the New
Securities will develop.
The Exchange Offer is not conditioned upon any minimum principal amount of
Existing Notes or liquidation amount of Existing Preferred Stock being tendered
for exchange pursuant to the Exchange Offers. The Company will pay all the
expenses incident to the Exchange Offer.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF EXISTING SECURITIES IN ANY JURISDICTION
IN WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE
WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
<PAGE> 5
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-4 (the "Registration Statement," which term shall encompass all amendments,
exhibits, annexes and schedules thereto) pursuant to the Securities Act, and the
rules and regulations promulgated thereunder, covering the New Securities being
offered hereby. This Prospectus does not contain all the information set forth
in the Registration Statement. For further information with respect to the
Company and the Exchange Offer, reference is made to the Registration Statement.
Statements made in this Prospectus as to the contents of any contract, agreement
or other document referred to are not necessarily complete. With respect to each
such contract, agreement or other document filed as an exhibit to the
Registration Statement, reference is made to the exhibit for a more complete
description of the document or matter involved, and each such statement shall be
deemed qualified in its entirety by such reference.
The Company is currently subject to the informational reporting
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith files periodic reports and other information
with the Commission. Such periodic reports and other information filed with the
Commission, including the Registration Statement, may be inspected without
charge at the Public Reference Section of the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and will also be available
for inspection and copying at the regional offices of the Commission located at
Seven World Trade Center, 13th Floor, New York, New York 10048 and the Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of
all or any portion of such material may be obtained from the Public Reference
Section of the Commission upon payment of certain prescribed fees. In addition,
the Commission maintains a website that contains periodic reports and other
information filed by the Company. This website can be accessed at
http://www.sec.gov. Copies of such material can also be obtained from the
Company upon request.
While any New Securities remain outstanding, the Company will make
available, on request, to any holder and any prospective purchaser of New
Securities the information required pursuant to Rule 144A(d)(4) under the
Securities Act during any period in which CLARK is not subject to Section 13 or
15(d) of the Exchange Act.
i
<PAGE> 6
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act. All
statements other than statements of historical facts included in this
Prospectus, including, without limitation, the statements under "Summary,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business" and located elsewhere herein regarding industry
prospects and the Company's financial position are forward-looking statements.
Although the Company believes that the expectations reflected in such
forward-looking statements are reasonable, it can give no assurance that such
expectations will prove to have been correct. Important factors that could cause
actual results to differ materially from the Company's expectations ("Cautionary
Statements") are disclosed in the Prospectus, including, without limitation, in
conjunction with the forward-looking statements in this Prospectus under "Risk
Factors." All subsequent written and oral forward-looking statements
attributable to the Company or persons acting on its behalf are expressly
qualified in their entirety by the Cautionary Statements.
ii
<PAGE> 7
SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial statements
(including notes thereto) included elsewhere in this Prospectus. Unless the
context otherwise requires, references to the "Company" or "CLARK" are to CLARK
Material Handling Company (including its predecessors) and the other material
handling operations acquired from certain subsidiaries of Terex Corporation (the
"Predecessor's Parent") in 1996 (the "1996 Acquisition") for periods prior to
November 26, 1996, and to CLARK Material Handling Company and its subsidiaries
for periods from and after November 26, 1996. The Company, which is a
wholly-owned subsidiary of CMH Holdings Corporation, a Delaware Corporation
("Holdings"), acquired in July 1998 (the "Samsung Forklift Acquisition")
substantially all of the assets and certain liabilities of the forklift division
("Samsung Forklift") of Samsung Heavy Industries Co., Ltd. ("Samsung"). The pro
forma financial information presented herein has been adjusted to give effect to
the Company's acquisition of the assets of Blue Giant (as defined) in November
1997 but unless otherwise indicated does not give effect to the offering of the
Series C Notes, the Existing Preferred Stock or the New Securities or the
acquisition of Samsung Forklift.
THE COMPANY
CLARK is a leading international designer, manufacturer, and marketer of a
complete line of forklift trucks, including internal combustion ("IC") trucks,
electric riders, narrow aisle stackers and powered hand trucks. The Company
invented the platform forklift truck in 1917 and has since established CLARK as
one of the most recognized brand names of forklift trucks in North America.
Management believes that CLARK has a large installed fleet in North America with
over 250,000 units and has a total of approximately 350,000 units in operation
worldwide. This large installed fleet has allowed CLARK to generate significant
ongoing replacement parts sales, which typically generate substantially higher
gross margins and provide a more stable revenue base than new forklift truck
sales. CLARK manufactures its products through five facilities in the United
States, Europe and Canada and distributes its products to a diverse customer
base through a global network of approximately 300 dealers from more than 560
locations. In addition, the Company's Blue Giant subsidiaries distribute their
products through a network of over 350 North American dealers and agents. For
the twelve months ended June 30, 1998 ("LTM"), on a pro forma basis, CLARK
generated net sales of $534.1 million and EBITDA (as defined) of $36.5 million.
Since 1993, CLARK has undertaken a series of initiatives aimed at reducing
fixed costs, developing a largely variable cost structure and offering a highly
competitive product portfolio. Specifically, the Company (i) eliminated
redundant manufacturing and distribution facilities, (ii) reduced head-count,
(iii) eliminated non-core unprofitable product lines, and (iv) improved
outsourcing of certain manufacturing operations. In addition to cost
rationalization, the Company made a series of new product introductions allowing
it to offer one of the most modern product portfolios in the industry. CLARK's
product development strategy emphasizes (i) product innovations and improvements
to meet the evolving needs of CLARK's customer base and (ii) lowering production
costs through better design, thereby enhancing margins. As a result of these
initiatives, the Company increased EBITDA (as defined) by $26.2 million from
$10.3 million in fiscal 1994 to $36.5 million on a pro forma basis in the LTM
period. EBITDA (as defined) consistently increased during this period despite a
declining forklift market in 1996 relative to 1995.
BUSINESS STRATEGY
Management believes that CLARK's strong brand name, extensive distribution
network, modern product portfolio and streamlined fixed cost structure provide a
strong foundation for increased growth and profitability. The Company's
operating strategy focuses on the following key components:
Introduce New Products. The Company's new product introduction strategy is
based on the Genesis(R) forklift truck platform which was introduced in December
1994. The purpose of the Genesis(R) forklift truck design project was to develop
a production platform which reduced the number of parts used in each model, used
like parts in various forklift models and enhanced functionality of operation.
As a result of the Genesis(R) model, the Company achieved purchasing
efficiencies from its vendors and streamlined the production process, which
resulted in significantly reduced production costs and enhanced margins. Due to
the wide customer acceptance of the Genesis(R) truck and the significantly
reduced production costs relative to its
1
<PAGE> 8
predecessor models, the Company has introduced four completely redesigned
electric riders and five new IC forklift models based on the Genesis(R)
platform. CLARK's new product development pipeline is focused on lower cost,
enhanced feature products, extending the Genesis(R) platform to the few
remaining older models in its product offering and improving the performance of
its electric powered hand truck designs. Each of these new products is designed
to reduce production costs and increase margins. In addition, the Company's
engineering team is continuously working toward achieving increased production
efficiencies and reduced manufacturing costs through improved design.
In addition, the Company seeks to acquire businesses which offer
complementary product lines that can be sold through the Company's existing
global network. For example, in 1997 the Company acquired substantially all of
the assets of Blue Giant USA Corporation and Blue Giant Canada Limited
(collectively "Blue Giant"), which design and manufacture a successful product
line of powered handtrucks, dock equipment and scissor lifts. Similarly, the
Company expects to significantly increase the distribution of the value priced
Samsung Forklift product line by leveraging the Company's global distribution
network, especially in North and South America. In addition, Samsung Forklift
expands the Company's product line in the entry level segment for IC forklift
truck models.
Augment the Distribution Network. CLARK distributes its products to a
diverse customer base through a global network of approximately 300 dealers from
more than 560 locations, with a majority in North America and Europe. Management
is focusing on enhancing the performance of its distribution network by offering
various incentive packages and support programs, replacing underperforming
dealers and adding new dealers in selected geographic areas. Since 1993, the
number of units exported to CLARK's international customers has more than
tripled from 689 to over 2,400 in 1997. The Company intends to continue
expanding the dealer base of its international operations, and management
believes that the Company is well positioned for continued growth in the
African, Middle Eastern, Caribbean and South American markets.
Improve Aftermarket Parts Sales. CLARK's worldwide installed fleet of
approximately 350,000 forklift trucks generates an estimated $240.0 million in
annual global aftermarket parts sales, of which CLARK has historically captured
an estimated 40% share. Management plans to increase the Company's share of
these high margin sales in North America and Europe as a result of the
introduction of the Totalift(TM) and PartsPro(TM) software systems and the
addition of a parts marketing manager at CLARK Europe. In 1998, the Company
developed the Totalift(TM) system which was designed as a parts database of
major competitor forklift brands and models. Management believes that the
Totalift(TM) system will allow the Company to increase its aftermarket parts
sales by supplying parts for all of the CLARK and competitor forklift trucks.
Also in 1998, the Company introduced PartsPro(TM), which provides the Company's
dealers with an advanced parts identification system that enables suppliers to
place on-line orders with CLARK, prepare quotes for customers and track work
orders by customer.
Further Reduce Product Cost. Although CLARK has made significant progress
in reducing its operating costs, management believes that ongoing opportunities
exist to improve profitability by reducing material costs. In 1997, material
costs amounted to over 80% of the cost of goods sold. Management plans to
continue to reduce the Company's material costs and increase purchasing
efficiencies, thereby enhancing its gross margins, through (i) the introduction
of new product designs that increase commonality of parts among different lift
truck models and reduce the overall number of parts and components, thereby
improving manufacturing and (ii) the further reduction of the number of
suppliers to increase volume discounts. Management believes that these
initiatives should also result in more timely delivery from suppliers, thereby
reducing costly manufacturing disruptions and the Company's working capital
investment.
THE SAMSUNG FORKLIFT ACQUISITION
In July 1998, CLARK acquired substantially all of the assets and certain
liabilities of Samsung Forklift. The purchase price for Samsung Forklift equaled
$30.4 million (based upon the stated purchase price of 39.1 billion South Korean
Won, subject to certain adjustments). The assets acquired pursuant to the
Samsung Forklift Acquisition include a 213,000-square-foot production facility
(the "Korean Plant"), working capital items and intellectual property. The
Company estimates that it will make approximately $5.0 million of capital
2
<PAGE> 9
expenditures for upgrades and to install new equipment in the Korean Plant. See
"The Samsung Forklift Acquisition" and "Risk Factors -- Risks Relating to the
Samsung Forklift Acquisition."
Samsung Forklift is a leading designer and manufacturer of forklift trucks
in South Korea. The Company believes that, for the year ended December 31, 1997,
Samsung Forklift maintained a market share of approximately 25% in South Korea
and generated approximately $90.0 million of net sales (based upon an average
1997 exchange rate of 950 South Korean Won to the U.S. dollar), approximately
60% of which were generated in South Korea. See "Risk Factors -- Risks Relating
to the Samsung Forklift Acquisition." In addition, Samsung Forklift has a
distribution network in Europe, Asia, Australia and New Zealand. The Company
plans to utilize the low cost manufacturing operations of Samsung Forklift to
produce a value-priced line of light IC forklift trucks under various brand
names, including the Samsung brand name for a period of three years. The Company
intends to market these forklift trucks through CLARK's and Samsung Forklift's
global distribution networks, as a complement to CLARK's product line.
Consequently, management estimates that it will sell approximately 75% of
Samsung Forklift's production outside of South Korea.
From 1986 through the mid-1990s, CLARK participated in a joint venture with
Samsung to manufacture forklift trucks in South Korea for worldwide
distribution. The partnership provided CLARK with an understanding of the South
Korean forklift market generally and an ongoing relationship with Samsung
managers, while providing Samsung Forklift with a product platform consistent
with the Genesis(R) line.
The Samsung Forklift Acquisition, together with the application of the
proceeds from the sale of the Series C Notes and Existing Preferred Stock, are
collectively referred to herein as the "Transactions." See "Use of Proceeds" and
"The Samsung Forklift Acquisition."
3
<PAGE> 10
THE EXCHANGE OFFERS
THE C NOTE EXCHANGE OFFER
The C Note Exchange Offer applies to up to $20.0 million aggregate
principal amount of the Series C Notes. The form and terms of the New Notes will
be the same as the form and terms of the Series C Notes except that (i) interest
on the New Notes will accrue from the most recent date to which interest has
been paid on the Series C Notes surrendered in exchange therefor or, if no
interest has been paid on the Series C Notes, from May 15, 1998, and (ii) the
New Notes are being registered under the Securities Act and, therefore, will not
bear legends restricting their transfer. The New Notes will evidence the same
debt as the Series C Notes and will be entitled to the benefits of the Indenture
(as defined) pursuant to which the Series C Notes were issued. See "Description
of Notes."
The C Note Exchange Offer..... Up to $20,000,000 aggregate principal amount of
10 3/4% Series D Senior Notes due 2006 in
exchange for a like principal amount of the
Company's 10 3/4% Series C Senior Notes due
2006. As of the date hereof, Series C Notes
representing $20.0 million aggregate principal
amount are outstanding. The terms of the New
Notes and the Series C Notes are substantially
identical.
Based on an interpretation by the Commission's
staff set forth in no-action letters issued to
third parties unrelated to CLARK and the
Guarantors (as defined), CLARK and the
Guarantors believe that New Notes issued
pursuant to the C Note Exchange Offer in
exchange for Series C Notes may be offered for
resale, resold and otherwise transferred by any
person receiving the New Notes, whether or not
that person is the holder (other than any such
holder or such other person that is an
"affiliate" of CLARK or any Guarantor within
the meaning of Rule 405 under the Securities
Act), without compliance with the registration
and prospectus delivery provisions of the
Securities Act, provided that (i) the New Notes
are acquired in the ordinary course of business
of that holder or such other person, (ii)
neither the holder nor such other person is
engaging in or intends to engage in a
distribution of the New Notes, and (iii)
neither the holder nor such other person has an
arrangement or understanding with any person to
participate in the distribution of the New
Notes. See "The Exchange Offers -- Purpose and
Effect." Each broker-dealer that receives New
Notes for its own account in exchange for
Series C Notes, where those Series C Notes were
acquired by the broker-dealer as a result of
its market-making activities or other trading
activities, must acknowledge that it will
deliver a prospectus in connection with any
resale of such New Notes. See "Plan of
Distribution."
Registration Rights
Agreement..................... The Series C Notes were sold by the Company on
July 17, 1998, in a private placement. In
connection with the sale, the Company entered
into a Registration Rights Agreement, dated
July 17, 1998, with Jeffries & Company, Inc.
and Bear, Stearns & Co. Inc. (the "Initial
Purchasers") (the "Notes Registration Rights
Agreement") providing for, among other things,
the C Note Exchange Offer. See "The Exchange
Offers -- Purpose and Effect."
Expiration Date............... The C Note Exchange Offer will expire at 5:00
p.m., New York City time, on October 23, 1998,
or such later date and time to which it is
extended (the "C Note Expiration Date").
4
<PAGE> 11
Withdrawal.................... The tender of Series C Notes pursuant to the C
Note Exchange Offer may be withdrawn at any
time prior to the C Note Expiration Date. Any
Series C Notes not accepted for exchange for
any reason will be returned without expense to
the tendering holder thereof as promptly as
practicable after the expiration or termination
of the C Note Exchange Offer.
Interest on the New Notes..... Interest on each New Note will accrue from the
most recent date to which interest has been
paid on the Series C Notes surrendered in
exchange therefor or, if no interest has been
paid on the Series C Notes, from May 15, 1998.
Conditions to the C Note
Exchange Offer.............. The C Note Exchange Offer is subject to certain
customary conditions, certain of which may be
waived by the Company. See "The Exchange
Offers -- Conditions to the Exchange Offers."
Procedures for Tendering
Series C Notes.............. Each holder of Series C Notes wishing to accept
the C Note Exchange Offer must complete, sign
and date the accompanying letter of transmittal
relating to the C Note Exchange Offer (the "C
Note Letter of Transmittal"), or a copy
thereof, in accordance with the instructions
contained herein and therein, and mail or
otherwise deliver the C Note Letter of
Transmittal, together with the Series C Notes
and any other required documentation, to the
Exchange Agent (as defined) at the address set
forth in the C Note Letter of Transmittal.
Persons holding Series C Notes through the
Depository Trust Company ("DTC") and wishing to
accept the C Note Exchange Offer must do so
pursuant to the DTC's Automated Tender Offer
Program, by which each tendering Participant
will agree to be bound by the C Note Letter of
Transmittal. By executing or agreeing to be
bound by the C Note Letter of Transmittal, each
holder will represent to the Company that,
among other things, (i) the New Notes acquired
pursuant to the C Note Exchange Offer are being
obtained in the ordinary course of business of
the person receiving such New Notes, whether or
not such person is the holder of the Series C
Notes, (ii) neither the holder nor any such
other person has an arrangement or
understanding with any person to participate in
the distribution of such New Notes within the
meaning of the Securities Act, (iii) neither
the holder nor any such person is an
"affiliate," as defined under Rule 405
promulgated under the Securities Act, of the
Company or any Guarantor, or if it is an
affiliate, such holder or such other person
will comply with the registration and
prospectus delivery requirements of the
Securities Act to the extent applicable, (iv)
if such holder or other person is not a
broker-dealer, neither the holder nor any such
other person is engaged in or intends to engage
in the distribution of such New Notes, and (v)
if such holder or other person is a
broker-dealer, that it will receive New Notes
for its own account in exchange for Series C
Notes that were acquired as a result of
market-making activities or other trading
activities and that it acknowledges that it
will be required to deliver a prospectus in
connection with any
5
<PAGE> 12
resale of such New Notes. See "The Exchange
Offers -- Procedures for Tendering."
Shelf Registration
Requirement................... Pursuant to the Notes Registration Rights
Agreement, the Company is required to file a
"shelf" registration statement for a continuous
offering pursuant to Rule 415 under the
Securities Act in respect of the Series C Notes
(and use its reasonable best efforts to cause
such shelf registration statement to be
declared effective by the Commission and keep
it continuously effective, supplemented and
amended for prescribed periods) if (i) prior to
the consummation of the C Note Exchange Offer,
the Company determines that a majority in
aggregate principal amount of the New Notes to
be exchanged for Series C Notes would not, upon
receipt, be tradeable by the holders thereof
without restriction under the Securities Act
and the Exchange Act and without material
restrictions under the applicable Blue Sky or
state securities laws, (ii) the Company is not
permitted to effect the C Note Exchange Offer
because of any change in law or in applicable
interpretations thereof by the staff of the
Commission, (iii) the C Note Exchange Offer is
not consummated within 240 days of the date of
issuance of the Series C Notes, (iv) under
certain circumstances, upon the request of the
Initial Purchasers, or (v) any holder of Series
C Notes is not eligible to participate in the C
Note Exchange Offer or, in the case of any
holder of Series C Notes (other than an
Exchanging Dealer) that participates in the C
Note Exchange Offer, such holder does not
receive freely tradable New Notes upon
consummation of the C Note Exchange Offer
(other than due solely to the status of such
holder as an affiliate of the Company within
the meaning of the Securities Act) and such
holder notifies the Company within six months
of the consummation of the exchange.
Acceptance of Series C Notes
and
Delivery of New Notes....... The Company will accept for exchange any and
all Series C Notes which are properly tendered
in the C Note Exchange Offer prior to the C
Note Expiration Date. The New Notes issued
pursuant to the C Note Exchange Offer will be
delivered promptly following the C Note
Expiration Date. See "The Exchange
Offers -- Terms of the C Note Exchange Offer."
Exchange Agent................ United States Trust Company of New York is
serving as Exchange Agent (the "Exchange
Agent").
Federal Income Tax
Considerations................ The exchange pursuant to the C Note Exchange
Offer should not be a taxable event for federal
income tax purposes. See "Certain Federal
Income Tax Considerations of the Exchange
Offers."
Effect of Not Tendering....... Following the completion of the C Note Exchange
Offer, Series C Notes that are not tendered
will not have any further registration rights
(except in certain circumstances with respect
to shelf registration as noted above) and will
continue to be subject to the existing
restrictions upon transfer thereof. See "The
Exchange Offers -- Consequences of Failure to
Exchange."
6
<PAGE> 13
THE B NOTE EXCHANGE OFFER
The B Note Exchange Offer applies to up to $130.0 million aggregate
principal amount of the Series B Notes. The form and terms of the New Notes will
be the same as the form and terms of the Series B Notes except that interest on
the New Notes will accrue from the most recent date to which interest has been
paid on the Series B Notes surrendered in exchange therefor. The New Notes will
evidence the same debt as the Series B Notes and will be entitled to the
benefits of the Indenture. See "Description of Notes."
The B Note Exchange Offer..... Up to $130,000,000 aggregate principal amount
of 10 3/4% Series D Senior Notes due 2006 in
exchange for a like principal amount of the
Company's 10 3/4% Series B Senior Notes due
2006. As of the date hereof, Series B Notes
representing $130.0 million aggregate principal
amount are outstanding. The terms of the New
Notes and the Series B Notes are substantially
identical.
Based on an interpretation by the Commission's
staff set forth in no-action letters issued to
third parties unrelated to CLARK and the
Guarantors, CLARK and the Guarantors believe
that New Notes issued pursuant to the B Note
Exchange Offer in exchange for Series B Notes
may be offered for resale, resold and otherwise
transferred by any person receiving the New
Notes, whether or not that person is the holder
(other than any such holder or such other
person that is an "affiliate" of CLARK or any
Guarantor within the meaning of Rule 405 under
the Securities Act), without compliance with
the registration and prospectus delivery
provisions of the Securities Act, provided that
(i) the New Notes are acquired in the ordinary
course of business of that holder or such other
person, (ii) neither the holder nor such other
person is engaging in or intends to engage in a
distribution of the New Notes, and (iii)
neither the holder nor such other person has an
arrangement or understanding with any person to
participate in the distribution of the New
Notes. See "The Exchange Offers -- Purpose and
Effect." Each broker-dealer that receives New
Notes for its own account in exchange for
Series B Notes, where those Series B Notes were
acquired by the broker-dealer as a result of
its market-making activities or other trading
activities, must acknowledge that it will
deliver a prospectus in connection with any
resale of such New Notes. See "Plan of
Distribution."
Registration Rights
Agreement..................... The Series C Notes were sold by the Company on
July 17, 1998, in a private placement. In
connection with the sale, the Company entered
into the Notes Registration Rights Agreement
providing for, among other things, the B Note
Exchange Offer. See "The Exchange
Offers -- Purpose and Effect."
Expiration Date............... The B Note Exchange Offer will expire at 5:00
p.m., New York City time, on October 23, 1998,
or such later date and time to which it is
extended (the "B Note Expiration Date").
Withdrawal.................... The tender of Series B Notes pursuant to the B
Note Exchange Offer may be withdrawn at any
time prior to the B Note Expiration Date. Any
Series B Notes not accepted for exchange for
any reason will be returned without expense to
the tendering holder thereof as promptly as
practicable after the expiration or termination
of the B Note Exchange Offer.
7
<PAGE> 14
Interest on the New Notes..... Interest on each New Note will accrue from the
most recent date to which interest has been
paid on the Series B Notes surrendered in
exchange therefor.
Conditions to the B Note
Exchange Offer.............. The Series B Note Exchange Offer is subject to
certain customary conditions, certain of which
may be waived by the Company. See "The Exchange
Offers -- Conditions to the Exchange Offers."
Procedures for Tendering
Series B Notes.............. Each holder of Existing Notes wishing to accept
the B Note Exchange Offer must complete, sign
and date the accompanying letter of transmittal
relating to the B Note Exchange Offer (the "B
Note Letter of Transmittal"), or a copy
thereof, in accordance with the instructions
contained herein and therein, and mail or
otherwise deliver the B Note Letter of
Transmittal, together with the Series B Notes
and any other required documentation, to the
Exchange Agent (as defined) at the address set
forth in the B Note Letter of Transmittal.
Persons holding Series B Notes through the DTC
and wishing to accept the B Note Exchange Offer
must do so pursuant to the DTC's Automated
Tender Offer Program, by which each tendering
Participant will agree to be bound by the B
Note Letter of Transmittal. By executing or
agreeing to be bound by the B Note Letter of
Transmittal, each holder will represent to the
Company that, among other things, (i) the New
Notes acquired pursuant to the B Note Exchange
Offer are being obtained in the ordinary course
of business of the person receiving such New
Notes, whether or not such person is the holder
of the Series B Notes, (ii) neither the holder
nor any such other person has an arrangement or
understanding with any person to participate in
the distribution of such New Notes within the
meaning of the Securities Act, (iii) neither
the holder nor any such person is an
"affiliate," as defined under Rule 405
promulgated under the Securities Act, of the
Company or any Guarantor, or if it is an
affiliate, such holder or such other person
will comply with the registration and
prospectus delivery requirements of the
Securities Act to the extent applicable, (iv)
if such holder or other person is not a
broker-dealer, neither the holder nor any such
other person is engaged in or intends to engage
in the distribution of such New Notes, and (v)
if such holder or other person is a
broker-dealer, that it will receive New Notes
for its own account in exchange for Series B
Notes that were acquired as a result of
market-making activities or other trading
activities and that it acknowledges that it
will be required to deliver a prospectus in
connection with any resale of such New Notes.
See "The Exchange Offers -- Procedures for
Tendering."
Acceptance of Series B Notes
and Delivery of New Notes..... The Company will accept for exchange any and
all Series B Notes which are properly tendered
in the B Note Exchange Offer prior to the B
Note Expiration Date. The New Notes issued
pursuant to the B Note Exchange Offer will be
delivered promptly following the B Note
Expiration Date. See "The Exchange
Offers -- Terms of the B Note Exchange Offer."
8
<PAGE> 15
Exchange Agent................ United States Trust Company of New York is
serving as Exchange Agent (the "Exchange
Agent").
Federal Income Tax
Considerations................ The exchange pursuant to the B Note Exchange
Offer should not be a taxable event for federal
income tax purposes. See "Certain Federal
Income Tax Considerations of the Exchange
Offers."
THE PREFERRED STOCK EXCHANGE OFFER
The Preferred Stock Exchange Offer applies to $20,000,000 aggregate
liquidation preference of the Existing Preferred Stock. The form and terms of
the New Preferred Stock will be the same as the form and terms of the Existing
Preferred Stock except that (i) dividends on the New Preferred Stock will accrue
from the most recent date to which dividends have been paid on the Existing
Preferred Stock surrendered in exchange therefor or, if no dividends have been
paid on the Existing Preferred Stock, from the date of issuance of the Existing
Preferred Stock, and (ii) the New Preferred Stock is being registered under the
Securities Act and, therefore, will not bear a legends restricting its transfer.
The New Preferred Stock will evidence the same equity as the Existing Preferred
Stock and will be entitled to the benefits of the Certificate of Designation
pursuant to which the Existing Preferred Stock was issued (as defined). See
"Description of New Preferred Stock."
The Preferred Stock Exchange
Offer......................... Up to $20,000,000 aggregate liquidation
preference of 13% Series B Senior Exchangeable
Preferred Stock due 2007 in exchange for a like
liquidation preference amount of 13% Series A
Senior Exchangeable Preferred Stock due 2007.
As of the date hereof, Existing Preferred Stock
representing $20,000,000 aggregate liquidation
amount is outstanding. The terms of the New
Preferred Stock and the Existing Preferred
Stock are substantially identical.
Based on an interpretation by the Commission's
staff set forth in no-action letters issued to
third parties unrelated to the Company, the
Company believes that New Preferred Stock
issued pursuant to the Preferred Stock Exchange
Offer in exchange for Existing Preferred Stock
may be offered for resale, resold and otherwise
transferred by any person receiving the New
Preferred Stock, whether or not that person is
the holder (other than any such holder or such
other person that is an "affiliate" of the
Company or any Guarantor within the meaning of
Rule 405 under the Securities Act), without
compliance with the registration and prospectus
delivery provisions of the Securities Act,
provided that (i) the New Preferred Stock is
acquired in the ordinary course of business of
that holder or such other person, (ii) neither
the holder nor such other person is engaging in
or intends to engage in a distribution of the
New Preferred Stock, and (iii) neither the
holder nor such other person has an arrangement
or understanding with any person to participate
in the distribution of the New Preferred Stock.
See "The Exchange Offers -- Purpose and
Effect." Each broker-dealer that receives New
Preferred Stock for its own account in exchange
for Existing Preferred Stock, where the
Existing Preferred Stock was acquired by the
broker-dealer as a result of its market-making
activities or other trading activities, must
acknowledge that it will deliver a prospectus
in connection with any resale of such New
Preferred Stock. See "Plan of Distribution."
Registration Rights
Agreement..................... The Existing Preferred Stock was sold by the
Company on July 17, 1998, in a private
placement. In connection with the sale, the
Company entered into the Registration Rights
Agreement, dated
9
<PAGE> 16
July 17, 1998, between the Company and the
Initial Purchasers relating to the Existing
Preferred Stock (the "Preferred Stock
Registration Rights Agreement" and, together
with the Notes Registration Rights Agreement,
the "Registration Rights Agreements") providing
for, among other things, the Preferred Stock
Exchange Offer. See "The Exchange
Offers -- Purpose and Effect."
Expiration Date............... The Preferred Stock Exchange Offer will expire
at 5:00 p.m., New York City time, on October
23, 1998, or such later date and time to which
it is extended (the "Preferred Stock Expiration
Date").
Withdrawal.................... The tender of Existing Preferred Stock pursuant
to the Preferred Stock Exchange Offer may be
withdrawn at any time prior to the Preferred
Stock Expiration Date. Any Existing Preferred
Stock not accepted for exchange for any reason
will be returned without expense to the
tendering holder thereof as promptly as
practicable after the expiration or termination
of the Preferred Stock Exchange Offer.
Dividends on the New Preferred
Stock......................... Dividends on the New Preferred Stock will
accrue from the most recent date to which
dividends have been paid on the Existing
Preferred Stock surrendered in exchange
therefor or, if no dividends have been paid on
the Existing Preferred Stock, from the date of
issuance of the Existing Preferred Stock.
Conditions to the Preferred
Stock Exchange Offer.......... The Preferred Stock Exchange Offer is subject
to certain customary conditions, certain of
which may be waived by the Company. See "The
Exchange Offers -- Conditions to the Exchange
Offers."
Procedures for Tendering
Existing Preferred Stock...... Each holder of Existing Preferred Stock wishing
to accept the Preferred Stock Exchange Offer
must complete, sign and date the accompanying
letter of transmittal relating to the Preferred
Stock Exchange Offer (the "Preferred Stock
Letter of Transmittal"; the Preferred Stock
Letter of Transmittal, the C Note Letter of
Transmittal and the B Note Letter of
Transmittal are sometimes referred to herein
individually as a "Letter of Transmittal" and
collectively as the "Letters of Transmittal")
or a copy thereof, in accordance with the
instructions contained herein and therein, and
mail or otherwise deliver the Preferred Stock
Letter of Transmittal, or the copy, together
with the Existing Preferred Stock and any other
required documentation, to the Exchange Agent
(as defined) at the address set forth in the
Preferred Stock Letter of Transmittal. Persons
holding Existing Preferred Stock through DTC
and wishing to accept the Preferred Stock
Exchange Offer must do so pursuant to DTC's
Automated Tender Offer Program, by which each
tendering Participant will agree to be bound by
the Preferred Stock Letter of Transmittal. By
executing or agreeing to be bound by the
Preferred Stock Letter of Transmittal, each
holder will represent to the Company that,
among other things, (i) the New Preferred Stock
acquired pursuant to the Preferred Stock
Exchange Offer is being obtained in the
ordinary course of business of
10
<PAGE> 17
the person receiving such New Preferred Stock,
whether or not such person is the holder of
Existing Preferred Stock, (ii) neither the
holder nor any such other person has an
arrangement or understanding with any person to
participate in the distribution of such New
Preferred Stock within the meaning of the
Securities Act, (iii) neither the holder nor
any such other person is an "affiliate," as
defined under Rule 405 promulgated under the
Securities Act, of the Company or any
Guarantor, or if it is an affiliate, such
holder or such other person will comply with
the registration and prospectus delivery
requirements of the Securities Act to the
extent applicable, (iv) if such holder or other
person is not a broker-dealer, neither the
holder nor any such other person is engaged in
or intends to engage in the distribution of
such New Preferred Stock, and (v) if such
holder or other person is a broker-dealer, that
it will receive New Preferred Stock for its own
account in exchange for Existing Preferred
Stock that was acquired as a result of
market-making activities or other trading
activities and that it acknowledges that it
will be required to deliver a prospectus in
connection with any resale of such New
Preferred Stock.
Shelf Registration
Requirement................... Pursuant to the Preferred Stock Registration
Rights Agreement, the Company is required to
file a "shelf" registration statement for a
continuous offering pursuant to Rule 415 under
the Securities Act in respect of the Existing
Preferred Stock (and use its reasonable best
efforts to cause such shelf registration
statement to be declared effective by the
Commission and keep it continuously effective,
supplemented and amended for prescribed
periods) if (i) prior to the consummation of
the Preferred Stock Exchange Offer, the Company
determines that a majority in aggregate
liquidation preference of the New Preferred
Stock would not, upon receipt, be tradeable by
the holders thereof without restriction under
the Securities Act and the Exchange Act and
without material restrictions under applicable
Blue Sky or state securities laws, (ii) the
Company is not permitted to effect the
Preferred Stock Exchange Offer because of any
change in law or in applicable interpretations
thereof by the staff of the Commission, (iii)
the Preferred Stock Exchange Offer is not
consummated within 240 days of the date of
issuance of the Existing Preferred Stock, (iv)
under certain circumstances, upon the request
of the Initial Purchasers, or (v) any holder of
Existing Preferred Stock (other than an
Exchanging Dealer) is not eligible to
participate in the Preferred Stock Exchange
Offer or, in the case of any holder of Existing
Preferred Stock that participates in the
Preferred Stock Exchange Offer, such holder
does not receive freely tradeable New Preferred
Stock upon consummation of the Preferred Stock
Exchange Offer (other than due solely to the
status of such holder as an affiliate of the
Company within the meaning of the Securities
Act) and such holder notifies the Company
within six months of the consummation of the
exchange.
Acceptance of Existing
Preferred Stock and Delivery
of New Preferred Stock...... The Company will accept for exchange any and
all Existing Preferred Stock which is properly
tendered in the Preferred Stock
11
<PAGE> 18
Exchange Offer prior to the Preferred Stock
Expiration Date. The New Preferred Stock issued
pursuant to the Preferred Stock Exchange Offer
will be delivered promptly following the
Preferred Stock Expiration Date. See "The
Exchange Offers -- Terms of the Preferred Stock
Exchange Offer."
Exchange Agent................ United States Trust Company of New York is
serving as Exchange Agent.
Federal Income Tax
Considerations................ The exchange pursuant to the Preferred Stock
Exchange Offer should not be a taxable event
for federal income tax purposes. See "Certain
Federal Income Tax Considerations of the
Exchange Offers."
Effect of Not Tendering....... Following the completion of the Preferred Stock
Exchange Offer. Existing Preferred Stock that
is not tendered or that is tendered but not
accepted will not have any further registration
rights (except in certain circumstances with
respect to shelf registration as noted above)
and will continue to be subject to the existing
restrictions upon transfer thereof. See "The
Exchange Offers -- Consequences of Failure to
Exchange."
12
<PAGE> 19
TERMS OF THE NEW SECURITIES
NEW NOTES
Issuer........................ CLARK Material Handling Company.
Securities Offered............ $150.0 million aggregate principal amount of
10 3/4% Series D Senior Notes due 2006 (the
"New Notes"). The New Notes are being issued
under the Indenture between the Company and
United States Trust Company of New York, as
trustee (the "Original Trustee"), dated as of
July 17, 1998, as amended by the First
Supplemental Indenture, dated as of August 18,
1998 between the Company and the Trustee (such
Indenture and First Supplemental Indenture
shall collectively be referred to herein as the
"Indenture") relating to the Company's $20.0
million 10 3/4% Series C Senior Notes due 2006
(the "Series C Notes" together with the Series
B Notes and the New Notes, the "Notes").
Maturity Date................. November 15, 2006.
Interest Rate and Payment
Dates......................... The New Notes will bear interest at a rate of
10 3/4% per annum. Interest on the New Notes
will be payable semi-annually in cash in
arrears on November 15 and May 15 of each year,
commencing November 15, 1998.
Ranking....................... The New Notes will be senior unsecured
obligations of the Company, pari passu in right
of payment with all existing and future senior
indebtedness of the Company and senior to all
subordinated indebtedness of the Company. The
New Notes will be effectively subordinated to
all senior secured indebtedness of the Company,
including indebtedness under the Revolving
Credit Facility (as defined), to the extent of
the assets securing such indebtedness, and to
all existing and future indebtedness and other
obligations of the Company's Foreign
Subsidiaries. At June 30, 1998, after giving
effect to the Transactions, the Company would
have had $10.5 million of senior secured
indebtedness outstanding (exclusive of unused
commitments of $20.6 million under the
Revolving Credit Facility). See "Description of
Notes -- General."
Optional Redemption........... The New Notes will be redeemable at the option
of the Company, in whole or in part, on or
after November 15, 2001, at the redemption
prices set forth herein, plus accrued and
unpaid interest, if any, to the date of
redemption. Notwithstanding the foregoing, at
any time or from time to time prior to November
15, 1999, the Company may redeem up to one
third of the aggregate principal amount of the
Notes issued on or after the Issue Date at the
redemption price of 110.75% of the principal
amount thereof, plus accrued and unpaid
interest, if any, to the date of redemption,
with the net cash proceeds of one or more
Public Equity Offerings, provided that at least
two thirds of the aggregate principal amount of
the Notes issued on or after the Issue Date
remains outstanding immediately thereafter. See
"Description of Notes -- Redemption."
Mandatory Redemption.......... None.
13
<PAGE> 20
Guarantors.................... Repayment of the New Notes is unconditionally
and irrevocably guaranteed on a senior basis by
all Restricted Subsidiaries (as defined) of the
Company that are not Foreign Subsidiaries (the
"Guarantors"). On the date of initial issuance
of the Series C Notes (the "Issue Date"), the
Company had, and on the date hereof the Company
has, two Restricted Subsidiaries other than
Foreign Subsidiaries and, accordingly, there
are two Guarantors as of the date hereof.
Change of Control............. Upon the occurrence of a Change of Control, the
Company will be required to offer to purchase
all of the outstanding Notes at 101% of the
principal amount thereof, together with accrued
and unpaid interest, if any, to the date of
purchase. See "Description of
Notes -- Repurchase Upon Change of Control."
Certain Covenants............. The Indenture contains certain covenants,
including covenants that limit the ability of
the Company and its Restricted Subsidiaries to:
(i) incur additional indebtedness; (ii) make
restricted payments; (iii) enter into certain
transactions with affiliates; (iv) create
certain liens; (v) sell assets; and (vi) merge,
consolidate or sell substantially all of the
Company's assets. All of these limitations are
subject to various qualifications. See
"Description of Notes -- Certain Covenants."
Use of Proceeds............... The Company will not receive any proceeds from
the B Note Exchange Offer or the C Note
Exchange Offer.
For a more detailed discussion of the terms of the New Notes, see
"Description of Notes."
NEW PREFERRED STOCK
Securities Offered............ 20,000 shares of 13% Series B Senior
Exchangeable Preferred Stock due 2007 (the "New
Preferred Stock").
Dividends..................... Dividends on the New Preferred Stock will
accrue in each period ending on January 15,
April 15, July 15 and October 15 of each year
at a rate of 13% per annum of the liquidation
preference. On or before July 15, 2003 the
Company may, at its option, pay dividends in
cash or in additional fully paid and
non-assessable shares of New Preferred Stock
having an aggregate liquidation preference
equal to the amount of such dividends.
Thereafter, dividends may be paid in cash only.
Liquidation Preference........ $1,000 per share.
Ranking....................... The New Preferred Stock will rank senior in
right of payment with respect to all Junior
Securities, pari passu with respect to all
Parity Securities and junior with respect to
all indebtedness and other obligations of the
Company and its subsidiaries. See "Risk
Factors -- Ranking; Subsidiary Operations" and
"Description of Preferred Stock -- Ranking."
Mandatory Redemption.......... July 15, 2007.
Optional Redemption........... The New Preferred Stock will be redeemable at
the option of the Company, in whole or in part,
on or after July 15, 2003 at the redemption
prices set forth herein, plus accrued and
unpaid dividends, if any, to the date of
redemption. In addition, at the option of the
Company, the New Preferred Stock may be
redeemed in whole, but not in part, at any time
prior to July 15, 2003 at the redemption price
set forth herein, plus accrued and unpaid divi-
14
<PAGE> 21
dends, if any, to the date of redemption, with
the net cash proceeds of one or more Public
Equity Offerings. See "Description of Preferred
Stock -- Redemption."
Change of Control............. If a Change of Control occurs, each holder of
New Preferred Stock will have the right to
require the Company to purchase all or any part
of such holder's New Preferred Stock at 101% of
the liquidation preference thereof, plus
accrued and unpaid dividends, if any, to the
date of purchase.
Certain Covenants............. The Certificate of Designation contains
customary covenants that limit the ability of
the Company to redeem or repurchase Junior
Securities or Parity Securities or pay
dividends thereon, to merge or consolidate with
any other entity, to sell assets and to enter
into transactions with affiliates. The
Certificate of Designation also requires the
Company to deliver certain reports and
information to the holders of the New Preferred
Stock.
Exchange Feature.............. On any scheduled dividend payment date, the
Company may, at its option, exchange all but
not less than all of the shares of New
Preferred Stock then outstanding for the
Company's Preferred Stock Exchange Notes (as
defined).
For a more detailed description of the terms of the New Preferred Stock,
see "Description of Preferred Stock."
PREFERRED STOCK EXCHANGE NOTES
Securities Offered............ 13% Subordinated Notes due 2007 (the "Preferred
Stock Exchange Notes").
Maturity Date................. July 15, 2007.
Interest Rate and Payment
Dates......................... The Preferred Stock Exchange Notes will bear
interest at a rate of 13% per annum. Interest
on the Preferred Stock Exchange Notes will be
payable semi-annually in arrears on January 15
and July 15 of each year, commencing with the
first such date to occur after the date of
exchange. On or before July 15, 2003 the
Company may, at its option, pay interest in
cash or in additional Preferred Stock Exchange
Notes having an aggregate principal amount
equal to the amount of such interest.
Thereafter, interest may be paid in cash only.
Ranking....................... The Preferred Stock Exchange Notes will be
unsecured obligations of the Company, junior in
right of payment to all existing and future
Senior Indebtedness (as defined), including the
Notes, and pari passu with all other
Indebtedness of the Company. At June 30, 1998,
after giving effect to the Transactions, the
Company would have had $160.5 million aggregate
principal amount of Senior Indebtedness
outstanding (exclusive of unused commitments of
$20.6 million under the Revolving Credit
Facility). See "Risk Factors -- Ranking;
Subsidiary Operations" and "Description of
Preferred Stock Exchange Notes -- Ranking."
Optional Redemption........... The Preferred Stock Exchange Notes will be
redeemable at the option of the Company, in
whole or in part, on or after July 15, 2003, at
the redemption prices set forth herein, plus
accrued and unpaid interest, if any, to the
date of redemption. In addition, at any time
prior to July 15, 2003, the Company may redeem
the Preferred Stock Exchange Notes in whole,
but not in part, at the
15
<PAGE> 22
redemption price set forth herein, plus accrued
and unpaid interest, if any, to the date of
redemption, with the net cash proceeds of one
or more Public Equity Offerings. See
"Description of Preferred Stock Exchange
Notes -- Redemption."
Change of Control............. Upon a Change of Control, the Company will be
required to purchase all of the outstanding
Preferred Stock Exchange Notes at 101% of the
principal amount thereof, together with accrued
and unpaid interest, if any, to the date of
purchase.
Certain Covenants............. The indenture governing the Preferred Stock
Exchange Notes (the "Preferred Stock Exchange
Note Indenture") will contain certain
covenants, including covenants that limit the
ability of the Company and its Restricted
Subsidiaries to: (i) make restricted payments;
(ii) enter into certain transactions with
affiliates; (iii) sell assets; and (iv) merge,
consolidate or sell substantially all of the
Company's assets. All of these limitations are
subject to various qualifications.
For a more detailed description of the terms of the Preferred Stock
Exchange Notes, see "Description of Preferred Stock Exchange Notes."
RISK FACTORS
An investment in the securities offered hereby involves a high degree of
risk. For a discussion of certain matters that should be considered by
prospective investors in connection with the Exchange Offer, see "Risk Factors."
16
<PAGE> 23
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
Through November 26, 1996, the Company operated as wholly owned
subsidiaries of the Predecessor's Parent. On November 27, 1996, the Company was
acquired by Holdings. Accordingly, the summary financial data shown below is not
necessarily comparable as a result of these ownership changes and the resulting
adjustments required for purchase business combinations under generally accepted
accounting principles. The summary historical data for the year ended December
31, 1994 have been derived from the audited financial statements of the Company.
The summary historical data for the year ended December 31, 1995, the eleven
month period ended November 26, 1996, the one month period ended December 31,
1996, and the year ended December 31, 1997 have been derived from the audited
consolidated financial statements of the Company included elsewhere in this
Prospectus. The summary historical data for the six month periods ended June 30,
1997 and 1998 and the actual balance sheet data at June 30, 1998 were derived
from the unaudited consolidated financial statements of the Company included
elsewhere in this Prospectus. In the opinion of management, the historical
unaudited financial data for the six month periods ended June 30, 1997 and 1998,
and the LTM period, contain all adjustments (consisting only of normal recurring
adjustments) necessary to present fairly the information shown. The information
contained in this table should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
"Unaudited Pro Forma Combined Financial Information" and the historical
consolidated financial statements of the Company, including the notes thereto,
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
WHOLLY OWNED SUBSIDIARIES
OF THE PREDECESSOR'S PARENT THE COMPANY
------------------------------ ---------------------------------------------------------
LAST
ELEVEN ONE SIX MONTHS TWELVE
YEAR ENDED MONTHS MONTH YEAR ENDED MONTHS
DECEMBER 31, ENDED ENDED ENDED JUNE 30, ENDED
--------------- NOVEMBER 26, DECEMBER 31, DECEMBER 31, --------------- JUNE 30,
1994 1995 1996 1996 1997 1997 1998 1998
------ ------ ------------ ------------ ------------ ------ ------ ---------
($ IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Net Sales...................... $472.7 $528.8 $404.6 $46.8 $489.3 $229.9 $269.0 $528.4
Gross Profit................... 42.9 44.2 45.6 4.9 58.2 26.4 33.4 65.2
Engineering, Selling and
Administrative Expenses....... 41.7 30.6 26.6 3.0 37.1 17.7 22.5 41.9
Income (Loss) from
Operations(2)................. (14.0) 3.1 13.3 1.9 21.0 8.7 10.9 23.2
Ratio of Earnings to Fixed
Charges(3).................... -- -- -- 1.4x 1.5x 1.2x 1.3x 1.5x
OTHER DATA:
EBITDA(4)...................... $ 10.3 $ 24.1 $ 27.4 $ 3.0 $ 33.3 $ 15.2 $ 17.8 $ 35.9
Net Income (Loss).............. (25.8) (18.8) (2.1) 0.5 7.9 1.3 1.5 8.1
Net Income (Loss) Available
for Common
Stockholder(5)................ (25.8) (18.8) (2.1) 0.5 7.9 1.3 1.5 8.1
Net Cash Provided By (Used In)
Operating Activities.......... 9.0 7.2 4.1 2.8 11.1 8.0 (1.8) 1.3
Net Cash Provided By (Used In)
Investing Activities.......... 16.7 (4.8) (3.1) (0.3) (21.0) (2.6) (5.6) (19.1)
Net Cash Provided By (Used In)
Financing Activities.......... (29.2) (2.1) 1.5 0.3 0.3 (5.1) 8.1 8.6
Depreciation and
Amortization(6)............... 10.6 12.3 10.1 1.1 12.3 6.5 6.9 12.7
Capital Expenditures........... 6.6 5.3 3.2 0.3 6.3 2.6 5.6 9.3
Ratio of EBITDA To Net Interest Expense(7).................................................................................
Ratio of EBITDA To Net Fixed Charges(8)....................................................................................
<CAPTION>
PRO FORMA(1)
------------------------
LAST
TWELVE
YEAR MONTHS
ENDED ENDED
DECEMBER 31, JUNE 30,
1997 1998
------------ ---------
($ IN MILLIONS)
<S> <C> <C>
OPERATING DATA:
Net Sales...................... $509.2 $534.1
Gross Profit................... 62.7 66.9
Engineering, Selling and
Administrative Expenses....... 41.2 43.3
Income (Loss) from
Operations(2)................. 21.6 23.6
Ratio of Earnings to Fixed
Charges(3).................... 1.5x 1.5x
OTHER DATA:
EBITDA(4)...................... $ 34.3 $ 36.5
Net Income (Loss).............. 6.0 5.9
Net Income (Loss) Available
for Common
Stockholder(5)................ 3.3 3.2
Net Cash Provided By (Used In)
Operating Activities.......... -- --
Net Cash Provided By (Used In)
Investing Activities.......... -- --
Net Cash Provided By (Used In)
Financing Activities.......... -- --
Depreciation and
Amortization(6)............... 12.7 12.9
Capital Expenditures........... 6.8 9.5
Ratio of EBITDA To Net Interest 2.1x 2.2x
Ratio of EBITDA To Net Fixed Ch 1.8x 1.9x
</TABLE>
(footnotes on following page)
17
<PAGE> 24
<TABLE>
<CAPTION>
AT JUNE 30, 1998
---------------------
AS
ACTUAL ADJUSTED(9)
------ -----------
($ IN MILLIONS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and Cash Equivalents(10)............................... $ 7.1 $ 8.9
Debt(11).................................................... 140.5 160.5
Senior Preferred Stock...................................... -- 20.0
Stockholder's Equity........................................ 25.7 25.7
</TABLE>
- ---------------
(1) The summary pro forma financial data for the year ended December 31, 1997
and the LTM period were derived from the "Unaudited Pro Forma Combined
Financial Information" included elsewhere in this Prospectus which adjusts
the Company's operating data to reflect the acquisition of Blue Giant.
Furthermore, the Pro Forma Other Data has been adjusted to reflect the sale
of the Series C Notes and the Existing Preferred Stock as follows: includes
the amortization of debt issuance costs of $0.1 million, the effect of the
interest relating to the Series C Notes of $2.2 million and the dividends
on the Existing Preferred Stock of $2.7 million. The pro forma financial
data are presented for informational purposes only and do not purport to
represent what the Company's financial position or results of operations
would actually have been if the acquisition of Blue Giant had occurred on
the assumed dates or to project the Company's financial position or results
of operations at any future date or for any future periods.
(2) Includes corporate charges allocated to the Company by the Predecessor's
Parent of $8.5 million, $7.0 million and $5.7 million in the years ended
December 31, 1994 and 1995, and the eleven month period ended November 26,
1996, respectively. Also includes severance and exit charges of $6.7
million and $3.5 million in the years ended December 31, 1994 and 1995,
respectively. See the Company's historical financial statements included
elsewhere herein.
(3) The Ratio of Earnings to Fixed Charges is computed as follows: (a) earnings
consists of consolidated income (loss) before income taxes and
extraordinary items plus fixed charges; (b) fixed charges consist of
interest expense, amortization of deferred debt issuance costs, along with
any discount or premiums and the amount of rental expense considered by
management to reasonably represent the interest factor related to such
rental expense. During the years ended December 31, 1994, 1995 and the
eleven month period ended November 26, 1996, the earnings were insufficient
to cover fixed charges by $24.5 million, $17.3 million and $2.1 million,
respectively.
(4) EBITDA represents Income (Loss) from Operations plus Depreciation and
Amortization, severance and exit charges, and corporate charges allocated
to the Company by the Predecessor's Parent described in Note 2 above, less
the addition of certain legal, accounting and administrative expenses to
replace such services previously provided by the Predecessor's Parent
(estimated to be $1.5 million for each of 1994 and 1995 and $1.4 million
for the eleven months ended November 26, 1996). For subsequent periods,
actual amounts are included in administrative expenses. In addition, for
the year ended December 31, 1995 and the eleven months ended November 26,
1996, EBITDA has been adjusted by $0.2 million and $0.2 million,
respectively, to eliminate amortization of deferred gain relating to the
predecessor's sale leaseback of certain facilities and eliminate rental and
related costs of an abandoned facility, net of the incremental costs at
other facilities for relocated employees. The Company has included
information concerning EBITDA herein because it understands that such
information is used by certain investors as one measure of an issuer's
historical ability to service debt. EBITDA should not be considered as an
alternative to, or more meaningful than, earnings from operations or other
traditional indicators under generally accepted accounting principles.
EBITDA as reported by the Company may not be comparable to similarly titled
measures reported by other issuers of securities.
(5) Net Income (Loss) Available for Common Stockholder is defined as Net Income
(Loss) less dividends on Senior Preferred Stock.
(6) Excludes amortization of historical debt issuance costs of $0.8 million,
$0.5 million and $0.3 million for the years ended December 31, 1994 and
1995 and the eleven months ended November 26, 1996, respectively, which
have not been deducted from Income (Loss) from Operations. For subsequent
periods, the amortization of debt issuance costs is included in Other
Income and Expenses.
(7) Net Interest Expense is defined as Interest Expense less Interest Income
and excludes interest on capital lease obligations. These capital leases
represent forklift trucks sold to financial institutions in
18
<PAGE> 25
Europe and leased back by the Company and then leased to customers. The
related income and interest expense are reflected in Income (Loss) from
Operations and EBITDA.
(8) Net Fixed Charges is defined as the sum of Net Interest Expense and
dividends on Senior Preferred Stock.
(9) Adjusted to give effect to the Transactions. See "Use of Proceeds" and
"Capitalization."
(10) Includes cash, cash equivalents and cash securing letters of credit.
(11) Excludes capital lease obligations of $7.3 million discussed in Note 7
above. See "Capitalization."
19
<PAGE> 26
RISK FACTORS
An investment in the securities offered hereby involves a high degree of
risk. Holders of the Existing Securities should give careful consideration to
the specific factors set forth below and the other information set forth herein
in connection with the Exchange Offer. The Risk Factors set forth below are
generally applicable to the Exchange Securities.
SIGNIFICANT LEVERAGE
The Company is highly leveraged. At June 30, 1998, after giving effect to
the Transactions, the Company's debt, Senior Preferred Stock and stockholder's
equity would have been $160.5 million (including subsidiary indebtedness), $20.0
million and $25.7 million, respectively. The Company would also have had
borrowing availability under the Revolving Credit Facility of $20.6 million,
subject to the borrowing conditions contained therein. For the year ended
December 31, 1997 and the LTM period ended June 30, 1998, the ratio of EBITDA
(as defined) to net interest expense would have been 2.1 to 1 and 2.2 to 1,
respectively, after giving pro forma effect to the acquisition of Blue Giant and
the sale of the Series C Notes and Existing Preferred Stock as if each had
occurred on January 1, 1997 and July 1, 1997. For the year ended December 31,
1997 and the LTM period ended June 30, 1998, the ratio of EBITDA (as defined) to
net fixed charges would have been 1.8 to 1 and 1.9 to 1, respectively, after
giving pro forma effect to the acquisition of Blue Giant and the sale of the
Series C Notes and Existing Preferred Stock as if each had occurred on January
1, 1997 and July 1, 1997.
The Company's high level of debt and debt service requirements will have
several important consequences, including the following: (i) a substantial
portion of the Company's cash flow from operations will be dedicated to
servicing its indebtedness; (ii) the covenants contained in the Company's
indebtedness will impose certain restrictions on the Company which, among other
things, will limit its ability to borrow additional funds; (iii) the Company's
ability to obtain additional financing in the future for working capital,
capital expenditures, acquisitions, general corporate purposes or other purposes
may be impaired; and (iv) the Company's ability to withstand competitive
pressures, adverse economic conditions and adverse changes in governmental
regulations may be negatively affected.
The Company's ability to meet its debt service obligations and to pay
dividends on the New Preferred Stock will depend upon its future performance,
which will be subject to general economic conditions, its ability to achieve
cost savings and other factors affecting the operations of the Company, many of
which are beyond its control. If the Company cannot generate sufficient cash
flow from operations in the future to service its debt, it may be required to
refinance all or a portion of such debt (including the Notes), sell assets or
obtain additional financing. There can be no assurance that any such refinancing
or asset sales would be possible or that any additional financing could be
obtained.
RANKING; SUBSIDIARY OPERATIONS
The New Notes, like the Existing Notes, will effectively rank junior to any
secured Indebtedness of the Company, to the extent of the assets securing such
Indebtedness, including Indebtedness incurred under the Revolving Credit
Facility. As of June 30, after giving effect to the Transactions, the Company
would have had $10.5 million of secured indebtedness outstanding, exclusive of
unused commitments of $20.6 million under the Revolving Credit Facility.
The Preferred Stock Exchange Notes, if issued, will be unsecured
obligations of the Company and will be subordinated in right of payment to all
existing and future Senior Indebtedness of the Company, including the New Notes
and the Existing Notes. In the event of the insolvency, liquidation,
reorganization, dissolution or other winding up of the Company, or upon the
maturity of any Senior Indebtedness, whether by lapse of time, acceleration or
otherwise, the holders of Senior Indebtedness must be paid in full in cash
before any payment of principal or interest in respect of the Preferred Stock
Exchange Notes. As a result, holders of Preferred Stock Exchange Notes may
recover ratably less than general creditors of the Company.
20
<PAGE> 27
The New Preferred Stock will rank junior to all Indebtedness and other
obligations of the Company and its subsidiaries.
Although the Company's North American operations are owned directly and
through Restricted Subsidiaries that are Guarantors of the New Notes, its
foreign operations are conducted through the Foreign Subsidiaries. The Foreign
Subsidiaries have not guaranteed or otherwise become obligated with respect to
the New Notes, and no Subsidiary has guaranteed or otherwise become obligated
with respect to the New Preferred Stock or, if issued, the Preferred Stock
Exchange Notes. The New Notes, New Preferred Stock and, if issued, the Preferred
Stock Exchange Notes will therefore be effectively subordinated to all existing
and future liabilities, including indebtedness, of the Foreign Subsidiaries and,
in the case of the New Preferred Stock and the Preferred Stock Exchange Notes,
of each other Subsidiary. At June 30, 1998, the Foreign Subsidiaries had
liabilities of approximately $43.3 million reflected on the Company's
consolidated balance sheet. In addition, the Foreign Subsidiaries assumed
liabilities of approximately $8.0 million in connection with the Samsung
Forklift Acquisition.
GUARANTEES
The repayment of the New Notes will be unconditionally and irrevocably
guaranteed on a senior basis by all Restricted Subsidiaries of the Company that
are not Foreign Subsidiaries. On the date hereof, the Company has two
subsidiaries other than the Foreign Subsidiaries and, accordingly, there are two
Guarantors on the date hereof. The guarantees of any present or future
Guarantors may be subject to legal challenge under applicable provisions of the
United States Bankruptcy Code or comparable provisions of state fraudulent
transfer or conveyance laws. If such a challenge were upheld, the guarantees of
such Guarantors would be invalidated and unenforceable, and it is possible that
the holders of the New Notes would be ordered by a court to turn over to other
creditors of such Guarantors or to their trustees in bankruptcy all or a portion
of the payments made to them pursuant to the guarantees.
CHANGE OF CONTROL PROVISIONS; LIMITATIONS ON RIGHTS OF REPAYMENT
Upon the occurrence of a Change of Control, each holder of New Notes, New
Preferred Stock and, if issued, Preferred Stock Exchange Notes will have the
right to require the Company to purchase all or part of such holder's New Notes,
New Preferred Stock or Preferred Stock Exchange Notes, as the case may be. The
Change of Control provisions will not afford any protection in a highly
leveraged transaction, including such a transaction initiated by the Company,
management of the Company or an affiliate of the Company, if such transaction
does not result in a Change of Control. Existing or future indebtedness of the
Company or obligations of the Subsidiaries may prohibit the Company from
repurchasing or redeeming any of the New Notes, New Preferred Stock and, if
issued, Preferred Stock Exchange Notes, as the case may be, upon a Change of
Control. Moreover, the ability of the Company to repurchase or redeem the New
Notes, New Preferred Stock and, if issued, Preferred Stock Exchange Notes, as
the case may be, following a Change of Control will be limited by the Company's
then-available resources. Accordingly, the Change of Control provisions are
likely to be of limited usefulness in such situations. See "Description of
Notes -- Purchase Upon Change of Control," "-- Amendment, Supplement and
Waiver," "Description of Preferred Stock -- Change of Control" and "Description
of Preferred Stock Exchange Notes -- Purchase Upon Change of Control."
TAX CONSEQUENCES OF DEEMED DISTRIBUTIONS AND STOCK DISTRIBUTIONS WITH RESPECT TO
THE NEW PREFERRED STOCK AND ORIGINAL ISSUE DISCOUNT ON PREFERRED STOCK EXCHANGE
NOTES
Because the issue price of the New Preferred Stock distributed in lieu of
payments of cash dividends will be equal to the fair market value of such
distributed New Preferred Stock at the time of distribution, it is possible,
depending on its fair market value at that time, that such New Preferred Stock
may be issued with a significant amount of redemption premium. In such event
holders would be required to include such premium in income as a distribution
over the remaining term of the New Preferred Stock in advance of receiving the
cash attributable to such income, and such New Preferred Stock might not trade
separately, which might adversely affect the liquidity of the New Preferred
Stock. Further, to the extent holders of New Preferred
21
<PAGE> 28
Stock receive additional shares of New Preferred Stock as a distribution with
respect to such New Preferred Stock, such holders would be required to include
in gross income for Federal income tax purposes the fair market value of such
stock, even though such holders have not received such fair market value in
cash.
Finally, the Company may, at its option and under certain circumstances,
exchange Preferred Stock Exchange Notes for the New Preferred Stock. Any such
exchange will be a taxable event to holders of the New Preferred Stock.
Furthermore, the Preferred Stock Exchange Notes may in certain circumstances be
treated as having been issued with original issue discount for Federal income
tax purposes. In such event, holders of Preferred Stock Exchange Notes will be
required to include such original issue discount in income over the term of the
Preferred Stock Exchange Notes, in advance of the receipt of the cash
attributable to such income. Depending upon a holder's particular circumstances,
the tax consequences of holding Preferred Stock Exchange Notes may be less
advantageous than the tax consequences of holding New Preferred Stock because,
for example, payments of interest on the Preferred Stock Exchange Notes will not
be eligible for any dividends received deduction that may be available to
corporate holders and Preferred Stock Exchange Notes may be issued with greater
amounts of original issue discount than the redemption premium on the New
Preferred Stock. See "Certain Federal Income Tax Considerations."
PRODUCT LIABILITY AND OTHER CLAIMS
From time to time product liability claims are asserted against the Company
for various injuries alleged to have resulted from defects in the manufacture
and/or design of its products. As of August 25, 1998, the Company had
approximately 66 pending lawsuits relating to claims arising from accidents
involving its products. Most of these lawsuits are in various stages of pretrial
completion, and certain plaintiffs are seeking punitive as well as compensatory
damages. The Company is self-insured, up to certain limits, for these product
liability claims, as well as certain exposures related to general workers'
compensation and automobile liability. The Company has recorded and maintains on
its balance sheet reserves relating to the estimated liability, based in part
upon actuarial determinations, of the Company's aggregate exposure for such
self-insured risks. There can be no assurance that these reserves are adequate.
Even if the Company's reserves are adequate to cover its exposure to potential
judgements, the payment by the Company of a significant judgement rendered
against it would affect the cash position of the Company.
The Company also has certain other contingent liabilities or uncertainties
for other obligations, including contingent liabilities relating to the
Company's guarantees of certain floor plan obligations and its obligation to
repurchase equipment from certain dealers and customers upon the occurrence of
certain events. The unfavorable resolution of product liability claims or any
other contingencies or uncertainties in the future could have a material adverse
effect on the Company. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Contingencies and Uncertainties" and
"Business -- Legal Proceedings."
INDUSTRY CYCLICALITY AND SUBSTANTIAL COMPETITION
Sales of products manufactured and sold by the Company have historically
been subject to substantial cyclical variation based, among other things, on
general economic conditions. The Company has been experiencing a strong demand
for forklift trucks in North America during the past several years. Industry
sources estimate that this market strength will soften in 1999 with a modest
improvement thereafter. There can be no assurance as to the magnitude or timing
of any future decline or recovery, or that any future decline will not have a
material adverse effect on the Company. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
The lift truck market in which the Company competes is highly competitive.
The Company encounters significant competition particularly from lower cost
foreign competitors, including manufacturers located in Japan and South Korea.
The Company competes on the basis of quality, price, on-time delivery, product
line, ease of use, safety, comfort and customer service. Many of the Company's
competitors have greater financial resources than the Company. Additionally,
certain of the Company's products are subject to changing technology which could
place the Company at a competitive disadvantage relative to product innovations
by
22
<PAGE> 29
competitors. There can be no assurance that the Company will be able to achieve
the technological advances that may be necessary to remain competitive.
DEPENDENCE ON KEY SUPPLIERS
The Company's future success will depend, in part, on its ability to
maintain continuity of supply of critical parts and to develop alternative
supply arrangements as needed. The failure of a key supplier to meet the
Company's requirements on a timely basis or the loss of a key supplier could
lead to delays in the Company's manufacturing operations and have a material
adverse effect on the Company.
FOREIGN OPERATIONS
The Company's products are sold in more than 80 countries worldwide.
Accordingly, a substantial portion of the sales of the Company are generated in
foreign currencies, while the costs associated with these sales are only
partially incurred in the same currencies. Consequently, the Company's financial
performance and results of operations are affected by fluctuations between the
U.S. dollar and such foreign currencies. In addition, currency fluctuations
could improve the competitive position of the Company's foreign competitors if
the value of the U.S. dollar rises in relation to the local currencies of such
competitors. The Company is also subject to other risks associated with
operating in foreign countries, including imposition of limitations on
conversion of foreign currencies into dollars or remittance of dividends and
other payments by foreign subsidiaries, imposition or increase of withholding
and other taxes on remittances and other payments by foreign subsidiaries,
hyperinflation in certain foreign countries and imposition or increase of
investment and other restrictions by foreign governments.
Several countries in Southeast Asia, including South Korea, have recently
experienced significant devaluation of their currencies, a reduction in the
value of their capital markets and a general decline in overall economic
conditions. In addition, these countries have experienced a number of bank
failures and consolidations. CLARK Asia (as defined) will conduct substantially
all of its manufacturing operations in South Korea. As a result, despite
management's expectation that only approximately five percent of the Company's
sales will be to countries within the Southeast Asia region, the business,
financial condition and results of operations of the Company may be influenced
by the general political, social and economic situation in Southeast Asia. The
Company may be subject to political and economic risks, including political
instability, currency controls and exchange rate fluctuations, and changes in
import/export regulations, tariffs, duties and quotas. No assurance can be given
that the risks associated with operating in foreign countries, including in
Southeast Asia, will not have a material adverse effect on the Company in the
future.
RISKS RELATING TO SOUTH KOREA
In addition to the risks specified above under "-- Foreign Operations,"
businesses in South Korea are presently subject to significant labor unrest. A
week-long work stoppage occurred at Samsung upon the announcement of the sale of
Samsung's construction equipment business to CLARK and another third party.
Although the Samsung Forklift business represents a relatively minor portion of
the overall construction equipment assets sold by Samsung, there can be no
assurance that CLARK Asia will not experience labor strife in the future.
Relations between South Korea and the Democratic People's Republic of Korea
("North Korea") have been tense over most of South Korea's history. Recent
events involving, among other things, North Korea's refusal to comply with the
Nuclear Non-Proliferation Treaty and the deployment of armed troops by North
Korea into the demilitarized zone dividing North Korea and South Korea in July
1997, have caused the level of tension between the two Koreas to increase.
Incidents affecting relations between the two Koreas continually occur. No
assurance can be given as to whether or when this situation will be resolved or
change abruptly as a result of current or future events. An adverse change in
economic or political conditions in South Korea or in its relations with North
Korea could have a material adverse effect on CLARK Asia's business.
23
<PAGE> 30
RISKS RELATING TO THE SAMSUNG FORKLIFT ACQUISITION
Samsung Forklift was not operated as a separate business unit by Samsung
and, as such, did not have regularly prepared financial statements prior to the
Samsung Forklift Acquisition. In addition, Samsung Forklift's books and records
have not been audited, and the Company has been granted only limited access to
these books and records. Consequently, financial information presented herein
concerning Samsung Forklift has required estimation by the Company and must
therefore not be relied upon to a material extent. There likely will be changes,
perhaps significant, to the financial information relating to Samsung Forklift
relied upon by the Company.
The realization of the full benefits of the Samsung Forklift Acquisition by
the Company will require the coordination of each company's operations, the
implementation of appropriate operational, financial and management systems and
controls, and the integration of the Samsung Forklift business into the
Company's administrative, finance and marketing organizations. This will in turn
require substantial attention from the Company's management team. The diversion
of management attention, as well as any other difficulties which may be
encountered in the transition and integration process, could have an adverse
impact on the Company. In addition, there can be no assurance that the Company
will be successful in integrating the operations of Samsung Forklift, or that
any planned benefits will be realized.
INTEGRATION OF ACQUIRED OPERATIONS
In connection with making acquisitions and in evaluating potential
acquisition opportunities, including the Samsung Forklift Acquisition, the
Company makes certain assumptions regarding the future combined results of the
existing and acquired operations. In certain acquisition transactions, the
acquisition analysis includes assumptions regarding the consolidation of
operations and improved operating cost structures for the combined operations.
There can be no assurance, however, that such consolidations or improved cost
structures will be achieved on the assumed time schedule, if at all. Any failure
to integrate the operations of an acquired business or significant delay in such
integration could have a material adverse effect on the Company's financial
condition and results of operations. In addition, the Company expects to
continue to evaluate and, where appropriate, pursue acquisition opportunities
that provide products or services that complement those offered by the Company.
There can be no assurance, however, that suitable acquisition candidates will be
identified in the future, or that the Company will be able to finance such
acquisitions on favorable terms. Further, there can be no assurances that any
future acquisitions will be integrated successfully into the Company's
operations or will achieve desired financial objectives.
GOVERNMENT REGULATION
The Company's facilities and operations are required to comply with and are
subject to federal, state, local and foreign environmental and worker health and
safety laws, regulations and ordinances, including those relating to air
emissions, wastewater discharges and the management and disposal of certain
materials, substances and wastes ("Environmental Laws"). The nature of the
Company's operations and the history of industrial uses at some of its
facilities expose the Company to the risk of liabilities or claims with respect
to environmental and worker health and safety matters. The Company may also have
contingent responsibility for liabilities with respect to environmental matters
arising in connection with the prior operations of the material handling
business of CLARK Equipment Company, a predecessor of the Company ("CEC"). There
can be no assurance that material costs will not be incurred in connection with
such liabilities or claims.
Future events, such as changes in existing laws and regulations or their
interpretations, may give rise to additional compliance costs or liabilities
that could have a material adverse effect on the Company's business, financial
condition or results of operations. Compliance with more stringent laws or
regulations, as well as more vigorous enforcement policies of regulatory
agencies or stricter or different interpretations of existing laws, may require
additional expenditures by the Company which may be material. See "Business --
Environmental Matters."
24
<PAGE> 31
DEPENDENCE ON MANAGEMENT AND KEY PERSONNEL
Certain of the executive officers of the Company, including among others
Dr. Martin M. Dorio, President and Chief Executive Officer of the Company, are
key to the management and direction of the Company. The loss of the services of
such persons could have a material adverse effect on the Company, and there can
be no assurance that the Company would be able to find replacements for such
persons with equivalent business experience and skills.
LABOR DISPUTES
Management believes that its relations with its employees are good.
However, there can be no assurance that labor disputes will not occur in the
future which, depending upon the timing and duration of such disputes, could
have a material adverse effect on the Company. See "Business -- Employees."
OWNERSHIP OF HOLDINGS AND THE COMPANY
Citicorp Venture Capital Ltd. ("CVC"), Dr. Martin M. Dorio, President and
Chief Executive Officer of the Company, Thomas J. Snyder, Michael A. Delaney,
James A. Urry and Diether Klingelnberg, who are members of the Board of
Directors of the Company, certain other members of the management of the Company
and certain employees of CVC own all of the outstanding voting stock of
Holdings, which owns all of the outstanding capital stock of the Company. By
virtue of such stock ownership, such persons have the power to direct the
affairs of the Company and are able to determine the outcome of all matters
required to be submitted to stockholders for approval, including the election of
a majority of the Company's directors and amendment of the Company's certificate
of incorporation. See "Ownership of the Company."
POTENTIAL DILUTION OF VOTING INTEREST
To the extent Existing Notes are exchanged for New Notes, up to $150
million aggregate principal amount of New Notes will be outstanding following
consummation of the Exchange Offer, and such New Notes will be deemed to be a
single series of debt securities outstanding under the Indenture. Accordingly,
the individual voting interest of each holder of Series B Notes under the
Original Indenture and Series C Notes under the Indenture will be substantially
diluted. See "Description of Notes."
LACK OF PUBLIC MARKET
The Existing Securities are currently eligible for trading in the PORTAL
Market. The New Notes, the New Preferred Stock and, if issued, the Preferred
Stock Exchange Notes will be new securities for which there is currently no
public market. The Company does not intend to list the New Notes, New Preferred
Stock and, if issued, the Preferred Stock Exchange Notes on any national
securities exchange or to seek the admission thereof to trading in the National
Association of Securities Dealers Automated Quotation System. The Initial
Purchasers have advised the Company that they currently intend to make a market
in the New Notes, New Preferred Stock and, if issued, the Preferred Stock
Exchange Notes. However, the Initial Purchasers are not obligated to do so and
any market making may be discontinued at any time without notice. There can be
no assurance as to the development of any market or the liquidity of any market
that may develop for the New Notes, New Preferred Stock and, if issued, the
Preferred Stock Exchange Notes.
YEAR 2000
The Company is aware of the issues associated with the programming code in
existing computer systems as the millennium approaches. The "year 2000" problem
is pervasive and complex as virtually every computer operation will be affected
in some way by the rollover of the two digit year value to 00. The issue is
whether computer systems will properly recognize date-sensitive information when
the year changes to 2000. Systems that do not recognize such information could
generate erroneous data or cause a system to fail. The Company plans to install
new year 2000 compliant software in its information technology systems at each
of its worldwide locations during 1998 and 1999. In addition, CLARK is in the
process of making contact with each of the third party suppliers, dealers and
other parties with which it has a material relationship in order to assess
25
<PAGE> 32
whether the Company faces any risks relating to third party year 2000 problems.
There can be no assurance that a year 2000 problem on the computer systems of
CLARK or a third party will not have a material adverse effect on the Company.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Year 2000."
26
<PAGE> 33
USE OF PROCEEDS
The Company will not receive any proceeds from the Exchange Offer. The net
proceeds to the Company from the sale of the Series C Notes and the Existing
Preferred Stock, after deducting the Initial Purchasers' discount, was
approximately $40.6 million, excluding $0.4 million in accrued interest on the
Series C Notes from May 15, 1998. The Company used and will continue to use the
proceeds of the sale of the Series C Notes and the Existing Preferred Stock as
follows: (i) approximately $30.4 million was applied to finance the Samsung
Forklift Acquisition; (ii) approximately $3.4 million was or will be applied to
pay fees and expenses relating to the Transactions; and (iii) approximately $6.8
million was or will be applied to fund capital expenditures and working capital
requirements relating to the Samsung Forklift Acquisition. See "The Samsung
Forklift Acquisition."
27
<PAGE> 34
CAPITALIZATION
The following table sets forth the capitalization of the Company as of June
30, 1998 and as adjusted to give effect to the sale of the Series C Notes and
the Existing Preferred Stock and the application of the net proceeds therefrom
to consummate the Samsung Forklift Acquisition. This table should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations," the Company's historical financial statements, the
"Unaudited Pro Forma Financial Information" and the notes thereto, and "The
Samsung Forklift Acquisition" included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF JUNE 30, 1998
------------------------
ACTUAL AS ADJUSTED(5)
------ --------------
($ IN MILLIONS)
<S> <C> <C>
Cash(1)..................................................... $ 7.1 $ 8.9
====== ======
Debt (including current portion):
The Revolving Credit Facility(2).......................... $ 9.4 $ 9.4
Other Debt(3)............................................. 1.1 1.1
The Original Notes........................................ 130.0 130.0
The New Notes............................................. 0.0 20.0
------ ------
Total Debt(4)..................................... 140.5 160.5
Senior Preferred Stock...................................... -- 20.0
Stockholder's Equity........................................ 25.7 25.7
------ ------
Total Capitalization.............................. $166.2 $206.2
====== ======
</TABLE>
- ---------------
(1) Includes cash, cash equivalents and cash securing letters of credit.
(2) Borrowings of up to $30.0 million under the Revolving Credit Facility are
available to the Company for working capital and general corporate purposes,
subject to the borrowing conditions contained therein. The Company has an
outstanding balance of $10.1 million under the Revolving Credit Facility as
of August 14, 1998. See "Description of Certain Indebtedness."
(3) Includes debt held by the Company's Foreign Subsidiaries of $1.1 million.
See "Description of Certain Indebtedness."
(4) Excludes capital lease obligations of $7.3 million. These capital leases
represent forklift trucks sold to financial institutions in Europe and
leased back by the Company and then leased to customers.
(5) Adjusted to give effect to the Transactions. See "Use of Proceeds."
28
<PAGE> 35
SELECTED HISTORICAL FINANCIAL DATA
Through November 26, 1996, the Company operated as wholly owned
subsidiaries of the Predecessor's Parent. On November 27, 1996, the Company was
acquired by Holdings. Accordingly, the selected financial data shown below is
not necessarily comparable as a result of these ownership changes and the
resulting adjustments required for purchase business combinations under
generally accepted accounting principles. The selected operating data and
balance sheet data for the periods from December 31, 1993 through December 31,
1997 (excluding the six months ended June 30, 1997) have been derived from the
audited consolidated financial statements of the Company. The audited
consolidated financial statements of the Company for the year ended December 31,
1995, the eleven month period ended November 26, 1996, the one month period
ended December 31, 1996 and the year ended December 31, 1997 are included
elsewhere in this Prospectus. The selected historical financial data at and for
the six month periods ended June 30, 1997 and 1998 were derived from the
unaudited consolidated financial statements of the Company included elsewhere in
this Prospectus. In the opinion of management, the historical financial data for
the six month periods ended June 30, 1997 and 1998 contain all adjustments
(consisting only of normal recurring adjustments) necessary to present fairly
the information shown. The information contained in this table should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the historical consolidated financial statements
of the Company, including the notes thereto, included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
WHOLLY OWNED SUBSIDIARIES OF
THE PREDECESSOR'S PARENT THE COMPANY
--------------------------------------- ---------------------------------------------
ELEVEN ONE SIX MONTHS
MONTHS MONTH YEAR ENDED
YEAR ENDED DECEMBER 31, ENDED ENDED ENDED JUNE 30,
------------------------ NOVEMBER 26, DECEMBER 31, DECEMBER 31, ---------------
1993 1994 1995 1996 1996 1997 1997 1998
------ ------ ------ ------------ ------------ ------------ ------ ------
($ IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Net Sales.................. $395.6 $472.7 $528.8 $404.6 $46.8 $489.3 $229.9 $269.0
Gross Profit............... 22.3 42.9 44.2 45.6 4.9 58.2 26.4 33.4
Engineering, Selling and
Administrative
Expenses................. 46.5 41.7 30.6 26.6 3.0 37.1 17.7 22.5
Parent Company Management
Fees..................... 4.4 8.5 7.0 5.7 -- -- -- --
Severance and Exit
Charges.................. -- 6.7 3.5 -- -- -- -- --
Income (Loss) from
Operations............... (28.6) (14.0) 3.1 13.3 1.9 21.0 8.7 10.9
Income (Loss) before
Extraordinary Items...... (44.9) (25.3) (17.4) (2.1) 0.5 7.9 1.3 1.5
Ratio of Earnings to Fixed
Charges(1)............... -- -- -- -- 1.4x 1.5x 1.2x 1.3x
BALANCE SHEET DATA (AT END
OF PERIOD):
Working Capital(2)......... $ 50.8 $ 41.4 $ 46.4 $ 51.4 $45.0 $ 55.8 $ 46.4 $ 63.8
Net Property, Plant and
Equipment................ 75.3 60.7 58.2 51.2 51.0 47.8 46.7 49.4
Total Assets............... 208.0 194.7 192.7 192.7 301.3 313.3 293.7 321.7
Long-Term Obligations(3)... 120.0 125.9 143.0 151.3 133.6 133.9 133.2 134.4
</TABLE>
(footnotes on following page)
29
<PAGE> 36
- ---------------
(1) The Ratio of Earnings to Fixed Charges is computed as follows: (a) earnings
consists of consolidated income (loss) before income taxes and extraordinary
items plus fixed charges; (b) fixed charges consist of interest expense,
amortization of deferred debt issuance costs, along with any discount or
premiums and the amount of rental expense considered by management to
reasonably represent the interest factor related to such rental expense.
During the years ended December 31, 1993, 1994, 1995 and the eleven month
period ended November 26, 1996, the earnings were insufficient to cover
fixed charges by $44.8 million, $24.5 million, $17.3 million and $2.1
million, respectively.
(2) Calculated as net trade receivables plus net inventories less trade
payables.
(3) The amounts of Long-Term Obligations as of December 31, 1993, 1994 and 1995,
and November 26, 1996, include Due to Parent of $40.2 million, $68.5
million, $87.6 million and $96.4 million, respectively; such amounts also
include the long-term portion of capital lease obligations. At December 31,
1996 and 1997 and at June 30, 1997 and 1998, the amount of long-term
obligations includes the Series B Notes and the long-term portion of capital
lease obligations.
30
<PAGE> 37
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company manufactures products in the U.S., Canada and Germany and sells
products in more than 80 countries worldwide. A portion of the Company's raw
materials are acquired from foreign suppliers and denominated in foreign
currencies. Consequently, the Company's operating results are subject to
fluctuations in foreign currency exchange rates, as well as the translation of
its foreign operations into U.S. dollars. The risks associated with operating in
foreign countries could adversely affect the Company's future operating results.
In addition, currency fluctuations could improve the competitive position of the
Company's foreign competitors if the value of the U.S. dollar rises in relation
to the local currencies of such competitors. The Company has not historically
hedged its foreign currency risk.
Sales of products manufactured and sold by the Company have historically
been subject to cyclical variation based, among other things, on general
economic conditions. Management believes that the Company has improved its
ability to sustain profitability in changing market conditions. There can be no
assurance, however, as to the magnitude or timing of any decline or recovery, or
that any future decline will not have a material adverse effect on the Company's
business.
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
WHOLLY OWNED SUBSIDIARIES OF
THE PREDECESSOR'S PARENT THE COMPANY
------------------------------- ----------------------------------------------------------------
ELEVEN MONTHS ONE MONTH SIX MONTHS SIX MONTHS
YEAR ENDED ENDED ENDED YEAR ENDED ENDED ENDED
DECEMBER 31, NOVEMBER 26, DECEMBER 31, DECEMBER 31, JUNE 30, JUNE 30,
1995 1996 1996 1997 1997 1998
-------------- -------------- ------------- -------------- -------------- --------------
($) (%) ($) (%) ($) (%) ($) (%) ($) (%) ($) (%)
------ ----- ------ ----- ----- ----- ------ ----- ------ ----- ------ -----
($ IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales.................... $528.8 100.0% $404.6 100.0% $46.8 100.0% $489.3 100.0% $229.9 100.0% $269.0 100.0%
Gross Profit................. 44.2 8.4% 45.6 11.3% 4.9 10.5% 58.2 11.9% 26.4 11.5% 33.4 12.4%
Engineering, Selling and
Administrative
Expenses(1)................. 37.6 7.1% 32.3 8.0% 3.0 6.4% 37.1 7.6% 17.7 7.7% 22.5 8.4%
Income from
Operations(1)(2)............ 3.1 0.6% 13.3 3.3% 1.9 4.0% 21.0 4.3% 8.7 3.8% 10.9 4.1%
</TABLE>
- ---------------
(1) Includes corporate charges allocated by the Predecessor's Parent of $7.0
million and $5.7 million in the year ended 1995 and the eleven months ended
November 26, 1996, respectively.
(2) Includes severance and exit charges of $3.5 million in the year ended
December 31, 1995.
Six months ended June 30, 1998, compared to the six months ended June 30, 1997
Net Sales
Net sales were $269.0 million for the six months ended June 30, 1998, an
increase of $39.1 million or 17.0% from $229.9 million for the same period in
1997. Machine and other sales increased 20.0% mainly due to stronger markets,
while parts sales increased 4.9% over the same time period last year. The
acquisition of Blue Giant contributed $13.0 million toward the Company's
increased sales for the period.
Gross Profit
Gross profit increased 26.5% or $7.0 million to $33.4 million in the first
six months of 1998 compared to $26.4 million in the first six months of 1997.
Increased sales and mix contributed $2.0 million of additional gross profit and
the acquisition of Blue Giant added $2.8 million of gross profit. Cost reduction
programs, lower product liability and higher production levels absorbing more
fixed costs contributed to the balance of the increase. As a percentage of
sales, gross profits were 12.4% for the six months ended June 30, 1998 compared
to 11.5% for the same period in the prior year.
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<PAGE> 38
Engineering, Selling and Administrative Expense
Engineering, selling and administrative expense increased $4.8 million to
$22.5 million for the six months ended June 30, 1998 from $17.7 million during
the same period of 1997. As a percent of sales, engineering, selling and
administrative expense was 8.4% and 7.7% for the same period in 1998 and 1997,
respectively. The 1997 acquisitions, HLT (as defined) (February 1997) and Blue
Giant accounted for $1.7 million of this increased expense while investments in
engineering and selling expense, to support programs for growth, accounted for
the balance.
Income from Operations
Income from operations increased 25.3% or $2.2 million to $10.9 million for
the six months ended June 30, 1998, compared to $8.7 million for the same period
in 1997 due to the reasons discussed above.
Interest and Other Expense
Net interest and other expense of the Company was $8.9 million during the
six months ended June 30, 1998, compared to $7.2 million during the six months
ended June 30, 1997. This was due, in part, to increases in net interest expense
and exchange losses of foreign subsidiaries.
Income Taxes
The provision for income taxes was $0.6 million during the six months ended
June 30, 1998 compared to $0.2 million during the six months ended June 30,
1997. The increase in income taxes is primarily due to foreign income taxes
recorded for Blue Giant Limited, which was acquired in November 1997.
Fiscal Year Ended December 31, 1997 compared to the month ended December 31,
1996, and the eleven months ended November 26, 1996
The acquisition of the Company on November 26, 1996 resulted in a
significant change in the Company's capital structure and a revaluation of the
Company's assets and liabilities in accordance with the provisions of purchase
accounting required by generally accepted accounting principles. Accordingly,
the results of operations for the year ended December 31, 1997 are not
comparable to the results of operations for the month ended December 31, 1996,
the eleven-month period ended November 26, 1996 or the year ended December 31,
1995.
Net Sales
Net sales were $489.3 million in 1997, an increase of $37.9 million or 8.4%
from $451.4 million in the twelve month period ended December 31, 1996. Truck
sales increased $38.1 million and parts sales were relatively consistent. The
increase in truck sales was primarily due to improved market conditions in 1997
and the acquisition of Blue Giant, which increased sales by $4.8 million or
1.2%. In 1997, CLARK derived 73.5% and 25.7% of its net sales from its North
American operations and CLARK Material Handling GmbH ("CLARK Europe"),
respectively, compared to 70.0% and 30.0%, respectively, in 1996. A change in
the German Deutsche mark ("DM") annual average currency translation rate from
1.505 DM to one U.S. dollar for 1996 to 1.734 DM to one U.S. dollar for 1997 had
a negative impact on reported sales (and income) in U.S. dollars from the
Company's European operations.
Gross Profit
Gross profit increased $7.7 million, or 15.2%, to $58.2 million in 1997
from $50.5 million in 1996. As a percentage of net sales, gross profit was 11.9%
and 11.2% for 1997 and 1996, respectively. Increased sales accounted for
approximately $4.2 million of the increased gross profit and lower costs due to
the Company's cost reduction efforts in the areas of materials, labor and
overhead accounted for the balance of the improvement.
32
<PAGE> 39
Engineering, Selling and Administrative Expenses
Engineering, selling and administrative expenses increased $1.8 million to
$37.1 million for the twelve month period ended December 31, 1997 from $35.3
million for the twelve month period ended December 31, 1996. Certain
administrative functions performed by the Predecessor's Parent were replaced,
but at a lower cost than was charged in 1996. The Company increased its
engineering and selling expenses by $4.4 million in 1997. This increase was to
support new product and sales initiatives in 1997 and beyond. Engineering,
selling and administrative expenses expressed as a percentage of sales were 7.6%
and 7.8%, respectively, in 1997 and 1996.
Income from Operations
Income from operations increased $5.8 million to $21.0 million for the
twelve month period ended December 31, 1997 from $15.2 million for the twelve
month period in 1996. This increase was due to the reasons noted above. Income
from operations expressed as a percentage of net sales was 4.3% and 3.4% for the
twelve months ended December 31, 1997 and December 31, 1996, respectively.
Eleven Months Ended November 26, 1996 compared to Year Ended December 31, 1995
Net Sales
Net sales were $404.6 million for the eleven months ended November 26, 1996
compared to $528.8 million for the twelve month period in 1995, a decrease of
$124.2 million or 23.5%. This decrease was primarily due to reduced demand by
CLARK's customers, which management believes was related to lower industry
activity beginning in the last quarter of 1995. Net truck sales decreased $112.6
million, or 26.0%, primarily due to a softening in the demand for lift trucks in
North America and Europe, while parts sales declined 12.1%. CLARK derived 70.3%
and 29.7% of its net sales from its North American operations and CLARK Europe,
respectively, in the eleven months ended November 26, 1996, and 71.6% and 28.4%,
respectively, in the twelve months ended December 31, 1995.
Gross Profit
Gross profit increased $1.4 million, or 3.2%, to $45.6 million for the
eleven months ended November 26, 1996, compared to $44.2 million for the twelve
month period in 1995, despite the 23.5% decline in net sales. As a percentage of
net sales, gross profit was 11.3% and 8.4% for the eleven months ended November
26, 1996 and the twelve month period of 1995, respectively. Cost reduction
efforts and production improvements accounted for most of this increase. Factory
overhead expenses were reduced by $13.9 million. This decrease was attributable
to lower salaries, wages, benefits and other significant areas of cost decreases
including lower product liability costs, lower freight costs and lower material
costs from improved outsourcing. These improvements were partially offset by
lower absorption of fixed costs due to lower production levels and by lower
margins for aftermarket parts due to a change in product mix.
Engineering, Selling and Administrative Expenses
For the eleven months ended November 26, 1996, engineering, selling and
administrative expenses decreased $5.3 million to $32.3 million from $37.6
million for the twelve month period in 1995 primarily due to the rationalization
of staff levels, facilities and support costs in response to lower industry
activity. Engineering, selling and administrative expenses as a percentage of
net sales were 8.0% and 7.1% in the eleven months ended November 26, 1996 and
the twelve months ended December 31, 1995, respectively.
Income from Operations
Income from operations increased $10.2 million to $13.3 million for the
eleven months ended November 26, 1996, compared to $3.1 million for the twelve
months ended December 31, 1995. In addition, CLARK had $3.5 million of severance
and exit charges related to workforce rationalization in Europe and the
termination of certain leases in 1995, which did not recur in 1996. The
Predecessor's Parent allocated
33
<PAGE> 40
corporate charges to CLARK of $5.7 million and $7.0 million in the 1996 and 1995
periods, respectively. Income from operations, expressed as a percentage of net
sales, were 3.3% and 0.6% for the eleven months ended November 26, 1996 and the
twelve months ended December 31, 1995, respectively.
BACKLOG
The Company's backlog of orders at June 30, 1998 and December 31, 1997 and
1996 were $108.0 million, $114.8 million and $80.4 million, respectively. The
backlog orders are due to strong market conditions and the acquisition of Blue
Giant, which added $5.1 million and $6.1 million to the backlog at June 30, 1998
and December 31, 1997. Substantially all of the Company's backlog orders are
expected to be filled within one year, although there can be no assurance that
all such orders will be filled within that time period. The cancellation or
delay of certain orders could have a material adverse affect on the Company.
CAPITAL RESOURCES, LIQUIDITY AND FINANCIAL CONDITION
The Company's business is capital intensive and requires funding for
purchases of production and replacement parts inventories, capital expenditures
for repair, replacement and upgrading of existing facilities as well as
financing of accounts receivable due from customers and dealers. The Company
will continue to have significant debt service requirements. At June 30, 1998,
the Company had 7.1 million of cash, cash equivalents and cash securing letters
of credit, $130.0 million of long-term debt and $7.3 million of capital lease
obligations. The Company's overall financial condition did not change
significantly at June 30, 1998 from December 31, 1997. However, working capital
(as defined) increased $8.0 million during the first six months of 1998
primarily due to higher accounts receivable and inventories somewhat offset by
higher accounts payable.
Cash used in operating activities through the first six months of 1998 was
$1.8 million primarily due to the increase in working capital discussed
previously. The Company had $5.6 million of capital expenditures for the first
six months of 1998 and anticipates $7.6 million of additional capital
expenditures during the balance of the year. Included in actual and anticipated
1998 capital expenditures are approximately $4.0 million on the installation of
new software and $5.0 million on new plant and equipment expenses to be incurred
at the facility acquired pursuant to the Samsung Forklift Acquisition. The
Company purchased substantially all the assets of Hydroelectric Lift Trucks,
Inc. ("HLT") on February 28, 1997, in exchange for a $4.9 million short-term
note, which matured and was paid in the second quarter of 1997. In addition to
paying the note issued to acquire HLT, the Company closed its acquisition of
Blue Giant in two separate purchase business combinations using existing cash of
$9.7 million (see note 4 to the consolidated financial statements). Blue Giant
manufactures manual and electric stackers and pallet trucks, electric tow
tractors, vehicle restraint devices, hydraulic scissor lifts and dock levelers
for sale in the U.S., Canada and other countries. In addition to the acquisition
price, the Company agreed to pay a total of $1.1 million over three years to a
former shareholder of Blue Giant in exchange for consulting services and a
noncompetition agreement.
In 1996, the Company entered into a $30.0 million revolving credit facility
(the "Revolving Credit Facility"), which is secured by the accounts receivable
and inventory of the Company's domestic operations, excluding Blue Giant. The
Revolving Credit Facility had an aggregate undrawn availability of $20.6 million
at June 30, 1998, subject to the borrowing conditions contained therein.
Management believes that it has adequate available borrowing capacity under the
Revolving Credit Facility to cover its foreseeable working capital requirements
for the next twelve months and that cash flow from operations and its borrowing
arrangements will be adequate to meet other liquidity and capital needs in 1998.
The Company expects that CLARK Europe will enter into a working capital
credit line of approximately $10.0 million, as permitted under the terms of the
Indenture.
CONTINGENCIES AND UNCERTAINTIES
From time to time product liability claims are asserted against the Company
for various injuries alleged to have resulted from defects in the manufacture
and/or design of its products. In addition, the Company is
34
<PAGE> 41
involved in various other legal proceedings, which have arisen in the normal
course of its operations. See "Business -- Legal Proceedings."
The Company is contingently liable as a guarantor for certain of its
dealers' and customers' financing arrangements with financial institutions. The
guarantees under these financing arrangements aggregated approximately $136.1
million at June 30, 1998. Historically, the Company has incurred only minimal
losses relating to these arrangements.
CLARK is contingently liable for a portion of the residual value of
machines sold to and leased by a third party to users for terms generally
ranging from three to five years. CLARK repurchases certain machines leased
under this program and then sells or leases such machines to other users. At
June 30, 1998, the maximum contingent liability under this program was
approximately $5.5 million. CLARK has historically recorded profits on the sale
of repurchased machines.
Pursuant to certain dealer sales agreements, CLARK has agreed to repurchase
certain new and unused equipment in the event of the termination of the dealer.
Similar repurchase obligations exist in the event of the dealer's default under
the dealer's financing agreements with financial institutions. CLARK has
historically incurred minimal losses from the foregoing arrangements.
For additional information on contingencies and uncertainties, see Note 11
to the audited financial statements of the Company included elsewhere in this
Prospectus, and "Risk Factors," "Business -- Environmental Matters" and
" -- Legal Proceedings."
YEAR 2000
The Company is aware of the issues associated with the programming code in
existing computer systems as the millennium approaches. The "year 2000" problem
is pervasive and complex as virtually every computer operation will be affected
in some way by the rollover of the two digit year value to 00. The issue is
whether computer systems will properly recognize date-sensitive information when
the year changes to 2000. Systems that do not recognize such information could
generate erroneous data or cause a system to fail.
The Company is utilizing both internal and external resources with respect
to its year 2000 issues. With regard to its information technology ("IT")
systems, CLARK is in the process of installing new software to provide improved
operational and financial functionality at each of its worldwide locations. This
new software is year 2000 compliant. The installation is expected to be
completed at the North American and European headquarter locations in Kentucky
and Germany during the last quarter of 1998 and the first quarter of 1999,
respectively. Following the installation and testing of this new software at
these sites, the Company intends to begin software installation at the Blue
Giant, HLT and CLARK Asia (as defined) facilities. The installation of the new
software by CLARK is a result of a strategic plan to upgrade its company-wide
computer systems which pre-dated the Company's efforts to make its IT systems
year 2000 compliant. Therefore, the Company has not incurred and does not
anticipate incurring any material costs specifically related to year 2000 issues
that are in addition to the costs associated with its overall computer system
upgrade.
CLARK does not believe that it has any material year 2000 issues with
regard to its non-IT systems. The Company's products employ chips and
microprocessors which use interval timers as opposed to real-time clocks and
therefore should not be affected by the year 2000 rollover. In addition, CLARK
does not utilize any computer controlled machines in its factory production,
thereby eliminating any potential year 2000 problem relating to its
manufacturing equipment.
The Company has ongoing business relationships with many suppliers, dealers
and other parties, each of which may have their own year 2000 issues. CLARK is
in the process of making contact with each of these third parties with which it
has a material relationship in order to assess whether the Company faces any
risks relating to third party year 2000 problems. The Company expects to be in a
position to make this assessment regarding third party risks during the first
quarter of 1999. There can be no assurance at this time that these third parties
are taking appropriate actions to safeguard their computer systems.
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Management can not at this time predict with any certainty CLARK's most
reasonably likely worst case scenario relating to the year 2000 problem.
However, the Company intends to perform test-runs at each of its facilities
following installation of its new year 2000 compliant software. If a year 2000
problem is identified during any of these test-runs, the Company intends to
immediately seek correction of the problem from its software vendor at no cost
to the Company.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income" and SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." In February 1998, the FASB issued SFAS No.
132, "Employers' Disclosures about Pensions and other Postretirement Benefits."
These statements require certain modifications and additional information
relating to financial statement disclosure of the components of comprehensive
income, operating segment information and pensions and other postretirement
benefits. These statements only impact the disclosure in financial statements;
therefore, management does not expect that the adoption of these new standards
in 1998 will have a significant impact on the Company's financial condition or
results of operations.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which establishes accounting and reporting
standards for these items and will be effective for fiscal years beginning after
June 15, 1999. Historically, the Company has not entered into derivative or
hedging transactions; therefore, management does not expect that the adoption of
this new standard will have a significant impact on the Company's financial
position or results of operations.
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THE EXCHANGE OFFERS
PURPOSE AND EFFECT
The Series C Notes and Existing Preferred Stock were sold by the Issuers on
July 17, 1998 to the Initial Purchasers pursuant to the Purchase Agreement. In
connection with that placement, the Company entered into the Registration Rights
Agreements, which require that the Company file a registration statement under
the Securities Act with respect to the New Securities and, upon the
effectiveness of that registration statement, offer to the holders of the
Existing Securities the opportunity to exchange their Existing Securities for a
like principal amount (or principal amount at maturity) or a like liquidation
preference amount of New Securities, which will be issued without a restrictive
legend and may be reoffered and resold by the holder without registration under
the Securities Act. The Registration Rights Agreements further provide that the
Company must use their best efforts to cause the registration statement with
respect to the Exchange Offers to be declared effective on or before November
16, 1998. Except as provided below, upon the completion of the Exchange Offers,
the Company's obligations with respect to the registration of the Existing
Securities and the New Securities will terminate. Copies of the Registration
Rights Agreements have been filed as exhibits to the Registration Statement of
which this Prospectus is a part.
Following the completion of the Exchange Offers (except as set forth in the
paragraph immediately below), holders of the Series C Notes and the Existing
Preferred Stock not tendered will not have any further registration rights and
those securities will continue to be subject to certain restrictions on
transfer. Accordingly, the liquidity of the market for the Existing Securities
could be adversely affected upon completion of the Exchange Offer.
Pursuant to the Registration Rights Agreements, the Company is required to
file a "shelf" registration statement for a continuous offering pursuant to Rule
415 under the Securities Act in respect of the Senior C Notes and the Existing
Preferred Stock (and use its reasonable best efforts to cause such shelf
registration statement to be declared effective by the Commission and keep it
continuously effective, supplemented and amended for prescribed periods) if (i)
prior to the consummation of the C Note Exchange Offer or the Preferred Stock
Exchange Offer, whichever applicable, the Company determines that a majority in
aggregate principal amount of the New Notes to be exchanged for Series C Notes
or a majority in aggregate liquidation preference of New Preferred Stock to be
exchanged for Existing Preferred Stock would not, upon receipt, be tradeable by
the holders thereof without restriction under the Securities Act and the
Exchange Act and without material restrictions under the applicable Blue Sky or
state securities laws, (ii) the Company is not permitted to effect the C Note
Exchange Offer or the Preferred Stock Exchange Offer, whichever applicable,
because of any change in law or in applicable interpretations thereof by the
staff of the Commission, (iii) the C Note Exchange Offer or the Preferred Stock
Exchange Offer, whichever applicable, is not consummated within 240 days of the
date of issuance of the Series C Notes and Existing Preferred Stock, (iv) under
certain circumstances, upon the request of the Initial Purchasers, or (v) any
holder of Series C Notes or Existing Preferred Stock, whichever applicable, is
not eligible to participate in the C Note Exchange Offer or the Preferred Stock
Exchange Offer, whichever applicable, or, in the case of any holder of Series C
Notes or Existing Preferred Stock that participates in the C Note Exchange Offer
or the Preferred Stock Exchange Offer, whichever applicable, such holder does
not receive freely tradable New Notes or New Preferred Stock upon consummation
of the C Note Exchange Offer or the Preferred Stock Exchange Offer, whichever
applicable, (other than due solely to the status of such holder as an affiliate
of the Company or any Guarantor within the meaning of the Securities Act) and
such holder notifies the Company within six months of the consummation of the
exchange.
In the event that the Company is obligated to file a "shelf" registration
statement, it may be required to keep such "shelf" registration statement
effective for at least three years. Other than as set forth in this paragraph,
no holder will have the right to participate in the "shelf" registration
statement nor otherwise to require that the Company register such holder's
Existing Securities under the Securities Act. See "-- Procedures for Tendering."
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<PAGE> 44
In order to participate in an Exchange Offer, a holder must represent to
the Company, among other things, that (i) the New Securities acquired pursuant
to such Exchange Offer are being obtained in the ordinary course of business of
the person receiving such New Securities, whether or not such person is the
holder of the Existing Securities, (ii) neither the holder nor any such other
person has an arrangement or understanding with any person to participate in the
distribution of such New Securities within the meaning of the Securities Act,
(iii) neither the holder nor any such other person is an "affiliate," as defined
under Rule 405 promulgated under the Securities Act, of the Company or any
Guarantor, or if it is an affiliate, such holder or such other person will
comply with the registration and prospectus delivery requirements of the
Securities Act to the extent applicable, (iv) if such holder or other person is
not a broker-dealer, neither the holder nor any such other person is engaged in
or intends to engage in the distribution of such New Securities, and (v) if such
holder or other person is a broker-dealer, that it will receive New Securities
for its own account in exchange for Existing Securities that were acquired as a
result of market-making activities or other trading activities and that it will
be required to acknowledge that it will deliver a prospectus in connection with
any resale of such New Securities.
Based on an interpretation by the Commission's staff set forth in no-action
letters issued to third-parties unrelated to the Company or any of the
Guarantors, the Company believes that, with the exceptions set forth below, New
Securities issued pursuant to the Exchange Offers in exchange for Existing
Securities may be offered for resale, sold and otherwise transferred by any
person receiving such New Securities, whether or not such person is the holder
(other than any such holder or such other person which is an "affiliate" of the
Company or any of the Guarantors within the meaning of Rule 405 under the
Securities Act) without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that (i) the New Securities are
acquired in the ordinary course of business of that holder or such other person,
(ii) neither the holder nor such other person is engaging in or intends to
engage in a distribution of the New Securities, and (iii) neither the holder nor
such other person has an arrangement or understanding with any person to
participate in the distribution of the New Securities. Any holder who tenders in
an Exchange Offer for the purpose of participating in a distribution of New
Securities cannot rely on this interpretation by the Commission's staff and must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with a secondary resale transaction. Each
broker-dealer that receives New Securities for its own account in exchange for
Existing Securities, where the Existing Securities were acquired by that
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such New Securities. See "Plan of Distribution."
CONSEQUENCES OF FAILURE TO EXCHANGE
Following the completion of the Exchange Offers, holders of Series C Notes
and Existing Preferred Stock not tendered will not have any further registration
rights (except in certain circumstances as set forth above with respect to shelf
registration (See "-- Purpose and Effect")) and those securities will continue
to be subject to the existing restrictions on transfer. Accordingly, the
liquidity of the market for a holder's Existing Securities could be adversely
affected upon completion of the Exchange Offers if the holder does not
participate in the Exchange Offers.
TERMS OF THE C NOTE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the C Note Letter of Transmittal (which together constitute the C Note
Exchange Offer), the Company will accept for exchange Series C Notes properly
tendered prior to the C Note Expiration Date and not withdrawn as permitted
below. As used herein, the term "C Note Expiration Date" means 5:00 p.m., New
York City time, on October 23, 1998; provided, however, that if the Company has
extended the period of time for which the C Note Exchange Offer is open, the
term "C Note Expiration Date" shall mean the latest time and date to which the C
Note Exchange Offer is extended.
The form and terms of the New Notes will be substantially the same as the
form and terms of the Series C Notes except that (i) interest on the New Notes
will accrue from the most recent date to which interest has been paid on the
Series C Notes surrendered in exchange therefor or, if no interest has been paid
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<PAGE> 45
on the Series C Notes, from May 15, 1998 and (ii) the New Notes are being
registered under the Securities Act and will not bear legends restricting their
transfer. The New Notes will evidence the same debt as the Series C Notes and
will be issued pursuant to, and entitled to benefits of the Indenture.
As of the date of this Prospectus, Series C Notes representing $20,000,000
aggregate principal amount are outstanding. This Prospectus, together with the C
Note Letter of Transmittal is being sent to all holders of the Series C Notes
known to the Company. The Company's obligation to accept Series C Notes for
exchange pursuant to the C Note Exchange Offer is subject to certain conditions
as set forth under "-- Certain Conditions to the Exchange Offer" below.
The Company shall be deemed to have accepted validly tendered Series C
Notes when as and if the Company has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering holders
of Series C Notes for the purposes of receiving the New Notes from the Company.
The Company expressly reserves the right, at any time or from time to time,
to extend the period of time during which the C Note Exchange Offer is open and
thereby delay acceptance for any exchange of any Series C Notes, by giving
notice of such extension to the Exchange Agent and the holders thereof. During
any such extension, all Series C Notes previously tendered will remain subject
to the C Note Exchange Offer and may be accepted for exchange by the Company.
Any Series C Notes not accepted for exchange for any reason will be returned
without expense to the tendering holder thereof as promptly as practicable after
the expiration or termination of the C Note Exchange Offer.
The Company reserves the right, in its sole discretion, (i) to delay
accepting any Series C Notes, (ii) to extend the C Note Exchange Offer, or (iii)
if any conditions set forth below under "-- Certain Conditions to the Exchange
Offers" shall not have been satisfied, to terminate the C Note Exchange Offer by
giving oral or written notice of such delay, extension or termination to the
Exchange Agent. Any such delay in acceptance, extension, termination or
amendment will be followed as promptly as practicable by oral or written notice
thereof to the registered holders. If the C Note Exchange Offer is amended in a
manner determined by the Company to constitute a material change, the Company
will promptly disclose such amendment by means of a prospectus supplement that
will be distributed to the registered holders, and the Company will extend the C
Note Exchange Offer for a period of five to 10 business days, depending upon the
significance of the amendment and the manner of disclosure to the registered
holders, if the C Note Exchange Offer would otherwise expire during such five to
10 business day period.
Holders of Series C Notes do not have any appraisal or dissenters' rights
under the Delaware Corporation Law in connection with the C Note Exchange Offer.
The Company intends to conduct the C Note Exchange Offer in accordance with the
provisions of the Notes Registration Rights Agreement and the applicable
requirements of the Securities Act, the Exchange Act and the rules and
regulations of the Commission thereunder.
TERMS OF THE B NOTE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the B Note Letter of Transmittal (which together with the Prospectus
constitute the B Note Exchange Offer), the Company will accept for exchange
Series B Notes properly tendered prior to the B Note Expiration Date and not
withdrawn as permitted below. As used herein, the term "B Note Expiration Date"
means 5:00 p.m., New York City time, on October 23, 1998; provided, however,
that if the Company has extended the period of time for which the B Note
Exchange Offer is open, the term "B Note Expiration Date" shall mean the latest
time and date to which the B Note Exchange Offer is extended.
The form and terms of the New Notes will be substantially the same as the
form and terms of the Series B Notes except that interest on the New Notes will
accrue from the most recent date to which interest has been paid on the Series B
Notes surrendered in exchange therefor. The New Notes will evidence the same
debt as the Series B Notes and will be issued pursuant to, and entitled to the
benefits of the Indenture.
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As of the date of this Prospectus, Series B Notes representing $130,000,000
aggregate principal amount are outstanding. This Prospectus, together with the B
Note Letter of Transmittal is being sent to all holders of the Series B Notes
known to the Company. The Company's obligation to accept Series B Notes for
exchange pursuant to the B Note Exchange Offer is subject to certain conditions
as set forth under "-- Certain Conditions to the Exchange Offer" below.
The Company shall be deemed to have accepted validly tendered Series B
Notes when as and if the Company has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering holders
of Series B Notes for the purposes of receiving the New Notes from the Company.
The Company expressly reserves the right, at any time or from time to time,
to extend the period of time during which the B Note Exchange Offer is open and
thereby delay acceptance for any exchange of any Series B Notes, by giving
notice of such extension to the Exchange Agent and the holders thereof. During
any such extension, all Series B Notes previously tendered will remain subject
to the B Note Exchange Offer and may be accepted for exchange by the Company.
Any Series B Notes not accepted for exchange for any reason will be returned
without expense to the tendering holder thereof as promptly as practicable after
the expiration or termination of the B Note Exchange Offer.
The Company reserves the right, in its sole discretion, (i) to delay
accepting any Series B Notes, (ii) to extend the B Note Exchange Offer, or (iii)
if any conditions set forth below under "-- Certain Conditions to the Exchange
Offers" shall not have been satisfied, to terminate the B Note Exchange Offer by
giving oral or written notice of such delay, extension or termination to the
Exchange Agent. Any such delay in acceptance, extension, termination or
amendment will be followed as promptly as practicable by oral or written notice
thereof to the registered holders. If the B Note Exchange Offer is amended in a
manner determined by the Company to constitute a material change, the Company
will promptly disclose such amendment by means of a prospectus supplement that
will be distributed to the registered holders, and the Company will extend the B
Note Exchange Offer for a period of five to 10 business days, depending upon the
significance of the amendment and the manner of disclosure to the registered
holders, if the B Note Exchange Offer would otherwise expire during such five to
10 business day period.
Holders of Series B Notes do not have any appraisal or dissenters' rights
under the Delaware Corporation Law in connection with the B Note Exchange Offer.
The Company intends to conduct the B Note Exchange Offer in accordance with the
provisions of the Notes Registration Rights Agreement and the applicable
requirements of the Securities Act, the Exchange Act and the rules and
regulations of the Commission thereunder.
TERMS OF THE PREFERRED STOCK EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Preferred Stock Letter of Transmittal (which together constitute the
Preferred Stock Exchange Offer), the Company will accept for exchange Existing
Preferred Stock properly tendered prior to the Preferred Stock Expiration Date
and not withdrawn as permitted below. As used herein, the term "Preferred Stock
Expiration Date" means 5:00 p.m., New York City time, on October 23, 1998;
provided, however, that if the Company has extended the period of time for which
the Preferred Stock Exchange Offer is open, the term "Preferred Stock Expiration
Date" shall mean the latest time and date to which the Preferred Stock Exchange
Offer is extended. The C Note Expiration Date, the B Note Expiration Date and
the Preferred Stock Expiration Date are hereinafter individually referred to as
an "Expiration Date."
As of the date of this Prospectus, Existing Preferred Stock representing
$20,000,000 aggregate liquidation preference amount was outstanding. This
Prospectus, together with the Preferred Stock Letter of Transmittal, is being
sent to all holders of Existing Preferred Stock known to the Company. The
Company's obligation to accept Existing Preferred Stock for exchange pursuant to
the Preferred Stock Exchange Offer is subject to certain conditions as set forth
under "-- Certain Conditions to the Exchange Offers" below.
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The Company shall be deemed to have accepted validly tendered Existing
Preferred Stock when, as and if the Company has given oral or written notice
thereof to the Exchange Agent. The Exchange Agent will act as agent for the
tendering holders of Existing Preferred Stock for the purposes of receiving the
New Preferred Stock from the Company.
The Company expressly reserves the right, at any time or from time to time,
to extend the period of time during which the Preferred Stock Exchange Offer is
open, and thereby delay acceptance for any exchange of any Existing Preferred
Stock, by giving notice of such extension to the Exchange Agent and the holders
thereof. During any such extension, all Existing Preferred Stock previously
tendered will remain subject to the Preferred Stock Exchange Offer and may be
accepted for exchange by the Company. Any Existing Preferred Stock not accepted
for exchange for any reason will be returned without expense to the tendering
holder thereof as promptly as practicable after the expiration or termination of
the Preferred Stock Exchange Offer.
The Company reserves the right in its sole discretion, (i) to delay
accepting any Existing Preferred Stock, (ii) to extend the Preferred Stock
Exchange Offer or (iii) if any conditions set forth below under "-- Certain
Conditions to the Exchange Offers" shall not have been satisfied, to terminate
the Preferred Stock Exchange Offer by giving oral or written notice of such
delay, extension or termination to the Exchange Agent. Any such delay in
acceptance, extension, termination or amendment will be followed as promptly as
practicable by oral or written notice thereof to the registered holders. If the
Preferred Stock Exchange Offer is amended in a manner determined by the Company
to constitute a material change, the Company will promptly disclose such
amendment by means of a prospectus supplement that will be distributed to the
registered holders, and the Company will extend the Preferred Stock Exchange
Offer for a period of five to 10 business days, depending upon the significance
of the amendment and the manner of disclosure to the registered holders, if the
Preferred Stock Exchange Offer would otherwise expire during such five to 10
business day period.
Holders of Existing Preferred Stock do not have any appraisal or
dissenter's rights under the Delaware Corporation Law in connection with the
Preferred Stock Exchange Offer. The Company intends to conduct the Preferred
Stock Exchange Offer in accordance with the provisions of the Preferred Stock
Registration Rights Agreement and the applicable requirements of the Securities
Act, the Exchange Act and the rules and regulations of the Commission
thereunder.
PROCEDURES FOR TENDERING
Only a registered holder of Existing Securities may tender the Existing
Securities in an Exchange Offer. Except as set forth under "-- Book Entry
Transfer," to tender in an Exchange Offer a holder must complete, sign and date
the Letter of Transmittal applicable to such Exchange Offer, or a copy thereof,
have the signatures thereon guaranteed if required by such Letter of
Transmittal, and mail or otherwise deliver such Letter of Transmittal or copy to
the Exchange Agent prior to the Expiration Date for such Exchange Offer. In
addition, either (i) certificates for such Existing Securities must be received
by the Exchange Agent along with the Letter of Transmittal applicable to such
Exchange Offer, or (ii) a timely confirmation of a book-entry transfer (a
"Book-Entry Confirmation") of such Existing Securities, if that procedure is
available, into the account of the Exchange Agent for such Exchange Offer at the
Depository (the "Book-Entry Transfer Facility") pursuant to the procedure for
book-entry transfer described below, must be received by such Exchange Agent
prior to the Expiration Date, or (iii) the Holder must comply with the
guaranteed delivery procedures described below. To be tendered effectively, a
Letter of Transmittal and other required documents must be received by the
Exchange Agent at its address set forth under "-- Exchange Agent" prior to the
Expiration Date.
The tender by a holder that is not withdrawn before the Expiration Date
will constitute an agreement between that holder and the Company in accordance
with the terms and subject to the conditions set forth herein and in the Letter
of Transmittal applicable to the Company's Exchange Offer.
THE METHOD OF DELIVERY OF EXISTING SECURITIES, A LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK
OF THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE
AN OVERNIGHT OR HAND DELIVERY SERVICE, PROP-
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ERLY INSURED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY
TO AN EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR
EXISTING SECURITIES SHOULD BE SENT TO THE COMPANY. HOLDERS MAY REQUEST THEIR
RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES, OR NOMINEES TO
EFFECT THESE TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner whose Existing Securities are registered in the name
of a broker, dealer, commercial bank, trust company, or other nominee and who
wishes to tender should contact the registered holder promptly and instruct the
registered holder to tender on the beneficial owner's behalf. If the beneficial
owner wishes to tender on the owner's own behalf, the owner must, prior to
completing and executing a Letter of Transmittal and delivering the owner's
Existing Securities, either make appropriate arrangements to register ownership
of the Existing Securities in the beneficial owner's name or obtain a properly
completed bond or stock power, whichever applicable, from the registered holder.
The transfer of registered ownership may take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case maybe, must be guaranteed by an Eligible Institution (as defined below)
unless Existing Securities tendered pursuant thereto are tendered (i) by a
registered holder who has not completed the box entitled "Special Registration
Instructions" or "Special Delivery Instructions" on such Letter of Transmittal
or (ii) for the account of an Eligible Institution. If signatures on a Letter of
Transmittal or a notice of withdrawal, as the case may be, are required to be
guaranteed, the guarantee must be by any eligible guarantor institution that is
a member of or participant in the Securities Transfer Agents Medallion Program,
the New York Stock Exchange Medallion Signature Program, the Stock Exchange
Medallion Program, or an "eligible guarantor institution" within the meaning of
Rule 17Ad-15 under the Exchange Act (an "Eligible Institution").
If a Letter of Transmittal is signed by a person other than the registered
holder of any Existing Securities listed therein, the Existing Securities must
be endorsed or accompanied by a properly completed bond or stock power,
whichever applicable, signed by the registered holder as that registered
holder's name appears on the Existing Securities.
If a Letter of Transmittal or any Existing Securities or bond or stock
power are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations, or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing, and
evidence satisfactory to the Company of their authority to so act must be
submitted with such Letter of Transmittal unless waived by the Company.
The Exchange Agent and the DTC have confirmed that any financial
institution that is a participant in the Depositary's system may utilize the
DTC's Automated Tender Offer Program to tender Existing Securities.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance, and withdrawal of tendered Existing Securities will be
determined by the Company in its sole discretion, which determination will be
final and binding. The Company reserves the absolute right to reject any and all
Existing Securities not properly tendered or any Existing Securities the
acceptance of which would, in the opinion of counsel for such Company, be
unlawful. The Company also reserves the right to waive any defects,
irregularities, or conditions of tender as to particular Existing Securities.
The Company's interpretation of the terms and conditions of its Exchange Offer
(including the instructions in a Letter of Transmittal) will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Existing Securities must be cured within such time as
the Company shall determine. Although the Company intends to notify holders of
defects or irregularities with respect to tenders of Existing Securities,
neither the Company, the Exchange Agent, nor any other person shall incur any
liability for failure to give such notification. Tenders of Existing Securities
will not be deemed to have been made until such defects or irregularities have
been cured or waived. Any Existing Securities received by an Exchange Agent that
are not properly tendered and as to which the defects or irregularities have not
been cured or waived will be returned by such Exchange Agent to the tendering
holders,
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unless otherwise provided in the Letter of Transmittal accompanying such
Existing Securities, as soon as practicable following the Expiration Date.
In addition, the Company reserves the right in its sole discretion to
purchase or make offers for any Existing Securities that remain outstanding
after the Expiration Date or, as set forth under "-- Conditions to the Exchange
Offers," to terminate its Exchange Offer and, to the extent permitted by
applicable law, purchase Existing Securities in the open market, in privately
negotiated transactions, or otherwise. The terms of any such purchases or offers
could differ from the terms of the Company's Exchange Offer.
By tendering, each holder will represent to the Company that, among other
things, (i) the New Securities acquired pursuant to such Exchange Offer are
being obtained in the ordinary course of business of the person receiving such
New Securities, whether or not such person is the holder of the Existing
Securities, (ii) neither the holder nor any such other person has an arrangement
or understanding with any person to participated in the distribution of such New
Securities within the meaning of the Securities Act, (iii) the holder or such
other person acknowledges and agrees that any person who is a broker-dealer
registered under the Exchange Act or is participating in the Exchange Offer for
the purposes of distributing the New Securities must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction of the New Securities acquired by
such person and cannot rely on the position of the staff of the Commission set
forth in certain no-action letters, (iv) the holder or such other person
understands that a secondary resale transaction described in clause (iii) above
and any resale of New Securities obtained by such holder or other person in
exchange for Existing Securities acquired by such holder or other person
directly from the Company should be covered by an effective registration
statement containing the selling securityholder information required by Item 507
or Item 508, as applicable, of Regulation S-K of the Commission, and (v) neither
the holder nor any such other person is an "affiliate," as defined under Rule
405 promulgated under the Securities Act, of the Company or any Guarantor. The
Company shall be deemed to have accepted properly tendered Existing Securities
when, as and if the Company has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering holders
for the purpose of receiving the New Securities from the Company.
In all cases, issuance of New Securities for Existing Securities that are
accepted for exchange pursuant to an Exchange Offer will be made only after
timely receipt by the Exchange Agent of certificates for such Existing
Securities or a timely Book-Entry Confirmation of such Existing Securities into
Exchange Agent's account at the Book-Entry Transfer Facility, a properly
completed and duly executed Letter of Transmittal (or, with respect to the
Depositary and its participants, electronic instructions in which the tendering
holder acknowledges its receipt of and agreement to be bound by the Letter of
Transmittal for such Exchange Offer) and all other required documents. If any
tendered Existing Securities are not accepted for any reason set forth in the
terms and conditions of the Exchange Offer for such Existing Securities or if
Existing Securities are submitted for a greater principal amount or liquidation
preference amount than the holder desires to exchange, such unaccepted or
non-exchanged Existing Securities will be returned without expense to the
tendering Holder thereof (or, in the case of Existing Securities tendered by
book-entry transfer into the Exchange Agent's account at the Book-Entry Transfer
Facility pursuant to the book-entry transfer procedures described below such
non-exchanged Existing Securities will be credited to an account maintained with
such Book-Entry Transfer Facility) as promptly as practicable after the
expiration or termination of the Exchange Offer for such Existing Securities.
BOOK-ENTRY TRANSFER
The Exchange Agent will make requests to establish accounts with respect
the Existing Securities at the Book-Entry Transfer Facility for purposes of the
Exchange Offers within two business days after the date of this Prospectus, and
any financial institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of the Existing Securities being
tendered by causing the Book-Entry Transfer Facility to transfer such Existing
Securities into the Exchange Agent's account for such Existing Securities at the
Book-Entry Transfer Facility in accordance with such Book-Entry Transfer
Facility's procedures for transfer. However, although delivery of Existing
Securities may be effected through book-entry transfer at the Book-Entry
Transfer Facility, a Letter of Transmittal or copy thereof, with any required
signature guarantees
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and any other required documents, must, in any case other than as set forth in
the following paragraph, be transmitted to and received by the Exchange Agent at
its address set forth under "-- Exchange Agent" on or prior to the Expiration
Date or the guaranteed delivery procedures described below must be complied
with.
DTC's Automated Tender Offer Program ("ATOP") is the only method of
processing exchange offers through DTC. To accept an Exchange Offer through
ATOP, participants in DTC must send electronic instructions to DTC through DTC's
communication system in place of sending a signed, hard copy Letter of
Transmittal. DTC communicates those electronic instructions to the Exchange
Agent. To tender Existing Securities through ATOP, the electronic instructions
sent to DTC and transmitted by DTC to the Exchange Agent must contain the
participant acknowledgment of its receipt of and agreement to be bound by the
Letter of Transmittal for such Existing Securities.
GUARANTEED DELIVERY PROCEDURES
If a registered holder of Existing Securities desires to tender such
Existing Securities and the Existing Securities are not immediately available,
or time will not permit such holder's Existing Securities or other required
documents to reach the Exchange Agent before the Expiration Date, or the
procedure for book-entry transfer cannot be completed on a timely basis, a
tender may be effected if (i) the tender is made through an Eligible
Institution, (ii) prior to the Expiration Date, the Exchange Agent received from
such Eligible Institution a properly completed and duly executed Letter of
Transmittal (or a facsimile thereof) and Notice of Guaranteed Delivery,
substantially in the form provided by the Company (by telegram, telex, facsimile
transmission, mail or hand delivery), setting forth the name and address of the
holder of such Existing Securities and the amount of Existing Securities
tendered, stating that the tender is being made thereby and guaranteeing that
within five New York Stock Exchange ("NYSE") trading days after the date of
execution of the Notice of Guaranteed Delivery, the certificates for all
physically tendered Existing Securities, in proper form for transfer, or a
Book-Entry Confirmation, as the case may be, and any other documents required by
the applicable Letter of Transmittal will be deposited by the Eligible
Institution with the appropriate Exchange Agent, and (iii) the certificates for
all physically tendered Existing Securities, in proper form for transfer, or a
Book-Entry Confirmation, as the case may be, and all other documents required by
the applicable Letter of Transmittal, are received by the Exchange Agent within
five NYSE trading days after the date of execution of the Notice of Delivery.
WITHDRAWAL RIGHTS
Tenders of Existing Securities may be withdrawn at any time prior to 5:00
p.m., New York City time, on the applicable Expiration Date.
For a withdrawal of a tender of Existing Securities to be effective, a
written or (for DTC participants) electronic ATOP transmission notice of
withdrawal must be received by the Exchange Agent at its address set forth in
this prospectus prior to 5:00 p.m., New York City time, on the Expiration Date.
Any such notice of withdrawal must (i) specify the name of the person having
deposited the Existing Securities to be withdrawn (the "Depositor"), (ii)
identify the Existing Securities to be withdrawn (including the certificate
number or numbers and principal amount of such Existing Securities), (iii) be
signed by the holder in the same manner as the original signature on the Letter
of Transmittal by which such Existing Securities were tendered (including any
required signature guarantees) or be accompanied by documents of transfer
sufficient to have the Trustee of such Existing Securities register the transfer
of such Existing Securities into the name of the person withdrawing the tender,
and (iv) specify the name in which any such Existing Securities are to be
registered, if different from that of the holder who tendered such Existing
Securities. All questions as to the validity, form, and eligibility (including
time of receipt) of such notices will be determined by the Company, whose
determination shall be final and binding on all parties. Any Existing Securities
so withdrawn will be deemed not to have been validly tendered for exchange for
purposes of the Exchange Offer relating to such Existing Securities. Any
Existing Securities which have been tendered for exchange but which are not
exchanged for any reason will be returned to the holder thereof without cost to
such holder as soon as practicable after withdrawal, rejection of tender, or
termination of the Exchange Offer relating to such
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Existing Security. Properly withdrawn Existing Securities may be retendered by
following one of the procedures under "-- Procedures for Tendering" at any time
on or prior to the applicable Expiration Date.
CONDITIONS TO THE EXCHANGE OFFERS
Notwithstanding any other provision of the Exchange Offers, the Company
shall not be required to accept for exchange, or to issue New Securities in
exchange for, any Existing Securities and may terminate or amend the Company's
Exchange Offers if at any time before the acceptance of such Existing Securities
for exchange or the exchange of the New Securities for such Existing Securities,
the Company determines that its Exchange Offer violates applicable law, any
applicable interpretation of the staff of the Commission or any order of any
governmental agency or court of competent jurisdiction.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to any such
condition or may be waived by the Company in whole or in part at any time and
from time to time in its sole discretion. The failure by the Company at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any such
right and each such right shall be deemed an ongoing right which may be asserted
at any time and from time to time.
In addition, the Company will not accept for exchange any Existing
Securities tendered, and no New Securities will be issued in exchange for any
such Existing Securities, if at such time any stop order shall be threatened or
in effect with respect to the Registration Statement of which this Prospectus
constitutes a part or the qualification of the indenture relating to the
Company's Existing Securities under the Trust Indenture Act of 1939, as amended
(the "TIA"). In any such event, the Company is required to use every reasonable
effort to obtain the withdrawal of any stop order at the earliest possible time.
EXCHANGE AGENT
All executed Letters of Transmittal should be directed to the Exchange
Agent. The United States Trust Company of New York has been appointed as the
Exchange Agent. Questions, requests for assistance and requests for additional
copies of the Prospectus or the Letter of Transmittal should be directed to the
Exchange Agent addressed as follows:
To: THE UNITED STATES TRUST COMPANY OF NEW YORK,
<TABLE>
<S> <C> <C>
BY OVERNIGHT COURIER OR BY BY HAND UP TO 4:30 PM: BY REGISTERED OR
HAND AFTER 4:30 PM ON THE United States Trust Company CERTIFIED MAIL:
EXPIRATION DATE ONLY: of New York
111 Broadway Lower Level United States Trust Company of
United States Trust Company New York, New York 10006 New York
of New York Attn: Corporate Trust Services P.O. Box 844, Cooper Station
770 Broadway, 13th Floor BY FACSIMILE: New York, New York
New York, New York 10003 10276-0844
Attn. Corporate Trust Services United States Trust Company Attn: Corporate Trust Services
Telephone: (800) 548-6565 of New York Telephone: (800) 548-6565
Facsimile: (212) 780-0592 (212) 420-6152 Facsimile: (212) 780-0592
Attn: Corporate Trust Services
Confirm by Telephone:
(800) 548-6565
</TABLE>
FEES AND EXPENSES
The Company will not make any payments to brokers, dealers, or others
soliciting acceptances of the Exchange Offers. The principal solicitation is
being made by mail; however, additional solicitations may be made in person or
by telephone by officers and employees of the Company.
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The expenses to be incurred in connection with the Exchange Offers will be
paid by the Company. Such expenses include fees and expenses of the Trustee for
the Existing Notes and the Registrar and Transfer Agent for the Existing
Preferred Stock, accounting, legal, printing, and related fees and expenses.
TRANSFER TAXES
Holders who tender their Existing Securities for exchange will not be
obligated to pay any transfer taxes in connection therewith except that holders
who instruct the Company to register New Securities in the name of, or request
that Existing Securities not tendered or not accepted in an Exchange Offer be
returned to, a person other than the registered tendering holder will be
responsible for the payment of any applicable transfer tax thereon.
ACCOUNTING TREATMENT
The New Securities will be recorded at the same carrying value as the
Existing Securities, which is the principal amount or the liquidation
preference, whichever applicable, as reflected in the Company's accounting
records on the date of the exchange. Accordingly, no gain or loss for accounting
purposes will be recognized. The debt issuance costs will be capitalized for
accounting purposes.
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
RELATING TO THE EXCHANGE OFFERS
The following discussion summarizes certain United States Federal income
tax consequences of the Exchange Offers to a holder of Existing Securities that
is an individual citizen or resident of the United States or a United States
corporation that purchased Existing Securities pursuant to their original issue
(a "U.S. Holder"). It is based on the Internal Revenue Code of 1986, as amended
to the date hereof (the "Code"), existing and proposed Treasury regulations, and
judicial and administrative determinations, all of which are subject to change
at any time, possibly on a retroactive basis. The following relates only to the
Existing Securities, and the New Securities received therefor, that are held by
U.S. Holders as "capital assets" within the meaning of Section 1221 of the Code.
It does not discuss state, local or foreign tax consequences, nor does it
discuss tax consequences to subsequent purchasers (persons who did not purchase
the Existing Securities pursuant to their original issue), or to categories of
holders that are subject to special rules, such as foreign persons, tax-exempt
organizations, insurance companies, banks, and dealers in stocks and securities.
Tax consequences may vary depending on the particular status of an investor. No
rulings will be sought from the Internal Revenue Service with respect to the
Federal income tax consequences of the Exchange Offers.
THIS SECTION DOES NOT PURPORT TO DEAL WITH ALL ASPECTS OF FEDERAL INCOME
TAXATION THAT MAY BE RELEVANT TO AN INVESTOR'S DECISION TO EXCHANGE EXISTING
SECURITIES FOR NEW SECURITIES. EACH INVESTOR SHOULD CONSULT WITH ITS OWN TAX
ADVISOR CONCERNING THE APPLICATION OF THE FEDERAL INCOME TAX LAWS AND OTHER TAX
LAWS TO ITS PARTICULAR SITUATION BEFORE DETERMINING WHETHER TO EXCHANGE EXISTING
SECURITIES FOR NEW SECURITIES.
THE EXCHANGE OFFERS
The exchange of Existing Securities pursuant to the Exchange Offers should
be treated as a continuation of the corresponding Existing Securities for
federal income tax purposes (or, in the case of the Existing Preferred Stock, as
a recapitalization of the Existing Preferred Stock for New Preferred Stock).
Accordingly, (i) no gain or loss should be realized by a U.S. Holder upon
receipt of a New Security, (ii) the holding period of the New Security should
include the holding period of the Existing Security exchanged therefor and (iii)
the adjusted tax basis of the New Security should be the same as the adjusted
tax basis of the Existing Security exchanged therefor immediately before the
exchange. For further discussion of the Federal income tax consequences of
holding the New Securities, see "Certain Federal Income Tax Considerations."
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BUSINESS
GENERAL
CLARK is a leading international designer, manufacturer, and marketer of a
complete line of forklift trucks, including internal combustion trucks, electric
riders, narrow aisle stackers and powered hand trucks. The Company invented the
platform forklift truck in 1917 and has since established CLARK as one of the
most recognized brand names of forklift trucks in North America. Management
believes that CLARK has the largest installed fleet in North America with over
250,000 units and has a total of approximately 350,000 units in operation
worldwide. This large installed fleet has allowed CLARK to generate significant
ongoing replacement parts sales, which typically generate substantially higher
gross margins and provide a more stable revenue base than new forklift truck
sales. CLARK manufactures its products through five facilities in the United
States, Europe and Canada and distributes its products to a diverse customer
base through a global network of approximately 300 dealers from more than 560
locations. In addition, the Company's Blue Giant subsidiaries distribute their
products through a network of over 350 North American dealers and agents. For
the LTM period, on a pro forma basis, CLARK generated net sales of $534.1
million and EBITDA (as defined) of $36.5 million.
Since 1993, CLARK has undertaken a series of initiatives aimed at reducing
fixed costs, developing a largely variable cost structure and offering a highly
competitive product portfolio. Specifically, the Company (i) eliminated
redundant manufacturing and distribution facilities, (ii) reduced head-count,
(iii) eliminated non-core unprofitable product lines, and (iv) improved
outsourcing of certain manufacturing operations. In addition to cost
rationalization, the Company made a series of new product introductions allowing
it to offer one of the most modern product portfolios in the industry. CLARK's
product development strategy emphasizes (i) product innovations and improvements
to meet the evolving needs of CLARK's customer base and (ii) lowering production
costs through better design, thereby enhancing margins. As a result of these
initiatives, the Company increased its EBITDA (as defined) by $26.2 million from
$10.3 million in fiscal 1994 to $36.5 million on a pro forma basis in the LTM
period. EBITDA (as defined) consistently increased during this period despite a
declining forklift market in 1996 relative to 1995.
For information concerning the Company's backlog orders, see "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Backlog."
The Company's principal business office and headquarters in North America
is located at 172 Trade Street, Lexington, Kentucky 40511 and its telephone
number is (606) 288-1200. The Company's principal business office and
headquarters in Europe is located at 19-23 Rheinstrass, Mulheim, Germany, and
its telephone number is 011-49-208-588-1201.
BUSINESS STRATEGY
Management believes that CLARK's strong brand name, extensive distribution
network, modern product portfolio and streamlined fixed cost structure provide a
strong foundation for increased growth and profitability. The Company's
operating strategy focuses on the following key components:
Introduce New Products. The Company's new product introduction strategy is
based on the Genesis(R) forklift truck platform which was introduced in December
1994. The purpose of the Genesis(R) forklift truck design was to develop a
production platform which reduced the number of parts used in each model, used
like parts in various forklift models and enhanced functionality of operation.
As a result of the Genesis(R) model, the Company achieved purchasing
efficiencies from its vendors and streamlined the production process, which
resulted in significantly reduced production costs and enhanced margins. Due to
the wide customer acceptance of the Genesis(R) truck and the significantly
reduced production costs relative to its predecessor models, the Company has
introduced four completely redesigned electric riders and five new IC forklift
models based on the Genesis(R) platform. CLARK's new product development
pipeline is focused on lower cost, enhanced feature products, extending the
Genesis(R) platform to the few remaining older models in its product offering
and improving the performance of its electric powered hand truck designs. Each
of these new products is designed to reduce production costs and increase
margins. In addition, the Company's engineering team is
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continuously working toward achieving increased production efficiencies and
reduced manufacturing costs through improved design. In addition, the Company
seeks to acquire businesses which offer complementary product lines that can be
sold through the Company's existing global network. For example, in 1997 the
Company acquired Blue Giant, which designs and manufactures a successful product
line of powered handtrucks, dock equipment and scissor lifts. Similarly, the
Company expects to significantly increase the distribution of the value priced
Samsung Forklift product line by leveraging the Company's global distribution
network, especially in North and South America. In addition, Samsung Forklift
will further expand the Company's product line in the entry level segment for IC
forklift truck models.
Augment the Distribution Network. CLARK distributes its products to a
diverse customer base through a global network of approximately 300 dealers from
more than 560 locations, with a majority in North America and Europe. Management
is focusing on enhancing the performance of its distribution network by offering
various incentive packages and support programs, replacing underperforming
dealers and adding new dealers in selected geographic areas. Since 1993, the
number of units exported to CLARK's international customers has more than
tripled from 689 to over 2,400 in 1997. The Company intends to continue
expanding the dealer base of its international operations, and management
believes that the Company is well positioned for continued growth in the
African, Middle Eastern, Caribbean and South American markets.
Improve Aftermarket Parts Sales. CLARK's worldwide installed fleet of
approximately 350,000 forklift trucks generates an estimated $240.0 million in
annual global aftermarket parts sales, of which CLARK has historically captured
an estimated 40% share. Management plans to increase the Company's share of
these high margin sales in North America and Europe as a result of the
introduction of the Totalift(TM) and PartsPro(TM) software systems and the
addition of a parts marketing manager at CLARK Europe. In 1998, the Company
developed the Totalift(TM) system which was designed as a parts database of
major competitor forklift brands and models. Management believes that the
Totalift(TM) system will allow the Company to increase its aftermarket parts
sales by supplying parts for all of the CLARK and competitor forklift trucks.
Also in 1998, the Company introduced PartsPro(TM), which provides the Company's
dealers with an advanced parts identification system that enables suppliers to
place on-line orders with CLARK, prepare quotes for customers and track work
orders by customer.
Further Reduce Product Cost. Although CLARK has made significant progress
in reducing its operating costs, management believes that ongoing opportunities
exist to improve profitability by reducing material costs. In 1997, material
costs amounted to over 80% of the cost of goods sold. Management plans to
continue to reduce the Company's material costs and increase purchasing
efficiencies, thereby enhancing its gross margins, through (i) the introduction
of new product designs that increase commonality of parts among different lift
truck models and reduce the overall number of parts and components, thereby
improving manufacturing and (ii) the further reduction of the number of
suppliers to increase volume discounts. Management believes that these
initiatives should also result in more timely delivery from suppliers, thereby
reducing costly manufacturing disruptions and the Company's working capital
investment.
PRODUCTS
CLARK currently offers over 100 truck designs within five major product
lines: light IC trucks (with a capacity of 1.0 to 5.0 tons), heavy IC trucks
(with a capacity of 5.5 to 17.5 tons), narrow-aisle trucks (with a capacity of
1.5 to 2.5 tons), electric counterbalanced riders (with a capacity of 1.3 to 6.0
tons) and manual and powered hand trucks (with a capacity of 2.0 to 4.0 tons).
Light IC trucks are used for general warehousing needs and are generally
powered by liquid propane. Such trucks are well suited for manufacturing and
distribution applications which require a high degree of maneuverability. Heavy
IC trucks are specialty products designed for use in more demanding situations
such as heavy manufacturing or container handling applications. Narrow-aisle
trucks provide solutions for high density storage needs and operate in six to
eight foot aisles and reach heights of more than 30 feet. Electric
counterbalanced riders are designed for indoor use in warehousing,
manufacturing, distribution and other applications and are powered by a
rechargeable electric battery. As a result of the increasing focus on the
environment, electric riders have become increasingly popular. Management
estimates that light IC trucks,
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heavy IC trucks, narrow-aisle trucks and electric counterbalanced riders
represent approximately 58%, 3%, 15% and 24%, respectively, of the unit volume
of the forklift truck industry, as reported by industry sources. Powered hand
trucks are generally used in the transportation and order-selecting businesses.
CLARK tailors its products to meet customers' particular material handling
needs. To further meet these needs, CLARK adds attachments such as container
handlers, side shifters, roll clamps, block handlers, carton clamps, push-pulls
(slip-sheet) and fork positioners.
The Company's new product introduction strategy is based on the Genesis(R)
forklift truck platform which was introduced in December 1994. The purpose of
the Genesis(R) forklift truck design was to develop a production platform which
reduced the number of parts used in each model, using like parts in various
forklift models and enhanced functionality of operation. As a result of the
Genesis(R) model, the Company achieved purchasing efficiencies from its vendors
and streamlined the production process, which resulted in significantly reduced
production costs, enhanced margins and increased the return on research and
development expenditures. Due to the wide customer acceptance of the Genesis(R)
truck and the significantly reduced production costs relative to its predecessor
models, the Company has introduced four completely redesigned electric riders
and five new IC forklift models based on the Genesis(R) platform. CLARK's new
product development pipeline is focused on lower cost, enhanced feature
products, extending the Genesis(R) platform to the few remaining older models in
its product offering and improving the performance of its electric powered hand
truck designs. Each of these new products is designed to reduce production costs
and increase margins. In addition, the Company's engineering team is
continuously working toward achieving increased production efficiencies and
reduced manufacturing costs through improved design.
Since 1993, CLARK has redesigned a substantial portion of its product line.
In December 1994, CLARK introduced the 2-3 ton Genesis(R) IC truck targeting the
light IC market. CLARK invested approximately $15.0 million to develop the
Genesis(R) truck. The Genesis(R) truck provides improved ergonomics,
performance, reliability and serviceability, and provides higher gross margins
than its predecessor primarily due to its lower production cost.
CLARK Europe introduced the Genesis(R) 2-3 ton gas and diesel MegaStat(TM)
model in April 1995. The Genesis(R) 2-3 ton MegaStat(TM) IC received the
"General Lift Truck Innovation" award in 1996 from the Fork Truck Association in
the United Kingdom. In 1996, CLARK continued to expand its Genesis(R) family
with the addition of a 4-5.5 ton pneumatic tired IC lift truck, and a 2-3.2 ton
electric four-wheel sit down rider. CLARK has also made significant additions to
its narrow aisle stackers product line which was expanded to include double
reach and straddle models.
During 1997, CLARK added three more trucks to its Genesis(R) family, a
4.0-5.0 ton cushion tired IC lift truck, a 6.0-7.0 ton cushion tired IC lift
truck, and a 1.2-2.5 ton three wheel electric sit down rider. CLARK also
expanded its Genesis(R) heart-of-the-line 2-3 ton IC trucks by increasing the
capacity to 3.2 tons and adding a 3.0 liter GM engine option. A new 80V AC
electric drive 2-3.5 ton Mega AC(TM) truck was also introduced. CLARK Europe
also introduced its MegaValve(TM) forklift trucks that are electronically
controlled and allow for "joystick" operation. These new products generate
higher gross margins than their predecessor models.
CLARK's product introductions in 1998 include a 10-16.4 ton IC pneumatic
tired truck, a re-powered and ergonomically enhanced narrow aisle reach truck
and, building on its introduction of MegaStat(TM) in Europe, a 1-2 ton
MegaStat(TM). In addition, in June 1998 CLARK began marketing the complete
Samsung Forklift product line worldwide. CLARK's new product development
pipeline is focused on lower cost, enhanced feature products, extending the
Genesis(R) platform to the few remaining older models in its product offering
and improving the performance of its electric powered hand truck designs.
In 1997, CLARK purchased HLT and Blue Giant. Blue Giant produces a full
line of CLARK branded manual and powered walkie pallet trucks and stackers and
continues to produce and sell under the Blue Giant name. HLT produces forklift
masts mainly for CLARK's own use.
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AFTERMARKET PARTS
Since the Company's inception, more than one million forklift trucks have
been manufactured by CLARK and its predecessors, and it currently has in service
approximately 350,000 trucks worldwide, with approximately 250,000 in North
America, 70,000 in Europe, and 30,000 in other international markets, generating
a substantial aftermarket parts business for CLARK. CLARK's worldwide installed
fleet of approximately 350,000 forklift trucks generates an estimated $240.0
million in annual global aftermarket parts sales, of which CLARK has
historically captured an estimated 40% share. CLARK supplies both original
equipment parts to fit CLARK brand forklifts and Totalift(R) parts to fit other
brands. CLARK's parts distribution operation undertakes purchasing and customer
services for aftermarket parts. CLARK distributes its aftermarket parts in North
America through a distribution center in Southaven, Mississippi, in Europe
through a warehouse located in Mulheim/Saarn, Germany and for the international
operations of CLARK, through two sales and distribution facilities located in
Seoul, South Korea and the State of Sao Paulo, Brazil. CLARK shares the
Southaven Facility with the Predecessor's Parent and, pursuant to the 1996
Acquisition, CLARK and the Predecessor's Parent entered into a Service Agreement
providing for the continued use by CLARK of such facility. For information
regarding the Service Agreement, see "Certain Relationships and Related
Transactions."
MANUFACTURING OPERATIONS
CLARK's Lexington, Kentucky facility produces both IC and electric
forklifts with lift capacities ranging from 1-16.4 tons and is equipped with
four assembly lines and one heavy IC assembly bay. The Lexington facility is
primarily an assembly operation with welding and painting capabilities, operates
one shift per day, and produces an average of 60 lift trucks per day. The
Lexington facility is ISO-9001 certified, which indicates that the Company has
implemented a system to ensure a high degree of quality and consistency with
respect to its products.
CLARK Europe's Mulheim manufacturing facility produces both IC forklifts
(Diesel, LP gas and natural gas) with hydrodynamic as well as electronically
controlled hydrostatic drive (MegaStat(TM)) and electric powered forklifts
equipped with D/C as well as frequency-controlled A/C motors (MegaAC(TM)) in the
capacity range of 1-5 tons. The Mulheim facility is equipped with four assembly
lines, one for electric trucks, two for IC trucks and one for uprights. The
manufacturing process includes pre-production and welding production of frames
and uprights and a powder dry paint system was recently installed to ensure
high-quality painting of frames and uprights. CLARK Europe's facility currently
operates one shift per day and produces an average of 26 lift trucks per day.
The Mulheim facility has also been awarded ISO-9001 certification.
Blue Giant has two facilities, one in Pell City, Alabama, and one in
Brampton, Ontario, Canada. The Pell City, Alabama facility produces tow
tractors, pallet trucks and stackers and its capabilities include machining,
welding, painting and assembly. The Brampton, Ontario facility, produces dock
equipment and scissor lifts and its primary operations include machining and
welding. HLT is located in Wilmington, Ohio, and produces forklift masts in
support of the CLARK Lexington plant's forklift production. HLT's primary
operations are welding, painting and assembly and the facility operates two
shifts per day. The Brampton, Ontario and Wilmington, Ohio facilities are
ISO-9001 certified.
Pursuant to the Samsung Forklift Acquisition, CLARK has added the
213,000-square-foot Korean Plant in Changwon, South Korea to its manufacturing
operations. The Korean Plant, which will become a center for CLARK's Asia
Pacific operations, is currently being modified and is expected to be completed
by November 1998. In the interim period between the closing of the Samsung
Forklift Acquisition and the opening of the Korean Plant, CLARK Asia is
operating from Samsung Forklift's current manufacturing plant under the terms of
a transition services and lease agreement executed in connection with the
closing.
DEALER NETWORK
CLARK markets both original equipment and parts through a worldwide dealer
network of approximately 300 dealers from more than 560 locations. CLARK's
dealers and distributors generally market the full CLARK product line and
maintain comprehensive service capabilities. CLARK's sales organization coordi-
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nates sales and promotional activities, provides ongoing dealer training and
facilitates dealer communications. CLARK sells to a diversified customer base,
with no single customer accounting for more than 5% of total sales.
Blue Giant markets its products through a network of independent
distributors. Typically these distributors also sell forklifts (manufactured by
CLARK and other companies) and related equipment. Blue Giant has over 350 active
North American dealers and agents and approximately 44 international
distributors and agents including distributors in Mexico, the Caribbean, South
America, Europe and Asia/Pacific.
Management continues to enhance the performance of its dealer network by
offering various incentive packages and support programs, replacing
underperforming dealers and adding new dealers in selected geographic areas. The
number of units sold by the Company's international operations has more than
tripled from 689 in 1993 to over 2,400 in 1997. The Company intends to continue
expanding the dealer base of its international operations and management
believes the Company is well positioned for continued growth in the African,
Middle Eastern, Caribbean and South American markets.
SUPPLIERS
The Company strategically relies upon outside suppliers for a vast majority
of the individual components of a lift truck. Management believes that such
outsourcing allows CLARK greater flexibility in varying its cost structure in
response to changing market conditions.
Management believes that significant opportunities exist to improve
profitability by reducing its material costs. CLARK is consolidating its vendor
base to realize volume discounts and purchasing efficiencies. The Company
regularly evaluates its relationships with current and potential suppliers on
the basis of their ability to meet CLARK's requirements and standards. Since
January 1995, CLARK has reduced the number of its regular worldwide suppliers
from approximately 1,000 to 750 in 1997 (excluding the effect of the acquisition
of Blue Giant) and intends to further reduce this number.
Principal materials used by CLARK in its various manufacturing processes
include steel, castings, engines, tires, electric controls, uprights,
transaxles, motors and a variety of other fabricated or manufactured items.
While substantially all such materials are typically available from multiple
suppliers, CLARK depends upon certain suppliers of key parts used in its lift
trucks. From time to time, certain of CLARK's suppliers have experienced
difficulties in meeting CLARK's production schedules. See "Risk
Factors -- Dependence on Key Suppliers."
COMPETITION
The material handling business is highly competitive. CLARK produces one of
the leading forklift truck brands in North America, although NACCO Industries,
Inc. ("NACCO"), through its Hyster and Yale divisions, produces more forklift
trucks annually. In addition to NACCO, other major North American competitors in
both IC trucks and electric riders include Toyota Industrial Equipment, Inc.,
Mitsubishi Caterpillar Forklift America Inc., Nissan Forklift Corp. North
America, Komatsu Forklift USA Inc. and Daewoo and in electric riders include
Crown Equipment Corp. and Raymond Corporation. In Europe, CLARK competes with
Linde AG, the European market leader, as well as Jungheinreich AG, Toyota
Industrial Equipment, Inc. and NACCO. CLARK also competes with a number of
specialty manufacturers. See "Risk Factors -- Industry Cyclicality and
Substantial Competition."
INTELLECTUAL PROPERTY
The Company relies on a combination of trademarks, service marks, trade
names, patents, licensing arrangements, trade secrets, know-how and proprietary
technology to secure and protect its intellectual property rights. In
particular, the Company's CLARK(R), CLARKlift(R), Powrworker(R), Genesis(R) and
Blue Giant(R) trademarks are of particular importance to the Company's business.
The Company is currently undertaking to obtain trademark registrations for its
MegaValve(TM), MegaStat(TM) and MegaAC(TM) marks. The loss
52
<PAGE> 59
of the Company's rights under one or more of the Company's trademarks could have
a material adverse effect on the Company's business.
There can be no assurance that the Company will be successful in obtaining
approval of any present or future patent or trademark applications; that any
patents, patent applications and patent licenses will adequately cover the
Company's technologies or protect the Company from potential infringements by
third parties; that any nondisclosure and confidentiality agreements will
provide meaningful protection for the Company's trade secrets, know-how or
proprietary technology in the event of any unauthorized use or disclosure of
such information; or that others will not obtain access to, or independently
develop technologies or know-how similar to, that of the Company. There also can
be no assurance that future litigation by the Company will not be necessary to
enforce its trademark, patent and other proprietary rights, or to defend the
Company against claimed infringement of the rights of others, adverse
determinations of which could have a material adverse effect on the Company.
EMPLOYEES
As of August 1, 1998, CLARK's total work force worldwide consisted of
approximately 1,650 salaried, hourly and temporary employees. Of these
employees, 1,000 are in the Company's North American operations and 650 work in
the international operations.
On July 27, 1998, the Company received from the National Labor Relations
Board a petition by the United Steelworkers for an election at the Blue Giant
facility in Pell City, Alabama. On August 25, 1998, this petition was withdrawn
by the United Steelworkers. In addition, the United Steelworkers are presently
attempting to organize the employees at the Company's Lexington, Kentucky plant.
In the past, there have been repeated attempts by unions to organize employees
at the Lexington facility. However, to date, efforts to unionize the Company's
Kentucky plant have been unsuccessful. The Company plans to actively continue
its efforts to maintain and promote a non-union workforce in its facilities.
Since moving to Kentucky ten years ago, there has not been a union at any of
CLARK's North American manufacturing operations.
In Europe, the Mulheim facility is represented by the German Metal Workers
(Industrie Gewerkschaft Metal) and the aftermarket parts facility at
Mulheim/Saarn is represented by the German Union for Trading, Banking and
Insurance (Gewerkschaft Handel, Banken und Versicherungen). The Mulheim facility
has a total work force of approximately 300 employees, of which approximately
200 are members of the German Metal Workers. There are no contracts between
CLARK and the unions, but CLARK follows standard practices by complying with
contracts between the unions and the employers' association. The Company's sales
and administration offices in France and Spain employ approximately 90
employees, all of whom are non-union. CLARK Asia employs approximately 250
employees, all of whom are non-union employees.
The union employees of the Predecessor's Parent at the Southaven Facility
engaged in a labor dispute beginning in 1995, which had a short-term effect on
the Company's distribution operations at the facility but had no appreciable
effect on the conduct of business or results of operations. See "-- Aftermarket
Parts." Although such union employees filed a petition with the National Labor
Relations Board in May 1996 for decertification of the union, there can be no
assurance that similar labor disputes will not occur in the future which,
depending upon the timing and duration of such disputes, could have a material
adverse effect on the Company.
Management believes that its relationships with its employees and unions
are good.
PROPERTIES
The Company is headquartered in Lexington, Kentucky. The Company currently
owns or leases 14 facilities in North America, Europe, Brazil and South Korea
which are used for manufacturing, distribution, sales, warehousing and service
center activities.
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<PAGE> 60
The following table outlines the principal facilities owned or leased by
CLARK or its subsidiaries:
<TABLE>
<CAPTION>
FACILITY LOCATION TYPE OF FACILITY
- ----------------- ----------------
<S> <C>
Lexington, Kentucky...................... Manufacturing, warehouse and office
Lexington, Kentucky*..................... Sales, training and engineering
Lexington, Kentucky...................... Warehouse
Manufacturing, engineering, power
Mulheim, Germany**....................... generation,
maintenance and office
Mulheim/Saarn, Germany................... Warehouse
Barcelona, Spain......................... Sales branch
Paris, France............................ Sales branch
Lyon, France............................. Sales branch
State of Sao Paulo, Brazil............... Parts distribution
Seoul, South Korea....................... Parts distribution and office
Changwon, South Korea*................... Manufacturing, warehouse and office
Wilmington, Ohio......................... Manufacturing, warehouse and office
Pell City, Alabama....................... Manufacturing, warehouse and office
Brampton, Ontario, Canada*............... Manufacturing, warehouse and office
</TABLE>
- ---------------
* Owned.
** A portion of the facility is owned.
CLARK also owns a manufacturing facility in Banwael, South Korea which was
closed in the fourth quarter of 1994 and is presently held for sale. CLARK
Europe also presently leases unoccupied office space in Mulheim-Ruhr, Germany.
Management believes that the Company's facilities are suitable for its
operations and provide sufficient capacity to meet the Company's requirements
for the foreseeable future.
ENVIRONMENTAL MATTERS
As with most industrial companies, the Company's facilities and operations
are required to comply with and are subject to a wide variety of Environmental
Laws relating to the use, storage, handling, generation, treatment, emission,
release, discharge and disposal of certain materials, substances and wastes.
Certain of these Environmental Laws hold owners or operators of land or
businesses liable for their own and for previous owners' or operators' releases
of hazardous or toxic substances, materials or wastes and pollutants or
contaminants, including, in some instances, petroleum and petroleum products.
Compliance with Environmental Laws also may require the acquisition of permits
or other authorizations for certain activities and compliance with various
standards or procedural requirements. Although the Company believes that its
operations are in substantial compliance with current regulatory requirements
under material applicable Environmental Laws, the nature of the Company's
operations and the history of industrial uses at some of its facilities expose
the Company to the risk of liabilities or claims with respect to environmental
and worker health and safety matters. The Company may also have contingent
responsibility for liabilities with respect to environmental matters arising in
connection with the prior operations of CEC's material handling business and
other predecessor companies. There can be no assurance that material costs or
liabilities will not be incurred in connection with such liabilities or claims.
In connection with the 1996 Acquisition, the Company agreed to indemnify
the Predecessor's Parent and hold it harmless from and against all losses which
are incurred or suffered by the Predecessor's Parent with respect to or arising
out of the Company's business and assets except for such losses which arise from
or are in connection with any real property, business entities or assets which
were not acquired as part of the 1996 Acquisition (which the Predecessor's
Parent agreed to retain responsibility for and indemnified the Company against).
No specific environmental losses were identified by the parties in the 1996
Acquisition Agreement
54
<PAGE> 61
nor are there any known material losses which have been asserted by the
Predecessor's Parent pursuant to the environmental indemnity provisions of the
1996 Acquisition Agreement or incurred by the Company. The environmental
indemnities are subject to certain deductibles, caps and time limitations
depending on the nature of the environmental claim.
Based upon the Company's experience to date and the indemnities obtained in
connection with the 1996 Acquisition, the Company believes that the future cost
of compliance with existing Environmental Laws (or liability for known
environmental liabilities or claims) should not have a material adverse effect
on the Company's business, financial condition or results of operations.
Compliance with such laws has, and will, require expenditures by the Company on
a continuing basis. Future events, such as changes in existing laws and
regulations or their interpretation, may give rise to additional compliance
costs or liabilities that could have a material adverse effect on the Company's
business, financial condition or results of operations. Compliance with more
stringent laws or regulations, as well as more vigorous enforcement policies of
regulatory agencies or stricter or different interpretations of existing laws,
may require additional expenditures by the Company that may be material. See
"Risk Factors -- Government Regulation."
LEGAL PROCEEDINGS
From time to time product liability claims are asserted against the Company
for various injuries alleged to have resulted from defects in the manufacture
and/or design of its products. As of August 25, 1998, the Company had
approximately 66 pending lawsuits relating to claims arising from accidents
involving its products. Most of these lawsuits are in various stages of pretrial
completion, and certain plaintiffs are seeking punitive as well as compensatory
damages. The Company is self-insured, up to certain limits, for these product
liability claims, as well as certain exposures related to general workers'
compensation and automobile liability. The Company has recorded and maintains on
its balance sheet reserves relating to the estimated liability, based in part
upon actuarial determinations, of the Company's aggregate exposure for such
self-insured risks. The Company is involved in various other legal proceedings
which have arisen in the normal course of its operations. The Company has
recorded provisions for estimated losses in circumstances where a loss is
probable and the amount or range of possible amounts of the loss is estimable.
There can be no assurance that any of the foregoing reserves are adequate. See
"Risk Factors -- Product Liability and Other Claims" and "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Contingencies and Uncertainties."
55
<PAGE> 62
THE SAMSUNG FORKLIFT ACQUISITION
On July 15, 1998, the Company acquired substantially all of the assets and
certain liabilities of Samsung Forklift. The purchase price for Samsung Forklift
was $30.4 million (based upon the stated purchase price of 39.1 billion South
Korean Won and is subject to certain adjustments (as described below)). The
assets acquired pursuant to the Samsung Forklift Acquisition include the Korean
Plant, working capital items and intellectual property. The Company estimates
that it will spend approximately $5.0 million on plant and equipment expenses at
the Korean Plant prior to the end of 1998.
Samsung Forklift is a leading designer and manufacturer of forklift trucks
in South Korea. The Company believes that, for the year ended December 31, 1997,
Samsung Forklift maintained a market share of approximately 25% in South Korea
and generated approximately $90.0 million of net sales (based upon an average
1997 exchange rate of 950 South Korean Won to the U.S. dollar), approximately
60% of which were generated in South Korea. In addition, Samsung Forklift has a
distribution network in Europe, Asia, Australia and New Zealand. The Company
plans to utilize the low cost manufacturing operations of Samsung Forklift to
produce a value-priced line of light IC forklift trucks under various brand
names including the Samsung brand name for a period of three years. The Company
intends to market these forklift trucks through CLARK's and Samsung Forklift's
global distribution networks, as a complement to CLARK's product line.
Consequently, management estimates that it will sell approximately 75% of
Samsung Forklift's production outside of South Korea.
From 1986 through the mid-1990s, CLARK participated in a joint venture with
Samsung to manufacture forklift trucks in South Korea for worldwide
distribution. The partnership provided CLARK with an understanding of the South
Korean forklift market generally and an ongoing relationship with Samsung
managers, while providing Samsung Forklift with a product platform consistent
with the Genesis(R) line. See "Risk Factors -- Risks Relating to the Samsung
Forklift Acquisition."
The Korean Plant, which will become a center for CLARK's Asia Pacific
operations, is currently being modified and is expected to be completed by
November 1998. In the interim period between the closing of the Samsung Forklift
Acquisition and the opening of the Korean Plant (the "Transition Period"), CLARK
Asia is operating from Samsung Forklift's current manufacturing plant under the
terms of a transition services and lease agreement executed in connection with
the closing. CLARK also obtained a license to use the Samsung name in connection
with the Samsung Forklift business during the Transition Period plus three years
in exchange for an agreed upon royalty payment.
CLARK formed a new wholly-owned subsidiary, CLARK Material Handling Asia,
Inc., a company organized under the laws of South Korea ("CLARK Asia"), to
acquire Samsung Forklift. It is anticipated that CLARK's present South Korean
subsidiary, CLARK Forklift Korea, Inc., will be consolidated with CLARK Asia
sometime in the future.
The consideration to be paid by the Company for the Samsung Forklift
Acquisition will be adjusted following the closing to reflect changes in the net
asset value of the Samsung Forklift business from December 31, 1997. Pursuant to
the Samsung Forklift Acquisition Agreement, CLARK is obligated to pay to Samsung
the value-added tax (the "VAT") related to the purchase price (estimated to
equal $2.4 million), although Samsung has agreed to reimburse CLARK for such
payment in the event that the Company is unable to receive reimbursement from
the South Korean government, subject to certain conditions. CLARK and Samsung do
not have an exchange rate variation sharing arrangement with regard to the VAT
payments. As of July 15, 1998, the exchange rate equaled 1281.50 South Korean
Won to the U.S. dollar. In addition, a portion of the purchase price for the
Samsung Forklift Acquisition, equal to 10 billion South Korean Won, subject to
certain post-closing adjustments (the "Holdback Amount"), will be held in a bank
account in South Korea for a period of up to eighteen (18) months (the
"Collection Period") pending the collection of the receivables of Samsung
Forklift outstanding as of the closing date of the Samsung Forklift Acquisition
(the "Pre-Closing Receivables"). At the conclusion of the Collection Period,
CLARK will retain an amount of the Holdback Amount equal to the then remaining
Pre-Closing Receivables and the remainder of the Holdback Amount will be
transferred to Samsung, along with the then remaining Pre-Closing Receivables.
Interest accruing on the Holdback Amount during the Collection Period will be
split equally between the Company and Samsung.
See "Risk Factors -- Risks Relating to the Samsung Forklift Acquisition."
56
<PAGE> 63
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the
persons who are members of the Board of Directors or executive officers of the
Company. Directors serve for a term of one year or until their successors are
elected and qualified; officers serve at the discretion of the Board of
Directors. The directors of the Company also serve as the directors of Holdings.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Dr. Martin M. Dorio.................... 52 President, Chief Executive Officer and
Director
Dr. J. Frithjof Timm................... 55 Managing Director and President, CLARK Europe
Joseph F. Lingg........................ 53 Vice President, Finance, Treasurer and
Assistant Secretary
Kevin M. Reardon....................... 53 President and Managing Director, CLARK Asia
Michael J. Grossman.................... 48 Vice President, General Counsel and Secretary
Robert J. O'Brien...................... 48 Vice President, Manufacturing, North America
Thomas J. Snyder....................... 53 Director
Diether Klingelnberg................... 54 Director
Michael A. Delaney..................... 44 Director
James A. Urry.......................... 44 Director
</TABLE>
Dr. Martin M. Dorio, President, Chief Executive Officer and Director. Dr.
Dorio joined the Company in June 1995 as President and Chief Executive Officer.
From 1990 until he joined the Company, Dr. Dorio served in various positions
with Case Corporation, a manufacturer of tractors and construction equipment,
including Vice President, Corporate Planning and Development. Dr. Dorio has over
20 years of experience in manufacturing and has served in key management
positions of FMC Corp. and General Electric Co.
Dr. J. Frithjof Timm, Managing Director and President, CLARK Europe. Dr.
Timm joined the Company in May 1995 as Managing Director and President of CLARK
Europe. From 1992 to 1995, he was President of Komatsu Europe and, prior to
that, he was Managing Director of Sales of the Hydraulic Mobile Crane Division
of Krupp A.G.
Joseph F. Lingg, Vice President, Finance and Treasurer. Mr. Lingg joined
the Company in January 1996 as Vice President, Finance and Treasurer. In 1998,
he was named Assistant Secretary of the Company. In 1995, Mr. Lingg served as
Vice President and Chief Financial Officer of RBC Company of America, a
manufacturer of bearings, and for more than five years prior thereto he served
as Vice President and Chief Financial Officer of Mosler Inc., a manufacturer and
servicer of security products.
Kevin M. Reardon, President and Managing Director of CLARK Asia. Mr.
Reardon joined the Company in 1984 and in 1998 was elected President and
Managing Director of CLARK Asia. From 1995 to 1998, he was Vice President of
Sales and Marketing, North America and from 1997 to 1998, he was Vice President
of Sales and Marketing, International. Previously, Mr. Reardon served as
Director of Marketing and National Sales Manager for the Company.
Michael J. Grossman, Vice President, General Counsel and Secretary. Since
joining the Company in 1978, Mr. Grossman has held several key legal positions
with CLARK. In 1991, he was named Vice President, General Counsel and Assistant
Secretary of the Company. In 1992, he was also named Secretary of the Company.
Robert J. O'Brien, Vice President, Manufacturing, North America. Mr.
O'Brien joined the Company in March of 1995, as Director of Manufacturing. From
1980 until he joined the Company, he served in various key operations positions
with Allied Signal Aerospace. Mr. O'Brien has over 20 years of experience in
manufacturing operations in the Aerospace industry.
57
<PAGE> 64
Thomas J. Snyder, Director. Mr. Snyder has been President, Chief Operating
Officer and a director of Delco Remy International, Inc. since 1994. From 1962
to 1994, Mr. Snyder held several executive positions with the Delco Remy
Division of General Motors, most recently as Product Manager, Heavy Duty
Systems. He is also a director of St. John's Health Systems.
Diether Klingelnberg, Director. Mr. Klingelnberg served as Chief Executive
Officer of International Knife & Saw, Inc. until March 1996. In addition, he
served as Chairman of the Board and Chief Executive Officer of IKS Corporation
from 1979 until November 1996. Mr. Klingelnberg is currently Managing Director
of Klingelnberg Beteillgungs-GmbH and is a director of Honsel AG, IKS
Corporation, the Alfred H. Schuette Company, and Eickhoff, Bochum, and Oerlikon
Geartec AG, Zuerich.
Michael A. Delaney, Director. Mr. Delaney has been a Managing Director of
Citicorp Venture Capital Ltd. ("CVC") since 1989. From 1986 through 1989, he was
Vice President of Citicorp Mergers and Acquisitions. Mr. Delaney is a director
of Aetna Industries, Inc., AmeriSource Health Corporation, MSX International,
CORT Business Services Corporation, Delco Remy International, Inc., Enterprise
Media Inc., Fabri-Steel Products Incorporated, GVC Holdings, IKS Corporation,
JAC Holdings, MSX International, Palomar Technologies, Inc., SC Processing,
Inc., and Triumph Holdings, Inc.
James A. Urry, Director. Mr. Urry has been with Citibank, N.A. since 1981,
serving as a Vice President since 1986. He has been a Vice President of CVC
since 1989. He is a director of AmeriSource Health Corporation, CORT Business
Services Corporation, Hancor Holding Corporation, IKS Corporation, Airxcel,
Inc., Palomar Technologies, Inc. and York International Corporation.
DIRECTOR COMPENSATION AND ARRANGEMENTS
The directors of the Company do not receive compensation for their services
as directors. Members of the Board of Directors are elected pursuant to certain
voting agreements among Holdings and its stockholders. See "Ownership of the
Company -- Stockholders' Agreement."
EXECUTIVE COMPENSATION
The compensation of executive officers of the Company will be determined by
the Board of Directors of the Company. The Company adopted a 401(k) retirement
plan in 1997. See "-- 401(k) Plan."
The following table sets forth certain information concerning the
compensation received by the Chief Executive Officer and the four most highly
compensated officers of the Company for services rendered in 1997.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION AWARDS
------------------------------------ -------------------------------------------
OTHER RESTRICTED STOCK
ANNUAL STOCK OPTIONS ALL OTHER
SALARY BONUS COMPENSATION AWARDS (# SHARES) COMPENSATION(1)
-------- -------- ------------ ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Dr. Martin M. Dorio.......... $293,750 $188,745 -- -- -- $11,490
President and Chief Executive
Officer
Dr. J. Frithjof Timm......... 193,195 60,723 -- -- -- 31,719
President, CLARK Europe(2)
Joseph F. Lingg.............. 124,375 48,367 -- -- -- 6,905
Vice President, Finance and
Treasurer
Kevin M. Reardon............. 118,067 33,132 -- -- -- 4,148
Vice President of Sales and
Marketing
Michael J. Grossman.......... 125,000 49,335 -- -- -- 5,639
Vice President and General
Counsel
</TABLE>
- ---------------
(1) Includes Company 401(k) contributions and group term life insurance
premiums, respectively, as follow: Dr. Dorio, $8,501 and $2,989; Mr.
Reardon, $1,171 and $2,977; Mr. Grossman, $3,868 and $1,772; and Mr. Lingg,
$3,866 and $3,039. Includes $31,719 for pension and disability for Dr. Timm.
(2) Dr. Timm's salary, bonus, and other compensation are paid in Deutsche Marks
and have been converted to U.S. dollars using a conversion rate of 1.734
DM/$.
58
<PAGE> 65
EMPLOYMENT AGREEMENTS
In 1996, Holdings entered into a three-year employment contract with Dr.
Martin M. Dorio pursuant to which Dr. Dorio is employed as the President and
Chief Executive Officer of Holdings and the Company. The agreement provides for
an annual base salary of $225,000, which is subject to annual merit increases,
and an annual performance bonus. The Company has agreed that, in the event that
Holdings is unable to pay Dr. Dorio any amounts due to him with respect to
annual bonuses, the Company will pay such amounts. Since November 1996, the
Company has paid Dr. Dorio's compensation. In addition, the agreement provides
for the receipt by Dr. Dorio of standard company benefits. The agreement is
terminable by Holdings with or without cause. In the event the agreement is
terminated without cause or as a result of the total disability of Dr. Dorio,
Dr. Dorio will be entitled to continue to receive his base salary and certain
other benefits for specified periods. Following any termination of Dr. Dorio's
employment, he will be subject to a non-competition covenant for up to two
years.
401(k) PLAN
In 1997, the Company adopted a qualified 401(k) retirement plan. Subject to
certain statutory limitations, eligible employees are able to contribute a
percentage of their compensation to the plan on a pre-tax basis ("elective
deferrals"). For 1997, the maximum amount of elective deferrals that could be
made by any employee was $9,500. Employees are fully vested in their elective
deferrals at all times. Generally, employees may not receive a distribution of
their account balances prior to their death, disability, termination of
employment or retirement, and their account balances cannot be assigned or
alienated.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Although the Company has no compensation committee, each of Messrs. Snyder,
Klingelnberg, Delaney and Urry participated in deliberations of the Board of
Directors concerning executive compensation.
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<PAGE> 66
OWNERSHIP OF THE COMPANY
All of the outstanding common stock of the Company is currently owned by
Holdings. In addition, the Company also has outstanding the Existing Preferred
Stock. See "Description of Preferred Stock." The following table sets forth
certain information with respect to the beneficial ownership of the Holdings
Preferred Stock and Holdings Common Stock by (i) each person or entity who owns
five percent or more thereof, (ii) each director of the Company who is a
stockholder, (iii) the Chief Executive Officer of the Company and the other
executive officers named in "Management -- Executive Compensation" above who are
stockholders, and (iv) all directors and executive officers of the Company as a
group. Unless otherwise specified, all shares are directly held.
<TABLE>
<CAPTION>
NUMBER AND PERCENT OF SHARES
---------------------------------------------------------------------
HOLDINGS PREFERRED HOLDINGS CLASS A HOLDINGS CLASS B
STOCK STOCK(1) STOCK(2)
------------------- --------------------- ---------------------
NUMBER PERCENT NUMBER PERCENT NUMBER PERCENT
-------- ------- ---------- ------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
Citicorp Venture Capital Ltd....... 12,207.4 71.8% 102,671.40 37.5% 550,220.04 75.7%
399 Park Avenue
New York, NY 10043
Dr. Martin M. Dorio................ 404.8 2.4% 55,180.7 20.2% -- --
172 Trade Street
Lexington, KY 40511
Dr. J. Frithjof Timm............... 130.1 0.8% 19,879.5 7.3% -- --
172 Trade Street
Lexington, KY 40511
Kevin M. Reardon................... 37.1 0.2% 5,391.6 2.0% -- --
Michael J. Grossman................ 68.4 0.4% 6,566.3 2.4% -- --
Joseph F. Lingg.................... 40.5 0.2% 5,518.1 2.0% -- --
Thomas J. Snyder................... -- -- 5,000.0 1.8% -- --
Diether Klingelnberg............... -- -- 42.0 0.02% 8,943.5 1.2%
Michael A. Delaney................. 101.5 0.6% 855.0 0.3% 4,536.3 0.6%
James A. Urry...................... 101.5 0.6% 855.0 0.3% 4,536.3 0.6%
All directors and executive
officers as a group (10
persons)......................... 966.8 5.7% 106,396.6 38.9% 18,016.1 2.4%
</TABLE>
- ---------------
(1) Does not include shares of Holdings Class A Stock issuable upon conversion
of Holdings Class B Stock. See "-- Holdings Common Stock." Assuming the
conversion of all of a holder's shares of Holdings Class B Stock into
Holdings Class A Stock, but no such conversion by any other holder of
Holdings Class B Stock, the number of shares and the percentage of total
Holdings Class A Stock held by the converting holder would be as follows:
for CVC, 652,891.0 and 79.3%; for Diether Klingelnberg, 8,985.5 and 3.2%;
for Michael A. Delaney, 5,391.3 and 1.9%; for James A. Urry, 5,391.3 and
1.9%; and for all directors and executive officers as a group, 124,412.7 and
42.7%.
(2) Does not include shares of Holdings Class B Stock issuable upon conversion
of Holdings Class A Stock. See "-- Holdings Common Stock." Assuming the
conversion of all of a holder's shares of Holdings Class A Stock into
Holdings Class B Stock, but no such conversion by any other holder of
Holdings Class A Stock, the number of shares and the percentage of total
Holdings Class B Stock held by the converting holder would be as follows:
for CVC, 652,891.0 and 78.7%; for Dr. Martin M. Dorio, 55,180.7 and 7.1%;
for Dr. J. Frithjof Timm, 19,879.5 and 2.7%; for Kevin M. Reardon, 5,391.6
and 0.7%; for Michael J. Grossman, 6,566.3 and 0.9%; for Joseph F. Lingg,
5,518.1 and 0.7%; for Thomas J. Snyder, 5,000 and 0.7%; for Diether
Klingelnberg, 8,985.5 and 1.2%; for Michael A. Delaney, 5,391.3 and 0.7%;
and for James A. Urry, 5,391.3 and 0.7%; and for all directors and executive
officers as a group, 124,412.7 and 14.9%.
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<PAGE> 67
HOLDINGS PREFERRED STOCK
The Holdings Certificate of Incorporation provides that Holdings may issue
20,000 shares of Holdings Preferred Stock, all of which is designated as Series
A Cumulative Compounding Preferred Stock. Holdings Preferred Stock has a stated
value of $1,000 per share and is entitled to annual dividends when, as and if
declared, which dividends are cumulative, whether or not earned or declared, and
accrue at a rate of 12%, compounding annually. The vote of a majority of the
outstanding shares of the Holdings Preferred Stock, voting as a separate class,
will be required to (i) create, authorize or issue any other class or series of
stock entitled to a preference prior to the Holdings Preferred Stock upon any
dividend or distribution or any liquidation, distribution of assets, dissolution
or winding up of Holdings, or increase the authorized amount of any such other
class or series, or (ii) amend Holdings' Certificate of Incorporation if such
amendment would adversely affect the relative rights and preferences of the
holders of the Holdings Preferred Stock. Except as described in the immediately
preceding sentence or as otherwise required by law, the Holdings Preferred Stock
is not entitled to vote. Holdings may not pay any dividend upon (except for a
dividend payable in Junior Stock, as defined below), or redeem or otherwise
acquire shares of, capital stock junior to the Holdings Preferred Stock
(including the Holdings Common Stock) ("Junior Stock") unless all cumulative
dividends on the Holdings Preferred Stock have been paid in full. Upon
liquidation, dissolution or winding up of Holdings, holders of Holdings
Preferred Stock will be entitled to receive out of the legally available assets
of Holdings, before any amount shall be paid to holders of Junior Stock, an
amount equal to $1,000 per share of Holdings Preferred Stock, plus all accrued
and unpaid dividends to the date of final distribution. If such available assets
are insufficient to pay the holders of the outstanding shares of Holdings
Preferred Stock in full, such assets, or the proceeds thereof, will be
distributed ratably among such holders. The Holdings Preferred Stock is not
mandatorily redeemable prior to the maturity of the Notes. Holdings may
optionally redeem, in whole or in part, the Holdings Preferred Stock at any time
at a price per share of $1,000, plus accrued and unpaid dividends to the date of
redemption.
HOLDINGS COMMON STOCK
The Certificate of Incorporation of Holdings provides that Holdings may
issue 2,500,000 shares of Holdings Common Stock, divided into two classes
consisting of 1,250,000 shares of Holdings Class A Stock and 1,250,000 shares of
Holdings Class B Stock. The holders of Holdings Class A Stock are entitled to
one vote for each share held of record on all matters submitted to a vote of the
stockholders. Except as required by law, the holders of Holdings Class B Stock
have no voting rights. Under the Certificate of Incorporation of Holdings, a
holder of either class of Holdings Common Stock may convert any or all of his
shares into an equal number of shares of the other class of Holdings Common
Stock; provided that in the case of a conversion from Holdings Class B Stock,
which is nonvoting, into Holdings Class A Stock, which is voting, the holder of
shares to be converted would be permitted under applicable law to hold the total
number of shares of Holdings Class A Stock which would be held after giving
effect to the conversion.
STOCKHOLDERS' AGREEMENT
Pursuant to the Securities Purchase and Holders Agreement entered into
among the stockholders of Holdings (the "Stockholders' Agreement"), the Board of
Directors of Holdings and the Company will be composed at all times of five
directors as follows: the President of the Company, Dr. Martin M. Dorio (so long
as he continues to serve as President); two individuals designated by CVC; and
two additional directors who shall not be employees of CVC but who shall be
designated by CVC, subject to the right of holders of the majority of the
outstanding shares of Holdings Class A Stock to veto the election of either of
such additional directors.
The Stockholders' Agreement contains certain provisions which, with certain
exceptions, restrict the ability of the stockholders to transfer any Holdings
Common Stock, Holdings Preferred Stock or Holdings Debentures except pursuant to
the terms of the Stockholders' Agreement. So long as Holdings has not
consummated a public offering of Holdings Common Stock resulting in aggregate
net proceeds of $30.0 million or more, if holders of at least 50% of the
Holdings Common Stock then outstanding approve the sale of the Company (an
"Approved Sale"), each stockholder has agreed to consent to such sale and, if
such sale
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includes the sale of stock, each stockholder has agreed to sell all of such
stockholder's Holdings Common Stock on the terms and conditions approved by
holders of a majority of the Holdings Common Stock then outstanding. In the
event Holdings proposes to issue and sell (other than in a public offering
pursuant to a registration statement) any shares of Holdings Common Stock and/or
Holdings Preferred Stock or any securities containing options or rights to
acquire any shares of Holdings Common Stock and/or Holdings Preferred Stock or
any securities convertible into Holdings Common Stock and/or Holdings Preferred
Stock to CVC or its corporate affiliates, Holdings must first offer to each of
the other shareholders a pro rata portion of such shares. Such preemptive rights
will not be applicable in certain circumstances including the issuance of shares
of Holdings Common Stock and/or Holdings Preferred Stock upon the conversion of
shares of one class of Holdings Common Stock and/or Holdings Preferred Stock
into shares of the other class or upon an initial public offering.
The Stockholders' Agreement also provides for certain additional
restrictions on transfer of shares by Management Investors, including the right
of Holdings to repurchase shares upon termination of such stockholder's
employment prior to 2001, at a formula price, and the grant of a right of first
refusal in favor of Holdings in the event a Management Investor elects to
transfer shares of Holdings Common Stock.
REGISTRATION RIGHTS AGREEMENT
In connection with their entry into the Stockholders' Agreement, Holdings,
CVC, and the other stockholders of Holdings entered into a Registration Rights
Agreement (the "Holdings Registration Rights Agreement"). Pursuant to the
Holdings Registration Rights Agreement, upon the written request of CVC,
Holdings has agreed to (subject to certain exceptions) prepare and file a
registration statement with the Commission concerning the distribution of all or
part of the shares held by CVC and use its best efforts to cause such
registration statement to become effective. If at any time Holdings files a
registration statement for the Holdings Common Stock pursuant to a request by
CVC or otherwise (other than a registration statement of Form S-8, Form S-4 or
any similar form, a registration statement filed in connection with a share
exchange or an offering solely to Holdings' employees or existing stockholders,
or a registration statement registering a unit offering), Holdings will use its
best efforts to allow the other parties to the Holdings Registration Rights
Agreement to have their shares of Holdings Common Stock (or a portion of their
shares under certain circumstances) included in such offering of Holdings Common
Stock if the registration form proposed to be used may be used to register such
shares. Registration expenses of the selling stockholders (other than
underwriting fees, brokerage fees and transfer taxes applicable to the shares
sold by such stockholders or the fees and expenses of any accountants or other
representatives retained by a selling stockholder) will be paid by Holdings.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
SERVICE AGREEMENT
In connection with the 1996 Acquisition, the Company entered into a Service
Agreement with the Predecessor's Parent pursuant to which the Company shares
space in the Southaven Facility with another division of the Predecessor's
Parent. In addition, pursuant to such agreement the Company hired approximately
38 employees who are responsible for aftermarket customer support and
administration. The Company pays an aggregate annual fee under such Service
Agreement of approximately $5.9 million (the "Base Fee"), payable in monthly
installments. In addition to the Base Fee, certain provisions of the Service
Agreement may require each of the Predecessor's Parent and CLARK to share the
responsibility for additional costs and savings resulting from, among other
things, changes or increases in the provision of services or the implementation
of certain cost savings. The term of the agreement is for three years.
Management believes that the terms of the Service Agreement are no less
favorable to the Company than those that could have been obtained from
non-affiliated parties at the time the agreement was entered into. Management
anticipates that it will be able to find an appropriate replacement facility in
the event that the Company does not renew the Service Agreement upon its
expiration in 1999.
TAX SHARING AGREEMENT
Holdings and the Company are included in the consolidated United States
federal income tax return of Holdings. Holdings and the Company entered into a
tax sharing agreement (the "Tax Sharing Agreement") whereby the Company will pay
Holdings (or Holdings will pay the Company) its pro rata share of the total tax
liability, as set out in the Tax Sharing Agreement. In the event the Company is
included in a joint, combined, consolidated or unitary state or local income or
franchise tax return with Holdings, the Company shall make payments to Holdings,
and Holdings shall make payments to the Company, in a manner consistent with
that described above for federal tax purposes.
LICENSE AGREEMENTS
In connection with the 1996 Acquisition, Holdings acquired certain patents
and patent applications related to the Company's business from the Predecessor's
Parent. Pursuant to a License Agreement dated as of November 27, 1996, Holdings
granted to the Company a perpetual, world-wide, exclusive royalty-free,
fully-paid-up license to practice methods, and to make, use, import, offer for
sale or sell any products, covered by such patents and patent applications.
In addition, in connection with the Samsung Forklift Acquisition, CLARK
Asia has obtained a license to use the Samsung name in connection with the
Samsung Forklift business for the Transition Period plus three years in exchange
for an agreed upon royalty payment.
OTHER
The Company and Holdings were formed by CVC and certain members of
management of CLARK (the "Management Investors") to effect the acquisition (the
"1996 Acquisition") of substantially all the assets and certain liabilities of
CLARK Material Handling Company, a Kentucky corporation, and all of the
outstanding capital stock of certain of its affiliates, including its German,
South Korean, Brazilian and Canadian affiliates. The 1996 Acquisition was
consummated on November 27, 1996 pursuant to a Stock and Asset Purchase and Sale
Agreement dated as of November 9, 1996 among the Predecessor's Parent and
certain of its subsidiaries, as sellers, and the Company, as buyer (the "1996
Acquisition Agreement"). The aggregate consideration for the 1996 Acquisition
was $139.5 million. To finance the 1996 Acquisition (including the payment of
related fees and expenses): (i) CVC, Dr. Martin M. Dorio, President and Chief
Executive Officer of the Company, and Thomas J. Snyder, who was elected to the
Board of Directors of the Company in connection with the 1996 Acquisition,
purchased $17.0 million of preferred stock (the "Holdings Preferred Stock"),
$1.0 million of voting common stock (the "Holdings Class A Stock") and
non-voting common stock (the "Holdings Class B Stock," and together with the
Holdings Class A Stock, the "Holdings Common Stock"), and $7.0 million of
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junior subordinated debentures (the "Holdings Debentures") from Holdings for
$25.0 million in cash; (ii) Holdings contributed $25.0 million to the Company in
exchange for all of the capital stock of the Company; and (iii) the Company
issued and sold $130 million of Original Notes (as defined).
At the time of the 1996 Acquisition, it was contemplated that certain
shares of capital stock of Holdings would be issued to the members of
management. In furtherance of that intent, effective as of January 31, 1997,
Holdings repurchased certain outstanding shares of Holdings Preferred Stock and
Holdings Class B Stock having an aggregate value of approximately $1.1 million
from CVC and, simultaneously therewith, issued and sold shares of Holdings
Preferred Stock and Holdings Common Stock having an equivalent value to Dr.
Martin M. Dorio and other members of management. In connection therewith, the
Company loaned Dr. Dorio $200,000 toward the purchase price of the securities
acquired by him. Such loan is evidenced by a demand promissory note that does
not bear interest. In addition, effective as of February 20, 1997, Holdings
repurchased certain outstanding shares of Holdings Class A Stock, Holdings Class
B Stock and 12% Junior Subordinated Notes (the "Junior Subordinated Notes") of
Holdings having an aggregate value of $250,000 from CVC and, simultaneously
therewith, issued and sold shares of Holdings Class A Stock, Holdings Class B
Stock and the Junior Subordinated Notes having an equivalent value to Diether
Klingelnberg.
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DESCRIPTION OF CERTAIN INDEBTEDNESS
The following is a summary of certain indebtedness of the Company and
Holdings which will be outstanding following consummation of the Exchange. To
the extent such summary contains descriptions of the Revolving Credit Facility
and other loan documents, such descriptions do not purport to be complete and
are qualified in their entirety by reference to such documents, which are
available upon request from the Company.
REVOLVING CREDIT FACILITY
In connection with the 1996 Acquisition, the Company entered into a $30.0
million Revolving Credit Facility with Congress Financial Corporation (the
"Bank"). Borrowings under the Revolving Credit Facility are available for
working capital and general corporate purposes, including letters of credit. The
Revolving Credit Facility is secured by first priority liens on all accounts
receivable and inventory of the Company's domestic operations, excluding Blue
Giant. The Revolving Credit Facility has an aggregate undrawn availability of
$20.6 million at June 30, 1998, subject to the borrowing conditions contained
therein.
The Revolving Credit Facility will expire on November 27, 1999, unless
extended. The interest rate per annum applicable to the Revolving Credit
Facility is the prime rate, as announced by CoreStates Bank N.A., plus 0.50% or,
at the Company's option, the adjusted Eurodollar rate plus 2.50%. The Revolving
Credit Facility permits the Company to prepay loans and to permanently reduce
revolving credit commitments or letters of credit, in whole or in part, at any
time in certain minimum amounts. The Company is required to pay certain fees in
connection with the Revolving Credit Facility, including a commitment fee of
0.25% on the undrawn portion of the revolving credit commitment.
The Revolving Credit Facility contains customary representations and
warranties, events of default and certain other covenants.
SUBSIDIARY CREDIT FACILITIES
CLARK's Foreign Subsidiaries have various term and revolving loan
facilities which have an aggregate principal amount outstanding as of June 30,
1998 of approximately $1.1 million. In addition, the Company expects that CLARK
Europe will enter into a revolving credit facility to provide working capital
for its European operations. It is expected that any such facility will provide
up to $10.0 million of revolving credit loans and will be secured by certain
assets of CLARK Europe.
THE ORIGINAL NOTES
On November 22, 1996 the Company issued $130 million aggregate principal
amount of 10 3/4% Series A Senior Notes due 2006 (the "Original Notes") pursuant
to an indenture (the "Original Indenture") initially between the Company and
United States Trust Company of New York, as trustee (the "Original Trustee")
dated as of November 27, 1996. The Company issued the Original Notes to the
Initial Purchasers, who resold the Original Notes to "qualified institutional
buyers" (within the meaning of Rule 144A) in transactions meeting the
requirements of Rule 144A and to a limited number of institutional "accredited
investors" (within the meaning of Rule 501 under the Securities Act) in
transactions not involving a public offering. The Original Notes were offered in
connection with the 1996 Acquisition. The Company applied the net proceeds of
the offering of the Original Notes, together with an equity contribution, (i) to
finance the 1996 Acquisition, (ii) to pay certain fees and expenses related to
the 1996 Acquisition and related transactions, and (iii) for general corporate
purposes. The Original Notes were exchanged for Series B Notes by the holders
thereof pursuant to an exchange offer by the Company in 1997.
HOLDINGS DEBENTURES
In connection with the 1996 Acquisition, Holdings issued an aggregate of
$7.0 million original principal amount of Holdings Debentures, designated as
Junior Subordinated Notes. The Holdings Debentures mature on December 1, 2007
and bear interest at a rate of 12% per annum. All interest due on the Holdings
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Debentures prior to their maturity is paid by adding such interest to the then
outstanding principal amount of the Holdings Debentures. Such amount accrues
interest as a portion of the principal amount of the Holdings Debentures from
the applicable interest payment date. The Holdings Debentures contain certain
covenants in favor of the holders of the Holdings Debentures including, but not
limited to: (i) restrictions on the payment by Holdings of dividends and the
purchase, redemption or prepayment by Holdings and its subsidiaries of its
capital stock or indebtedness which is, by its terms or by operation of law,
junior in right of payment to the Holdings Debentures, and (ii) restrictions on
subsidiaries entering into agreements (other than with respect to the Notes)
restricting their ability to pay dividends or make certain other distributions
to Holdings or any subsidiary of Holdings.
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DESCRIPTION OF NOTES
GENERAL
The Series C Notes were issued pursuant to an Indenture, dated July 17,
1998, between the Company and United States Trust Company of New York, as
trustee (the "Trustee") as amended by the First Supplemental Indenture, dated
August 18, 1998, between the Company and the Trustee (such Indenture and First
Supplemental Indenture shall collectively be referred to herein as the
"Indenture"). The terms of the Indenture apply to the Series C Notes and to the
New Notes to be issued in exchange for the Series C Notes and the Series B Notes
pursuant to the Exchange Offer (all such Notes being referred to herein
collectively as the "Notes"). The terms of the New Notes include those stated in
the Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"). The following
summary of the material provisions of the Indenture does not purport to be
complete and is qualified in its entirety by reference to the Indenture,
including the definitions therein of certain terms used below. A copy of the
form of Indenture is available from the Company upon request. The definitions of
certain terms used in the following summary are set forth below under
"-- Certain Definitions."
The Notes are senior unsecured obligations of the Company and rank senior
in right of payment to all subordinated Indebtedness of the Company and pari
passu in right of payment with all senior Indebtedness.
The Notes are effectively subordinated to all senior secured indebtedness
of the Company, including indebtedness under the Revolving Credit Facility, to
the extent of the assets securing such debt. As of June 30, 1998, after giving
effect to the Transactions, the Company would have had secured indebtedness
outstanding equal to $10.5 million, exclusive of unused commitments of $20.6
million which may be borrowed by the Company under the Revolving Credit
Facility.
Although the Company's U.S. operations are owned directly, its foreign
operations are conducted through the Foreign Subsidiaries. The Foreign
Subsidiaries have not guaranteed or otherwise become obligated with respect to
the Notes. The Notes are therefore effectively subordinated to all existing and
future liabilities, including indebtedness, of the Foreign Subsidiaries. At June
30, 1998, the Foreign Subsidiaries would have had liabilities of approximately
$43.3 million reflected on the Company's combined balance sheet. In addition,
the Foreign Subsidiaries assumed liabilities of approximately $8.0 million in
connection with the Samsung Forklift Acquisition. Claims of creditors of the
Foreign Subsidiaries, including trade creditors, will generally have priority as
to the assets of such subsidiaries over the claims of the Company and the
holders of the Company's indebtedness, including the Notes.
The Notes are issued in registered form, without coupons, and in
denominations of $1,000 and integral multiples thereof.
PRINCIPAL MATURITY AND INTEREST
The New Notes are limited in aggregate principal amount to $150.0 million
and will mature on November 15, 2006. Interest on the Notes will be payable
semi-annually on November 15 and May 15 of each year, to holders of record on
the immediately preceding November 1 and May 1, respectively. The Notes will
bear interest at 10 3/4% per annum. Interest on the New Notes will accrue from
the most recent date to which interest has been paid or, if no interest has been
paid, from May 15, 1998. Interest will be computed on the basis of a 360-day
year comprised of twelve 30-day months. The Notes will be payable both as to
principal and interest at the office or agency of the Company maintained for
such purpose within the City of New York or, at the option of the Company,
payment of interest may be made by check mailed to the holders of the Notes at
their respective addresses set forth in the register of holders of Notes. Until
otherwise designated by the Company, the Company's office or agency will be the
office of the Trustee maintained for such purpose. If a payment date is a Legal
Holiday, payment may be made at that place on the next succeeding day that is
not a Legal Holiday, and no interest shall accrue for the intervening period.
REDEMPTION
The Notes are not redeemable at the Company's option prior to November 15,
2001. Thereafter, the Notes will be subject to redemption at the option of the
Company, in whole or in part, upon not less than 30 nor more than 60 days'
notice, at the redemption prices (expressed as percentages of principal amount)
set
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forth below plus accrued and unpaid interest thereon, if any, to the applicable
date of redemption, if redeemed during the 12-month period beginning on November
15 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---- ----------
<S> <C>
2001...................................................... 105.375%
2002...................................................... 102.688
2003 and thereafter....................................... 100.000
</TABLE>
Notwithstanding the foregoing, the Indenture provides that at any time or
from time to time prior to November 15, 1999, the Company may, at its option,
redeem up to one-third of the aggregate principal amount of the New Notes and
Series C Notes issued on or after the Issue Date, at a redemption price of
110.75% of the principal amount thereof, plus accrued and unpaid interest, if
any, to the applicable redemption date, with the net cash proceeds of one or
more Public Equity Offerings; provided, that (a) such redemption shall occur
within 90 days of the date of closing of such public offering and (b) at least
two-thirds of the aggregate principal amount of New Notes and Series C Notes
issued on or after the Issue Date remains outstanding immediately after giving
effect to each such redemption.
If less than all of the New Notes and Series C Notes are to be redeemed at
any time, selection of New Notes and Series C Notes for redemption will be made
by the Trustee in compliance with the requirements of the principal national
securities exchange, if any, on which the New Notes and Series C Notes are
listed, or, if the New Notes and Series C Notes are not so listed, on a pro rata
basis, by lot or by such other method as the Trustee deems to be fair and
appropriate, provided, that New Notes and Series C Notes of $1,000 or less may
not be redeemed in part. Notice of redemption will be mailed by first-class mail
at least 30 but not more than 60 days before the redemption date to each holder
of New Notes and Series C Notes to be redeemed at such holder's registered
address. If any Note is to be redeemed in part only, the notice of redemption
that relates to such Note will state the portion of the principal amount thereof
to be redeemed. A new Note in principal amount equal to the unredeemed portion
thereof will be issued in the name of the holder thereof upon cancellation of
the original Note. On and after the date of redemption, interest will cease to
accrue on Notes or portions thereof called for redemption.
The Notes will not be entitled to any mandatory redemption or sinking fund.
PURCHASE UPON CHANGE OF CONTROL
Upon the occurrence of a Change of Control, the Company will be required to
offer to purchase all the Notes then outstanding (the "Change of Control Offer")
at a purchase price equal to 101% of the aggregate principal amount thereof plus
accrued and unpaid interest, if any, to the date of repurchase (the "Change of
Control Payment"). Within 30 days following any Change of Control, the Company
must mail or cause to be mailed a notice to each holder stating, among other
things: (i) that the Change of Control Offer is being made pursuant to this
provision and that all Notes tendered will be accepted for payment, (ii) the
purchase price and the purchase date, which will be no earlier than 30 days nor
later than 60 days from the date such notice is mailed (the "Change of Control
Payment Date"), (iii) that any Note not tendered will continue to accrue
interest, (iv) that, unless the Company defaults in the payment of the Change of
Control Payment, all Notes accepted for payment pursuant to the Change of
Control Offer will cease to accrue interest on the Change of Control Payment
Date, (v) that any holder electing to have Notes purchased pursuant to a Change
of Control Offer will be required to surrender the Notes, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Notes completed, to
the paying agent with respect to the Notes (the "Paying Agent") at the address
specified in the notice prior to the close of business on the third business day
preceding the Change of Control Payment Date, (vi) that any holder will be
entitled to withdraw such election if the Paying Agent receives, not later than
the close of business on the second business day preceding the Change of Control
Payment Date, a telegram, telex, facsimile transmission or letter setting forth
the name of the holder, the principal amount of Notes delivered for purchase,
and a statement that such holder is withdrawing his election to have such Notes
purchased, and (vii) that a holder whose Notes are being purchased only in part
will be issued new Notes equal in principal amount to the unpurchased portion of
the Notes surrendered, which unpurchased portion must be equal to $1,000 in
principal amount or an integral multiple thereof.
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The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of the Notes in connection with a Change of Control. To the extent
that the provisions of any securities laws or regulations conflict with the
"Change of Control" provisions of the Indenture, the Company will comply with
the applicable securities laws and regulations and shall not be deemed to have
breached its obligations under the "Change of Control" provisions of the
Indenture by virtue thereof.
On the Change of Control Payment Date, the Company will, to the extent
lawful, (i) accept for payment the Notes or portions thereof tendered pursuant
to the Change of Control Offer, (ii) deposit with the Paying Agent an amount
equal to the Change of Control Payment in respect of all Notes or portions
thereof so tendered and not withdrawn, and (iii) deliver or cause to be
delivered to the Trustee the Notes so accepted together with an Officer's
Certificate stating that the Notes or portions thereof tendered to the Company
are accepted for payment. The Paying Agent will promptly mail to each holder of
Notes so accepted payment in an amount equal to the purchase price for such
Notes, and the Trustee will authenticate and mail to each holder a new Note
equal in principal amount to any unpurchased portion of the Notes surrendered,
if any, provided, that each such new Note will be in principal amount of $1,000
or an integral multiple thereof. The Company will announce the result of the
Change of Control Offer on or as soon as practicable after the Change of Control
Payment Date.
The Board of Directors of the Company may not waive the covenant relating
to the Company's obligation to make a Change of Control Offer. Except as
described above with respect to a Change of Control, the Indenture does not
contain provisions that permit the holders of the Notes to require that the
Company purchase or redeem the Notes in the event of a takeover,
recapitalization or similar restructuring.
There can be no assurance that sufficient funds will be available at the
time of any Change of Control Offer to make required purchases.
"Change of Control" means (i) the transfer (in one transaction or a series
of transactions) of all or substantially all of the Company's assets to any
Person or group (as such term is used in Section 13(d)(3) of the Exchange Act)
other than to one or more Existing Holders, (ii) the liquidation or dissolution
of the Company or the adoption of a plan by the stockholders of the Company
relating to the dissolution or liquidation of the Company, (iii) the acquisition
by any Person or group (as such term is used in Section 13(d)(3) of the Exchange
Act), except for one or more Existing Holders, of beneficial ownership, directly
or indirectly, of more than 50% of the voting power of the total outstanding
Voting Stock of Holdings, (iv) after the consummation of an initial public
offering of any class of common stock of the Company or Holdings, during any
period of two consecutive years, individuals who at the beginning of such period
constituted the Board of Directors of the Company or Holdings (together with any
new directors who have been appointed by CVC, or any Affiliate of CVC or whose
nomination for election by the stockholders of the Company was approved by a
vote of at least 66 2/3% of the directors then still in office who were either
directors at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the Board of Directors of the Company or Holdings, as the case may
be, then still in office or (v) the failure by Holdings to own more than 50% of
the voting power of the total outstanding Voting Stock of the Company.
The definition of Change of Control includes a phrase relating to the
transfer of "all or substantially all" of the Company's assets. Although there
is a developing body of case law interpreting the phrase "substantially all,"
there is no precise established definition of the phrase under applicable law.
Accordingly, the ability of a holder of Notes to require the Company to
repurchase such Notes as a result of a transfer of less than all of the assets
of the Company to another Person or group may be uncertain.
"Existing Holders" shall mean (i) CVC, (ii) any Affiliate of CVC, (iii) any
officer, employee or director of CVC, (iv) the Management Investors, (v) Thomas
Snyder and Diether Klingelnberg and (vi) in the case of any natural Person
specified in the foregoing clauses, any spouse or lineal descendant (including
by adoption) of such Person; provided, that in no event shall the Persons
specified in clauses (iii) through (vi) be deemed "Existing Holders" with
respect to more than 30% of the voting power of the total outstanding Voting
Stock of the Company or Holdings.
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CERTAIN COVENANTS
Limitation on Restricted Payments. The Company will not, and will not
permit any of its Restricted Subsidiaries to, directly or indirectly (i) declare
or pay any dividend or make any distribution on account of any Equity Interests
of the Company or any of its Subsidiaries (other than dividends or distributions
payable in Equity Interests (other than Disqualified Stock) of the Company or
dividends or distributions payable to the Company or any Wholly Owned
Subsidiary), (ii) purchase, redeem or otherwise acquire or retire for value any
Equity Interest of the Company, any Subsidiary or any other Affiliate of the
Company (other than any such Equity Interest owned by the Company or any Wholly
Owned Subsidiary), (iii) make any principal payment on, or purchase, redeem,
defease or otherwise acquire or retire for value any Indebtedness of the Company
or any Guarantor that is subordinated in right of payment to the Notes or such
Guarantor's Guarantee thereof, as the case may be, prior to any scheduled
principal payment, sinking fund payment or other payment at the stated maturity
thereof, or (iv) make any Restricted Investment (all such payments and other
actions set forth in clauses (i) through (iv) above being collectively referred
to as "Restricted Payments") unless, at the time of such Restricted Payment:
(a) no Default or Event of Default has occurred and is continuing or
would occur as a consequence thereof,
(b) immediately after giving effect thereto on a pro forma basis, the
Company could incur at least $1.00 of additional Indebtedness under the
Interest Coverage Ratio test set forth in the covenant described under
"-- Limitation on Incurrence of Indebtedness," and
(c) such Restricted Payment (the value of any such payment, if other
than cash, being determined in good faith by the Board of Directors and
evidenced by a resolution set forth in an Officers' Certificate delivered
to the Trustee), together with the aggregate of all other Restricted
Payments made after the date of the Original Indenture (including
Restricted Payments permitted by clauses (i) and (ii) of the next following
paragraph and excluding Restricted Payments permitted by the other clauses
therein), is less than the sum of (1) 50% of the Consolidated Net Income of
the Company for the period (taken as one accounting period) from the
beginning of the first quarter commencing immediately after the date of the
Original Indenture to the end of the Company's most recently ended fiscal
quarter for which internal financial statements are available at the time
of such Restricted Payment (or, if such Consolidated Net Income for such
period is a deficit, 100% of such deficit), plus (2) 100% of the aggregate
net cash proceeds (or of the net cash proceeds received upon the conversion
of non-cash proceeds into cash) received by the Company from the issuance
or sale, other than to a Subsidiary, of Equity Interests of the Company
(other than Disqualified Stock) after the date of the Original Indenture
and on or prior to the time of such Restricted Payment, plus (3) 100% of
the aggregate net cash proceeds (or of the net cash proceeds received upon
the conversion of non-cash proceeds into cash) received by the Company from
the issuance or sale, other than to a Subsidiary, of any convertible or
exchangeable debt security of the Company that has been converted or
exchanged into Equity Interests of the Company (other than Disqualified
Stock) pursuant to the terms thereof after the date of the Original
Indenture and on or prior to the time of such Restricted Payment (including
any additional net cash proceeds received by the Company upon such
conversion or exchange) plus (4) 100% of the aggregate after-tax net cash
proceeds (or of the after-tax net cash proceeds received upon the
conversion of non-cash proceeds into cash) received by the Company or a
Restricted Subsidiary from the sale or other disposition of any Investment
constituting a Restricted Payment that was made after the date of the
Original Indenture; provided, that the gain on such sale or disposition, if
any, shall be excluded in determining Consolidated Net Income for purposes
of clause (1) above.
The foregoing provisions will not prohibit (i) the payment of any dividend
within 60 days after the date of declaration thereof, if at said date of
declaration such payment would not have been prohibited by the provisions of the
Indenture, (ii) the redemption, purchase, retirement or other acquisition of any
Equity Interests of the Company in exchange for, or out of the proceeds of the
substantially concurrent sale (other than to a Subsidiary) of, other Equity
Interests of the Company (other than Disqualified Stock), (iii) the redemption,
repurchase or payoff of any Indebtedness (1) with proceeds of any Refinancing
Indebtedness
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<PAGE> 77
permitted to be incurred pursuant to the provision described under
"-- Limitation on Incurrence of Indebtedness" or (2) solely in exchange for, or
out of the proceeds of the substantially concurrent sale (other than to a
Subsidiary) of, any Equity Interests of the Company (other than Disqualified
Stock), (iv) Investments by the Company or any Restricted Subsidiary, in an
aggregate amount not to exceed $5.0 million, in an Unrestricted Subsidiary
formed primarily for the purpose of financing purchases and leases of inventory
manufactured by the Company or any of its Restricted Subsidiaries, (v) payments
by the Company to Holdings pursuant to the Tax Sharing Agreement, (vi)
distributions, loans or advances to Holdings in an aggregate amount not to
exceed $500,000 per fiscal year; provided, that such amounts are used by
Holdings to pay ordinary operating expenses (including, without limitation,
reasonable directors' fees and expenses, indemnification obligations and
professional fees and expenses) and certain CLARK management compensation
expenses, (vii) (A) payments to, and promptly used by, Holdings to repurchase
Capital Stock or Indebtedness of Holdings from directors, officers and employees
of the Company and its Subsidiaries, including Management Investors, who have
died or whose employment has been terminated, and (B) loans or advances to
employees of the Company or any of its Subsidiaries; provided, that the
aggregate amount of such payments, loans and advances in any fiscal year shall
not exceed the lesser of (x) $500,000 plus any amount available for such
payments pursuant to this clause (x) since the date of the Original Indenture
that have not been used for such purpose and (y) $2.0 million, (viii) Permitted
Transactions or (ix) other Restricted Payments in an aggregate amount not to
exceed $3.0 million; provided, that with respect to clauses (iv), (vii) and (ix)
above, no Default or Event of Default shall have occurred and be continuing at
the time, or shall occur as a consequence thereof. In addition, so long as any
of the Series B Notes are outstanding, the foregoing provisions will not
prohibit any Restricted Payment to the extent such prohibition would violate the
covenant in the Original Indenture relating to limitations on restrictions on
subsidiary dividends.
Not later than the date of making each Restricted Payment, the Company will
deliver to the Trustee an Officers' Certificate stating that such Restricted
Payment is permitted and setting forth the basis upon which the calculations
required by this covenant were computed, which calculations may be based upon
the Company's latest available financial statements.
Limitation on Incurrence of Indebtedness. The Company will not, and will
not permit any of its Restricted Subsidiaries to, directly or indirectly, (1)
create, incur, issue, assume, guaranty or otherwise become directly or
indirectly liable, contingently or otherwise, (collectively, "incur"), with
respect to any Indebtedness (including Acquired Debt) or (2) issue any
Disqualified Stock; provided, that the Company may incur Indebtedness (including
Acquired Debt) or issue shares of Disqualified Stock and any Restricted
Subsidiary may incur Acquired Debt, in each case if (x) no Default or Event of
Default shall have occurred and be continuing at the time of, or would occur
after giving effect on a pro forma basis to such incurrence or issuance, and (y)
the Interest Coverage Ratio for the Company's most recently ended four full
fiscal quarters for which internal financial statements are available
immediately preceding the date on which such additional Indebtedness is incurred
or such Disqualified Stock is issued would have been at least equal to the ratio
set forth below opposite the period in which such incurrence or issuance occurs,
determined on a pro forma basis (including a pro forma application of the net
proceeds therefrom), as if the additional Indebtedness had been incurred, or the
Disqualified Stock had been issued, as the case may be, at the beginning of such
four-quarter period:
<TABLE>
<CAPTION>
PERIOD ENDING RATIO
- ------------- -----
<S> <C>
November 15, 1998........................................... 2.00
Thereafter.................................................. 2.50
</TABLE>
The foregoing limitations will not prohibit the incurrence of:
(a) Indebtedness of the Company under the Revolving Credit Facility
and Indebtedness of CLARK Europe and its subsidiaries under the German
Subsidiary Facilities, provided, that the aggregate principal amount of
Indebtedness so incurred on any date, together with all other Indebtedness
incurred pursuant to this clause (a) and outstanding on such date, shall
not exceed the greater of (x) $40.0 million, less any required permanent
repayments (which are accompanied by a corresponding permanent commitment
reduction) thereunder, and (y) the sum, on such date, of (i) 90% of
Eligible Receivables
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(as defined) of the Company and the Restricted Subsidiaries, plus (ii) 65%
of Eligible Inventory (as defined) of the Company and the Restricted
Subsidiaries,
(b) performance bonds, appeal bonds, surety bonds, insurance
obligations or bonds and other similar bonds or obligations incurred in the
ordinary course of business,
(c) obligations incurred (i) to fix the interest rate on any variable
rate Indebtedness otherwise permitted by the Indenture, (ii) to hedge
currency risk with respect to any receivable or liability, the payment of
which is determined by reference to a foreign currency, or (iii) to protect
against fluctuations in the price of raw materials used in the ordinary
course of business of the Company and its Restricted Subsidiaries
(collectively, "Hedging Obligations"),
(d) Indebtedness arising out of Capital Lease Obligations or Purchase
Money Obligations (collectively, "Purchase Money Indebtedness") in an
aggregate amount not to exceed $10.0 million outstanding at any time,
(e) Indebtedness owed by (i) a Restricted Subsidiary to the Company or
to a Wholly Owned Subsidiary or (ii) the Company to a Wholly Owned
Subsidiary,
(f) Floor Plan Guarantees incurred in the ordinary course of business,
(g) Indebtedness outstanding on the date of the Indenture, including
the Series C Notes,
(h) Guarantees by the Company or any Guarantor of Indebtedness
otherwise permitted to be incurred by the Indenture,
(i) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument inadvertently
(except in the case of daylight overdrafts) drawn against insufficient
funds in the ordinary course of business; provided, that such Indebtedness
is extinguished within three business days of incurrence,
(j) Indebtedness of the Company or any Restricted Subsidiary in
addition to that described in clauses (a) through (i) above, so long as the
aggregate principal amount of all such Indebtedness incurred pursuant to
this clause (j) does not exceed $10.0 million at any one time outstanding
(which may be, but shall not be required to be, incurred, in whole or in
part, under the Revolving Credit Facility or the Germany Subsidiary
Facilities), and
(k) Indebtedness issued in exchange for, or the proceeds of which are
contemporaneously used to extend, refinance, renew, replace, or refund
(collectively, "Refinance") Indebtedness referred to in clause (g) above or
this clause (k) or Indebtedness incurred pursuant to the Interest Coverage
Ratio test set forth in the immediately preceding paragraph ("Refinancing
Indebtedness"); provided, that (1) the principal amount of such Refinancing
Indebtedness does not exceed the principal amount of Indebtedness so
Refinanced (plus the premiums required to be paid, and the out-of-pocket
expenses (other than those payable to an Affiliate of the Company)
reasonably incurred, in connection therewith), (2) the Refinancing
Indebtedness has a final scheduled maturity that exceeds the final stated
maturity, and a Weighted Average Life to Maturity that is equal to or
greater than the Weighted Average Life to Maturity, of the Indebtedness
being Refinanced and (3) the Refinancing Indebtedness ranks, in right of
payment, no less favorable to the Notes as the Indebtedness being
Refinanced.
Limitation on Asset Sales. The Company will not, and will not permit any
Restricted Subsidiary to, make any Asset Sale unless (i) the Company or such
Restricted Subsidiary receives consideration at the time of such Asset Sale at
least equal to the fair market value (as determined in good faith by the Board
of Directors as evidenced by a resolution of the Board of Directors set forth in
an Officers' Certificate delivered to the Trustee) of the assets subject to such
Asset Sale, (ii) at least 75% of the consideration for such Asset Sale is in the
form of cash, Cash Equivalents or liabilities of the Company or any Restricted
Subsidiary (other than liabilities that are by their terms subordinated to the
Notes or any Guarantee) that are assumed by the transferee of such assets
(provided, that there is no further recourse to the Company and its Restricted
Subsidiaries with respect to such liabilities), and (iii) within 12 months of
such Asset Sale, the Net Proceeds thereof are (a) invested in assets related to
the business of the Company or its Restricted Subsidiaries or (b) applied to
make an offer to purchase the Series B Notes, if any are then outstanding,
pursuant to the Original Indenture, at a price equal to 100% of the principal
amount of the Series B Notes, plus accrued and
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<PAGE> 79
unpaid interest, if any, to the date of purchase or (c) to the extent not used
in clauses (a) or (b), applied to make an offer to purchase the Series C Notes
and the New Notes as described below (an "Excess Proceeds Offer"); provided,
that if the amount of Net Proceeds from any Asset Sale not used pursuant to
clauses (a) and (b) above is less than $5.0 million, the Company will not be
required to make an offer pursuant to clause (c). Pending the final application
of any such Net Proceeds, the Company or any Restricted Subsidiary may
temporarily reduce Indebtedness under the Revolving Credit Facility or the
German Subsidiary Facilities, or temporarily invest such Net Proceeds in Cash
Equivalents.
The amount of Net Proceeds not used as set forth in the preceding clause
(a) and (b) constitutes "Excess Proceeds." If the Company elects, or becomes
obligated to make an Excess Proceeds Offer, the Company will offer to purchase
the applicable Notes having an aggregate principal amount equal to the Excess
Proceeds (the "Purchase Amount"), at a purchase price equal to 100% of the
aggregate principal amount thereof, plus accrued and unpaid interest, if any, to
the purchase date. The Company must commence such Excess Proceeds Offer not
later than 30 days after the expiration of the 12-month period following the
Asset Sale that produced Excess Proceeds. If the aggregate purchase price for
the Notes tendered pursuant to the Excess Proceeds Offer is less than the Excess
Proceeds, the Company and its Restricted Subsidiaries may use the portion of the
Excess Proceeds remaining after payment of such purchase price for general
corporate purposes.
Each Excess Proceeds Offer will remain open for a period of 20 business
days and no longer, unless a longer period is required by law (the "Excess
Proceeds Offer Period"). Promptly after the termination of the Excess Proceeds
Offer Period (the "Excess Proceeds Payment Date"), the Company will purchase and
mail or deliver payment for the Purchase Amount for the Notes or portions
thereof tendered, pro rata or by such other method as may be required by law,
or, if less than the Purchase Amount has been tendered, all Notes tendered
pursuant to the Excess Proceeds Offer. The principal amount of Notes to be
purchased pursuant to an Excess Proceeds Offer may be reduced by the principal
amount of Notes acquired by the Company through purchase or redemption (other
than pursuant to a Change of Control Offer) subsequent to the date of the Asset
Sale and surrendered to the Trustee for cancellation.
Any Excess Proceeds Offer will be conducted in compliance with applicable
regulations under the Federal securities laws, including Exchange Act Rule
14e-1. To the extent that the provisions of any securities laws or regulations
conflict with the "Asset Sale" provisions of the Indenture, the Company shall
comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations under the "Asset Sale" provisions of the
Indenture by virtue thereof.
There can be no assurance that sufficient funds will be available at the
time of any Excess Proceeds Offer to make required repurchases. The Company's
failure to comply with the covenant described above will be an Event of Default
under the Indenture if such failure continues for a specified period and the
required notice is given by the Trustee or the holders of not less than 25% in
principal amount of the then outstanding Series C Notes and New Notes.
Limitation on Liens. The Company will not, and will not permit any
Restricted Subsidiary to, directly or indirectly, create, incur, assume or
suffer to exist any Lien on any asset (including, without limitation, all real,
tangible or intangible property) of the Company or any Restricted Subsidiary,
whether now owned or hereafter acquired, or on any income or profits therefrom,
or assign or convey any right to receive income therefrom, except (i) Liens on
accounts receivable and inventory and proceeds thereof (and certain rights
relating thereto) securing Indebtedness permitted to be incurred under the
Revolving Credit Facility, (ii) Liens on property, plant, equipment, accounts
receivable and inventory of CLARK Europe and its subsidiaries, and proceeds
thereof (and certain rights relating thereto) securing Indebtedness permitted to
be incurred under the German Subsidiary Facilities, (iii) Purchase Money Liens,
and (iv) Permitted Liens.
Limitation on Restrictions on Subsidiary Dividends. The Company will not,
and will not permit any Restricted Subsidiary to, directly or indirectly, create
or otherwise cause or suffer to exist or become effective any encumbrance or
restriction on the ability of any Restricted Subsidiary (a) to (1) pay dividends
or make any other distributions to the Company or any of its Restricted
Subsidiaries (A) on such Restricted Subsidiary's Capital Stock or (B) with
respect to any other interest or participation in, or measured by, such
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<PAGE> 80
Restricted Subsidiary's profits or (2) pay any indebtedness owed to the Company
or any of its Restricted Subsidiaries, (b) make loans or advances to the Company
or any of its Restricted Subsidiaries, or (c) transfer any of its assets to the
Company or any of its Restricted Subsidiaries, except for such encumbrances or
restrictions existing under or by reason of (i) the Revolving Credit Facility,
as in effect on the Issue Date, or any refinancing thereof containing
restrictions that are not materially more restrictive than those contained in
the Revolving Credit Facility on the Issue Date, (ii) the Original Notes, the
Series B Notes and the Original Indenture, each as in effect on the Issue Date,
or any refinancing thereof containing restrictions that are not materially more
restrictive than those contained in the Original Notes, the Series B Notes and
the Original Indenture, respectively, on the Issue Date; (iii) customary net
worth restrictions on the actions specified in clause (a)(1) above contained in
the German Subsidiary Facilities, (iv) the Indenture and the Series C Notes and
the New Notes, (v) applicable law, (vi) restrictions with respect to a
Subsidiary that was not a Subsidiary on the Issue Date in existence at the time
such Person becomes a Subsidiary (but not created as a result of or in
anticipation of such Person becoming a Subsidiary); provided, that such
restrictions are not applicable to any other Person or the properties or assets
of any other Person, (vii) customary non-assignment and net worth provisions of
any contract or lease entered into in the ordinary course of business, (viii)
customary restrictions on the transfer of assets subject to a Lien permitted
under the Indenture imposed by the holder of such Lien, (ix) restrictions
imposed by any agreement to sell assets or Capital Stock to any Person pending
the closing of such sale, and (x) permitted Refinancing Indebtedness (including
Indebtedness Refinancing Acquired Debt), provided, that such restrictions
contained in any agreement governing such Refinancing Indebtedness are not
materially more restrictive than those contained in any agreements governing the
Indebtedness being Refinanced.
Merger, Consolidation or Sale of Assets. The Company may not consolidate
or merge with or into (whether or not the Company is the surviving corporation),
or sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of its properties or assets (determined on a consolidated
basis for the Company and its Restricted Subsidiaries) in one or more related
transactions to, any other Person unless (i) the Company is the surviving Person
or the Person formed by or surviving any such consolidation or merger (if other
than the Company) or to which such sale, assignment, transfer, lease, conveyance
or other disposition has been made is a corporation organized and existing under
the laws of the United States, any state thereof or the District of Columbia,
(ii) the Person formed by or surviving any such consolidation or merger (if
other than the Company) or the Person to which such sale, assignment, transfer,
lease, conveyance or other disposition has been made assumes all the Obligations
of the Company, pursuant to a supplemental indenture in a form reasonably
satisfactory to the Trustee, under the Notes, the Indenture and the Original
Indenture, (iii) immediately after such transaction, no Default or Event of
Default exists, and (iv) the Company, or any Person formed by or surviving any
such consolidation or merger, or to which such sale, assignment, transfer,
lease, conveyance or other disposition has been made, (A) has a Consolidated Net
Worth (immediately after the transaction but prior to any purchase accounting
adjustments resulting from the transaction) equal to or greater than the
Consolidated Net Worth of the Company immediately preceding the transaction and
(B) will be permitted, at the time of such transaction and after giving pro
forma effect thereto as if such transaction had occurred at the beginning of the
applicable four-quarter period, to incur at least $1.00 of additional
Indebtedness pursuant to the Interest Coverage Ratio test set forth in the
covenant described under "-- Limitation on Incurrence of Indebtedness."
In the event of any transaction (other than a lease) complying with the
conditions listed in the immediately preceding paragraph in which the Company is
not the surviving Person, such surviving Person or transferee shall succeed to,
and be substituted for, and may exercise every right and power of, the Company,
and the Company shall be discharged from its Obligations under, the Indenture,
the Original Indenture and the Notes.
Limitation on Transactions with Affiliates. The Company will not, and will
not permit any of its Restricted Subsidiaries to, directly or indirectly, sell,
lease, transfer or otherwise dispose of any of its properties or assets to, or
purchase any property or assets from, or enter into any contract, agreement,
understanding, loan, advance or guarantee with, or for the benefit of, any
Affiliate (each of the foregoing, an "Affiliate Transaction"), except for (i)
Affiliate Transactions, which together with all Affiliate Transactions that are
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part of a common plan, have an aggregate value of not more than $1.0 million;
provided, that such transactions are conducted in good faith and on terms that
are no less favorable to the Company or the relevant Restricted Subsidiary than
those that would have been obtained in a comparable transaction at such time on
an arm's-length basis from a Person that is not an Affiliate of the Company or
such Restricted Subsidiary, (ii) Affiliate Transactions, which together with all
Affiliate Transactions that are part of a common plan, have an aggregate value
of not more than $5.0 million; provided, that a majority of the disinterested
members of the Board of Directors of the Company determine that such
transactions are conducted in good faith and on terms that are no less favorable
to the Company or the relevant Restricted Subsidiary than those that would have
been from a Person that is not an Affiliate of the Company or such Restricted
Subsidiary, and (iii) Affiliate Transactions for which the Company delivers to
the Trustee an opinion as to the fairness to the Company or such Restricted
Subsidiary from a financial point of view, issued by an investment banking firm
of national standing; provided, that the following will not be deemed to be
Affiliate Transactions: (i) employment agreements entered into by the Company or
any Restricted Subsidiary in the ordinary course of business with the approval
of a majority of the disinterested members of the Company's Board of Directors,
(ii) transactions between or among the Company and/or its Wholly Owned
Subsidiaries, (iii) Restricted Payments permitted by the provisions of the
Indenture described above under "-- Limitation on Restricted Payments," and (iv)
reasonable fees and compensation paid to and indemnity provided on behalf of,
officers, directors, employees or consultants of the Company or any Restricted
Subsidiary as determined in good faith by a majority of the disinterested
directors of the Company's Board of Directors or, if none, unanimously by the
Board of Directors.
Restrictions on Sale and Issuance of Subsidiary Stock. The Company shall
not sell, and shall not permit any of its Restricted Subsidiaries to issue or
sell, any shares of Capital Stock (other than directors' qualifying shares) of
any Restricted Subsidiary to any Person other than the Company or a Wholly Owned
Subsidiary; provided, that the Company and its Restricted Subsidiaries may sell
all of the Capital Stock of a Restricted Subsidiary owned by the Company and its
Restricted Subsidiaries if the Net Proceeds from such Asset Sale are used in
accordance with the terms of the covenant described under "-- Limitation on
Asset Sales."
Line of Business. The Company will not, and will not permit any Restricted
Subsidiary to, engage in any business other than (a) the business conducted or
proposed to be conducted by the Company and the Restricted Subsidiaries on the
Issue Date and (b) any business that in the reasonable, good faith judgment of
the Board of Directors of the Company is ancillary, complementary,
supplementary, or related to, or an extension of, any business described in
clause (a) above.
Guarantors. The Indenture will provide that as long as any Series C Notes
or New Notes remain outstanding, any Restricted Subsidiary that is not a Foreign
Subsidiary shall (a) execute and deliver to the Trustee a supplemental indenture
in form reasonably satisfactory to the Trustee pursuant to which such Restricted
Subsidiary shall unconditionally guarantee all of the Company's obligations
under the Series C Notes, the New Notes and the Indenture on the terms set forth
in the Indenture and (b) deliver to the Trustee an opinion of counsel that such
supplemental indenture has been duly authorized, executed and delivered by such
Restricted Subsidiary and constitutes a legal, valid, binding and enforceable
obligation of such Restricted Subsidiary. Thereafter, such Restricted Subsidiary
shall be a Guarantor for all purposes of the Indenture. On the date hereof, the
Company has two Restricted Subsidiaries other than Foreign Subsidiaries and,
accordingly, there are two Guarantors.
If all of the Capital Stock of any Guarantor is sold to a Person (other
than the Company or any of its Restricted Subsidiaries) and the Net Proceeds
from such Asset Sale are used in accordance with the terms of the covenant
described under "-- Limitation on Asset Sales," then such Guarantor will be
released and discharged from all of its obligations under its Guarantee of the
Series C Notes, the New Notes and the Indenture.
The obligations of each Guarantor will be limited to the maximum amount as
will, after giving effect to all other contingent and fixed liabilities of such
Guarantor and after giving effect to any collections from or payments made by or
on behalf of any other Guarantor in respect of the obligations of such other
Guarantor under its Guarantee of the Notes, result in the obligations of such
Guarantor under its Guarantee of the Notes
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not constituting a fraudulent conveyance or fraudulent transfer under Federal or
state law. See "Risk Factors -- Guarantees."
Rule 144A Information Requirement. The Company will furnish to the holders
of the Notes and prospective purchasers of Notes designated by the holders of
Notes, upon their request, the information required to be delivered pursuant to
Rule 144A(d)(4) under the Securities Act for so long as is required for an offer
or sale of the Notes to qualify for an exemption under Rule 144A. The Company
will provide a copy of the Registration Rights Agreement to prospective
investors upon request.
Reports. Whether or not required by the rules and regulations of the
Commission, so long as any Notes are outstanding, the Company will furnish to
the Trustee, and deliver or cause to be delivered to the holders of Notes, (i)
all quarterly and annual financial information that would be required to be
contained in a filing with the Commission on Forms 10-Q and 10-K if the Company
were required to file such Forms, including for each a "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and, with respect
to the annual information only, a report thereon by the Company's independent
certified public accountants and (ii) all reports that would be required to be
filed with the Commission on Form 8-K if the Company were required to file such
reports. From and after the time a registration statement with respect to the
Notes is declared effective by the Commission, the Company will file such
information with the Commission, provided that the Commission will accept such
filing.
EVENTS OF DEFAULT AND REMEDIES
Each of the following will constitute an Event of Default under the
Indenture: (i) default for 30 days in the payment when due of interest on the
New Notes and Series C Notes, (ii) default in payment of principal (or premium,
if any) on the New Notes and Series C Notes when due at maturity, redemption, by
acceleration or otherwise, (iii) default in the performance or breach of the
provisions of "-- Merger, Consolidation or Sale of Assets," (iv) failure by the
Company or any Guarantor for 60 days after notice to comply with certain other
agreements in the Indenture the New Notes or the Series C Notes, (v) default
under (after giving effect to any applicable grace periods or any extension of
any maturity date) any mortgage, indenture or instrument under which there may
be issued or by which there may be secured or evidenced any Indebtedness for
money borrowed by the Company or any Restricted Subsidiary (or the payment of
which is guaranteed by the Company or any Restricted Subsidiary), whether such
Indebtedness or guarantee now exists or is created after the date of the
Indenture, if (a) either (1) such default results from the failure to pay
principal on such Indebtedness or (2) as a result of such default the maturity
of such Indebtedness has been accelerated, and (b) the principal amount of such
Indebtedness, together with the principal amount of any other such Indebtedness
with respect to which such a payment default (after the expiration of any
applicable grace period or any extension of the maturity date) has occurred, or
the maturity of which has been so accelerated, exceeds $5.0 million in the
aggregate, (vi) failure by the Company or any Restricted Subsidiary to pay final
non-appealable judgments (other than any judgment as to which a reputable
insurance company has accepted full liability) aggregating in excess of $2.5
million which judgments are not discharged, bonded or stayed within 60 days
after their entry, (vii) written assertion by the Company or any of the
Guarantors, of the unenforceability of their obligations under the Indenture,
the New Notes, the Series C Notes or the Guarantees, and (viii) certain events
of bankruptcy or insolvency with respect to the Company or any Material
Subsidiary.
If any Event of Default occurs and is continuing, the Trustee or the
holders of at least 25% in principal amount of the then outstanding New Notes
and Series C Notes may declare by written notice to the Company and the Trustee
all the New Notes and Series C Notes to be due and payable immediately.
Notwithstanding the foregoing, in the case of an Event of Default arising from
certain events of bankruptcy or insolvency, all outstanding New Notes and Series
C Notes will become due and payable without further action or notice. Holders of
the New Notes and Series C Notes may not enforce the Indenture, the New Notes or
the Series C Notes except as provided in the Indenture. Subject to certain
limitations, holders of a majority in principal amount of the then outstanding
New Notes may direct the Trustee in its exercise of any trust or power.
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The holders of a majority in aggregate principal amount of the New Notes
and Series C Notes then outstanding, by written notice to the Company and the
Trustee, may on behalf of the holders of all of the New Notes and Series C Notes
(i) waive any existing Default or Event of Default and its consequences under
the Indenture except a continuing Default or Event of Default in the payment of
interest on, or the principal of, the New Notes or Series C Notes or a Default
or an Event of Default with respect to any covenant or provision which cannot be
modified or amended without the consent of the holder of each outstanding New
Note or Series C Note affected, and/or (ii) rescind an acceleration and its
consequences if the rescission would not conflict with any judgment or decree
and if all existing Events of Default (except nonpayment of principal or
interest that has become due solely because of the acceleration) have been cured
or waived.
The Company is required upon becoming aware of any Default or Event of
Default, to deliver to the Trustee a statement specifying such Default or Event
of Default and what action the Company is taking or proposes to take with
respect thereto.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator, stockholder or controlling
person of the Company or any Guarantor, as such, will have any liability for any
obligations of the Company under the Notes or the Indenture or for any claim
based on, in respect of, or by reason of, such obligations or their creation.
Each holder of the Notes by accepting a Note waives and releases all such
liability. The waiver and release will be part of the consideration for issuance
of the Notes and the Guarantees. Such waiver may not be effective to waive
liabilities under the Federal securities laws and it is the view of the
Commission that such a waiver is against public policy.
DEFEASANCE AND DISCHARGE OF THE INDENTURE AND THE NOTES
The Indenture provides that the Company will be discharged from any and all
obligations in respect of the Series C Notes and the New Notes, other than the
obligation to duly and punctually pay the principal of, and premium, if any, and
interest on, the Series C Notes and the New Notes in accordance with the terms
of the Series C Notes and the New Notes and the Indenture upon irrevocable
deposit with the Trustee, in trust, of money and/or U.S. government obligations
that will provide money in an amount sufficient in the opinion of a nationally
recognized accounting firm to pay the principal of and premium, if any, and each
installment of interest, if any, on the due dates thereof on the Series C Notes
and the New Notes. Such trust may only be established if, among other things,
(i) the Company has delivered to the Trustee an opinion of independent counsel
to the effect that the holders of the Series C Notes and the New Notes will not
recognize income, gain or loss for Federal income tax purposes as a result of
such deposit and defeasance and will be subject to Federal income tax on the
same amount, in the same manner and at the same times as would have been the
case if such deposit and defeasance had not occurred, (ii) no Default or Event
of Default shall have occurred or be continuing, and (iii) certain customary
conditions precedent are satisfied.
The Company may satisfy and discharge its Obligations under the Indenture
to holders of the Series C Notes and the New Notes by delivering to the Trustee
for cancellation all outstanding Series C Notes and the New Notes or by
depositing with the Trustee or the Paying Agent, if applicable, after the Series
C Notes and the New Notes have become due and payable, cash sufficient to pay at
the stated maturity of all of the outstanding Series C Notes and the New Notes
and paying all other sums payable under the Indenture by the Company. If the
Company has so deposited such cash, the Guarantors will be discharged from their
Obligations under their Guarantees of the Series C Notes and the New Notes and
the Indenture.
TRANSFER AND EXCHANGE
A holder may transfer or exchange Series C Notes or New Notes in accordance
with the Indenture. The Registrar and the Trustee may require a holder, among
other things, to furnish appropriate endorsements and transfer documents and the
Company may require a holder to pay any taxes and fees required by law or
permitted by the Indenture. The Company is not required to transfer or exchange
any Note selected for
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redemption. Also, the Company is not required to transfer or exchange any Note
for a period of 15 days before a selection of Notes to be redeemed.
The registered holder of a Note will be treated as the owner of it for all
purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the two succeeding paragraphs, the Indenture, the New
Notes and the Series C Notes may be amended or supplemented with the consent of
the holders of at least a majority in principal amount of the New Notes and
Series C Notes then outstanding (including consents obtained in connection with
a tender offer or exchange offer for New Notes and Series C Notes) and any
existing Default or Event of Default or compliance with any provision of the
Indenture, the New Notes or Series C Notes may be waived with the consent of the
holders of a majority in principal amount of the then outstanding New Notes and
Series C Notes (including consents obtained in connection with a tender offer or
exchange offer for New Notes or Series C Notes).
Without the consent of each holder affected, an amendment or waiver may not
(with respect to any New Notes or Series C Notes held by a non-consenting holder
of New Notes or Series C Notes): (i) reduce the principal amount of New Notes or
Series C Notes whose holders must consent to an amendment, supplement or waiver,
(ii) reduce the principal of, or the premium on, or change the fixed maturity of
any New Note or Series C Note, alter the provisions with respect to the
redemption of the New Notes or Series C Notes in a manner adverse to the holders
of the New Notes or Series C Notes, or alter the price at which repurchases of
the New Notes or Series C Notes may be made pursuant to an Excess Proceeds Offer
or Change of Control Offer, (iii) reduce the rate of or change the time for
payment of interest on any New Note or Series C Note, (iv) waive a Default or
Event of Default in the payment of principal of or premium, if any, or interest
on the New Notes or Series C Notes, (v) make any New Note or Series C Note
payable in money other than that stated in the New Notes or Series C Notes, (vi)
make any change in the provisions of the Indenture relating to waivers of past
Defaults or the rights of holders of New Notes or Series C Notes to receive
payments of principal of or interest on the New Notes or Series C Notes, (vii)
waive a redemption payment with respect to any New Note or Series C Note, (viii)
adversely affect the contractual ranking of the New Notes or Series C Notes or
Guarantees of the New Notes or Series C Notes, or (ix) make any change in the
foregoing amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of the holders of New
Notes and the Series C Notes, the Company, the Guarantors and the Trustee may
amend or supplement the Indenture, the New Notes or the Series C Notes to cure
any ambiguity, defect or inconsistency, to provide for uncertificated Notes in
addition to or in place of certificated Notes, to provide for the assumption of
the Company's obligations to holders of the New Notes and the Series C Notes or
any Guarantor's obligation under its Guarantee of the New Notes and the Series C
Notes in the case of a merger or consolidation, to make any change that would
provide any additional rights or benefits to the holders of the New Notes and
the Series C Notes or that does not adversely affect the legal rights under the
Indenture of any such holder, to release any Guarantee of the New Notes and the
Series C Notes permitted to be released under the terms of the Indenture, or to
comply with requirements of the Commission in order to effect or maintain the
qualification of the Indenture under the Trust Indenture Act.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim as security or otherwise. The Trustee will be permitted to engage in other
transactions; provided, that if the Trustee acquires any conflicting interest it
must eliminate such conflict within 90 days, apply to the Commission for
permission to continue or resign.
The holders of a majority in principal amount of the then outstanding New
Notes and Series C Notes will have the right to direct the time, method and
place of conducting any proceeding for exercising any remedy available to the
Trustee, subject to certain exceptions. The Indenture provides that in case an
Event of Default
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occurs (and is not cured), the Trustee will be required, in the exercise of its
power, to use the degree of care of a prudent man in the conduct of his own
affairs. Subject to such provisions, the Trustee will be under no obligation to
exercise any of its rights or powers under the Indenture at the request of any
holder of New Notes or Series C Notes, unless such holder shall have offered to
the Trustee security and indemnity satisfactory to it against any loss,
liability or expense.
ADDITIONAL INFORMATION
Anyone who receives this Prospectus may obtain a copy of the Indenture
without charge by writing to the Company at 172 Trade Street, Lexington,
Kentucky 40511; Attention: Joseph F. Lingg.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full definition of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"Acquired Debt" means Indebtedness of a Person existing at the time such
Person is merged with or into the Company or a Restricted Subsidiary or becomes
a Restricted Subsidiary, other than Indebtedness incurred in connection with, or
in contemplation of, such Person merging with or into the Company or a
Restricted Subsidiary or becoming a Restricted Subsidiary; provided, that
Indebtedness of such Person that is redeemed, defeased, retired or otherwise
repaid at the time, or immediately upon consummation, of the transaction by
which such Person is merged with or into the Company or a Restricted Subsidiary
or becomes a Restricted Subsidiary shall not be Acquired Debt.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, will mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise. Notwithstanding the
foregoing, neither Initial Purchaser nor any of their respective Affiliates will
be deemed to be Affiliates of the Company.
"Asset Sale" means any direct or indirect (i) sale, assignment, transfer,
lease, conveyance, or other disposition (including, without limitation, by way
of merger or consolidation) (collectively, a "transfer"), other than in the
ordinary course of business, of any assets of the Company or any Restricted
Subsidiary or (ii) issuance of any Capital Stock of any Restricted Subsidiary,
in each case to any Person (other than the Company or a Restricted Subsidiary
and other than directors' qualifying shares). For purposes of this definition,
(a) any series of transfers that are part of a common plan shall be deemed a
single Asset Sale and (b) the term "Asset Sale" shall not include any
disposition of all or substantially all of the assets of the Company that is
governed under and complies with the terms of the covenant described under
"-- Merger, Consolidation or Sale of Assets."
"Capital Lease Obligation" means, as to any Person, the obligations of such
Person under a lease that are required to be classified and accounted for as
capital lease obligations under GAAP, and the amount of such obligations at any
date shall be the capitalized amount of such obligations at such date,
determined in accordance with GAAP.
"Capital Stock" means (i) with respect to any Person that is a corporation,
any and all shares, interests, participations, rights or other equivalents
(however designated) of corporate stock, and (ii) with respect to any other
Person, any and all partnership or other equity interests of such Person.
"Cash Equivalent" means (i) securities issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof), (ii) time deposits and
certificates of deposit and commercial paper issued by the parent corporation of
any domestic commercial bank of recognized standing having capital and surplus
in excess of $250,000,000 and commercial paper issued by others rated at least
A-2
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or the equivalent thereof by Standard & Poor's Corporation or at least P-2 or
the equivalent thereof by Moody's Investors Service, Inc. and in each case
maturing within one year after the date of acquisition and (iii) investments in
money market funds substantially all of whose assets comprise securities of the
types described in clauses (i) and (ii) above.
"CLARK Europe" means CLARK Material Handling GmbH, a Wholly Owned
Subsidiary.
"Consolidated EBITDA" means, with respect to any Person (the referent
Person) for any period, consolidated income (loss) from operations of such
Person and its subsidiaries for such period, determined in accordance with GAAP,
plus (to the extent such amounts are deducted in calculating such income (loss)
from operations of such Person for such period, and without duplication)
amortization, depreciation and other non-cash charges (including, without
limitation, amortization of goodwill, deferred financing fees and other
intangibles but excluding non-cash charges incurred after the date of the
Indenture that require an accrual of or a reserve for cash charges for any
future period); provided, that (i) the income from operations of any Person
(including, without limitation, any Unrestricted Subsidiary) that is not a
Wholly Owned Subsidiary or that is accounted for by the equity method of
accounting will be included only to the extent of the amount of dividends or
distributions paid during such period to the referent Person or a Wholly Owned
Subsidiary of the referent Person, and (ii) the income from operations of any
Restricted Subsidiary will not be included to the extent that declarations of
dividends or similar distributions by that Restricted Subsidiary are not at the
time permitted, directly or indirectly, by operation of the terms of its
organization documents or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to that Restricted
Subsidiary or its owners.
"Consolidated Interest Expense" means, with respect to any Person for any
period, the consolidated interest expense of such Person and its subsidiaries
for such period, whether paid or accrued (including amortization of original
issue discount, noncash interest payment, and the interest component of Capital
Lease Obligations), to the extent such expense was deducted in computing
Consolidated Net Income of such Person for such period.
"Consolidated Net Income" means, with respect to any Person (the referent
Person) for any period, the aggregate of the Net Income of such Person and its
subsidiaries for such period, determined on a consolidated basis in accordance
with GAAP; provided, that (i) the Net Income of any Person (including, without
limitation, any Unrestricted Subsidiary) that is not a Wholly Owned Subsidiary
or that is accounted for by the equity method of accounting will be included in
calculating the referent Person's Consolidated Net Income only to the extent of
the amount of dividends or distributions paid during such period to the referent
Person or a Wholly Owned Subsidiary of the referent Person, (ii) the Net Income
of any Person acquired in a pooling of interests transaction for any period
prior to the date of such acquisition will be excluded, and (iii) the Net Income
of any Subsidiary will be excluded to the extent that declarations of dividends
or similar distributions by that Subsidiary of such Net Income are not at the
time permitted, directly or indirectly, by operation of the terms of its
organization documents or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to that Subsidiary or its
owners.
"Consolidated Net Worth" means, with respect to any Person, the total
stockholders' equity of such Person determined on a consolidated basis in
accordance with GAAP, adjusted to exclude (to the extent included in calculating
such equity), (i) the amount of any such stockholders' equity attributable to
Disqualified Capital Stock of such Person and its consolidated subsidiaries, and
(ii) all upward revaluations and other write-ups in the book value of any asset
of such person or a consolidated subsidiary of such person subsequent to the
Issue Date, and (iii) all Investments in persons that are not consolidated
Restricted Subsidiaries.
"Default" means any event that is, or after notice or the passage of time
or both would be, an Event of Default.
"Disqualified Stock" means that portion of any Equity Interests that (i)
either by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable) is or upon the happening of an
event would be required to be redeemed or repurchased prior to the final stated
maturity of the Notes or is
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redeemable at the option of the holder thereof at any time prior to such final
stated maturity or (ii) is convertible into or exchangeable at the option of the
issuer thereof or any other Person for debt securities.
"Equity Interests" means Capital Stock or warrants, options or other rights
to acquire Capital Stock (but excluding any debt security that is convertible
into, or exchangeable for, Capital Stock).
"Floor Plan Guaranty" means (a) the Guarantee by the Company or a
Restricted Subsidiary of Indebtedness incurred by a franchise dealer or other
purchaser of Inventory manufactured or sold by the Company or a Restricted
Subsidiary, the proceeds of which Indebtedness is used solely to pay the
purchase price of such Inventory and any related fees and expenses (including
finance fees); provided, that (i) to the extent commercially practicable, the
Indebtedness so guaranteed is secured by a perfected first priority lien on such
inventory in favor of the holder of such Indebtedness and (ii) if the Company or
such Restricted Subsidiary is required to make payment with respect to such
Guarantee, the Company or such Restricted Subsidiary will have the right to
receive either (A) title to such Inventory, (B) a valid assignment of a first
priority perfected lien in such Inventory or (C) the net proceeds of any resale
of such Inventory and (b) obligations to repurchase equipment sold by the
Company or its Restricted Subsidiaries from a dealer upon termination of such
dealer or from customers who lease such equipment to third parties when the
equipment comes off lease.
"Foreign Subsidiary" means a Restricted Subsidiary not organized under the
laws of the United States or any political subdivision thereof and the
operations of which are located entirely outside the United States.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as approved by a significant segment of the accounting profession,
and in the rules and regulations of the Commission, that are in effect on the
date of the Original Indenture.
"German Subsidiary Facilities" means one or more revolving credit
facilities of CLARK Europe, as the same may be amended, modified, renewed,
refunded, replaced or refinanced from time to time including (i) any related
notes, letters of credit, guarantees, collateral documents, instruments and
agreements executed in connection therewith, and in each case amended, modified,
renewed, refunded, replaced or refinanced from time to time, and (ii) any notes,
guarantees, collateral documents, instruments and agreements executed in
connection with any such amendment, modification, renewal, refunding,
replacement or refinancing.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Indebtedness" of any Person means (without duplication) (1) all
liabilities and obligations, contingent or otherwise, of such Person (a) in
respect of borrowed money (whether or not the recourse of the lender is to the
whole of the assets of such Person or only to a portion thereof), (b) evidenced
by bonds, debentures, notes or other similar instruments, (c) representing the
deferred purchase price of property or services (other than (i) non interest
bearing obligations and (ii) liabilities incurred in the ordinary course of
business which are not more than 90 days past due), (d) created or arising under
any conditional sale or other title retention agreement with respect to property
acquired by such Person (even though the rights and remedies of the seller or
lender under such agreement in the event of default are limited to repossession
or sale of such property), (e) as lessee under capitalized leases, (f) under
bankers' acceptance and letter of credit facilities, (g) to purchase, redeem,
retire, defease or otherwise acquire for value any Disqualified Stock, or (h) in
respect of Hedging Obligations, (2) all liabilities and obligations of others of
the type described in clause (1), above, that are Guaranteed by such Person, and
(3) all liabilities and obligations of others of the type described in clause
(1), above, that are secured by (or for which the holder of such Indebtedness
has an existing right, contingent or otherwise, to be secured by) any Lien on
property (including, without limitation, accounts and contract rights) owned by
such Person; provided, that the amount of such Indebtedness shall (to the extent
such Person has not assumed or become liable for the payment of such
Indebtedness in full) be the lesser of (x) the fair market value of such
property at the time of determination and (y) the amount of such
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Indebtedness. The amount of Indebtedness of any Person at any date shall be the
outstanding balance at such date of all unconditional obligations as described
above and the maximum liability, upon the occurrence of the contingency giving
rise to the obligation, of any contingent obligations at such date.
"Interest Coverage Ratio" means, for any period, the ratio of (i)
Consolidated EBITDA of the Company for such period, to (ii) Consolidated
Interest Expense of the Company for such period. In calculating the Interest
Coverage Ratio for any period, pro forma effect shall be given to: (a) the
incurrence, assumption, guarantee, repayment, repurchase, redemption or
retirement by the Company or any of its Subsidiaries of any Indebtedness (other
than under the Revolving Credit Facility) subsequent to the commencement of the
period for which the Interest Coverage Ratio is being calculated but on or prior
to the date on which the event for which the calculation is being made, as if
the same had occurred at the beginning of the applicable period; and (b) the
occurrence of any Asset Sale during such period by reducing Consolidated EBITDA
for such period by an amount equal to the Consolidated EBITDA (if positive)
directly attributable to the assets sold and by reducing Consolidated Interest
Expense by an amount equal to the Consolidated Interest Expense directly
attributable to any Indebtedness assumed by third parties or repaid with the
proceeds of such Asset Sale, in each case as if the same had occurred at the
beginning of the applicable period. For purposes of making the computation
referred to above, acquisitions that have been made by the Company or any of its
Restricted Subsidiaries, including mergers and consolidations, subsequent to the
commencement of such period but on or prior to the date on which the event for
which the calculation is being made shall be given effect on a pro forma basis,
assuming that all such acquisitions, mergers and consolidations had occurred on
the first day of such period. Without limiting the foregoing, the financial
information of the Company with respect to any portion of such four fiscal
quarters that falls before the Issue Date shall be adjusted to give pro forma
effect to the issuance of the Series C Notes and the New Notes and the
application of the proceeds therefrom as if they had occurred at the beginning
of such four fiscal quarters.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of loans,
Guarantees, advances or capital contributions (excluding (i) commission, travel
and similar advances to officers and employees of such Person made in the
ordinary course of business and (ii) bona fide accounts receivable arising from
the sale of goods or services in the ordinary course of business consistent with
past practice), purchases or other acquisitions for consideration of
Indebtedness, Equity Interests or other securities, and any other items that are
or would be classified as investments on a balance sheet prepared in accordance
with GAAP.
"Issue Date" means the date upon which the Series C Notes are first issued.
"Lien" means any mortgage, lien, pledge, charge, security interest or
encumbrance of any kind, whether or not filed, recorded or otherwise perfected
under applicable law (including any conditional sale or other title retention
agreement, any lease in the nature thereof, any option or other agreement to
sell or give a security interest in and any filing of or agreement to give any
financing statement under the Uniform Commercial Code (or equivalent statutes)
of any jurisdiction).
"Material Subsidiary" means any Subsidiary (a) that is a "Significant
Subsidiary" of the Company as defined in Rule 1-02 of Regulation S-X promulgated
by the Commission or (b) is otherwise material to the business of the Company.
"Net Income" means, with respect to any Person for any period, the net
income (loss) of such Person for such period, determined in accordance with
GAAP, excluding any gain or loss, together with any related provision for taxes
on such gain or loss, realized in connection with any Asset Sales and
dispositions pursuant to sale and leaseback transactions, and excluding any
extraordinary gain or loss, together with any related provision for taxes on
such gain or loss.
"Net Proceeds" means the aggregate proceeds received in the form of cash or
Cash Equivalents in respect of any Asset Sale (including payments in respect of
deferred payment obligations when received), net of (a) the reasonable and
customary direct out-of-pocket costs relating to such Asset Sale (including,
without limitation, legal, accounting and investment banking fees and sales
commissions), other than any such costs payable to an Affiliate of the Company,
(b) taxes actually payable directly as a result of such Asset Sale (after
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taking into account any available tax credits or deductions and any tax sharing
arrangements), (c) amounts required to be applied to the permanent repayment of
Indebtedness in connection with such Asset Sale, and (d) appropriate amounts
provided as a reserve by the Company or any Restricted Subsidiary, in accordance
with GAAP, against any liabilities associated with such Asset Sale and retained
by the Company or such Restricted Subsidiary, as the case may be, after such
Asset Sale, including, without limitation, pension and other post-employment
benefit liabilities, liabilities related to environmental matters and
liabilities under any indemnification obligations arising from such Asset Sale.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other obligations and liabilities
of the Company or any of the Guarantors under the Indenture, the New Notes, the
Series C Notes or the Guarantees of the Notes.
"Permitted Investments" means (a) Investments in the Company, any Guarantor
or any Wholly Owned Subsidiary (including without limitation, Guarantees of
Indebtedness of any such Person), (b) Investments in Cash Equivalents, (c)
Investments in a Person, if as a result of such Investment (i) such Person
becomes a Wholly Owned Subsidiary or (ii) such Person is merged, consolidated or
amalgamated with or into, or transfers or conveys substantially all of its
assets to, or is liquidated into, the Company or a Wholly Owned Subsidiary, (d)
Floor Plan Guarantees permitted to be incurred in compliance with the covenant
described under the caption "Limitation on Incurrence of Indebtedness," (e)
Hedging Obligations, (f) Investments in securities of trade creditors or
customers received pursuant to any plan of reorganization or similar arrangement
upon the bankruptcy or insolvency of such trade creditors or customers and (g)
Investments as a result of consideration received in connection with an Asset
Sale made in compliance with the covenant described under the caption
"-- Limitation on Asset Sales."
"Permitted Liens" means (i) Liens in favor of the Company and/or its
Restricted Subsidiaries other than with respect to intercompany Indebtedness,
(ii) Liens on property of a Person existing at the time such Person is acquired
by, merged into or consolidated with the Company or any Restricted Subsidiary,
provided, that such Liens were not created in contemplation of such acquisition
and do not extend to assets other than those subject to such Liens immediately
prior to such acquisition, (iii) Liens on property existing at the time of
acquisition thereof by the Company or any Restricted Subsidiary, provided, that
such Liens were not created in contemplation of such acquisition and do not
extend to assets other than those subject to such Liens immediately prior to
such acquisition, (iv) Liens incurred in the ordinary course of business in
respect of Hedging Obligations and Floor Plan Guarantees, (v) Liens to secure
Indebtedness for borrowed money of a Subsidiary in favor of the Company or a
Wholly Owned Subsidiary, (vi) Liens incurred in the ordinary course of business
to secure the performance of statutory obligations, surety or appeal bonds,
performance bonds or other obligations (exclusive of obligations constituting
Indebtedness) of a like nature, (vii) Liens existing or created on the date of
the Indenture, (viii) Liens for taxes, assessments or governmental charges or
claims that are not yet delinquent or that are being contested or remedied in
good faith by appropriate proceedings promptly instituted and diligently
concluded, provided, that any reserve or other appropriate provision as may be
required in conformity with GAAP has been made therefor, (ix) Liens arising by
reason of any judgment, decree or order of any court with respect to which the
Company or any of its Restricted Subsidiaries is then in good faith prosecuting
an appeal or other proceedings for review, the existence of which judgment,
order or decree is not an Event of Default under the Indenture, (x) encumbrances
consisting of zoning restrictions, survey exceptions, utility easements,
licenses, rights of way, easements of ingress or egress over property of the
Company or any of its Restricted Subsidiaries, rights or restrictions of record
on the use of real property, minor defects in title, landlord's and lessor's
liens under leases on property located on the premises rented, mechanics' liens,
vendors' liens, and similar encumbrances, rights or restrictions on personal or
real property, in each case not interfering in any material respect with the
ordinary conduct of the business of the Company or any of its Restricted
Subsidiaries, (xi) Liens incidental to the conduct of business or the ownership
of properties incurred in the ordinary course of business in connection with
workers' compensation, unemployment insurance and other types of social
security, or to secure the performance of tenders, bids, and government
contracts and leases and subleases, (xii) Liens for any interest or title of a
lessor under any Capitalized Lease Obligation permitted to be incurred under the
Indenture; provided, that such Liens do not extend to any property or asset that
is not leased property subject to such Capitalized Lease Obligation,
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(xiii) any extension, renewal, or replacement (or successive extensions,
renewals or replacements), in whole or in part, of Liens described in clauses
(i) through (xii) above and (xiv) Liens in addition to the foregoing, which in
the aggregate, are secured by assets with a fair market value not in excess of
$100,000 at any time.
"Permitted Transactions" means bona fide purchases and sales of Inventory
or of machining, assembly, testing and fabrication services, in any such case
made in the ordinary course of business; provided, that such transactions are
conducted in good faith and on terms that are no less favorable to the Company
or the relevant Restricted Subsidiary than those that would have been obtained
in a comparable transaction with an unrelated Person.
"Person" means any individual, corporation, partnership, joint venture,
association, joint stock company, trust, unincorporated organization, government
or any agency or political subdivision thereof, or any other entity.
"Public Equity Offering" means a bona fide underwritten public offering of
Qualified Capital Stock of Holdings or the Company, pursuant to a registration
statement filed with and declared effective by the Commission in accordance with
the Securities Act; provided, that in the event of a Public Equity Offering by
Holdings, Holdings contributes to the capital of the Company the portion of the
net cash proceeds of such Public Equity Offering necessary to pay the aggregate
redemption price, plus accrued and unpaid interest, if any, to the redemption
date of the Notes to be redeemed pursuant to the second paragraph under the
caption "Redemption."
"Purchase Money Liens" means Liens to secure or securing Purchase Money
Obligations permitted to be incurred under the Indenture.
"Purchase Money Obligations" means Indebtedness representing, or incurred
to finance, the cost (i) of acquiring or improving any assets and (ii) of
construction or build-out of manufacturing, distribution or administrative
facilities (including Purchase Money Obligations of any other Person at the time
such other Person is merged with or into or is otherwise acquired by the
Company), provided, that (a) the principal amount of such Indebtedness does not
exceed 100% of such cost, including construction charges, (b) any Lien securing
such Indebtedness does not extend to or cover any other asset or property other
than the asset or property being so acquired or improved and (c) such
Indebtedness is incurred, and any Liens with respect thereto are granted, within
180 days of the acquisition or improvement of such property or asset.
"Qualified Capital Stock" means, with respect to any Person, Capital Stock
of such Person other than Disqualified Capital Stock.
"Restricted Investment" means any Investment other than a Permitted
Investment. The aggregate amount of each Investment constituting a Restricted
Payment since the date of the Original Indenture shall be reduced by the
aggregate after-tax amount of all payments made to the Company and its
Restricted Subsidiaries with respect to such Investments; provided, that (a) the
maximum amount of such payments so applied shall not exceed the original amount
of such Investment and (b) such payments shall be excluded from the calculations
contemplated by clauses (c)(1) through (4) under the caption "-- Limitation on
Restricted Payments."
"Restricted Subsidiary" means a Subsidiary other than an Unrestricted
Subsidiary.
"Revolving Credit Facility" means the Revolving Credit Facility, entered
into on November 27, 1996 between the Company and the lenders named therein as
the same may be amended, modified, renewed, refunded, replaced or refinanced
from time to time, including (i) any related notes, letters of credit,
guarantees, collateral documents, instruments and agreements executed in
connection therewith, and in each case as amended, modified, renewed, refunded,
replaced or refinanced from time to time, and (ii) any notes, guarantees,
collateral documents, instruments and agreements executed in connection with
such amendment, modification, renewal, refunding, replacement or refinancing.
"subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Voting Stock thereof is at the time owned or controlled,
directly or indirectly, by such Person or one or more of the other subsidiaries
of that Person or a
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combination thereof and (ii) any partnership in which such Person or any of its
subsidiaries is a general partner.
"Subsidiary" means any subsidiary of the Company.
"Unrestricted Subsidiary" means any Subsidiary that has been designated by
the Company (by written notice to the Trustee as provided below) as an
Unrestricted Subsidiary; provided, that a Subsidiary may not be designated as an
"Unrestricted Subsidiary" unless (a) such Subsidiary does not own any Capital
Stock of, or own or hold any Lien on any property of, the Company or any
Restricted Subsidiary (other than such Subsidiary), (b) neither immediately
prior thereto nor after giving pro forma effect to such designation, would there
exist a Default or Event of Default, (c) immediately after giving effect to such
designation on a pro forma basis, the Company could incur at least $1.00 of
Indebtedness pursuant to the Interest Coverage Ratio test set forth in the
covenant described under "-- Limitation on Incurrence of Indebtedness" and (d)
the creditors of such Subsidiary have no direct or indirect recourse (including,
without limitation, recourse with respect to the payment of principal or
interest on Indebtedness of such Subsidiary) to the assets of the Company or of
a Restricted Subsidiary (other than such Subsidiary). The Board of Directors of
the Company may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary only if (i) no Default or Event of Default is existing or will occur
as a consequence thereof and (ii) immediately after giving effect to such
designation, on a pro forma basis, the Company could incur at least $1.00 of
Indebtedness pursuant to the Interest Coverage Ratio test set forth in the
covenant described under "-- Limitation on Incurrence of Indebtedness." Each
such designation shall be evidenced by filing with the Trustee a certified copy
of the Board Resolution giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the foregoing
conditions. The Company shall be deemed to make an Investment in each Subsidiary
designated as an "Unrestricted Subsidiary" immediately following such
designation in an amount equal to the Investment in such Subsidiary and its
subsidiaries immediately prior to such designation; provided, that if such
Subsidiary is subsequently redesignated as a Restricted Subsidiary, the amount
of such Investment shall be deemed to be reduced (but not below zero) by the
fair market value of the net consolidated assets of such Subsidiary on the date
of such redesignation.
"Voting Stock" means, with respect to any Person, (i) one or more classes
of the Capital Stock of such Person having general voting power to elect at
least a majority of the board of directors, managers or trustees of such Person
(irrespective of whether or not at the time Capital Stock of any other class or
classes have or might have voting power by reason of the happening of any
contingency) and (ii) any Capital Stock of such Person convertible or
exchangeable without restriction at the option of the holder thereof into
Capital Stock of such Person described in clause (i) above.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years (rounded to the nearest one-twelfth) obtained
by dividing (i) the then outstanding principal amount of such Indebtedness into
(ii) the total of the products obtained by multiplying (x) the amount of each
then remaining installment, sinking fund, serial maturity or other required
payments of principal, including payment at final maturity, in respect thereof,
by (y) the number of years (calculated to the nearest one-twelfth) that will
elapse between such date and the making of such payment.
"Wholly Owned Subsidiary" means a Restricted Subsidiary all the Capital
Stock of which (other than directors' qualifying shares) is owned by the Company
or one or more Wholly Owned Subsidiaries.
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DESCRIPTION OF PREFERRED STOCK
The New Preferred Stock will be issued pursuant to, and entitled to the
benefits of the Certificate of Designation filed with the Secretary of State of
the State of Delaware on July 17, 1998, as amended by the Certificate of
Correction filed with the Secretary of State of the State of Delaware on
September 1, 1998 (together, the "Certificate of Designation") pursuant to which
the Existing Preferred Stock was issued. The terms of the Certificate of
Designation apply to the Existing Preferred Stock and the New Preferred Stock
(all such Preferred Stock being referred to herein collectively as the "Senior
Preferred Stock"). The summary contained herein of certain provisions of the
Senior Preferred Stock does not purport to be complete and is qualified in its
entirety by reference to the provisions of the Certificate of Designation. The
definitions of certain terms used in the Certificate of Designation and in the
following summary are substantially the same as those used in the Indenture. See
"Description of Notes -- Certain Definitions."
GENERAL
Initially 20,000 shares of Senior Preferred Stock will be issued, each with
a liquidation preference of $1,000 per share. The New Senior Preferred Stock,
when issued and exchanged for by the holders of Existing Preferred Stock, will
be fully paid and non-assessable, and the holders thereof will not have any
subscription or preemptive rights related thereto. All issued and outstanding
shares of Senior Preferred Stock will be redeemed by the Company on July 15,
2007.
RANKING
The Senior Preferred Stock will, with respect to dividend distributions and
distributions upon the liquidation, winding-up or dissolution of the Company,
rank (i) senior to each class or series of capital stock (including Common
Stock) the terms of which do not expressly provide that such class or series
will rank senior to or on a parity with the Senior Preferred Stock as to
dividend distributions and distributions upon the liquidation, winding-up or
dissolution of the Company (collectively, "Junior Securities"); (ii) subject to
certain conditions, on a parity with any class or series of capital stock issued
by the Company established after the issue date of the Existing Preferred Stock
("Preferred Stock Issue Date"), the terms of which expressly provide that such
class or series will rank on a parity with the Senior Preferred Stock as to
dividend distributions and distributions upon the liquidation, winding-up or
dissolution of the Company (collectively, "Parity Securities"); and (iii)
subject to certain conditions, junior to each class or series of capital stock
issued by the Company established after the Preferred Stock Issue Date, the
terms of which expressly provide that such class or series will rank senior to
the Senior Preferred Stock as to dividend distributions and distributions upon
liquidation, winding-up or dissolution of the Company (collectively, "Senior
Securities").
The Senior Preferred Stock will be subject to the issuance of series of
Junior Securities, Parity Securities and Senior Securities, however, the Company
may not issue any new class of Parity Securities or Senior Securities without
the approval of the holders of at least 50% of the shares of Senior Preferred
Stock then outstanding, voting or consenting, as the case may be, together as
one class, except that without the approval of the holders of Senior Preferred
Stock, the Company may issue shares of Parity Securities in exchange for, or the
proceeds of which are used to redeem or repurchase, any or all of the shares of
Senior Preferred Stock or other Parity Securities.
Creditors and stockholders of each Subsidiary will have structural priority
over the Senior Preferred Stock with respect to claims on the assets of such
Subsidiary.
DIVIDENDS
Holders of Senior Preferred Stock will be entitled to receive, when, as and
if declared by the Board of Directors, out of funds legally available therefor,
dividends on the Senior Preferred Stock at a rate per annum equal to 13% of the
liquidation preference per share of Senior Preferred Stock. All dividends will
be cumulative, whether or not earned or declared, on a daily basis from the date
of issuance of the Existing Preferred Stock and will be payable on January 15,
April 15, July 15 and October 15 of each year, commencing on October 15, 1998.
Dividends on the Senior Preferred Stock will be computed on the basis of a
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360-day year comprised of twelve 30-day months. On or before July 15, 2003, the
Company may, at its option, pay dividends in cash or in additional fully paid
and non-assessable shares of Senior Preferred Stock having an aggregate
liquidation preference equal to the amount of such dividends. After July 15,
2003, dividends may be paid only in cash. It is not expected that the Company
will pay any dividends in cash for any period ending on or prior to July 15,
2003. The terms of the Company's debt instruments, including the Indenture and
the Revolving Credit Facility will restrict the payment of cash dividends by the
Company, and future agreements may also restrict such payments. See "Risk
Factors -- Significant Leverage," "Description of Certain Indebtedness" and
"Description of Notes -- Certain Covenants". If any dividend (or portion
thereof) payable on any dividend payment date after July 15, 2003 is not
declared or paid in full in cash on such dividend payment date, the amount of
such dividend that is payable and that is not paid in cash on such date will
increase at a rate of 13% per annum, compounded quarterly, from such dividend
payment date until declared and paid in full.
No full dividends may be declared or paid or funds set apart for the
payment of dividends on any Parity Securities for any period unless full
cumulative dividends shall have been or contemporaneously are declared and paid
in full or declared and, if payable in cash, a sum in cash set apart for such
payment on the Senior Preferred Stock. If full dividends are not so paid, the
Senior Preferred Stock will share dividends pro rata with the Parity Securities.
No dividends may be paid or set apart for such payment on Junior Securities
(except dividends on Junior Securities in additional shares of Junior
Securities) and no Junior Securities or Parity Securities may be repurchased,
redeemed or otherwise retired nor may funds be set apart for payment with
respect thereto, if full cumulative dividends have not been paid on the Senior
Preferred Stock.
REDEMPTION
Optional Redemption. The Senior Preferred Stock may be redeemed (subject
to contractual and other restrictions with respect thereto and to the legal
availability of funds therefor) at any time on or after July 15, 2003, in whole
or in part, at the option of the Company, at the redemption prices (expressed as
a percentage of the liquidation preference thereof) set forth below, plus an
amount in cash equal to all accumulated and unpaid dividends (including an
amount in cash equal to a prorated dividend for the period from the dividend
payment date immediately prior to the redemption date to the redemption date),
if redeemed during the 12-month period beginning July 15 of each of the years
set forth below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2003...................................................... 106.500%
2004...................................................... 104.333
2005...................................................... 102.167
2006 and thereafter....................................... 100.000
</TABLE>
In addition, prior to July 15, 2003, the Company may redeem the Senior
Preferred Stock in whole, but not in part, at a redemption price equal to 115%
of the liquidation preference thereof, plus an amount in cash equal to all
accumulated and unpaid dividends (including an amount in cash equal to a
prorated dividend for the period from the dividend payment date immediately
prior to the redemption date to the redemption date), with the proceeds of a
Public Equity Offering, provided that such redemption shall occur within 60 days
of the date of the closing of such Public Equity Offering.
No optional redemption may be authorized or made (i) unless prior thereto
full unpaid cumulative dividends shall have been paid or a sum shall have been
set apart for such payment on the Senior Preferred Stock; or (ii) at less than
101% of the liquidation preference of the Senior Preferred Stock at any time
when the Company is making or purchasing shares of Senior Preferred Stock under
an Offer in accordance with the provisions of "Change of Control."
In the event of partial redemptions of Senior Preferred Stock, the shares
to be redeemed will be determined pro rata or by lot, as determined by the
Company. The terms of the Company's debt instruments, including the Indenture
and the Revolving Credit Facility, will restrict the ability of the Company to
redeem the Senior Preferred Stock, and future agreements may similarly restrict
redemptions of Senior Preferred
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Stock by the Company. See "Description of Certain Indebtedness" and "Description
of Notes -- Certain Covenants."
Procedure for Redemption. On and after a redemption date, unless the
Company defaults in the payment of the applicable redemption price, dividends
will cease to accrue on shares of Senior Preferred Stock called for redemption
and all rights of holders of such shares will terminate except for the right to
receive the redemption price, without interest. The Company will send a written
notice of redemption by first class mail to each holder of record of shares of
Senior Preferred Stock, not fewer than 30 days nor more than 60 days prior to
the date fixed for such redemption. Shares of Senior Preferred Stock issued and
reacquired will, upon compliance with the applicable requirements of Delaware
law, have the status of authorized but unissued shares of Preferred Stock of the
Company undesignated as to series and may with any and all other authorized but
unissued shares of Preferred Stock of the Company be designated or redesignated
and issued or reissued, as the case may be, as part of any series of Preferred
Stock of the Company, except that any issuance or reissuance of shares of Senior
Preferred Stock must be in compliance with the Certificate of Designation.
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each holder of Senior Preferred
Stock will have the right to require the Company to purchase all or any part of
such holder's Senior Preferred Stock pursuant to an offer (an "Offer") at a
purchase price equal to 101% of the liquidation preference thereof, plus an
amount in cash equal to all accumulated and unpaid dividends per share
(including an amount in cash equal to a prorated dividend for the period from
the dividend payment date immediately prior to the repurchase date to the
repurchase date). Notice of an Offer must be mailed within 30 days following a
Change of Control, must remain open for at least 30 and not more than 40 days
and must comply with the requirements of Rule l4e-l under the Exchange Act and
any other applicable securities laws and regulations.
If a Change of Control were to occur, the Company could be obligated to
offer to purchase all of the securities issued under the Indenture and the
Original Indenture and to repay all outstanding obligations, if any, under the
Revolving Credit Facility, and there can be no assurance that the Company would
have sufficient funds to pay the purchase price for all shares of Senior
Preferred Stock that the Company is required to purchase. In the event that the
Company were required to purchase outstanding shares of Senior Preferred Stock
pursuant to an Offer, the Company expects that it would need to seek third-party
financing to the extent it does not have available funds to meet its purchase
obligations. However, there can be no assurance that the Company would be able
to obtain such financing. In addition, the Company's ability to purchase the
Senior Preferred Stock may be limited by other then-existing borrowing
agreements, including the Indenture, the Original Indenture and the Revolving
Credit Facility. See "Description of Notes -- Certain Covenants" and
"Description of Certain Indebtedness."
Except as described above, the Certificate of Designation does not contain
provisions that permit the holders of Senior Preferred Stock to require the
Company to purchase or redeem the Senior Preferred Stock in the event of a
takeover, recapitalization or similar restructuring, including an issuer
recapitalization or similar transaction with management. Consequently, the
Change of Control provisions will not afford any protection in a highly
leveraged transaction, including a transaction initiated by the Company,
management of the Company or an affiliate of the Company, if such transaction
does not result in a Change of Control. In addition, certain events that may
obligate the Company to offer to repurchase all of the securities issued under
the Indenture and the Original Indenture or to repay all outstanding
obligations, if any, under the Revolving Credit Facility may not constitute a
Change of Control under the Certificate of Designation.
The definition of Change of Control includes a phrase relating to the
transfer of "all or substantially all" of the Company's assets. Although there
is a developing body of case law interpreting the phrase "substantially all,"
there is no precise established definition of the phrase under applicable law.
Accordingly, the ability of a holder of Senior Preferred Stock to require the
Company to repurchase such Senior Preferred Stock as a result of a transfer of
less than all of the assets of the Company to another Person or group may be
uncertain.
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The Change of Control provisions of the Certificate of Designation may not
be waived by the Board of Directors without the consent of the holders of at
least a majority of the outstanding Senior Preferred Stock. See "-- Voting
Rights."
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding-up of
the Company, holders of Senior Preferred Stock will be entitled to be paid, out
of the assets of the Company available for distribution, the liquidation
preference per share, plus an amount in cash equal to all accumulated and unpaid
dividends thereon to the date fixed for liquidation, dissolution or winding-up
(including an amount equal to a prorated dividend for the period from the last
dividend payment date to the date fixed for liquidation, dissolution or
winding-up), before any distribution is made on any Junior Securities. If, upon
any voluntary or involuntary liquidation, dissolution or winding-up of the
Company, the amounts payable with respect to the Senior Preferred Stock and all
other Parity Securities are not paid in full, the holders of the Senior
Preferred Stock and the Parity Securities will share equally and ratably in any
distribution of assets of the Company in proportion to the full liquidation
preference and accumulated and unpaid dividends to which each is entitled. After
payment of the full amount of the liquidation preferences and accumulated and
unpaid dividends to which they are entitled, the holders of shares of Senior
Preferred Stock will not be entitled to any further participation in any
distribution of assets of the Company. However, neither the sale, conveyance,
exchange or transfer (for cash, shares of stock, securities or other
consideration) of all or substantially all of the property or assets of the
Company nor the consolidation or merger of the Company with or into one or more
corporations will be deemed to be a liquidation, dissolution or winding-up of
the Company.
The Certificate of Designation does not contain any provision requiring
funds to be set aside to protect the liquidation preference of the Senior
Preferred Stock.
VOTING RIGHTS
Holders of the Senior Preferred Stock will have no voting rights with
respect to general corporate matters except as provided by law or as set forth
in the Certificate of Designation. The Certificate of Designation provides that
(a) if (i) dividends on the Senior Preferred Stock are in arrears and unpaid
(and, in the case of dividends payable after July 15, 2003, are not paid in
cash) for four consecutive quarterly periods; (ii) the Company fails to
discharge any redemption obligation with respect to the Senior Preferred Stock
(whether or not the Company is permitted to do so by the terms of the Indenture,
the Revolving Credit Facility or any other obligation of the Company); (iii) the
Company fails to make an Offer to purchase all of the outstanding shares of
Senior Preferred Stock following a Change of Control (whether or not the Company
is permitted to do so by the terms of the Indenture, the Revolving Credit
Facility or any other obligation of the Company); (iv) a breach or violation of
the provisions described under the caption "-- Certain Covenants" occurs and the
breach or violation continues for a period of 30 days or more; or (v) a default
occurs on the obligation to pay principal of, interest on or any other payment
obligation when due (a "Payment Default") at final maturity on one or more
classes of Indebtedness of the Company or any Subsidiary of the Company, whether
such Indebtedness exists on the Preferred Stock Issue Date or is incurred
thereafter, having individually or in the aggregate an outstanding principal
amount of $10,000,000 or more, or any other Payment Default occurs on one or
more such classes of Indebtedness having individually or in the aggregate an
outstanding principal amount of $10,000,000 or more and such class or classes of
Indebtedness are declared due and payable prior to their respective maturities,
then the number of directors constituting the Board of Directors will be
adjusted to permit the holders of the majority of the then outstanding Senior
Preferred Stock, voting separately as a class, to elect two directors, and (b)
the approval of holders of a majority of the outstanding shares of Senior
Preferred Stock, voting as a separate class, will be required for (i) any
merger, consolidation or sale of assets of the Company, except as permitted
pursuant to the covenant described under "-- Certain Covenants -- Merger,
Consolidation or Sale of Assets;" and (ii) any modification of the Preferred
Stock Exchange Note Indenture (other than a modification contemplated under the
caption "Description of Preferred Stock Exchange Notes -- Certain Covenants").
Each such event described in clause (a) above is referred to herein as a "Voting
Rights Triggering Event." Voting rights arising as a result of a Voting Rights
Triggering Event
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will continue until such time as all dividends in arrears on the Senior
Preferred Stock are paid in full (and after July 15, 2003, paid in cash) and any
failure, breach or default referred to in clause (a) is remedied.
In addition, the Certificate of Designation provides that, except as stated
above under "-- Ranking," the Company will not authorize any class of Senior
Securities or Parity Securities without the affirmative vote or consent of
holders of at least a majority of the shares of Senior Preferred Stock then
outstanding, voting or consenting as the case may be. The Certificate of
Designation also provides that the Company may not amend the Certificate of
Designation so as to affect adversely the specified rights, preferences,
privileges or voting rights of holders of shares of the Senior Preferred Stock,
or authorize the issuance of any additional shares of Senior Preferred Stock,
without the affirmative vote or consent of the holders of at least a majority of
the then outstanding shares of Senior Preferred Stock, voting or consenting, as
the case may be. The Certificate of Designation also provides that, except as
set forth above, (a) the creation, authorization or issuance of any shares of
Junior Securities, Parity Securities or Senior Securities or (b) the increase or
decrease in the amount of authorized capital stock of any class, including any
preferred stock, shall not require the consent of the holders of Senior
Preferred Stock and shall not be deemed to affect adversely the rights,
preferences, privileges or voting rights of holders of shares of Senior
Preferred Stock.
Under Delaware law, holders of Senior Preferred Stock will be entitled to
vote as a class upon a proposed amendment to the Certificate of Incorporation,
whether or not entitled to vote thereon by the Certificate of Incorporation, if
the amendment would increase or decrease the par value of the shares of such
class, or alter or change the powers, preferences or special rights of the
shares for such class so as to affect them adversely.
CERTAIN COVENANTS
Merger, Consolidation or Sale of Assets. The provisions of the Certificate
of Designation relating to mergers, consolidations and sales of assets is
substantially the same as the provisions of the Indenture relating to such
matters. See "Description of Notes -- Certain Covenants."
Junior Payments. The Certificate of Designation provides that the Company
will not, directly or indirectly, (i) declare or pay any dividend or make any
distribution on account of any Junior Securities (other than dividends or
distributions payable in Junior Securities (other than Disqualified Stock));
(ii) purchase, redeem or otherwise acquire or retire for value any Junior
Securities; or (iii) make any Restricted Investment (all such dividends,
distributions, purchases, redemptions, acquisitions, retirements and Restricted
Investments being collectively referred to as "Junior Payments"), if, at the
time of such Junior Payment:
(a) a Voting Rights Triggering Event shall have occurred and be
continuing or would occur as a consequence thereof; or
(b) all dividends on the Senior Preferred Stock payable on dividend
payment dates after July 15, 2003, have not been declared and paid in cash.
Notwithstanding the foregoing, the Certificate of Designation will permit
Junior Payments under circumstances substantially the same as the provisions of
the Indenture relating to Restricted Payments.
Transactions with Affiliates. The provisions of the Certificate of
Designation relating to transactions with Affiliates is substantially the same
as the provisions of the Indenture relating to such matters. See "Description of
Notes -- Certain Covenants."
Rule 144A Information Requirement. The provisions of the Certificate of
Designation relating to the information required to be delivered pursuant to
Rule 144A(d)(4) under the Securities Act is substantially the same as the
provisions of the Indenture relating to such matters.
Reports. The provisions of the Certificate of Designation relating to the
provision of reports and information by the Company is substantially the same as
the provisions of the Indenture relating to such matters. See "Description of
Notes -- Certain Covenants."
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EXCHANGE
The Company may at its option exchange all, but not less than all, of the
then outstanding shares of Senior Preferred Stock into Preferred Stock Exchange
Notes on any dividend payment date, provided that on the date of such exchange:
(a) there are no contractual impediments to such exchange; (b) there are legally
available funds sufficient therefor; (c) a registration statement relating to
the Preferred Stock Exchange Notes shall have been declared effective under the
Securities Act prior to such exchange and shall continue to be in effect on the
date of such exchange or the Company shall have obtained a written opinion of
counsel that an exemption from the registration requirements of the Securities
Act is available for such exchange, and that upon receipt of such Preferred
Stock Exchange Notes pursuant to such exchange made in accordance with such
exemption, the holders (assuming such holder is not an Affiliate of the Company)
thereof will not be subject to any restrictions imposed by the Securities Act
upon the resale thereof and such exemption is relied upon by the Company for
such exchange; (d) the Preferred Stock Exchange Note Indenture and the trustee
thereunder shall have been qualified under the Trust Indenture Act; (e)
immediately after giving effect to such exchange, no Default or Event of Default
(each as defined in the Preferred Stock Exchange Note Indenture) would exist
under the Preferred Stock Exchange Note Indenture; and (f) the Company shall
have delivered a written opinion of counsel, dated the date of exchange,
regarding the satisfaction of the conditions set forth in clauses (a), (b), (c)
and (d) and certain other matters. The Company shall send a written notice of
exchange by mail to each holder of record of shares of Senior Preferred Stock,
which notice shall state, among other things, (i) that the Company is exercising
its option to exchange the Senior Preferred Stock for Preferred Stock Exchange
Notes pursuant to the Certificate of Designation; and (ii) the date of exchange
(the "Preferred Stock Exchange Date"), which date shall not be less than 30 days
nor more than 60 days following the date on which such notice is mailed. On the
Preferred Stock Exchange Date, holders of outstanding shares of Senior Preferred
Stock will be entitled to receive a principal amount of Preferred Stock Exchange
Notes equal to the liquidation preference per share, plus an amount in cash
equal to all accrued and unpaid dividends (including an amount in cash equal to
a prorated dividend for the period from the dividend payment date immediately
prior to the Preferred Stock Exchange Date to the Preferred Stock Exchange
Date), as provided below.
The Preferred Stock Exchange Notes will be issued in registered form,
without coupons. Preferred Stock Exchange Notes issued in exchange for Senior
Preferred Stock will be issued in principal amounts of $1,000 and integral
multiples thereof to the extent possible, and will also be issued in principal
amounts less than $1,000 so that each holder of Senior Preferred Stock will
receive certificates representing the entire amount of Preferred Stock Exchange
Notes to which his shares of Senior Preferred Stock entitle him, provided, that
the Company may, at its option, pay cash in lieu of issuing Preferred Stock
Exchange Notes in a principal amount less than $1,000. On and after the
Preferred Stock Exchange Date, dividends will cease to accrue on the outstanding
shares of Senior Preferred Stock, and all rights of the holders of Senior
Preferred Stock (except the right to receive the Preferred Stock Exchange Notes,
an amount in cash equal to the accrued and unpaid dividends to the Preferred
Stock Exchange Date and if the Company so elects, cash in lieu of any Preferred
Stock Exchange Notes which is an amount that is not an integral multiple of
$1,000) will terminate. The person entitled to receive the Preferred Stock
Exchange Notes issuable upon such exchange will be treated for all purposes as
the registered holder of such Preferred Stock Exchange Notes.
The Revolving Credit Facility, the Original Indenture and the Indenture
contain limitations with respect to the Company's ability to issue the Preferred
Stock Exchange Notes, and any future credit agreements or other agreements
relating to indebtedness to which the Company becomes a party may contain
similar limitations. See "Description of Certain Indebtedness" and "Description
of Notes -- Certain Covenants."
The Company intends to comply with the provisions of Rule 13e-4 promulgated
pursuant to the Exchange Act in connection with any exchange, to the extent
applicable.
Registrar and Transfer Agent. American Stock Transfer & Trust Company is
the registrar and transfer agent for the Senior Preferred Stock (the "Transfer
Agent").
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DESCRIPTION OF PREFERRED STOCK EXCHANGE NOTES
The Preferred Stock Exchange Notes, if issued, will be issued under the
Preferred Stock Exchange Note Indenture between the Company and the trustee to
be named thereunder. The terms of the Preferred Stock Exchange Notes include
those stated in the Preferred Stock Exchange Note Indenture and those made part
of the Preferred Stock Exchange Note Indenture by reference to the Trust
Indenture Act. The Preferred Stock Exchange Notes will be subject to all such
terms, and prospective holders of the Preferred Stock Exchange Notes are
referred to the Preferred Stock Exchange Note Indenture and the Trust Indenture
Act for a statement of such terms. The following summary of certain provisions
of the Preferred Stock Exchange Note Indenture does not purport to be complete
and is subject to, and is qualified in its entirety by reference to, the Trust
Indenture Act and to all of the provisions of the Preferred Stock Exchange Note
Indenture, including the definitions of certain terms therein and those terms
made a part of the Preferred Stock Exchange Note Indenture by reference to the
Trust Indenture Act. The definitions of certain terms used in the Preferred
Stock Exchange Note Indenture and in the following summary are substantially the
same as those used in the Indenture. See "Description of Notes -- Certain
Definitions."
GENERAL
The Preferred Stock Exchange Notes, if issued, will be general unsecured
obligations of the Company, subordinated to all existing and future Senior
Indebtedness (which, for purposes of the Preferred Stock Exchange Notes will
include Senior Subordinated Indebtedness), including the Notes and Indebtedness
under the Revolving Credit Facility. The Preferred Stock Exchange Notes will be
issued in fully registered form only in denominations of $1,000 and integral
multiples thereof (other than as described in "Description of Preferred
Stock -- Exchange" or with respect to additional Preferred Stock Exchange Notes
issued in lieu of cash interest as described herein).
Principal of, and premium, if any, and interest on the Preferred Stock
Exchange Notes will be payable, and the Preferred Stock Exchange Notes may be
presented for registration of transfer or exchange, at the office of the Paying
Agent and Registrar in New York, New York. Holders of Preferred Stock Exchange
Notes must surrender their Preferred Stock Exchange Notes to the Paying Agent to
collect principal payments, and the Company may pay principal and interest by
check and may mail checks to a holder's registered address; provided that all
payments with respect to Preferred Stock Exchange Notes, the holders of which
have given wire transfer instructions to the Company, will be required to be
made by wire transfer of immediately available funds to the accounts specified
by the holders thereof. The Registrar may require payment of a sum sufficient to
cover any transfer tax or similar governmental charge payable in connection with
certain transfers or exchanges. See "-- Other Provisions of the Preferred Stock
Exchange Note Indenture" and "Book Entry, Delivery and Form." The Trustee will
initially act as Paying Agent and Registrar. The Company may change any Paying
Agent and Registrar without prior notice to holders of the Preferred Stock
Exchange Notes, and the Company or any of its Subsidiaries may act as Paying
Agent or Registrar.
The Preferred Stock Exchange Notes will mature on July 15, 2007. Each
Preferred Stock Exchange Note will bear interest at the rate of 13% per annum
from the Exchange Note Issue Date or from the most recent interest payment date
to which interest has been paid. Interest will be payable semi-annually in
arrears on January 15 and July 15 of each year, commencing with the first such
date after the Exchange Note Issue Date. Interest on the Preferred Stock
Exchange Notes will be computed on the basis of a 360-day year comprised of
twelve 30-day months. On or before July 15, 2003, the Company may, at its
option, pay interest in cash or in additional Preferred Stock Exchange Notes
having an aggregate principal amount equal to the amount of such interest. After
July 15, 2003, interest may be paid only in cash.
SUBORDINATION AND RANKING
The Preferred Stock Exchange Notes will be subordinated to the prior
payment when due of the principal of, and premium, if any, and interest on, all
existing and future Senior Indebtedness as defined in the Preferred Stock
Exchange Note Indenture, and will rank pari passu in right of payment to all
other Subordinated
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Indebtedness of the Company. The Preferred Stock Exchange Notes will also
effectively rank junior to all indebtedness of the Subsidiaries. At June 30,
1998, after giving effect to the Transactions and the application of the net
proceeds therefrom, the aggregate principal amount of Senior Indebtedness of the
Company and indebtedness of the Subsidiaries would have been approximately
$160.5 million. Under the terms of the Preferred Stock Exchange Note Indenture,
the Company's Subsidiaries may incur certain Indebtedness pursuant to agreements
that may restrict the ability of such Subsidiaries to make dividends or other
intercompany transfers to the Company necessary to service the Company's
obligations, including its obligations under the Preferred Stock Exchange Notes.
See "Risk Factors -- Secured Indebtedness; Subsidiary Operations," "Description
of Certain Indebtedness" and "-- Certain Covenants."
Upon (a) any distribution to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property; or
(b) an assignment for the benefit of creditors or any marshaling of the
Company's assets and liabilities, the holders of Senior Indebtedness will be
entitled to receive payment in full of all Obligations due in respect of such
Senior Indebtedness (including interest after the commencement of any such
proceeding at the rate specified in the applicable Senior Indebtedness) before
holders of the Preferred Stock Exchange Notes will be entitled to receive any
payment with respect to the Preferred Stock Exchange Notes. Until all
Obligations with respect to Senior Indebtedness are paid in full, any
distribution to which holders of the Preferred Stock Exchange Notes would be
entitled shall be made to holders of Senior Indebtedness. However, holders of
the Preferred Stock Exchange Notes may receive securities that are subordinated,
at least to the same extent as the Preferred Stock Exchange Notes are
subordinated to Senior Indebtedness and any securities issued in exchange for
Senior Indebtedness.
In addition, the Company may not make any payment upon or in respect of the
Preferred Stock Exchange Notes (except in such subordinated securities) if (a) a
default in the payment of any principal, premium if any, interest or other
Obligations with respect to any Designated Senior Debt occurs and is continuing
beyond any applicable grace period (whether upon maturity, as a result of
acceleration or otherwise); or (b) any other default occurs and is continuing
with respect to any Designated Senior Debt that permits holders of such
Designated Senior Debt to accelerate its maturity, and the Company and the
Trustee receive a notice of such default (a "Payment Blockage Notice") from the
holders, or from the trustee, agent or other representative of the holders, of
any such Designated Senior Debt. Payments on the Preferred Stock Exchange Notes
may and shall be resumed upon the earlier of (i) the date upon which the default
is cured or waived; or (ii) in the case of a default referred to in clause (b)
above, 179 days after the date on which the applicable Payment Blockage Notice
is received, unless the maturity of any Designated Senior Debt has been
accelerated. No new period of payment blockage may be commenced within 360 days
after the receipt by the Trustee of any prior Payment Blockage Notice. No
nonpayment default that existed or was continuing on the date of delivery of any
Payment Blockage Notice to the Trustee shall be, or be made, the basis for a
subsequent Payment Blockage Notice unless such default shall have been cured or
waived for a period of not less than 180 days.
The Preferred Stock Exchange Note Indenture will further require that the
Company promptly notify holders of Senior Indebtedness if payment on the
Preferred Stock Exchange Notes is accelerated because of an Event of Default.
As a result of the subordination provisions described above, in the event
of a liquidation or insolvency, holders of the Preferred Stock Exchange Notes
may recover less ratably than other creditors of the Company.
REDEMPTION
Optional Redemption. The Preferred Stock Exchange Notes may not be
redeemed at the option of the Company prior to July 15, 2003 other than out of
the net proceeds of one or more Public Equity Offerings, as and to the extent
described below. During the 12-month period beginning on July 15 of the years
indicated below, the Preferred Stock Exchange Notes will be redeemable, at the
option of the Company, in whole or in
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part, on at least 30 but not more than 60 days' notice to each holder of
Preferred Stock Exchange Notes to be redeemed, at the redemption prices
(expressed as percentages of the principal amount) set forth below, plus any
accrued and unpaid interest to the redemption date:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---- ----------
<S> <C>
2003.................................................... 106.500%
2004.................................................... 104.333
2005.................................................... 102.167
2006 and thereafter..................................... 100.000
</TABLE>
In addition, prior to July 15, 2003, the Company may redeem the Preferred
Stock Exchange Notes in whole, but not in part, at a redemption price equal to
115% of the principal amount thereof, plus accrued and unpaid interest thereon
to the applicable redemption date, with the proceeds of a Public Equity
Offering, provided that such redemption shall occur within 60 days of the date
of the closing of such Public Equity Offering.
Mandatory Redemption. Except as set forth under "-- Change of Control,"
the Company is not required to make any mandatory redemption, purchase or
sinking fund payments with respect to the Preferred Stock Exchange Notes.
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each holder of Preferred Stock
Exchange Notes will have the right to require the Company to purchase all or any
part (equal to $1,000 or an integral multiple thereof) of such holder's
Preferred Stock Exchange Notes pursuant to an offer (an "Offer") at a purchase
price in cash equal to 101% of the aggregate principal amount thereof, plus any
accrued and unpaid interest to the date of purchase. Notice of an Offer must be
mailed within 30 days following a Change of Control, must remain open for at
least 30 and not more than 40 days and must comply with the requirements of Rule
l4e-l under the Exchange Act and any other applicable securities laws and
regulations.
Except as described above, the Preferred Stock Exchange Note Indenture does
not contain provisions that permit the holders of Preferred Stock Exchange Notes
to require the Company to purchase or redeem the Preferred Stock Exchange Notes
in the event of a takeover, recapitalization or similar restructuring, including
an issuer recapitalization or similar transaction with management. Consequently,
the Change of Control provisions will not afford any protection in a highly
leveraged transaction, including a transaction initiated by the Company,
management of the Company or an affiliate of the Company, if such transaction
does not result in a Change of Control.
The Company expects that prepayment of the Preferred Stock Exchange Notes
following a Change of Control would, and the exercise by holders of Preferred
Stock Exchange Notes of the right to require the Company to purchase Preferred
Stock Exchange Notes may, constitute a default under the Revolving Credit
Facility or other Indebtedness of the Company. The Preferred Stock Exchange Note
Indenture will provide that, prior to the mailing of the Offer notice, but in
any event within 30 days following any Change of Control, the Company covenants
to (i) repay in full and terminate all commitments under Indebtedness under the
Revolving Credit Facility and all other Senior Indebtedness the terms of which
require repayment upon a Change of Control or offer to repay in full and
terminate all commitments under all Indebtedness under the Revolving Credit
Facility and all other such Senior Indebtedness and to repay the Indebtedness
owed to each lender which has accepted such offer; or (ii) obtain the requisite
consents under the Revolving Credit Facility and all such other Senior
Indebtedness to permit the purchase of the Preferred Stock Exchange Notes as
provided below.
In the event a Change of Control occurs, the Company will likely be
required to refinance the Indebtedness outstanding under the Revolving Credit
Facility, the Notes and the Preferred Stock Exchange Notes. There can be no
assurance that sufficient funds will be available at the time of any Change of
Control to make any required purchases of the Notes and the Preferred Stock
Exchange Notes given the Company's high leverage. The financing of the purchases
of Notes and Preferred Stock Exchange Notes could
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additionally result in a default under the Revolving Credit Facility, the Notes
or other indebtedness of the Company. The occurrence of a Change of Control may
also have an adverse impact on the ability of the Company to obtain additional
financing in the future.
The Company will comply with any tender offer rules under the Exchange Act
which may then be applicable, including Rule l4e-l, in connection with an Offer
required to be made by the Company. To the extent that the provisions of any
securities laws or regulations conflict with provisions of the Preferred Stock
Exchange Note Indenture, the Company shall comply with the applicable securities
laws and regulations and shall not be deemed to have breached its obligations
under the Preferred Stock Exchange Note Indenture by virtue thereof.
The Change of Control provisions may not be waived by the Board of
Directors of the Company or the Trustee without the consent of holders of at
least a majority in principal amount of the Preferred Stock Exchange Notes.
CERTAIN COVENANTS
Limitation on Restricted Payments. The Preferred Stock Exchange Note
Indenture will contain a covenant relating to Restricted Payments that will be
substantially the same as the covenant contained in the Indenture on the date of
issuance of the Preferred Stock Exchange Notes (or, if no New Notes or Series C
Notes are outstanding on such date, on the last interest payment date during
which any New Notes or Series C Notes were outstanding).
Limitation on Asset Sales. The Preferred Stock Exchange Note Indenture
will contain a covenant relating to Asset Sales that will be substantially the
same as the covenant contained in the Indenture on the date of issuance of the
Preferred Stock Exchange Notes (or, if no New Notes or Series C Notes are
outstanding on such date, on the last interest payment date during which any New
Notes or Series C Notes were outstanding).
Limitation on Restrictions on Subsidiary Dividends. The Preferred Stock
Exchange Note Indenture will contain a covenant relating to restrictions on
Subsidiary dividends that will be substantially the same as the covenant
contained in the Indenture on the date of issuance of the Preferred Stock
Exchange Notes (or, if no New Notes or Series C Notes are outstanding on such
date, on the last interest payment date during which any New Notes or Series C
Notes were outstanding).
Merger, Consolidation or Sale of Assets. The Preferred Stock Exchange Note
Indenture will contain a covenant relating to merger, consolidation or sale of
assets that will be substantially the same as the covenant contained in the
Indenture on the date of issuance of the Preferred Stock Exchange Notes (or, if
no New Notes or Series C Notes are outstanding on such date, on the last
interest payment date during which any New Notes or Series C Notes were
outstanding).
Limitation on Transactions with Affiliates. The Preferred Stock Exchange
Note Indenture will contain a covenant relating to transactions with Affiliates
that will be substantially the same as the covenant contained in the Indenture
on the date of issuance of the Preferred Stock Exchange Notes (or, if no New
Notes or Series C Notes are outstanding on such date, on the last interest
payment date during which any New Notes or Series C Notes were outstanding).
Restrictions on Sale and Issuance of Subsidiary Stock. The Preferred Stock
Exchange Note Indenture will contain a covenant relating to the sale and
issuance of Subsidiary stock that will be substantially the same as the covenant
contained in the Indenture on the date of issuance of the Preferred Stock
Exchange Notes (or, if no New Notes or Series C Notes are outstanding on such
date, on the last interest payment date during which any New Notes or Series C
Notes were outstanding).
Line of Business. The Preferred Stock Exchange Note Indenture will contain
a covenant relating to line of business that will be substantially the same as
the covenant contained in the Indenture on the date of issuance of the Preferred
Stock Exchange Notes (or, if no New Notes or Series C Notes are outstanding on
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such date, on the last interest payment date during which any New Notes or
Series C Notes were outstanding).
Rule 144A Information Requirement. The Preferred Stock Exchange Note
Indenture will contain a covenant relating to the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act that will be
substantially the same as the covenant contained in the Indenture on the date of
issuance of the Preferred Stock Exchange Notes (or, if no New Notes or Series C
Notes are outstanding on such date, on the last interest payment date during
which any New Notes or Series C Notes were outstanding).
Reports. The Preferred Stock Exchange Note Indenture will contain
provisions relating to the provision of reports and information by the Company
that will be substantially the same as the provisions of the Indenture relating
to such matters on the date of issuance of the Preferred Stock Exchange Notes
(or, if no New Notes or Series C Notes are outstanding on such date, on the last
interest payment date during which any New Notes or Series C Notes were
outstanding).
Because certain of the covenants contained in the Preferred Stock Exchange
Note Indenture may be amended to conform to covenants contained in the Indenture
prior to issuance of the Preferred Stock Exchange Notes, there can be no
assurance that the rights of holders of Preferred Stock Exchange Notes will not
be materially different from those described herein.
EVENTS OF DEFAULT AND REMEDIES
The Preferred Stock Exchange Note Indenture will contain provisions
relating to Events of Default that will be substantially the same as the
provisions of the Indenture relating to such matters. See "Description of
Notes -- Events of Default and Remedies."
OTHER PROVISIONS OF THE PREFERRED STOCK EXCHANGE NOTE INDENTURE
The Preferred Stock Exchange Note Indenture will include other provisions
that are substantially the same with respect to the Preferred Stock Exchange
Notes as those with respect to the Notes set forth under "Description of
Notes -- No Personal Liability of Directors, Officers, Employees and
Stockholders," "-- Defeasance and Discharge of the Indenture and the Notes,"
"-- Transfer and Exchange," "-- Amendment, Supplement and Waiver" and
"-- Concerning the Trustee."
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain Federal income tax consequences of
the purchase, ownership, and disposition of the New Notes and New Preferred
Stock acquired pursuant to the Exchange Offer and the ownership and disposition
of Preferred Stock Exchange Notes received in exchange for Senior Preferred
Stock. This summary is based upon existing Federal income tax law, which is
subject to change, possibly retroactively. This summary does not discuss all
aspects of Federal income taxation which may be important to particular holders
in light of their individual investment circumstances, such as New Notes, New
Preferred Stock or Preferred Stock Exchange Notes held by investors subject to
special tax rules (e.g., financial institutions, insurance companies,
broker-dealers, tax-exempt organizations, and foreign investors) or to persons
that will hold the New Notes, New Preferred Stock or Preferred Stock Exchange
Notes as a part of a straddle, hedge, conversion, or synthetic security
transaction for Federal income tax purposes or that have a functional currency
other than the United States dollar, all of whom may be subject to tax rules
that differ significantly from those summarized below. In addition, this summary
does not discuss any foreign, state, or local tax considerations. This summary
assumes that investors will hold their New Notes, New Preferred Stock, and
Preferred Stock Exchange Notes received in exchange for Senior Preferred Stock,
as "capital assets" (generally, property held for investment) under the Internal
Revenue Code of 1986, as amended (the "Code") and with respect to holders of New
Preferred Stock, such holders do not hold and will not acquire equity, other
than the New Preferred Stock, in the Company or in Holdings. Prospective
investors are urged to consult their tax advisors regarding the Federal, state,
local and foreign income and other tax considerations associated with the
purchase, ownership, and disposition of New Notes and New Preferred Stock and
the ownership and disposition of Preferred Stock Exchange Notes received in
exchange for Senior Preferred Stock.
NEW NOTES
Because the New Notes are treated as a continuation of the Existing Notes
for federal income tax purposes, the tax consequences of holding the New Notes
is the same as that applicable to the Existing Notes.
Issue Price
For Federal income tax purposes, the issue price of the Notes is equal to
the first price at which a substantial amount of Notes were initially sold
reduced by the amount of the purchase price for a Note that is allocated to
pre-issuance accrued interest on such Note. Accordingly, the receipt of stated
interest on November 15, 1998, equal to such amount of pre-issuance interest on
a Note will not be treated as a payment on the Note but rather will be a
tax-free return of pre-issuance interest.
Amortizable Bond Premium
The Notes were issued with amortizable bond premium for Federal income tax
purposes. The amount of amortizable bond premium attributable to each Note was
equal the excess of the issue price of the Note over its stated principal
amount. Pursuant to recently issued Treasury regulations that are generally
effective for bonds acquired on or after March 2, 1998 (the "1998 Treasury
Regulations"), the holder may elect to amortize such premium over the term of
the Note based on the holder's yield to maturity with respect to the Note as
determined under the bond premium rules. A holder may generally offset the
amortizable bond premium allocable to an accrual period against stated interest
on the Note that the holder is required to include in income with respect to
such accrual period under his regular method of tax accounting. An election to
amortize bond premium applies to all taxable debt obligations held by the holder
at the beginning of the first taxable year to which the election applies or
thereafter acquired and may be revoked only with the consent of the Internal
Revenue Service. Special rules apply if the holder has previously elected to
amortize bond premium prior to the effective date of the 1998 Treasury
Regulations. Holders are urged to consult their tax advisors regarding the
election to amortize bond premium.
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Disposition of Notes
A holder of a Note will recognize a capital gain or loss upon any sale,
exchange or retirement of a Note in an amount equal to the difference between
the amount realized (other than any amounts attributable to pre-issuance
interest and accrued, but unpaid interest) and the holder's adjusted tax basis
in such Note. In the case of a holder who purchased a Note pursuant to the
Offering, the adjusted tax basis of a Note is equal the purchase price of the
Note reduced by (i) the amount of the purchase price for a Note that is
allocated to pre-issuance accrued interest on such Note, (ii) any amortizable
bond premium used to offset stated interest or otherwise allowed as a deduction
under the 1998 Treasury Regulations and (iii) all payments of principal received
on such Note.
Under the recently enacted Internal Revenue Service Restructuring and
Reform Act of 1998, net capital gain (i.e., generally, capital gain in excess of
capital loss) recognized by an individual upon the sale of a capital asset that
has been held for (i) more than 12 months will generally be subject to tax at a
rate not to exceed 20%, and (ii) 12 months or less will be subject to tax at
ordinary income tax rates. Capital gain recognized by a corporate holder will be
subject to tax at the ordinary income tax rates applicable to corporations.
SENIOR PREFERRED STOCK AND PREFERRED STOCK EXCHANGE NOTES
Classification of Senior Preferred Stock and Preferred Stock Exchange Notes
Although the characterization of an instrument as debt or equity is a
factual determination that cannot be predicted with certainty, the Company
intends to treat the Senior Preferred Stock as "equity" and the Preferred Stock
Exchange Notes as "debt" for Federal income tax purposes, and the remainder of
this discussion assumes that such treatment will be respected by the Internal
Revenue Service.
Senior Preferred Stock
Dividends. Distributions on the Senior Preferred Stock will constitute
dividend income for Federal income tax purposes, subject to tax as ordinary
income, to the extent paid from current or accumulated earnings and profits of
the Company as specially determined for Federal income tax purposes. Dividends
"paid in kind" through the issuance of additional Senior Preferred Stock will be
treated as distributions in an amount equal to the fair market value of such
additional Senior Preferred Stock as of the date of distribution. Such amount
will also be the initial issue price and tax basis of the newly distributed
Senior Preferred Stock for Federal income tax purposes. In addition to the
amount of cash and stock received, a holder will be treated as having received
as a distribution, to the extent of current or accumulated earnings and profits
of the Company, an amount equal to the annual accrual of the difference between
the issue price of the Senior Preferred Stock and the mandatory redemption price
of such stock (the "Redemption Premium"), unless a statutorily-defined de
minimis exception applies. Such accrual will be determined under a constant
yield method that will result in increasing amounts of accruals of income over
the term of the Senior Preferred Stock.
Dividends Received Deduction. Under section 243 of the Code, corporate
holders generally will be able to claim as a deduction 70% of the amount of any
distribution qualifying as a dividend, subject to a minimum holding period and
other applicable requirements described below.
Section 246A of the Code reduces the dividends received deduction allowable
to a corporate holder that has incurred indebtedness "directly attributable" to
its investment in portfolio stock. Section 246(c) of the Code requires that, in
order to be eligible for the dividends received deduction, a corporate holder
must generally hold the shares of the Senior Preferred Stock for a minimum of 46
days (91 days in the case of certain preferred stock) during the 90 day period
beginning on the date which is 45 days before the date on which such shares
become ex-dividend with respect to such dividend (during the 180 day period
beginning 90 days before such date in the case of certain preferred stock). A
holder's holding period for these purposes is suspended during any period in
which it has certain options or contractual obligations with respect to
substantially identical stock or holds one or more other positions with respect
to substantially identical stock that diminishes the risk of loss from holding
the Senior Preferred Stock.
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Under section 1059 of the Code, a corporate holder is required to reduce
its adjusted tax basis (but not below zero) in the Senior Preferred Stock by the
nontaxed portion of any "extraordinary dividend" if such stock has not been held
for more than two years before the earliest of the date such dividend is
declared, announced, or agreed to. Generally, the nontaxed portion of an
extraordinary dividend is the amount excluded from income by operation of the
dividends received deduction provisions of section 243 of the Code. An
extraordinary dividend on the Senior Preferred Stock generally would be a
dividend that (i) equals or exceeds 5% of the corporate holder's adjusted tax
basis in the Senior Preferred Stock, treating all dividends having ex-dividend
dates within an 85 day period as one dividend or (ii) exceeds 20% of the
corporate holder's adjusted tax basis in the Senior Preferred Stock, treating
all dividends having ex-dividend dates within a 365 day period as one dividend.
In determining whether a dividend paid on the Senior Preferred Stock is an
extraordinary dividend, a corporate holder may elect to substitute the fair
market value of the stock for such holder's adjusted tax basis for purposes of
applying these tests, provided such fair market value is established to the
satisfaction of the Secretary of the Treasury as of the day before the
ex-dividend date. An extraordinary dividend also currently includes any amount
treated as a dividend in the case of a redemption that is either non-pro rata as
to all stockholders or in partial liquidation of the Company, regardless of the
holder's holding period and regardless of the size of the dividend. If any part
of the nontaxed portion of an extraordinary dividend is not applied to reduce
the holder's adjusted tax basis as a result of the limitation on reducing such
basis below zero, such part will be treated as capital gain and will be
recognized in the taxable year in which the extraordinary dividend is received.
Special rules exist with respect to extraordinary dividends for "qualified
preferred dividends," which are any fixed dividends payable with respect to any
share of stock which (i) provides for fixed preferred dividends payable not less
frequently than annually and (ii) is not in arrears as to dividends at the time
the holder acquires such stock. A qualified preferred dividend does not include
any dividend payable with respect to any share if the actual rate of return of
such stock for the period the stock has been held by the holder receiving the
dividend exceeds 15%.
Disposition of Senior Preferred Stock. A holder's adjusted tax basis in
the Senior Preferred Stock will, in general, be equal to the holder's initial
tax basis of such Senior Preferred Stock increased by the Redemption Premium
previously included in income by the holder. A corporate holder's adjusted tax
basis may be further adjusted by the extraordinary dividend provision discussed
above. Upon the sale or other disposition of Senior Preferred Stock (including
an exchange of Senior Preferred Stock for Preferred Stock Exchange Notes and a
complete redemption of all of the outstanding Senior Preferred Stock) a holder
will generally recognize capital gain or loss equal to the difference between
the amount realized upon the disposition and the adjusted tax basis of the
Senior Preferred Stock and any such capital gain may be subject to a reduced
rate of tax as described above under the heading "-- New Notes -- Disposition of
New Notes."
In the case of an exchange of Senior Preferred Stock for Preferred Stock
Exchange Notes, the amount realized in the exchange will be equal to the "issue
price" of the Preferred Stock Exchange Note plus any cash received in the
exchange. If either the Senior Preferred Stock or the Preferred Stock Exchange
Notes are traded on an established securities market, the issue price of a
Preferred Stock Exchange Note will be equal to its fair market value, determined
as of the exchange date, as reflected in the public trading in the Senior
Preferred Stock or Preferred Stock Exchange Notes. If neither the Senior
Preferred Stock nor the Preferred Stock Exchange Notes are so traded, the issue
price of the Preferred Stock Exchange Notes would be the stated principal amount
of the Preferred Stock Exchange Notes provided that the yield on the Preferred
Stock Exchange Notes is equal to or greater than the "applicable Federal rate"
in effect at the time the Preferred Stock Exchange Notes are issued. If the
yield on the Preferred Stock Exchange Notes is less than such applicable Federal
rate, the issue price of the notes would be equal to the present value as of the
issue date of all payments to be made on the Preferred Stock Exchange Notes,
discounted at the applicable Federal rate. It can not be determined at the
present time whether the Senior Preferred Stock or the Preferred Stock Exchange
Notes will be, at the relevant time, traded on an established securities market
or whether the yield on the Preferred Stock Exchange Notes will equal or exceed
the applicable Federal rate.
Depending upon a holder's particular circumstances, the tax consequences of
holding Preferred Stock Exchange Notes may be less advantageous than the tax
consequences of holding Senior Preferred Stock
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because, for example, payments of interest on the Preferred Stock Exchange Notes
will not be eligible for any dividends received deduction that may be available
to corporate holders and because, as discussed at "-- Preferred Stock Exchange
Notes -- Original Issue Discount," Preferred Stock Exchange Notes may be issued
with greater amounts of original issue discount than the Redemption Premium on
the Senior Preferred Stock.
Partial Redemption of Senior Preferred Stock. In the case of a partial
redemption of the Senior Preferred Stock by the Company, the partial redemption
would be treated, under section 302 of the Code, either as a sale or exchange
giving rise to capital gain or loss or as dividend income subject to tax as
ordinary income. If a partial redemption of the Senior Preferred Stock for cash
is treated as a dividend with respect to a particular exchanging holder under
section 302 of the Code, such holder (i) will not recognize any loss on the
exchange and (ii) will recognize dividend income (rather than capital gain) in
an amount equal to cash received in the redemption without regard to the
holder's adjusted tax basis in the shares of Senior Preferred Stock surrendered
in the redemption, to the extent of its proportionate share of the Company's
current or accumulated earnings and profits. Pursuant to section 302 of the
Code, such redemption will not be treated as a dividend, if after giving effect
to the constructive ownership rules of section 318 of the Code, such redemption
(i) represents a "complete termination" of the exchanging holder's stock
interest in the Company, (ii) is "substantially disproportionate" with respect
to the exchanging holder or (iii) is "not essentially equivalent to a dividend"
with respect to the exchanging holder, all within the meaning of section 302(b)
of the Code. An exchange will be "not essentially equivalent to a dividend" as
to a particular holder if it results in a "meaningful reduction" in such
holder's interest in the Company (after application of the constructive
ownership rules of section 318 of the Code). In general, there are no fixed
rules for determining whether a "meaningful reduction" has occurred. Each holder
should consult its tax advisor as to its ability in light of its particular
circumstances to satisfy any of the foregoing tests. Additionally, corporate
holders should consult their tax advisors concerning the availability of the
corporate dividends received deduction and the possible application of the
extraordinary dividend rules of section 1059 of the Code to an exchange by a
corporate holder for whom the distribution is taxable as a dividend.
Preferred Stock Exchange Notes
Original Issue Discount. If the exchange of Preferred Stock Exchange Notes
for Senior Preferred Stock is consummated on or prior to April 15, 2003, the
Preferred Stock Exchange Notes will be issued with original issue discount, for
Federal income tax purposes, in an amount equal to the excess of the "stated
redemption price at maturity" of the Preferred Stock Exchange Notes over the
"issue price" of such notes (as described above). For this purpose, the stated
redemption price at maturity of the Preferred Stock Exchange Notes will be
deemed to be equal to the sum of all scheduled amounts payable on the Preferred
Stock Exchange Notes (including the payment of stated interest). Alternatively,
if the exchange of Preferred Stock Exchange Notes for Senior Preferred Stock is
consummated after April 15, 2003, the Preferred Stock Exchange Notes will be
issued with original issue discount, for Federal income tax purposes, only if
the "stated redemption price at maturity" of the Preferred Stock Exchange Notes
exceeds the "issue price" of such notes by a statutorily-defined de minimis
amount. In this case, the stated redemption price at maturity will be equal to
the stated principal amount of such notes and the payment of stated interest
will be treated as interest income when received or accrued in accordance with a
holder's regular method of tax accounting.
If the Preferred Stock Exchange Notes are issued with original issue
discount, holders will be required to include original issue discount in
ordinary income over the period that they hold the Preferred Stock Exchange
Notes in advance of the receipt of the cash attributable thereto. The amount of
original issue discount to be included in income will be determined using a
constant yield method, which will result in a greater portion of such discount
being included in income in the later part of the term of the Preferred Stock
Exchange Notes. Any amount of discount included in income will increase a
holder's tax basis in the Preferred Stock Exchange Notes.
Disposition of Preferred Stock Exchange Notes. Upon the sale, exchange or
retirement of a Preferred Stock Exchange Note, a holder will recognize capital
gain or loss equal to the difference between the amount realized and the
holder's adjusted tax basis in such note and any such capital gain may be
subject to a reduced rate of tax as described above under the heading "-- New
Notes -- Disposition of New Notes."
100
<PAGE> 107
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Securities for its own account
pursuant to an Exchange Offer must acknowledge that it will deliver a prospectus
in connection with any resale of such New Securities. This Prospectus, as it may
be amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Securities received in exchange for Existing
Securities where such Existing Securities were acquired as a result of
market-making activities or other trading activities. The Company has agreed
that, for a period of 180 days after the Expiration Date, they will make this
Prospectus, as amended or supplemented, available to any broker-dealer for use
in connection with any such resale. In addition, until December 17, 1998 (90
days after the date of this Prospectus), all dealers effecting transactions in
the New Securities may be required to deliver a prospectus.
The Company will not receive any proceeds from any sale of New Securities
by broker-dealers. New Securities received by broker-dealers for their own
account pursuant to the Exchange Offers may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the New Securities or a combination of such
methods of resale, at market prices prevailing at the time of resale, at prices
related to such prevailing market price or negotiated prices. Any such resale
may be made directly to purchasers or to or through brokers or dealers who may
receive compensation in the form of commissions or concessions from any such
broker-dealer or the purchasers of any such New Securities. Any broker-dealer
that resells New Securities that were received by it for its own account
pursuant to an Exchange Offer and any broker or dealer that participates in a
distribution of such New Securities may be deemed to be an "underwriter" within
the meaning of the Securities Act and any profit on any such resale of New
Securities and any commissions or concessions received by any such persons may
be deemed to be underwriting compensation under the Securities Act. The Letters
of Transmittal state that, by acknowledging that it will deliver and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. For a period of 180
days after the Expiration Date, the Company will promptly send additional copies
of this Prospectus and any amendment or supplement to this Prospectus to any
broker-dealer that requests such documents in a Letter of Transmittal. The
Company has agreed to pay all expenses incident to the Exchange Offers
(including the expenses of one counsel for the holders of the Existing
Securities) other than commissions or concessions of any brokers or dealers and
will indemnify the holders of the Existing Securities (including any
broker-dealers) against certain liabilities, including liabilities under the
Securities Act.
LEGAL MATTERS
The validity of the New Securities will be passed upon for the Company by
Dechert Price & Rhoads, Philadelphia, Pennsylvania.
INDEPENDENT ACCOUNTANTS
The financial statements of the Company as of December 31, 1996 and 1997
and for the year ended December 31, 1995, the eleven month period ended November
26, 1996, the one month period ended December 31, 1996 and the year ended
December 31, 1997 included in this Prospectus have been audited by
PricewaterhouseCoopers LLP, independent accountants.
The financial statements of Blue Giant USA Corporation and Blue Giant
Canada Limited as of December 31, 1996 and for the year then ended included in
this Prospectus have been audited by Raughton & Company and by KPMG,
respectively.
101
<PAGE> 108
CLARK MATERIAL HANDLING COMPANY
AND PREDECESSOR BUSINESSES
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CLARK MATERIAL HANDLING COMPANY
Report of independent accountants........................... F-2
Consolidated balance sheet as of December 31, 1996 and
1997...................................................... F-3
Consolidated statement of operations for the year ended
December 31, 1995, the eleven-month period ended November
26, 1996, the one-month period ended December 31, 1996 and
the year ended December 31, 1997.......................... F-4
Consolidated statement of stockholder's equity as of
December 31, 1995, November 26, 1996, December 31, 1996
and December 31, 1997..................................... F-5
Consolidated statement of cash flows for the year ended
December 31, 1995, the eleven-month period ended November
26, 1996, the one-month period ended December 31, 1996,
and the year ended December 31, 1997...................... F-6
Notes to consolidated financial statements.................. F-7
Unaudited consolidated balance sheet as of December 31, 1997
and June 30, 1998......................................... F-21
Unaudited consolidated statement of operations for the six
months ended June 30, 1997 and 1998....................... F-22
Unaudited consolidated statement of cash flows for the six
months ended June 30, 1997 and 1998....................... F-23
Notes to unaudited consolidated financial statements........ F-24
BLUE GIANT USA CORPORATION
Independent auditors' report................................ F-26
Balance sheet as of December 31, 1996 and as of June 28,
1997 (unaudited).......................................... F-27
Statement of operations for the year ended December 31, 1996
and for the six months ended June 28, 1996 and June 28,
1997 (unaudited).......................................... F-28
Statement of changes in shareholders' equity for the year
ended December 31, 1996 and for the six months ended June
28, 1997 (unaudited)...................................... F-29
Statement of cash flows for the year ended December 31, 1996
and for the six months ended June 28, 1996 and June 28,
1997 (unaudited).......................................... F-30
Notes to financial statements............................... F-31
BLUE GIANT CANADA LIMITED
Auditors' report to the shareholders........................ F-36
Balance sheet as of December 31, 1996 and June 28, 1997
(unaudited)............................................... F-37
Statement of earnings and retained earnings for the year
ended December 31, 1996 for the six months ended June 29,
1996 and June 28, 1997 (unaudited)........................ F-38
Statement of changes in financial position for the year
ended December 31, 1996 and for the six months ended June
29, 1996 and June 28, 1997 (unaudited).................... F-39
Notes to financial statements............................... F-40
PRO FORMA COMBINED FINANCIAL INFORMATION
Unaudited pro forma combined financial information.......... P-1
Unaudited pro forma combined statement of operations for the
twelve months ended June 30, 1998......................... P-2
Notes to unaudited pro forma combined statement of
operations for the twelve months ended June 30, 1998...... P-3
Unaudited pro forma combined statement of operations for the
year ended December 31, 1997.............................. P-4
Notes to unaudited pro forma combined statement of
operations for the year ended December 31, 1997........... P-5
</TABLE>
F-1
<PAGE> 109
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Stockholder of CLARK Material
Handling Company
In our opinion, the consolidated balance sheet and the related consolidated
statements of operations, of stockholder's equity and of cash flows present
fairly, in all material respects, the consolidated financial position of CLARK
Material Handling Company and its predecessor businesses at December 31, 1997
and December 31, 1996 and the results of their operations and cash flows for the
year ended December 31, 1997, the one month period ended December 31, 1996, the
eleven month period ended November 26, 1996 and the year ended December 31,
1995, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of 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 audits 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
Cincinnati, Ohio
February 24, 1998
F-2
<PAGE> 110
CLARK MATERIAL HANDLING COMPANY
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1997
------------ ------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents................................. $ 16,554 $ 6,334
Cash securing letters of credit........................... 1,092 320
Trade receivables (less allowance of $2,215 at December
31, 1996 and $1,906 at December 31, 1997).............. 38,154 47,018
Net inventories........................................... 60,441 70,784
Other current assets...................................... 6,255 7,281
-------- --------
Total current assets.............................. 122,496 131,737
Long-term assets
Property, plant and equipment-net......................... 51,014 47,836
Goodwill, net of accumulated amortization of $231 at
December 31, 1996 and $3,081 at December 31, 1997...... 109,311 114,887
Other assets.............................................. 18,486 18,794
-------- --------
Total assets...................................... $301,307 $313,254
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities
Notes payable............................................. $ 3,246 $ 3,184
Current portion of capital lease obligations.............. 2,407 2,732
Trade accounts payable.................................... 53,562 62,002
Accrued compensation and benefits......................... 5,319 5,730
Accrued warranties and product liability.................. 23,383 20,774
Other current liabilities................................. 9,489 10,728
-------- --------
Total current liabilities......................... 97,406 105,150
Non-current liabilities
Senior notes payable...................................... 130,000 130,000
Capital lease obligations, less current portion........... 3,600 3,864
Accrued warranties and product liability.................. 30,826 38,497
Other non-current liabilities............................. 14,402 12,002
-------- --------
Total liabilities................................. 276,234 289,513
-------- --------
Commitments and contingencies (Note 11)..................... -- --
Stockholder's equity
Common stock, par value $1 per share, 1,000 shares
authorized, issued and outstanding..................... 1 1
Paid-in-capital........................................... 24,999 24,999
Retained earnings......................................... 535 8,406
Cumulative translation adjustment......................... (462) (9,665)
-------- --------
Total stockholder's equity........................ 25,073 23,741
-------- --------
Total liabilities and stockholder's equity........ $301,307 $313,254
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 111
CLARK MATERIAL HANDLING COMPANY
AND PREDECESSOR BUSINESSES
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR THE COMPANY
----------------------------- ----------------------------
ELEVEN MONTHS ONE MONTH
YEAR ENDED ENDED ENDED YEAR ENDED
DECEMBER 31, NOVEMBER 26, DECEMBER 31, DECEMBER 31,
1995 1996 1996 1997
------------ ------------- ------------ ------------
<S> <C> <C> <C> <C>
Net sales.............................. $528,759 $404,629 $46,763 $489,294
Cost of goods sold..................... 484,569 359,061 41,905 431,127
-------- -------- ------- --------
Gross profit......................... 44,190 45,568 4,858 58,167
Engineering, selling and administrative
expenses............................. 30,649 26,613 2,923 37,133
Parent company management fees......... 6,996 5,672 -- --
Severance and exit charges............. 3,478 -- -- --
-------- -------- ------- --------
Income from operations............... 3,067 13,283 1,935 21,034
Other income (expense):
Interest expense..................... (790) (370) (1,393) (15,086)
Allocated interest expense from
parent company.................... (16,145) (14,656) -- --
Interest income...................... 602 220 25 809
Amortization interest expense from
parent company.................... (530) (349) -- --
Property impairment charge........... (2,500) -- -- --
Other income (expense) -- net........ (975) (223) (32) 1,598
-------- -------- ------- --------
Income (loss) before income taxes and
extraordinary items............... (17,271) (2,095) 535 8,355
Provision (benefit) for income taxes... (148) -- -- 484
-------- -------- ------- --------
Income (loss) before extraordinary
items................................ (17,419) (2,095) 535 7,871
Extraordinary loss on retirement of
allocated debt....................... (1,347) -- -- --
-------- -------- ------- --------
Net income (loss)...................... $(18,766) $ (2,095) $ 535 $ 7,871
======== ======== ======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 112
CLARK MATERIAL HANDLING COMPANY
AND PREDECESSOR BUSINESSES
CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOREIGN
RETAINED CURRENCY
COMMON PAID-IN EARNINGS TRANSLATION
STOCK CAPITAL (DEFICIT) ADJUSTMENTS
------ ------- --------- -----------
<S> <C> <C> <C> <C>
PREDECESSOR
Balance at December 31, 1994........................ $(76,107) $(3,915)
Net loss for the year ended December 31, 1995..... (18,766) --
Translation adjustment............................ -- 2,066
-------- -------
Balance at December 31, 1995........................ (94,873) (1,849)
Net loss for the eleven months ended
November 26, 1996.............................. (2,095) --
Translation adjustment............................ -- (2,546)
-------- -------
Balance at November 26, 1996........................ $(96,968) $(4,395)
======== =======
THE COMPANY
Issuance of common stock............................ $ 1 $24,999 $ -- $ --
Net income for the month ended December 31,
1996........................................... -- -- 535 --
Translation adjustment............................ -- -- -- (462)
--- ------- --------- -----------
Balance at December 31, 1996........................ 1 24,999 535 (462)
Net income for the year ended December 31,
1997........................................... -- -- 7,871 --
Translation adjustment............................ -- -- -- (9,203)
------ ------- --------- -----------
Balance at December 31, 1997........................ $ 1 $24,999 $ 8,406 $(9,665)
====== ======= ========= ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 113
CLARK MATERIAL HANDLING COMPANY
AND PREDECESSOR BUSINESSES
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR THE COMPANY
---------------------------- ---------------------------
ELEVEN MONTHS ONE MONTH
YEAR ENDED ENDED ENDED YEAR ENDED
DECEMBER 31, NOVEMBER 26, DECEMBER 31, DECEMBER 31,
1995 1996 1996 1997
------------ ------------- ------------ ------------
<S> <C> <C> <C> <C>
Operating activities:
Net income (loss)............................. $(18,766) $(2,095) $ 535 $ 7,871
Adjustments to reconcile net income (loss) to
cash provided by operating activities:
Depreciation................................ 11,534 9,312 778 8,900
Amortization................................ 1,310 1,099 322 3,350
Extraordinary loss on retirement of
allocated debt............................ 1,347 -- -- --
Loss on sale of property, plant and
equipment................................. 183 31 70 24
Property impairment charge.................. 2,500 -- -- --
Changes in operating assets and liabilities
excluding business combinations:
Restricted cash........................ (516) (220) (136) 638
Trade receivables...................... (240) (2,406) 2,800 (8,732)
Net inventories........................ (2,685) (2,696) 9,801 (7,015)
Trade accounts payable................. (2,084) 61 (11,265) 7,866
Accrued compensation and benefits...... (73) 409 (609) (156)
Accrued warranties and product
liability............................ 1,126 (2,248) 237 3,581
Due to parent company.................. 19,187 8,720 -- --
Other assets and liabilities, net...... (5,645) (5,876) 223 (5,218)
-------- ------- -------- --------
Net cash provided by operating
activities........................... 7,178 4,091 2,756 11,109
-------- ------- -------- --------
Investing activities:
Business combinations......................... -- -- -- (14,646)
Capital expenditures.......................... (5,290) (3,208) (317) (6,340)
Proceeds from sale of assets.................. 534 139 -- --
-------- ------- -------- --------
Net cash used in investing
activities........................... (4,756) (3,069) (317) (20,986)
-------- ------- -------- --------
Financing activities:
Issuance of current notes payable............. -- -- -- 1,182
Repayment of current notes payable............ -- -- -- (1,020)
Repayment of allocated debt................... (51,754) -- -- --
Proceeds from allocated debt.................. 51,220 105 -- --
Other, net.................................... (1,607) 1,376 293 147
-------- ------- -------- --------
Net cash provided by (used in)
financing activities................. (2,141) 1,481 293 309
-------- ------- -------- --------
Effect of exchange rate changes on cash and cash
equivalents................................... (976) (1,262) (306) (652)
-------- ------- -------- --------
Net increase (decrease) in cash and cash
equivalents................................... (695) 1,241 2,426 (10,220)
Cash and cash equivalents at beginning of
period........................................ 1,514 819 14,128 16,554
-------- ------- -------- --------
Cash and cash equivalents at end of period...... $ 819 $ 2,060 $ 16,554 $ 6,334
-------- ------- -------- --------
Supplemental disclosures
Cash paid for interest........................ $ 793 $ 337 $ 86 $ 14,465
Income taxes paid............................. $ 148 $ 17 $ -- $ --
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 114
CLARK MATERIAL HANDLING COMPANY
AND PREDECESSOR BUSINESSES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS)
(1) REPORTING ENTITY AND BASIS OF PRESENTATION
CLARK Material Handling Company (the "Company") is a wholly-owned
subsidiary of CMH Holdings Corporation ("Holdings"). Prior to November 27, 1996,
Holdings had no previous business operations and was formed for the purpose of
acquiring the Company and its subsidiaries from Terex Corporation (the
"Predecessor's Parent") in a purchase business combination. That acquisition was
consummated on November 27, 1996. See Note 3 for information regarding the
acquisition.
Prior to the acquisition, the Company's predecessor businesses
("Predecessor") operated as wholly-owned subsidiaries of the Predecessor's
Parent. Reference to the Company relates to the period subsequent to November
26, 1996, while reference to the Predecessor relates to operations on or prior
to November 26, 1996. The Predecessor's Parent acquired the Predecessor in 1992
in a purchase business combination and Predecessor's Parent's basis, including
its acquisition debt and goodwill associated with the 1992 acquisition, was
"pushed down" to the Predecessor's financial statements.
The Predecessor's financial statements include allocations of Predecessor's
Parent acquisition debt and related interest expense. Management fees, which
include corporate overhead costs (including legal, treasury and other shared
services), have been allocated to the Predecessor based generally on the
percentage of Predecessor revenues to the Predecessor's Parent's consolidated
revenues. Interest has been charged on the management fee allocated and the due
to Predecessor's Parent balance at a rate of 13% compounded monthly.
The Company and the Predecessor operate in one industry segment, that being
the design, manufacture, marketing and worldwide distribution and support of
internal combustion and electric lift trucks, electric walkies and related
components and replacement parts. Geographic segment information is shown in
Note 13.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation. The Company's financial statements include the
accounts of the Company and its subsidiaries, including CLARK Material Handling
GmbH, CLARK Forklift Korea, CLARK Material Handling of Brazil, HLT, Inc. ("HLT")
and Blue Giant Canada Limited and Blue Giant USA Corporation ("Blue Giant"). HLT
and Blue Giant were acquired in 1997 -- see Note 4. The Predecessor's financial
statements include the U.S., German, Brazilian and Korean material handling
operations of the Predecessor's Parent prior to their acquisition on November
27, 1996, on a combined basis. All material intercompany balances, transactions
and profits have been eliminated.
Cash and cash equivalents. Cash equivalents consist of highly liquid
investments with original maturities of three months or less. The carrying
amount of cash and cash equivalents approximates their fair value.
Cash securing letters of credit. The Company has certain cash and cash
equivalents that are not fully available for use in operations. Certain
international operations collateralize letters of credit and performance bonds
with cash deposits.
Inventories. Inventories are stated at the lower of cost or market value.
The Company determines cost on the first-in, first-out ("FIFO") method for all
inventories. The Predecessor determined cost using the last-in, first-out
("LIFO") method for U.S. inventories and by the FIFO method for inventories of
international operations.
Goodwill. Goodwill represents the difference between the total purchase
price and the fair value of assets and liabilities (tangible and intangible)
acquired at the date of acquisition. Goodwill related to the Company is being
amortized on the straight-line method over forty years. The Company reviews the
carrying value of goodwill for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable.
Measurement of any impairment would include a comparison of discounted
F-7
<PAGE> 115
CLARK MATERIAL HANDLING COMPANY
AND PREDECESSOR BUSINESSES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS) -- (CONTINUED)
estimated future operating cash flows anticipated to be generated during the
remaining amortization period of the goodwill to the net carrying value of
goodwill.
Debt issuance costs. Debt issuance costs of the Company have been
capitalized and are being amortized on the straight-line method over the term of
the related debt. Debt issuance costs are included in other assets and totaled
$5,599 and $6,625 at December 31, 1996 and 1997, respectively. Amortization of
these costs totaled $47 and $625 for the one month ended December 31, 1996 and
the year ended December 31, 1997, respectively.
Property, plant and equipment. Property, plant and equipment are stated at
cost. Expenditures for major renewals and improvements are capitalized while
expenditures for maintenance and repairs not expected to extend the life of an
asset beyond its normal useful life are charged to expense when incurred.
Depreciation is determined for financial reporting purposes using the
straight-line method over the estimated useful asset lives, generally 20 to 35
years for buildings, eight to twelve years for machinery and equipment and two
to eight years for other assets.
Revenue recognition. Revenue and costs are generally recorded when products
are shipped and invoiced to customers. Certain new units may be invoiced prior
to the time customers take physical possession. Revenue is recognized in such
cases only when the customer has a fixed commitment to purchase the units, the
units have been completed, tested and made available to the customer for pickup
or delivery, and the customer has requested that the units be held for pickup or
delivery at a time specified by the customer in the sales documents. In such
cases, the units are invoiced under the customary billing terms, title to the
units and risks of ownership pass to the customer upon invoicing, the units are
segregated from inventories and identified as belonging to the customer and
there are no further obligations under the order.
Accrued warranties and product liability. Accruals for potential warranty
and product liability claims are recorded based on past claims experience.
Warranty costs are accrued at the time revenue is recognized. Self-insurance
accruals are provided for estimated product liability experience on known claims
and for claims anticipated to have been incurred which have not yet been
reported. Product liability accruals are presented on a gross settlement basis.
Foreign currency translation. Assets and liabilities of international
operations are translated at year-end exchange rates. Income and expenses are
translated at average exchange rates prevailing during the year. Foreign
operations utilize the local currency as the functional currency; translation
adjustments are accumulated in the cumulative translation adjustment account in
equity. Gains or losses resulting from foreign currency transactions are
included in other income (expense) and totaled ($1,232) ($1,055), ($149) and
$1,536 for the year ended December 31, 1995, the eleven months ended November
26, 1996, the one month ended December 31, 1996 and for the year ended December
31, 1997, respectively.
Income taxes. Income taxes are provided using the asset and liability
method required by Statement of Financial Accounting Standards ("SFAS") No. 109.
Pursuant to a tax sharing agreement with Holdings, the Company is included in
the consolidated federal return of Holdings. The tax sharing arrangement does
not differ materially from that which would occur on a separate entity basis.
The Predecessor provided for income taxes on a separate entity basis.
Use of estimates. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting periods. Actual results could differ from those estimates.
F-8
<PAGE> 116
CLARK MATERIAL HANDLING COMPANY
AND PREDECESSOR BUSINESSES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS) -- (CONTINUED)
Reclassifications. Certain reclassifications of prior year amounts have
been made to conform with the current year presentation.
(3) ACQUISITION
On November 27, 1996, Holdings acquired the Company and the Company's
subsidiaries in a business combination accounted for as a purchase. The
aggregate purchase price for the acquisition was $139,500, which was subject to
certain immaterial post-closing adjustments, and was financed through a $25,000
equity investment by Holdings in the common stock of the Company and the
issuance of $130,000 in Senior Notes due 2006 by the Company. The purchase price
was allocated to the estimated fair values of the Company's tangible and
intangible net assets with the remainder allocated to goodwill. The excess of
purchase price over the net assets acquired of $116,942 is being amortized on a
straight-line basis over forty years.
The operating results of the Company are included in the consolidated
results of operations since November 27, 1996. The following unaudited pro forma
summary presents the consolidated results of operations as though Holdings
completed the acquisition on January 1 of each period presented.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1995 1996
---------- ----------
<S> <C> <C>
Net sales...................................... $528,759 $451,392
======== ========
Income from operations......................... $ 5,894 $ 16,976
======== ========
Net income (loss).............................. $(12,452) $ 1,881
======== ========
</TABLE>
(4) BUSINESS COMBINATIONS
BLUE GIANT
On November 7, 1997, the Company closed its acquisitions of substantially
all of the assets and certain liabilities of Blue Giant USA Corporation ("BGU")
and Blue Giant Canada Limited ("BGC") (collectively, "Blue Giant") in two
separate purchase business combinations effective November 1, 1997. Although
separate legal entities, BGU and BGC were under the common control of
substantially the same stockholder group. The purchase price for the
acquisitions comprised $9,365 in cash (of which $200 was paid to a shareholder
of Blue Giant under a noncompete agreement), an obligation payable over three
years totaling $1,105 under a noncompete agreement with a shareholder of the
Blue Giant and related expenses of $333. The purchase price was allocated to the
estimated fair value of the tangible and intangible net assets acquired, with
the residual being allocated to goodwill. The goodwill of $1,026 is being
amortized on a straight-line basis over forty years.
The operating results of Blue Giant are included in the consolidated
results of operations since November 1, 1997. The following unaudited pro forma
summary presents the consolidated results of operations as though the
acquisition of the Company described in Note 3 had been completed and the
Company had completed the acquisition of Blue Giant on January 1 of each period
presented.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1996 1997
---------- ----------
<S> <C> <C>
Net sales...................................... $477,254 $509,187
======== ========
Income from operations......................... $ 17,293 $ 21,583
======== ========
Net income..................................... $ 1,415 $ 8,320
======== ========
</TABLE>
F-9
<PAGE> 117
CLARK MATERIAL HANDLING COMPANY
AND PREDECESSOR BUSINESSES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS) -- (CONTINUED)
HLT, INC.
On February 28, 1997, the Company purchased substantially all of the assets
of HLT, Inc., a supplier of upright material handling equipment, for $4,948.
Assets acquired included inventory, equipment and tooling. The purchase was
financed through a short-term note which matured in the second quarter of 1997.
The Company is leasing the former company's facility and is continuing
production of the equipment, primarily for its own use. The acquisition was not
significant and pro forma data is not presented.
(5) INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1996 1997
------- -------
<S> <C> <C>
Finished equipment............................... $12,797 $12,000
Replacement parts................................ 24,107 28,302
Work-in-progress................................. 1,402 5,356
Raw material and supplies........................ 22,135 25,126
------- -------
Net inventories.................................. $60,441 $70,784
======= =======
</TABLE>
(6) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1996 1997
------- -------
<S> <C> <C>
Property......................................... $ 7,364 $ 7,005
Plant............................................ 15,556 14,574
Equipment........................................ 28,779 33,854
------- -------
51,699 55,433
Less: Accumulated depreciation................... (685) (7,597)
------- -------
Net property, plant and equipment................ $51,014 $47,836
======= =======
</TABLE>
(7) BORROWINGS, LINES OF CREDIT AND INDEBTEDNESS
Long-term debt is summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1997
-------- --------
<S> <C> <C>
10.75% Senior Notes due 2006................... $130,000 $130,000
Capital lease obligations (Note 8)............. 6,007 6,596
-------- --------
Total long-term debt........................... 136,007 136,596
Less: current portion.......................... 2,407 2,732
-------- --------
Long-term debt, less current portion........... $133,600 $133,864
======== ========
</TABLE>
SENIOR NOTES DUE 2006
The Senior Notes due 2006 ("Senior Notes") were issued in connection with
the acquisition of the Company and are due on November 15, 2006. The Senior
Notes are not redeemable at the Company's option
F-10
<PAGE> 118
CLARK MATERIAL HANDLING COMPANY
AND PREDECESSOR BUSINESSES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS) -- (CONTINUED)
prior to November 15, 2001. Thereafter, the Senior Notes will be subject to
redemption at the option of the Company, in whole or in part, upon not less than
30 nor more than 60 days notice, at the redemption prices (expressed as
percentages of principal amount) set forth below plus accrued and unpaid
interest thereon, if any, to the applicable date of redemption, if redeemed
during the 12 month period beginning on November 15 of the years indicated
below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---- ----------
<S> <C>
2001.............................................. 105.375%
2002.............................................. 102.688%
2003 and thereafter............................... 100.000%
</TABLE>
The Senior Notes also contain provision for early redemption upon the
occurrence of certain significant corporate events, including an offering of
equity securities or a change in control of the Company.
REVOLVING LINE OF CREDIT
The Company has entered into a $30,000 revolving credit facility (the
"Facility") with Congress Financial Corporation (the "Bank"). Borrowings under
the Facility are available for working capital and general corporate purposes,
including letters of credit. The Facility is secured by first priority liens on
all accounts receivable and inventory of the Company's domestic operations,
excluding HLT and Blue Giant.
The Facility expires in November 1999, unless extended. The interest rate
per annum applicable to the Facility is the prime rate, as announced
periodically, plus 0.50% or, at the Company's option, the adjusted Eurodollar
rate plus 2.50%. The Facility permits the Company to prepay loans and to
permanently reduce revolving credit commitments or letters of credit, in whole
or in part, at any time in certain minimum amounts. The Company is required to
pay certain fees in connection with the Facility, including a commitment fee of
0.25% on the undrawn portion of the revolving credit commitment.
The Facility contains customary representations and warranties, and events
of default and certain other covenants. Borrowings on the Facility are
classified in the consolidated balance sheet as notes payable and were $0 and
$799 at December 31, 1996 and 1997, respectively. The average interest rate on
borrowings during 1997 was 9%.
FAIR VALUE DISCLOSURES
The fair value of the Company's Senior Notes at December 31, 1997 is
approximately $137,800 based on quoted market prices. The fair value of the
Senior Notes approximated carrying value at December 31, 1996. The Company
believes that the carrying value of its other borrowings approximates fair
market value based on discounted future cash flows using rates currently
available for debt with similar terms and remaining maturities.
(8) LEASE COMMITMENTS
The Company leases certain facilities, machinery and equipment, and
vehicles with varying terms under operating leases. In most leasing
arrangements, the Company pays the property taxes, insurance, maintenance and
expenses related to the leased property.
Most of the Company's operating leases provide the Company with the option
to renew the leases for varying periods after the initial lease terms. These
renewal options enable the Company to renew the leases
F-11
<PAGE> 119
CLARK MATERIAL HANDLING COMPANY
AND PREDECESSOR BUSINESSES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS) -- (CONTINUED)
based upon the fair rental values at the date of expiration of the initial
lease. Total rental expense under operating leases was as follows:
<TABLE>
<S> <C>
Year ended December 31, 1995................................ $2,557
======
Eleven months ended November 26, 1996....................... $1,886
======
One month ended December 31, 1996........................... $ 191
======
Year ended December 31, 1997................................ $2,807
======
</TABLE>
The Company also routinely enters into sale-leaseback arrangements for
certain equipment, which is similarly sold to third-party customers under
sales-type lease agreements. The Company maintains a net investment in these
leases, represented by the present value of payments receivable under the
leases. The Company's net investment in sales-type leases was $7,517 and $7,901
at December 31, 1996 and 1997, respectively, and is included in other current
and non-current assets on the consolidated balance sheet.
In connection with the original sale-leaseback arrangements underlying the
customer lease program, the Company has an outstanding rental installment
obligation which is recorded based on the present value of minimum payments due
under the leases of $6,596 of which $2,732 is current at December 31, 1997.
Future minimum capital and noncancelable operating lease payments and the
related present value of capital lease payments at December 31, 1997 are as
follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------- ---------
<S> <C> <C>
1998..................................................... $2,446 $ 3,139
1999..................................................... 2,001 2,439
2000..................................................... 1,556 2,023
2001..................................................... 1,038 1,454
2002..................................................... 371 1,314
Thereafter............................................... -- 29
------ -------
Total minimum obligations...................... 7,412 $10,398
=======
Less amount representing interest........................ 816
------
Present value of net minimum obligations....... 6,596
Less current portion..................................... 2,732
------
Long-term obligations.......................... $3,864
======
</TABLE>
(9) INCOME TAXES
The components of income (loss) before income taxes and extraordinary items
are as follows:
<TABLE>
<CAPTION>
ELEVEN MONTHS ONE MONTH
YEAR ENDED ENDED ENDED YEAR ENDED
DECEMBER 31, NOVEMBER 26, DECEMBER 31, DECEMBER 31,
1995 1996 1996 1997
------------ ------------- ------------ ------------
<S> <C> <C> <C> <C>
United States.................. $(16,405) $ 2,541 $165 $4,080
Foreign........................ (866) (4,636) 370 4,275
-------- ------- ---- --------
Income (loss) before income
taxes and extraordinary
items........................ $(17,271) $(2,095) $535 $8,355
======== ======= ==== ========
</TABLE>
F-12
<PAGE> 120
CLARK MATERIAL HANDLING COMPANY
AND PREDECESSOR BUSINESSES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS) -- (CONTINUED)
As a result of the Predecessor's operating losses for book and tax
purposes, provision (benefit) for income taxes for the year ended December 31,
1995 and the eleven months ended November 26, 1996 were minimal, relating
primarily to state or foreign jurisdictions where taxable income occurred but
net operating loss ("NOL") carryforwards were limited.
Provisions for income taxes during the year ended December 31, 1997 and the
one month ended December 31, 1996 relate to state and local income taxes. The
Company did not provide for federal income taxes during the year ended December
31, 1997 and the one month period ended December 31, 1996 as the result of
incurring a taxable loss in the United States and utilizing NOL carryforwards to
offset taxable income in foreign jurisdictions.
The provision for income taxes is different from the amount which would be
provided by applying the statutory federal income tax rate to income (loss)
before income taxes and extraordinary items. The reasons for the difference are
summarized below:
<TABLE>
<CAPTION>
ELEVEN MONTHS ONE MONTH
YEAR ENDED ENDED ENDED YEAR ENDED
DECEMBER 31, NOVEMBER 26, DECEMBER 31, DECEMBER 31,
1995 1996 1996 1997
------------ ------------- ------------ ------------
<S> <C> <C> <C> <C>
Expected income tax at U.S. federal
rates............................... $(6,045) $ (712) $ 182 $ 2,841
NOL with no current benefit........... 5,651 1,575 -- --
Foreign NOL carryforward benefit...... -- -- (166) (1,987)
Benefit of domestic NOL............... -- (863) (56) (1,387)
Foreign tax differential on
income/losses of foreign
subsidiaries........................ 303 -- 40 533
State and local taxes................. -- -- -- 484
Other................................. 239 -- -- --
------- ------ ----- -------
Total provision for income
taxes..................... $ 148 $ -- $ -- $ 484
======= ====== ===== =======
</TABLE>
The tax effects of the basis differences and NOL carryforwards as of
December 31, 1997 and December 31, 1996 are summarized below:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1997
-------- --------
<S> <C> <C>
Property, plant and equipment.......................... $ (81) $ (1,846)
Goodwill............................................... -- (942)
-------- --------
Total deferred tax liabilities......................... (81) (2,788)
-------- --------
Warranties and product liability....................... 19,602 21,478
Net inventories........................................ 2,586 975
Receivables............................................ 536 414
Other.................................................. 2,330 1,620
Benefit of net operating loss carryforwards............ 19,506 19,293
-------- --------
Total deferred tax assets.............................. 44,560 43,780
-------- --------
Deferred tax valuation allowance....................... (44,479) (40,992)
-------- --------
Net deferred taxes..................................... $ -- $ --
======== ========
</TABLE>
F-13
<PAGE> 121
CLARK MATERIAL HANDLING COMPANY
AND PREDECESSOR BUSINESSES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS) -- (CONTINUED)
Basis differences between the amounts assigned to net assets for financial
reporting purposes and the amounts assigned for tax purposes resulted in a net
deferred tax asset of $40,992. In light of the Company's and Predecessor's
operating history, management provided a valuation allowance in the same amount.
At December 31, 1997, the Company had U.S. federal NOL carryforwards of
$3,049 which begin to expire in 2011.
In addition, the Company's foreign subsidiaries have approximately $43,036
of loss carryforwards, $18,407 in corporate losses for Germany, $20,763 in
municipal losses for Germany and $3,866 in other countries, which are available
to offset future foreign taxable income. The loss carryforwards in Germany are
available without expiration. The loss carryforwards in other countries expire
in the years 1998 through 2001.
(10) RETIREMENT PLANS
Pension Plans
Certain of the Company's German employees are covered by noncontributory
defined benefit pension plans. The Company also maintains separate pension
benefit plans for German executive employees and for other staff. The executive
pension plans are based on final pay and service, and, in some cases, are
dependent on social security pensions while the other staff plans are based on
fixed amounts applied to the number of years of service rendered. The plans are
unfunded.
The components of pension expense relating to defined benefit plans for
each of the reporting periods covered by these financial statements are as
follows:
<TABLE>
<CAPTION>
ELEVEN MONTHS ONE MONTH
YEAR ENDED ENDED ENDED YEAR ENDED
DECEMBER 31, NOVEMBER 26, DECEMBER 31, DECEMBER 31,
1995 1996 1996 1997
------------ ------------- ------------ ------------
<S> <C> <C> <C> <C>
Current service cost.............. $ 57 $ 38 $ 2 $ 37
Interest cost..................... 886 840 52 837
Net amortization and deferrals.... (927) 107 7 --
----- ---- --- ----
$ 16 $985 $61 $874
===== ==== === ====
</TABLE>
The following table summarizes the funded status of the Company's defined
benefit pension plans to the amounts recognized in the financial statements:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1996 1997
------- -------
<S> <C> <C>
Projected benefit obligation.............................. $12,379 $11,073
------- -------
Accrued pension cost...................................... $12,379 $11,073
======= =======
</TABLE>
The accumulated benefit obligations do not differ materially from the
projected benefit obligations.
A discount rate of 7.5% was used in 1997 and 1996 to determine the
projected benefit obligations.
Savings Plans
The Company sponsors various tax deferred savings plans into which eligible
employees may elect to contribute a portion of their compensation. Generally,
the Company matches contributions up to a maximum of 3% of compensation. In
connection with the required match, the Company's contribution to the plan was
$283, $237, $30, and $512 for the year ended December 31, 1995, for the eleven
months ended November 26, 1996, for the one month ended December 31, 1996, and
for the year ended December 31, 1997, respectively.
F-14
<PAGE> 122
CLARK MATERIAL HANDLING COMPANY
AND PREDECESSOR BUSINESSES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS) -- (CONTINUED)
Other Postemployment Benefits
The Company does not have any benefit programs which provide retiree health
or life insurance benefits.
(11) LITIGATION, COMMITMENTS AND CONTINGENCIES
In the normal course of business, lawsuits have been filed alleging damages
for accidents relating to use of the Company's products. As part of the
acquisition of the Predecessor, the Company assumed both the outstanding and
future product liability exposures related to such operations. As of December
31, 1997, there were 76 lawsuits outstanding alleging damages for injuries or
deaths arising from accidents involving forklift products. Most of the foregoing
suits are in various stages of pretrial completion, and certain plaintiffs are
seeking punitive as well as compensatory damages. The Company is self-insured,
up to certain limits, for these product liability exposures, as well as for
certain exposures related to general, workers' compensation and automobile
liability. Insurance coverage is obtained for catastrophic losses as well as
those risks required to be insured by law or contract. The Company has recorded
and maintains an estimated liability, based in part upon actuarial
determinations, in the amount of management's estimate of the Company's
aggregate exposure for such self-insured risks.
The Company is involved in various other legal proceedings which have
arisen in the normal course of business. The Company has recorded provisions for
estimated losses in circumstances where a loss is probable and the amount or
range of possible amounts of the loss is estimable.
The Company is contingently liable as a guarantor for certain of its
dealers' financing arrangements with a financial institution. In certain
circumstances of dealer default, the Company is obligated to: a) repurchase new
equipment financed under dealer floor plan obligations and b) purchase dealers'
long-term rental equipment contracts with customers for which financing has been
provided by the financial institution to the dealer. The guarantees under these
financing arrangements aggregated approximately $25,000 and $110,000,
respectively, at December 31, 1997. When a dealer default does occur, a newly
selected dealer generally assumes the assets of the prior dealer and any related
financial obligations. Historically, the Company and the Predecessor have
incurred only minimal losses relating to these arrangements.
The Company is contingently liable for a portion of the residual value of
machines sold by the Company to an independent company which subsequently leases
those machines to third parties for terms generally ranging from three to five
years. Historically, the Company and the Predecessor have made a profit on the
subsequent resale of repurchased machines. At December 31, 1997, the maximum
contingent liability was approximately $6,273. At December 31, 1996 and December
31, 1997, there were $1,188 and $1,887, respectively, of repurchased machines
included in inventory.
The Company is contingently liable on guarantees given by the Predecessor
to financial institutions relating to loans and other dealer and customer
obligations arising in the ordinary conduct of its business. Such guarantees
approximated $2,272 at December 31, 1997. Estimated losses, if any, on such
guarantees are accrued as a component of the allowance for doubtful accounts.
Historically, the Company and the Predecessor have not incurred material losses
on these guarantees.
The Company's outstanding letters of credit totaled $1,084 at December 31,
1997. The letters of credit generally serve as collateral for certain
liabilities included in the balance sheet. Certain of the letters of credit
serve as collateral guaranteeing the Company's performance under contracts.
The Company is a wholly-owned subsidiary of Holdings. Other than its
investment in the Company, Holdings has no other substantive business activities
or operations. Holdings has financed its investment in the Company through the
issuance of $7,000 of Junior Subordinated Debentures, bearing interest at 12%
per annum and maturing 2007, $17,000 of preferred stock with an annual
cumulative dividend of 12% and $1,000
F-15
<PAGE> 123
CLARK MATERIAL HANDLING COMPANY
AND PREDECESSOR BUSINESSES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS) -- (CONTINUED)
of common stock. Although the Company has not guaranteed Holdings' debt or
preferred stock dividend obligations, or otherwise assumed such obligations,
Holdings will look to the Company's assets and cash flows to meet its interest,
debt and dividend obligations when and if they are paid.
(12) RELATED PARTY TRANSACTIONS
The following table summarizes related party transactions conducted with
the Predecessor's Parent:
<TABLE>
<CAPTION>
ELEVEN MONTHS ONE MONTH
YEAR ENDED ENDED ENDED YEAR ENDED
DECEMBER 31, NOVEMBER 26, DECEMBER 31, DECEMBER 31,
1995 1996 1996 1997
------------ ------------- ------------ ------------
<S> <C> <C> <C> <C>
Distribution and parts warehousing
expenses........................ $ 7,088 $ 6,100 $490 $5,580
Management fee allocation......... 6,996 5,672 -- --
Interest expense.................. 16,145 14,656 -- --
Interest income................... 480 150 -- --
</TABLE>
(13) GEOGRAPHIC SEGMENT INFORMATION
<TABLE>
<CAPTION>
ELEVEN MONTHS ONE MONTH
YEAR ENDED ENDED ENDED YEAR ENDED
DECEMBER 31, NOVEMBER 26, DECEMBER 31, DECEMBER 31,
1995 1996 1996 1997
------------ ------------- ------------ ------------
<S> <C> <C> <C> <C>
Sales
North America........................... $385,611 $286,992 $ 31,480 $388,185
Europe.................................. 162,396 126,045 15,787 134,437
All other............................... 116 85 231 3,829
Eliminations............................ (19,364) (8,493) (735) (37,157)
-------- -------- -------- --------
Total........................... $528,759 $404,629 $ 46,763 $489,294
======== ======== ======== ========
Income (loss) from operations
North America........................... $ (523) $ 10,307 $ 1,389 $ 17,164
Europe.................................. 3,973 3,664 571 4,741
All other............................... (379) (688) (25) (768)
Eliminations............................ (4) -- -- (103)
-------- -------- -------- --------
Total........................... $ 3,067 $ 13,283 $ 1,935 $ 21,034
======== ======== ======== ========
Identifiable assets
North America........................... $ 95,107 $ 98,553 $265,472 $305,184
Europe.................................. 101,054 96,595 89,861 79,249
All other............................... 9,650 10,353 10,161 6,839
Eliminations............................ (13,102) (12,794) (64,187) (78,018)
-------- -------- -------- --------
Total........................... $192,709 $192,707 $301,307 $313,254
======== ======== ======== ========
</TABLE>
Sales between geographic areas are generally priced to recover costs plus a
reasonable markup for profit. Operating income equals net sales less direct and
allocated operating expenses, excluding interest and other nonoperating items.
The Company is not dependent upon any single customer.
F-16
<PAGE> 124
CLARK MATERIAL HANDLING COMPANY
AND PREDECESSOR BUSINESSES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS) -- (CONTINUED)
(14) SEVERANCE ACTIONS
The Predecessor announced personnel reductions totaling approximately 134
employees in the North American operations during 1995 as a continuation of the
Predecessor's programs to increase manufacturing efficiency, reduce costs and
improve liquidity. The Predecessor recorded a combined charge of $3,478 in 1995
for severance costs associated with these actions and additional costs
associated with the closing of certain administrative and warehouse facilities.
Also during 1995, the Predecessor recorded a charge of $2,500 to recognize the
impairment in value of certain properties held for sale in South Korea.
(15) FINANCIAL INFORMATION FOR SUBSIDIARY GUARANTORS AND NON-GUARANTOR
SUBSIDIARIES
The Company conducts a portion of its business through subsidiaries. The
Senior Notes referred to in Note 7 are unconditionally guaranteed, jointly and
severally, by certain subsidiaries (the "Subsidiary Guarantors") which presently
constitute HLT and BGU operations. Certain of the Company's subsidiaries do not
guarantee the Senior Notes (the "Non-Guarantor Subsidiaries"), presently the
Company's foreign subsidiaries.
Presented below is condensed financial information for the Company, the
Subsidiary Guarantors and the Non-Guarantor Subsidiaries at December 31, 1997.
The equity method has been used by the Company with respect to investments
in subsidiaries. Separate financial statements for Subsidiary Guarantors are not
presented based on management's determination that they do not provide
additional information that is material to investors.
F-17
<PAGE> 125
CLARK MATERIAL HANDLING COMPANY
AND PREDECESSOR BUSINESSES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS) -- (CONTINUED)
CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1997
<TABLE>
<CAPTION>
CLARK MATERIAL
HANDLING COMPANY NON-
(PARENT COMPANY SUBSIDIARY GUARANTOR
ONLY) GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
---------------- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Current assets
Cash and cash equivalents....... $ 70 $ 1 $ 6,263 $ -- $ 6,334
Cash securing letters of
credit........................ -- -- 320 -- 320
Trade receivables............... 24,224 3,081 19,713 -- 47,018
Affiliate accounts receivable... 4,900 11,982 189 (17,071) --
Net inventories................. 47,331 5,106 18,347 -- 70,784
Other current assets............ 1,614 552 5,115 -- 7,281
---------------- ---------- ------------ ------------ ------------
Total current assets..... 78,139 20,722 49,947 (17,071) 131,737
Long-term assets
Property, plant and equipment
-- net........................ 18,275 1,639 27,922 -- 47,836
Goodwill........................ 113,861 1,026 -- -- 114,887
Investment in affiliates........ 60,844 -- -- (60,844) --
Other assets.................... 9,638 1,178 7,978 -- 18,794
---------------- ---------- ------------ ------------ ------------
Total assets............. $ 280,757 $ 24,565 $ 85,847 $ (77,915) $ 313,254
================ ========== ============ ============ ============
Current liabilities
Notes payable................... $ 1,261 $ -- $ 1,923 $ -- $ 3,184
Current portion of capital lease
obligations................... -- -- 2,732 -- 2,732
Trade accounts payable.......... 44,437 3,664 13,901 -- 62,002
Affiliate accounts payable...... 12,043 1,680 2,707 (16,430) --
Accrued compensation and
benefits...................... 3,051 503 2,176 -- 5,730
Accrued warranties and product
liability..................... 19,345 196 1,233 -- 20,774
Other current liabilities....... 4,424 303 6,001 -- 10,728
---------------- ---------- ------------ ------------ ------------
Total current
liabilities............ 84,561 6,346 30,673 (16,430) 105,150
Non-current liabilities
Senior notes payable............ 130,000 -- -- -- 130,000
Capital lease obligations, less
current portion............... -- -- 3,864 -- 3,864
Accrued warranties and product
liability..................... 38,497 -- -- -- 38,497
Other non-current liabilities... 730 7,168 4,745 (641) 12,002
---------------- ---------- ------------ ------------ ------------
Total liabilities........ 253,788 13,514 39,282 (17,071) 289,513
---------------- ---------- ------------ ------------ ------------
Commitments and contingencies..... -- -- -- -- --
Stockholder's equity
Common stock.................... 1 -- -- -- 1
Paid-in-capital................. 24,999 -- -- -- 24,999
Retained earnings............... 1,969 1,741 4,696 -- 8,406
Subsidiary investment........... -- 9,310 51,534 (60,844) --
Cumulative translation
adjustment.................... -- -- (9,665) -- (9,665)
---------------- ---------- ------------ ------------ ------------
Total stockholder's
equity................. 26,969 11,051 46,565 (60,844) 23,741
---------------- ---------- ------------ ------------ ------------
Total liabilities and
stockholder's equity... $ 280,757 $ 24,565 $ 85,847 $ (77,915) $ 313,254
================ ========== ============ ============ ============
</TABLE>
F-18
<PAGE> 126
CLARK MATERIAL HANDLING COMPANY
AND PREDECESSOR BUSINESSES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS) -- (CONTINUED)
CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
CLARK MATERIAL
HANDLING COMPANY NON-
(PARENT COMPANY SUBSIDIARY GUARANTOR
ONLY) GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
---------------- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales...................... $358,103 $27,849 $140,499 $(37,157) $489,294
Cost of goods sold............. 316,068 24,579 127,535 (37,055) 431,127
-------- ------- -------- -------- --------
Gross profit................. 42,035 3,270 12,964 (102) 58,167
Engineering, selling and
administrative expenses...... 26,918 1,399 8,816 -- 37,133
-------- ------- -------- -------- --------
Income from operations....... 15,117 1,871 4,148 (102) 21,034
Other income (expense):
Interest income................ 699 8 102 -- 809
Interest expense............... (14,480) (48) (558) -- (15,086)
Other income -- net............ 907 6 685 -- 1,598
-------- ------- -------- -------- --------
Income before income taxes... 2,243 1,837 4,377 (102) 8,355
Equity in earnings of
subsidiaries................. 5,952 -- -- (5,952) --
Provision for income taxes..... 324 105 55 -- 484
-------- ------- -------- -------- --------
Net income..................... $ 7,871 $ 1,732 $ 4,322 $ (6,054) $ 7,871
======== ======= ======== ======== ========
</TABLE>
F-19
<PAGE> 127
CLARK MATERIAL HANDLING COMPANY
AND PREDECESSOR BUSINESSES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS) -- (CONTINUED)
CONSOLIDATING STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
CLARK MATERIAL
HANDLING COMPANY NON-
(PARENT COMPANY SUBSIDIARY GUARANTOR
ONLY) GUARANTORS SUBSIDIARIES CONSOLIDATED
---------------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Net cash provided by operating
activities............................ $ 3,347 $ 326 $ 7,436 $ 11,109
-------- ----- ------- --------
Investing activities:
Business combinations................... (14,646) -- -- (14,646)
Capital expenditures.................... (4,532) (325) (1,483) (6,340)
-------- ----- ------- --------
Net cash used in investing activities... (19,178) (325) (1,483) (20,986)
-------- ----- ------- --------
Financing activities:
Issuance of current notes payable....... 822 -- 360 1,182
Repayment of current notes payable...... -- -- (1,020) (1,020)
Other, net.............................. -- -- 147 147
-------- ----- ------- --------
Net cash provided by (used in)
financing activities............... 822 -- (513) 309
-------- ----- ------- --------
Effect of exchange rate changes on cash
and cash equivalents.................. -- -- (652) (652)
-------- ----- ------- --------
Net increase (decrease) in cash and cash
equivalents........................... (15,009) 1 4,788 (10,220)
Cash and cash equivalents at beginning
of period............................. 15,079 -- 1,475 16,554
-------- ----- ------- --------
Cash and cash equivalents at end of
period................................ $ 70 $ 1 $ 6,263 $ 6,334
======== ===== ======= ========
</TABLE>
(16) VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
BEGINNING OF (1) (2) END OF
PERIOD PROVISION OTHER DEDUCTIONS PERIOD
------------ --------- ----- ---------- ----------
<S> <C> <C> <C> <C> <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS
THE PREDECESSOR
Year ended December 31, 1995........... $3,600 $ -- $ 71 $(804) $2,867
Eleven months ended November 26,
1996................................. 2,867 59 (48) (740) 2,138
THE COMPANY
One month ended December 31, 1996...... 2,063 164 (12) -- 2,215
Year ended December 31, 1997........... 2,215 27 (123) (213) 1,906
</TABLE>
- ---------------
(1) Effect of exchange rate.
(2) Utilization of established reserves, net of recoveries.
F-20
<PAGE> 128
CLARK MATERIAL HANDLING COMPANY
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1997 1998
------------ --------
<S> <C> <C>
Current assets
Cash and cash equivalents................................. $ 6,334 $ 6,873
Cash securing letters of credit........................... 320 182
Net trade receivables..................................... 47,018 47,675
Net inventories (Note 2).................................. 70,784 76,705
Other current assets...................................... 7,281 6,829
-------- --------
Total current assets.............................. 131,737 138,264
Long-term assets
Property, plant and equipment-net......................... 47,836 49,390
Goodwill, net of accumulated amortization................. 114,887 114,062
Other assets.............................................. 18,794 19,942
-------- --------
Total assets...................................... $313,254 $321,658
======== ========
Current liabilities
Notes payable............................................. $ 3,184 $ 10,544
Current portion of capital lease obligations.............. 2,732 2,918
Trade accounts payable.................................... 62,002 60,562
Accrued compensation and benefits......................... 5,730 6,313
Accrued warranties and product liability.................. 20,774 18,936
Other current liabilities................................. 10,728 10,212
-------- --------
Total current liabilities......................... 105,150 109,485
-------- --------
Non-current liabilities
Senior notes payable...................................... 130,000 130,000
Capital lease obligations, less current portion........... 3,864 4,391
Accrued warranties and product liability.................. 38,497 39,377
Other non-current liabilities............................. 12,002 12,688
-------- --------
Total liabilities................................. 289,513 295,941
-------- --------
Commitments and contingencies (Note 3)...................... -- --
Stockholder's equity
Common stock, par value $1 per share, 1,000 shares
authorized, issued and outstanding..................... 1 1
Paid-in-capital........................................... 24,999 24,999
Retained earnings......................................... 8,406 9,920
Cumulative translation adjustment......................... (9,665) (9,203)
-------- --------
Total stockholder's equity........................ 23,741 25,717
-------- --------
Total liabilities and stockholder's equity........ $313,254 $321,658
======== ========
</TABLE>
See accompanying notes to unaudited financial statements.
F-21
<PAGE> 129
CLARK MATERIAL HANDLING COMPANY
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
1997 1998
-------------- --------------
<S> <C> <C>
Net sales................................................... $229,924 $269,037
Cost of goods sold.......................................... 203,510 235,604
-------- --------
Gross profit.............................................. 26,414 33,433
Engineering, selling and administrative expenses............ 17,672 22,491
-------- --------
Income from operations.................................... 8,742 10,942
Other income (expense)
Interest income........................................... 509 128
Interest expense.......................................... (7,528) (7,590)
Foreign exchange gain (loss).............................. 182 (541)
Other (expense) income-net................................ (379) (864)
-------- --------
Income before income taxes.................................. 1,526 2,075
Provision for income taxes.................................. 224 561
-------- --------
Net income................................................ $ 1,302 $ 1,514
======== ========
</TABLE>
See accompanying notes to unaudited financial statements.
F-22
<PAGE> 130
CLARK MATERIAL HANDLING COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, JUNE 30,
1997 1998
---------- ----------
<S> <C> <C>
Operating activities:
Net income................................................ $ 1,302 $ 1,514
Adjustments to reconcile net income to cash provided by
operating activities:
Depreciation and amortization.......................... 6,456 6,892
Changes in operating assets and liabilities:
Restricted cash...................................... 802 136
Trade receivables.................................... (1,817) (186)
Net inventories...................................... 241 (5,891)
Trade accounts payable............................... 805 (1,380)
Accrued compensation and benefits.................... 78 591
Accrued warranties and product liability............. 1,435 (952)
Other assets and liabilities, net.................... (1,277) (2,539)
------- -------
Net cash provided by (used in) operating activities......... 8,025 (1,815)
------- -------
Investing activities -- capital expenditures................ (2,603) (5,639)
------- -------
Financing activities:
(Repayment) issuance of notes payable, net................ (5,129) 7,284
Issuance of other long term debt.......................... -- 842
------- -------
Net cash (used in) provided by financing activities......... (5,129) 8,126
------- -------
Effect of exchange rate changes on cash and cash
equivalents............................................... (695) (133)
------- -------
Net (decrease) increase in cash and cash equivalents........ (402) 539
Cash and cash equivalents at beginning of period............ 16,554 6,334
------- -------
Cash and cash equivalents at end of period.................. $16,152 $ 6,873
======= =======
</TABLE>
See accompanying notes to unaudited financial statements.
F-23
<PAGE> 131
CLARK MATERIAL HANDLING COMPANY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS)
(1) The accompanying unaudited interim consolidated financial statements have
been prepared in accordance with Rule 10-01 of SEC Regulation S-X.
Consequently, they do not include all the disclosures required under
generally accepted accounting principles for complete financial statements.
However, in the opinion of the management of CLARK Material Handling Company
(the "Company"), the consolidated financial statements presented herein
contain all adjustments (consisting only of normal recurring adjustments)
necessary to present fairly the financial position, results of operations
and cash flows of the Company and its consolidated subsidiaries.
(2) Inventories consist of the following:
<TABLE>
<CAPTION>
JUNE 30,
1998
---------
<S> <C>
Finished equipment........................................ $16,397
Replacement parts......................................... 28,272
Work-in-process........................................... 8,298
Raw materials and supplies................................ 23,738
--------
Net inventories................................. $76,705
========
</TABLE>
(3) There have been no material changes in the status of the Company's legal
proceedings or its other contingent obligations since December 31, 1997.
(4) On February 28, 1997, the Company purchased substantially all the assets of
HLT (Hydroelectric Lift Trucks) a supplier of upright material handling
equipment, for $4,948. Assets acquired included inventory, equipment and
tooling. The purchase was financed through a short-term note which matured
in the second quarter of 1997. The Company is leasing the former company's
facility and is continuing production, primarily for its own use. The
acquisition was not significant and pro forma data is not presented.
(5) On November 7, 1997 the Company closed its acquisition of substantially all
of the assets and certain liabilities of Blue Giant USA Corporation ("BGU")
and Blue Giant Canada Limited ("BGC"), (collectively, "Blue Giant") in two
separate purchase business combinations effective November 1, 1997. Although
separate legal entities, BGU and BGC were under the common control of
substantially the same stockholder group. The purchase price for the
acquisition comprised $9,365 in cash (of which $200 was paid to a
shareholder of Blue Giant under a noncompetition agreement), an obligation
payable over three years totaling $1,105 under a noncompetition and
consulting agreement with a shareholder of Blue Giant and related
out-of-pocket expenses of approximately $333. The purchase price was
allocated to the estimated fair value of the tangible and intangible net
assets acquired, with the residual being allocated to goodwill. The goodwill
is being amortized on a straight-line basis over forty years.
The following unaudited pro forma summary presents the consolidated results
of operations as though the acquisition of Blue Giant had been completed on
January 1 of 1997.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30,
1997
----------
<S> <C>
Net sales................................................. $243,980
Income from operations.................................... $ 9,165
Net income................................................ $ 1,665
</TABLE>
(6) The Company had total comprehensive (loss) income of ($4,599) and $1,976 for
the six months ended June 30, 1997 and 1998, respectively. The difference
between the Company's net income and total comprehensive (loss) income
relates to the cumulative translation adjustment of its foreign
subsidiaries.
F-24
<PAGE> 132
CLARK MATERIAL HANDLING COMPANY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS)
(7) On July 15, 1998, the Company purchased substantially all the assets and
certain liabilities of Samsung Forklift for approximately $30,400 (subject
to certain post-closing adjustments). The Company estimates that it will
make approximately $5,000 of capital expenditures for upgrading and new
equipment in the manufacturing facilities. To finance this acquisition, the
Company sold $20,000 aggregate principle amounts of 10 3/4% Senior Notes due
2006 and $20,000 of aggregate liquidation preference of 13% Senior
Exchangeable Preferred Stock due 2007. The Company may, at its option, pay
dividends in additional fully paid and non-assessable shares of Senior
Exchangeable Preferred Stock until July 15, 2003. After July 15, 2003
dividends are to be paid in cash. The acquisition is not significant and pro
forma financial information is not provided.
(8) Certain reclassifications of prior year amounts have been made to conform
with the current year presentation.
F-25
<PAGE> 133
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Blue Giant USA Corporation
Pell City, Alabama
We have audited the accompanying balance sheet of Blue Giant USA Corporation as
of December 31, 1996 and the related statements of operation, retained earnings
and cash flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Blue Giant USA Corporation as
of December 31, 1996 and the results of its operations and its cash flows for
the year then ended in conformity with generally accepted accounting principles.
Raughton & Company
Certified Public Accountants
Pell City, Alabama
March 21, 1997
F-26
<PAGE> 134
BLUE GIANT USA CORPORATION
BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 28,
1996 1997
------------ -----------
(UNAUDITED)
<S> <C> <C>
Current Assets:
Cash...................................................... $ 4,736 $ 7,945
Accounts receivable, net of allowance for doubtful
accounts of $62,000 and $62,000........................ 2,289,631 2,552,076
Other receivables......................................... 18,203 --
Inventory (Note 2)........................................ 1,563,403 1,709,548
Prepaid expenses.......................................... 235,757 231,722
---------- ----------
Total current assets.............................. 4,111,730 4,501,291
Property, plant and equipment (Note 3)...................... 1,005,195 1,020,819
Other assets................................................ 114,417 110,449
---------- ----------
Total assets...................................... $5,231,342 $5,632,559
========== ==========
Current Liabilities:
Bank overdraft............................................ $ 15,240 $ 125,305
Line of credit borrowings (Note 7)........................ 842,154 773,298
Accounts payable.......................................... 1,338,799 1,391,450
Accrued payroll and related liabilities................... 19,498 26,688
Other accrued expenses.................................... 156,510 251,995
Current portion of long-term debt (Note 7)................ 171,540 127,781
---------- ----------
Total current liabilities......................... 2,543,741 2,696,517
Long-term debt (Note 7)..................................... 747,228 747,228
---------- ----------
Total liabilities................................. 3,290,969 3,443,745
---------- ----------
Shareholders' Equity:
Common stock, $1 par value, 1,025 shares authorized, 1,000
shares issued
and outstanding........................................ 1,000 1,000
Additional paid in capital................................ 39,500 39,500
Retained earnings......................................... 1,899,873 2,148,314
---------- ----------
Total shareholders' equity........................ 1,940,373 2,188,814
---------- ----------
Total liabilities and shareholders' equity........ $5,231,342 $5,632,559
========== ==========
</TABLE>
The accompany notes are an integral part of these financial statements.
F-27
<PAGE> 135
BLUE GIANT USA CORPORATION
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JUNE 28, SIX MONTHS ENDED
DECEMBER 31, 1996 JUNE 28, 1997
1996 (UNAUDITED) (UNAUDITED)
------------ ---------------- ----------------
<S> <C> <C> <C>
Net sales..................................... $13,875,445 $6,314,971 $7,172,227
Cost of sales................................. 10,513,947 4,874,793 5,585,027
----------- ---------- ----------
3,361,498 1,440,178 1,587,200
----------- ---------- ----------
Operating expenses:
Selling, general and administrative......... 2,807,368 1,153,430 1,120,602
Research, development and engineering....... 158,371 76,285 65,630
----------- ---------- ----------
Total operating expenses............ 2,965,739 1,229,715 1,186,232
Income before interest and other income....... 395,759 210,463 400,968
Interest expense............................ (141,368) (69,194) (71,506)
Other income, net........................... 31,940 153,001 71,393
----------- ---------- ----------
Income before taxes........................... 286,331 294,270 400,855
Income tax expense............................ (106,232) (107,775) (152,414)
----------- ---------- ----------
Net income.................................... $ 180,099 $ 186,495 $ 248,441
=========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-28
<PAGE> 136
BLUE GIANT USA CORPORATION
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL RETAINED
---------------- PAID-IN EARNINGS
SHARES VALUE CAPITAL (DEFICIT)
------ ------ ---------- ----------
<S> <C> <C> <C> <C>
Balance at December 31, 1995...................... 1,000 $1,000 $39,500 $1,719,774
Net income for the period......................... -- -- -- 180,099
----- ------ ------- ----------
Balance at December 31, 1996...................... 1,000 1,000 39,500 1,899,873
Net income for the period (unaudited)............. -- -- -- 248,441
----- ------ ------- ----------
Balance at June 28, 1997 (unaudited).............. 1,000 $1,000 $39,500 $2,148,314
===== ====== ======= ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-29
<PAGE> 137
BLUE GIANT USA CORPORATION
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED SIX MONTHS ENDED
YEAR ENDED JUNE 28, JUNE 28,
DECEMBER 31, 1996 1997
1996 (UNAUDITED) (UNAUDITED)
------------ ---------------- ----------------
<S> <C> <C> <C>
Cash Flow From Operating Activities
Net Income................................. $ 180,099 $186,495 $248,441
Adjustment to reconcile net income to net
cash flows from operating activities:
Depreciation and amortization........... 157,914 64,758 72,306
Gain on sale of fixed assets............ (22,535) (16,535) (26)
Deferred income taxes................... 13,267 -- --
Changes in assets and liabilities:
Accounts receivable..................... (243,378) (589,347) (262,445)
Inventory............................... (220,945) (95,006) (146,145)
Prepaid expenses........................ (6,584) 78,338 26,206
Accounts payable........................ 144,976 138,160 52,651
Accrued payroll and related
liabilities........................... 2,119 (5,643) 7,190
Other accrued expenses.................. (260,887) (51,087) 205,550
------------ -------- --------
Net cash from operating
activities....................... (255,954) (289,867) 203,728
------------ -------- --------
Cash Flows From Investing Activities
Purchase of equipment...................... (204,674) (322,161) (93,501)
Proceeds from sale of fixed assets......... 35,250 125,526 5,600
------------ -------- --------
Net cash from investing
activities....................... (169,424) (196,635) (87,901)
------------ -------- --------
Cash Flows From Financing Activities
Line of credit borrowings.................. 14,261,692 618,321 389,610
Long-term borrowings....................... 164,341 91,400 46,814
Line of credit principal repayments........ (13,831,177) (132,799) (458,466)
Long-term debt principal repayment......... (170,436) (89,798) (90,576)
------------ -------- --------
Net cash from financing
activities....................... 424,420 487,124 (112,618)
------------ -------- --------
Net change in cash........................... (958) 622 3,209
Cash at beginning of period.................. 5,694 5,694 4,736
------------ -------- --------
Cash at end of period........................ $ 4,736 $ 6,316 $ 7,945
============ ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-30
<PAGE> 138
BLUE GIANT USA CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND JUNE 28, 1997
NOTE 1 -- NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
Blue Giant USA Corporation is principally engaged in the manufacturing and
sales of materials handling equipment. The Company sells its products throughout
the United States and worldwide, primarily to wholesalers and to contractors.
The accounting policies followed by the Company and the methods of applying
those policies which affect the determination of financial position, results of
operations and cash flows are summarized below.
The unaudited financial statements as of June 28, 1997 and for the six
month periods ended June 28, 1997 and 1996 have been prepared in accordance with
Rule 10-01 of SEC Regulation S-X. Consequently, they do not include all the
disclosures required under generally accepted accounting principles for complete
financial statements. However, in the opinion of the management, the financial
statements presented herein contain all adjustments (consisting only of normal
recurring adjustments) necessary to present fairly the financial position,
results of operations and cash flows of the Company for the periods indicated.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions. These affect the reported amounts of assets and liabilities and
disclosure of assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months or less
to be cash equivalents.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
The allowance for doubtful accounts is maintained at a level believed by
management sufficient to absorb potential losses. Management's determination of
the adequacy of the allowance is based on past loss experience, current economic
conditions and other relevant factors. The allowance is increased by the
provision for losses charged to operations and is decreased by the actual net
charge-offs.
INVENTORIES
Inventories are valued at cost (first-in, first-out) or market, whichever
is lower, and consist of raw materials, and purchased finished goods.
Manufactured goods are valued using the average cost method and include raw
materials, labor and allocable overhead.
F-31
<PAGE> 139
BLUE GIANT USA CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost, less accumulated
depreciation. Depreciation is provided at rates intended to distribute the cost
of property, plant and equipment over their estimated service lives as follows:
<TABLE>
<CAPTION>
DESCRIPTION METHOD SERVICE LIFE
----------- ------ ------------
<S> <C> <C>
Buildings and improvements........... Straight-line 21-30 years
Factory equipment.................... Straight-line 3-10 years
Tools and dies....................... Straight-line and accelerated 3 years
Office furniture..................... Straight-line 5-7 years
Automotive........................... Straight-line 3-7 years
</TABLE>
INCOME TAXES
Annual provision for income taxes is based primarily on income before
income taxes adjusted to reflect adjustments to taxable income representing
permanent differences.
Where income and expenses are recognized in different periods for financial
reporting purposes and for purposes of computing income taxes currently payable,
deferred income taxes have been provided.
NOTE 2 -- INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 28, 1997
1996 (UNAUDITED)
------------ -------------
<S> <C> <C>
Raw materials and purchased parts.................. $ 819,261 $ 895,845
Work-in-process.................................... 308,493 337,331
Finished goods manufactured........................ 348,635 381,225
Finished goods purchased........................... 87,014 95,147
---------- ----------
Total.................................... $1,563,403 $1,709,548
========== ==========
</TABLE>
NOTE 3 -- PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
1996
------------
<S> <C>
Autos and trucks............................................ $ 239,653
Office equipment and furnishings............................ 250,340
Factory equipment........................................... 294,498
Tools and dies.............................................. 245,507
Buildings and improvements.................................. 1,074,425
Land........................................................ 11,000
----------
Total property, plant and equipment............... 2,115,423
Less: Accumulated depreciation.............................. 1,110,228
----------
Net property, plant and equipment................. $1,005,195
==========
</TABLE>
F-32
<PAGE> 140
BLUE GIANT USA CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 4 -- INCOME TAXES
The provision (benefit) for income taxes consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
1996
------------
<S> <C>
Current liability:
Federal.............................................. $ 82,367
State................................................ 10,598
--------
92,965
--------
Deferred liability:.................................... 13,267
--------
$106,232
========
</TABLE>
The deferred income tax assets and liabilities are as follows:
<TABLE>
<S> <C>
Deferred income tax assets:
Reserves and accruals not currently deductible.......... $21,080
=======
Deferred income tax liabilities:
Depreciation............................................ $17,112
=======
</TABLE>
NOTE 5 -- RELATED PARTY TRANSACTIONS
During the period ended December 31, 1996, the Company transacted business
with Blue Giant Canada, LTD ("B. G. Canada") and Blue Giant -- Europe, LTD as
follows:
<TABLE>
<S> <C>
Purchases from B. G. Canada............................ $4,138,145
Sales to B. G. Canada.................................. 388,886
Sales to B. G. Europe.................................. 5,963
</TABLE>
At December 31, 1996, $5,963 was included in trade accounts receivable as a
receivable from Blue Giant Europe.
At December 31, 1996, Blue Giant USA owed Blue Giant Canada $1,001,730 in
accounts payable. This amount is included in current liabilities on the balance
sheet.
All of the above transactions result form normal business activities. The
Company's common stock was formerly owned by B. G. Canada. A majority
shareholder of the Company is also a majority shareholder in B. G. Canada.
Blue Giant USA Corporation owns 25% of the stock of Blue Giant Europe, LTD,
but has no control over this company. During 1995, Blue Giant USA Corporation
made a $33,010 loan to Blue Giant Europe LTD. This note is expected to be
collected during 1998 and is included under other assets on the balance sheet.
F-33
<PAGE> 141
BLUE GIANT USA CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 6 -- NOTES PAYABLE AND LONG-TERM DEBT
The following is a detail of notes payable and long-term debt at December
31, 1996:
<TABLE>
<S> <C>
Note Payable -- Line of Credit:
Note payable to AmSouth Bank on demand with interest at
AmSouth Bank prime rate, secured by accounts receivable,
inventories, machinery, furniture, equipment and real
estate and guaranteed by the President of the Company.
Line-of-credit on this note is the lesser of $2,000,000 or
the sum of (1) 80% of accounts receivable not delinquent
and (2) 30% of the cost of inventories not past 90 days,
less international receivables that are not supported by
letters of credit......................................... $ 842,154
==========
Note Payable AmSouth (Term)
Note payable (term Loan) to AmSouth Bank due in monthly
installments of $8333.33 principal plus interest on the
unpaid amount at the AmSouth Bank floating prime rate. The
Company borrowed $1,000,000 under this loan which will
fully amortize in ten years. The note is secured by
accounts receivable, inventories, machinery, furniture,
equipment and real estate and is guaranteed by the
President of the Company.................................. $ 750,000
Note Payable to AmSouth Bank in monthly installments of
$476, including principal and interest at 8.25%, with
final payment due August, 1997; secured by automobile..... 3,810
Note Payable to AmSouth Bank in monthly installments of $604
principal, plus interest at 9.50%, with final payment due
June 1999; secured by an automobile....................... 18,125
Note Payable to AmSouth Bank in monthly installments of $417
principal, plus interest at 9.25%, with final payment due
November, 1998; secured by an automobile.................. 10,016
Note Payable to AmSouth Bank in monthly installments of
$1750 principal, plus interest at AmSouth prime rate,
8.25% at December 31, 1996, with final payment due April
15, 1999; secured by automobiles.......................... 47,250
Note Payable to AmSouth Bank in monthly installments of $789
principal, plus interest at 0.5% above AmSouth prime rate,
8.75% at December 31, 1996, with final payment due June
21, 1999; secured by equipment............................ 22,878
Note Payable to AmSouth Bank in monthly installments of $560
principal, plus interest at AmSouth prime rate, 8.25% at
December 31, 1996, with final payment due September 12,
1999; secured by an automobile............................ 17,913
Note Payable to AmSouth Bank in monthly installments of $835
principal, plus interest at AmSouth prime rate, 8.25% at
December 31, 1996, with final payment due September 12,
1999; secured by an automobile............................ 26,718
Note Payable to AmSouth Bank in monthly installments of
$689, plus interest at AmSouth Bank prime rate, 8.25% at
December 31, 1996, with final payment due September 12,
1999; secured by automobile............................... 22,058
----------
918,768
Less current portion...................................... 171,540
----------
Long-term debt....................................... $ 747,228
==========
</TABLE>
F-34
<PAGE> 142
BLUE GIANT USA CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Long-term debt matures as follows:
<TABLE>
<S> <C>
December 31,
1997................................................... $1,013,694
1998................................................... 167,734
1999................................................... 129,494
2000................................................... 100,000
2001................................................... 100,000
Thereafter............................................... 250,000
----------
Total.......................................... $1,760,922
==========
</TABLE>
NOTE 7 -- CONTINGENT LIABILITIES
The Company has been named as defendant or co-defendant in various actions
arising in the ordinary course of business. In the opinion of management, and
legal counsel, all such matters are adequately covered by insurance or involve
such amounts that an unfavorable disposition would not have a material effect on
the financial position of the Company.
NOTE 8 -- COMMITMENTS
During 1994, the Corporation entered into two three-year non-cancelable
leases for equipment. These are being accounted for as operating leases. Future
lease payments associated with these leases are as follows:
<TABLE>
<S> <C>
Year ending December 31, 1997.............................. $13,705
-------
Total...................................................... $13,705
=======
</TABLE>
The Corporation was required to make deposits on these leases totaling
$4,259. This amount is included in current assets on the balance sheet.
NOTE 9 -- EMPLOYEE BENEFIT PLAN
The Company has a deferred compensation plan pursuant to Section 401(k) of
the Internal Revenue Code for all employees who meet certain eligibility
requirements. The Plan calls for the Company to match one-half of participant
voluntary salary deferrals up to but not in excess of 2% of each participant's
compensation. $48,933 was expensed under the Plan for the period ended December
31, 1996.
NOTE 10 -- SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash was paid during the years ended December 31, 1996 for:
<TABLE>
<S> <C>
Interest.................................................. $140,332
Income taxes.............................................. $116,322
</TABLE>
NOTE 11 -- FAIR VALUES OF FINANCIAL INSTRUMENTS
The carrying value of cash, receivables and accounts payable approximates
fair value due to the short maturity of these instruments. The carrying value of
short and long-term debt approximates fair value based on current interest
rates. None of the financial instruments are held for trading purposes.
F-35
<PAGE> 143
AUDITORS' REPORT TO THE SHAREHOLDERS
We have audited the balance sheet of Blue Giant Canada Limited as at
December 31, 1996 and the statements of earnings and retained earnings and
changes in financial position for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at December 31, 1996 and the
results of its operations and the changes in its financial position for the year
then ended in accordance with generally accepted accounting principles in Canada
which, except as described in note 14 to the financial statements, conform in
all material respects with generally accepted accounting principles in the
United States.
KPMG
Chartered Accountants
Richmond Hill, Canada
February 20, 1997, except for note 15,
which is as of April 8, 1998
F-36
<PAGE> 144
BLUE GIANT CANADA LIMITED
BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 28,
1996 1997
------------ -----------
(UNAUDITED)
<S> <C> <C>
Assets
Current assets:
Accounts receivable (note 2).............................. $ 4,880,790 $ 4,911,147
Income taxes receivable................................... -- 31,461
Inventories............................................... 2,672,620 3,250,218
Prepaid expenses and deposits............................. 86,414 129,136
----------- -----------
7,639,824 8,321,962
Due from employee (note 3).................................. 45,000 --
Capital assets (note 4)..................................... 2,416,612 2,532,256
----------- -----------
$10,101,436 $10,854,218
=========== ===========
Liabilities and Shareholders' Equity
Current liabilities:
Bank indebtedness (note 5)................................ $ 1,435,553 $ 2,206,635
Accounts payable and accrued liabilities.................. 2,869,518 2,842,484
Income taxes payable...................................... 77,398 --
Long-term debt payable within one year (note 6)........... 120,000 120,000
----------- -----------
4,502,469 5,169,119
----------- -----------
Long-term debt (note 6)..................................... 1,620,565 1,562,999
Payable to shareholders (note 7)............................ 1,188,158 1,150,825
Deferred income taxes....................................... 27,496 23,496
Shareholders' equity:
Capital stock (note 8).................................... 100 100
Retained earnings......................................... 2,762,648 2,947,679
----------- -----------
2,762,748 2,947,779
----------- -----------
Commitments (note 10)
Contingencies (note 11)
----------- -----------
$10,101,436 $10,854,218
=========== ===========
</TABLE>
See accompanying notes to financial statements.
F-37
<PAGE> 145
BLUE GIANT CANADA LIMITED
STATEMENT OF EARNINGS AND RETAINED EARNINGS
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTH PERIOD SIX MONTH PERIOD
DECEMBER 31, ENDED JUNE 29, ENDED JUNE 28,
1996 1996 1997
------------ ---------------- ----------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Sales............................................ $17,097,231 $8,393,315 $9,897,352
Cost of sales.................................... 13,087,119 6,503,910 7,801,369
----------- ---------- ----------
4,010,112 1,889,405 2,095,983
----------- ---------- ----------
Expenses:
General and administrative..................... 881,678 441,284 541,230
Marketing...................................... 1,006,997 532,433 524,350
Manufacturing support.......................... 591,685 300,979 257,160
Service department............................. 492,012 246,324 283,880
Management bonuses............................. 197,968 64,576 81,200
Shipping and receiving......................... 122,111 65,934 53,825
Parts department............................... 130,409 65,577 69,331
----------- ---------- ----------
3,422,860 1,717,107 1,810,976
----------- ---------- ----------
Operating income before interest................. 587,252 172,298 285,007
----------- ---------- ----------
Interest:
On short-term debt............................. 93,885 57,655 42,600
On long-term debt and shareholder advances..... 153,048 44,694 98,934
----------- ---------- ----------
246,933 102,349 141,534
----------- ---------- ----------
Operating income................................. 340,319 69,949 143,473
Other income..................................... 262,269 143,786 133,558
----------- ---------- ----------
Earnings before income taxes..................... 602,588 213,735 277,031
Income taxes:
Current........................................ 188,500 72,000 96,000
Deferred (recovery)............................ (1,200) (3,000) (4,000)
----------- ---------- ----------
187,300 69,000 92,000
----------- ---------- ----------
Net earnings..................................... 415,288 144,735 185,031
Retained earnings, beginning of period........... 2,347,360 2,347,360 2,762,648
----------- ---------- ----------
Retained earnings, end of period................. $ 2,762,648 $2,492,095 $2,947,679
=========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
F-38
<PAGE> 146
BLUE GIANT CANADA LIMITED
STATEMENT OF CHANGES IN FINANCIAL POSITION
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTH PERIOD SIX MONTH PERIOD
DECEMBER 31, ENDED JUNE 29, ENDED JUNE 28,
1996 1996 1997
------------ ---------------- ----------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Cash provided by (used in):
Operations:
Net earnings................................... $ 415,288 $ 144,735 $ 185,031
Items not involving cash:
Depreciation and amortization............... 197,533 82,909 90,922
Gain on sale of capital assets.............. (59,228) (21,220) (18,135)
Deferred income tax recovery................ (1,200) (3,000) (4,000)
Changes in non-cash operating working
capital..................................... (54,991) (110,463) (786,570)
----------- ----------- ----------
497,402 92,961 (532,752)
----------- ----------- ----------
Financing:
Increase in long-term debt..................... 1,800,000 1,800,000 --
Principal payments on long-term debt........... (59,435) -- (57,566)
Repayment of capital lease obligation.......... (6,399) (6,399) --
Increase (decrease) in payable to
shareholders................................ 52,743 8,176 (37,333)
----------- ----------- ----------
1,786,909 1,801,777 (94,899)
----------- ----------- ----------
Investments:
Proceeds from sale of capital assets........... 121,635 44,994 39,649
Purchase of capital assets..................... (2,003,686) (1,924,563) (228,080)
Decrease in due from employee.................. 30,000 30,000 45,000
----------- ----------- ----------
(1,852,051) (1,849,569) (143,431)
----------- ----------- ----------
(Decrease) increase in bank indebtedness during
the period..................................... (432,260) (45,169) 771,082
Bank indebtedness, beginning of period........... 1,867,813 1,867,813 1,435,553
----------- ----------- ----------
Bank indebtedness, end of period................. $ 1,435,553 $ 1,822,644 $2,206,635
=========== =========== ==========
</TABLE>
See accompanying notes to financial statements.
F-39
<PAGE> 147
BLUE GIANT CANADA LIMITED
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1996
Blue Giant Canada Limited is a private Company incorporated under the
Canada Business Corporations Act. The Company manufactures and sells materials
handling equipment.
1. SIGNIFICANT ACCOUNTING POLICIES:
(a) Basis of presentation:
These financial statements have been prepared in accordance with accounting
principles generally accepted in Canada which, except as described in note 14,
conform in all material respects with generally accepted accounting principles
in the United States.
(b) Inventories:
Raw materials are valued at the lower of cost and replacement cost.
Finished goods and manufactured parts are valued at the lower of cost and net
realizable value. Costs are determined on a first-in, first-out basis.
(c) Foreign currency transactions:
Transactions in foreign currencies are recorded in Canadian dollars at the
rates of exchange in effect at the dates of the transactions. At year end,
monetary assets and liabilities are translated into Canadian dollars at the
rates of exchange prevailing on that date. The resulting gains and losses are
included in net earnings.
(d) Capital assets:
Capital assets are recorded at cost. Depreciation and amortization are
provided using the following methods and annual rates:
<TABLE>
<CAPTION>
ASSET BASIS RATE
- ----- ----------------- ----
<S> <C> <C>
Building............................................. Declining balance 4%
Building improvements................................ Declining balance 4%
Equipment............................................ Declining balance 20%
Rental equipment..................................... Declining balance 20%
Automotive........................................... Declining balance 30%
Leasehold improvements............................... Straight-line 10%
Computer software.................................... Declining balance 50%
</TABLE>
(e) Revenue recognition:
The Company recognizes revenue upon shipment, except for custom orders,
where revenue is recognized when the manufacturing process is complete.
(f) Use of estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions which affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and revenues and expenses for the period reported. Actual results
could differ from these estimates.
(g) Investment in Blue Giant Europe Ltd.:
The Company's 25% investment in Blue Giant Europe Ltd. ("Blue Giant
Europe") is accounted for in the accompanying financial statements by the equity
method under which such investments initially are recorded at cost. The carrying
value of the investment is increased (decreased) to recognize the Company's
proportionate share of the increases (decreases) in the underlying net book
equity of Blue Giant Europe subsequent to acquisition by the Company and the
Company's share of net earnings (loss) of Blue Giant
F-40
<PAGE> 148
BLUE GIANT CANADA LIMITED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Europe is included in the determination of the net earnings of the Company. The
Company has recognized net decreases in the underlying net book equity of Blue
Giant Europe to the extent of their original investment as they are not required
to fund continuing operating losses of Blue Giant Europe.
2. ACCOUNTS RECEIVABLE:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 28,
1996 1997
------------ -----------
(UNAUDITED)
<S> <C> <C>
Trade (net of allowance for doubtful accounts).............. $3,120,473 $3,229,269
Receivable from related companies (note 12 (c))............. 1,742,700 1,658,862
Other....................................................... 17,617 23,016
---------- ----------
$4,880,790 $4,911,147
========== ==========
</TABLE>
3. DUE FROM EMPLOYEE:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 28,
1996 1997
------------ -----------
(UNAUDITED)
<S> <C> <C>
Non-interest bearing promissory note, maturing on March 31,
1998. The balance outstanding on the note shall become
due, prior to the maturity date, if the employee ceases to
be employed by the Company................................ $ 45,000 $ --
======== ==========
</TABLE>
4. CAPITAL ASSETS:
<TABLE>
<CAPTION>
DECEMBER 31, 1996
------------------------------------------
ACCUMULATED
DEPRECIATION AND NET BOOK
COST AMORTIZATION VALUE
---------- ---------------- ----------
<S> <C> <C> <C>
Land................................................... $ 906,000 $ -- $ 906,000
Building............................................... 1,134,885 209,564 925,321
Building improvements.................................. 58,446 1,169 57,277
Equipment.............................................. 1,499,771 1,132,831 366,940
Rental equipment....................................... 209,755 112,800 96,955
Automotive............................................. 189,341 125,222 64,119
Computer software...................................... 31,483 31,483 --
---------- ---------- ----------
$4,029,681 $1,613,069 $2,416,612
========== ========== ==========
</TABLE>
F-41
<PAGE> 149
BLUE GIANT CANADA LIMITED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
JUNE 28, 1997
(UNAUDITED)
--------------------------------------------
ACCUMULATED
DEPRECIATION AND NET BOOK
COST AMORTIZATION VALUE
---------- ---------------- ----------
<S> <C> <C> <C>
Land................................................ $ 906,000 $ -- $ 906,000
Building............................................ 1,134,885 231,485 903,400
Building improvements............................... 79,645 2,471 77,174
Equipment........................................... 1,615,065 1,130,622 484,443
Rental equipment.................................... 196,495 112,980 83,515
Automotive.......................................... 207,007 133,449 73,558
Computer software................................... 35,803 31,637 4,166
---------- ---------- ----------
$4,174,900 $1,642,644 $2,532,256
========== ========== ==========
</TABLE>
5. BANK INDEBTEDNESS:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 28,
1996 1997
------------ -----------
(UNAUDITED)
<S> <C> <C>
Demand loan at prime plus 0.5% per annum.................... $1,375,000 $1,825,000
Bank overdraft.............................................. 60,553 381,635
---------- ----------
$1,435,553 $2,206,635
========== ==========
</TABLE>
As security for the bank indebtedness, the Company has pledged accounts
receivable, inventories, assigned proceeds of fire insurance and provided a
general security agreement covering all assets of the Company. The shareholders
have provided a postponement of the amounts payable to them.
6. LONG-TERM DEBT:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 28,
1996 1997
------------ -----------
(UNAUDITED)
<S> <C> <C>
Non-revolving demand loan bearing interest at 7.35% payable
in monthly blended installments of $10,662, secured by a
collateral mortgage providing a first fixed charge over
the land and building..................................... $1,335,565 $1,322,999
Non-revolving demand loan bearing interest at prime plus 1%
payable in monthly installments of $7,500 plus interest
due on June 27, 2001, secured under the same provision as
the bank indebtedness (note 5)............................ 405,000 360,000
---------- ----------
1,740,565 1,682,999
Less current portion........................................ 120,000 120,000
---------- ----------
$1,620,565 $1,562,999
========== ==========
</TABLE>
F-42
<PAGE> 150
BLUE GIANT CANADA LIMITED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Principal repayments due on long-term debt in each of the next five years
and thereafter are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 28,
1996 1997
---------- ----------
(UNAUDITED)
<S> <C> <C>
1997....................................... $ 120,000 $ --
1998....................................... 124,796 120,000
1999....................................... 127,400 126,075
2000....................................... 130,200 128,775
2001....................................... 88,209 131,677
2002....................................... 46,444 44,797
Thereafter................................. 1,103,516 1,131,675
---------- ----------
$1,740,565 $1,682,999
========== ==========
</TABLE>
7. PAYABLE TO SHAREHOLDERS:
Amounts payable to shareholders bear interest at 8%, are not secured and
have no set terms of repayment. Interest expense totaled $89,135, $44,568
(unaudited) and $47,528 (unaudited) for the periods ended December 31, 1996,
June 29, 1996 and June 28, 1997 respectively.
8. CAPITAL STOCK:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 28,
1996 1997
------------ -----------
(UNAUDITED)
<S> <C> <C>
Authorized:
Unlimited number of common shares issued:
900 common shares........................ $100 $100
</TABLE>
9. FINANCIAL INSTRUMENTS:
The carrying values of accounts receivable, bank indebtedness, accounts
payable and accrued liabilities approximate their fair value due to the
relatively short periods to maturity of the instruments. The fair values of
other financial assets and liabilities included in the balance sheet are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1996 JUNE 28, 1997
----------------------- -----------------------
CARRYING CARRYING
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Due from employee (note 3)................... $ 45,000 $ 43,135 $ -- $ --
Long-term debt (note 6)...................... 1,740,565 1,880,225 1,682,999 1,794,697
</TABLE>
The following methods and assumptions were used to estimate the fair value
of each class of financial instrument:
- Due from employee -- at the year-end prime rate.
- Long-term debt -- at the present value of contractual future payments of
principal and interest, discounted at the current market rates of
interest available to the Company for the same or similar debt
instruments.
The fair value of the payable to shareholder has not been presented due to
the undeterminable nature of the term of repayment of the loan.
F-43
<PAGE> 151
BLUE GIANT CANADA LIMITED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The Company does not have a significant exposure to any individual customer
or counterparty.
10. COMMITMENTS:
The Company is committed under long-term leases for the rental of
automotive equipment with expiry dates to 1999 and with varying renewal options.
Minimum annual rentals exclusive of insurance and maintenance costs and for the
next five years obligations under these leases are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 28,
1996 1997
------------ -----------
(UNAUDITED)
<S> <C> <C>
1997......................................... $83,494 $46,654
1998......................................... 46,197 62,130
1999......................................... 7,102 23,486
2000......................................... -- 3,469
2001......................................... -- 1,518
</TABLE>
11. CONTINGENCIES:
The Company is contingently liable with respect to litigation and claims
which arise from time to time in the normal course of business. In the opinion
of management, any liability that may arise from such contingencies would not
have a significant adverse effect on the financial statements of the Company.
12. RELATED PARTY TRANSACTIONS AND ECONOMIC DEPENDENCE:
(a) A significant portion of the Company's sales are derived from Blue
Giant USA Corporation, which is related by virtue of common control. The Company
had entered into the following transactions with this company on normal terms
and prices.
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 29, JUNE 28,
1996 1996 1997
------------ ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Sales................................................... $5,515,482 $2,813,610 $2,976,792
Purchases............................................... 505,047 265,878 243,999
</TABLE>
(b) Effective October 1, 1993, the Company acquired 25% of the common
shares of Blue Giant Europe for $1. The Company has recorded sales to Blue Giant
Europe totaling $453,110, $279,052 (unaudited) and $165,114 (unaudited) for the
periods ended December 31, 1996, June 29, 1996 and June 28, 1997 respectively.
(c) Receivables from related companies are comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 28,
1996 1997
------------ -----------
(UNAUDITED)
<S> <C> <C>
Blue Giant USA Corporation.................. $1,457,724 $1,416,679
Blue Giant Europe........................... 284,976 242,183
---------- ----------
$1,742,700 $1,658,862
========== ==========
</TABLE>
F-44
<PAGE> 152
BLUE GIANT CANADA LIMITED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
13. REFUNDABLE DIVIDEND TAX:
Under the Income Tax Act, certain taxes paid by the Company relating to
investment income are potentially refundable at the rate of $1 for each $3 of
taxable dividends paid. Since these taxes are considered advance distribution to
shareholders, they have been charged directly to retained earnings. As dividends
are paid, the applicable refundable tax is credited to retained earnings. The
cumulative amount of potential refundable taxes was $73,333 for each of the
periods reported on.
14. RECONCILIATION BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES (GAAP):
The financial statements of the Company have been prepared in accordance
with generally accepted accounting principles (GAAP) in Canada. These principles
conform in all material respects to those in the United States except for the
following:
The application of U.S. GAAP would have the following effect on net income
as reported:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 29, JUNE 28,
1996 1996 1997
------------ ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Net earnings as shown in the financial
statements............................. $415,288 $144,735 $185,031
Description of items having an effect on
reported income:
Revenue recognition (a)................ (81,076) (36,600) 19,073
Deferred income taxes (b).............. 1,800 3,300 3,000
-------- -------- --------
Net income according to generally
accepted accounting principles in the
United States.......................... $336,012 $111,435 $207,104
======== ======== ========
</TABLE>
The application of U.S. GAAP would have the following effect on the balance
sheets as reported:
<TABLE>
<CAPTION>
INCREASE
AS REPORTED (DECREASE) U.S. GAAP
----------- ---------- ----------
<S> <C> <C> <C>
December 31, 1996:
Assets:
Accounts receivable (a)................ $4,880,790 $(420,209) $4,460,581
Inventory (a).......................... 2,672,620 272,274 2,944,894
---------
$(147,935)
=========
Liabilities:
Deferred income taxes (b).............. $ 27,496 $ (26,496) $ 1,000
Shareholders' equity:
Retained earnings...................... 2,762,648 (121,439) 2,641,209
---------
$(147,935)
=========
</TABLE>
F-45
<PAGE> 153
BLUE GIANT CANADA LIMITED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
INCREASE
AS REPORTED (DECREASE) U.S. GAAP
----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
June 28, 1997:
Assets:
Accounts receivable (a)................................ $4,911,147 $(380,091) $4,531,056
Inventory (a).......................................... 3,250,218 262,229 3,512,447
---------
$(117,862)
=========
Liabilities:
Deferred income taxes (b).............................. $ 23,496 $ (18,496) $ 5,000
Shareholders' equity:
Retained earnings...................................... 2,947,679 (99,366) 2,848,313
---------
$(117,862)
=========
</TABLE>
(a) Revenue recognition:
Under U.S. GAAP, the Company would not record sales and cost of sales on
custom orders of equipment until the customer has received the goods. Such
amounts included in sales for Canadian GAAP amounted to $420,209, $227,028
(unaudited) and $380,091 (unaudited) and included in cost of sales of $272,274,
$148,569 (unaudited) and $262,229 (unaudited) for the periods ended December 31,
1996, June 29, 1996 and June 28, 1997 respectively. The decrease in net earnings
after the above adjustment is $81,076 and $36,600 (unaudited) for the periods
ended December 31, 1996 and June 29, 1996 respectively. The increase in net
earnings resulting from this adjustment for the period ended June 28, 1997 is
$19,073 (unaudited).
(b) Accounting for income taxes:
Financial Accounting Standards No. 109, "Accounting for Income Taxes" (FAS
109) requires the use of an asset and liability approach for financial
accounting and reporting for income taxes. Tax allocation is provided on
temporary differences existing at the end of a financial period. These are
differences between the tax basis of an asset or liability and the amount in the
financial statements. It is assumed that each item in the financial statements
will be recovered or settled at the amounts reported in the statements and that
the reversal of the temporary differences will result in taxable amounts or
deductions in the future years. The effect of the adoption of the statements
would be as follows:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 28,
1996 1997
------------ -----------
(UNAUDITED)
<S> <C> <C>
Deferred tax asset:
Accruals not currently deductible.................. $10,000 $ 10,000
Accounts receivable................................ 42,400 31,500
Deferred tax liabilities:
Capital assets..................................... (48,400) (44,000)
Prepaid expenses................................... (5,000) (2,500)
------- --------
$(1,000) $ (5,000)
======= ========
</TABLE>
F-46
<PAGE> 154
BLUE GIANT CANADA LIMITED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers the
scheduled reversal of deferred tax liabilities, projected future taxable income,
and tax planning strategies in making this statement. Based upon the level of
historical taxable income and projections for future taxable income over the
periods which the deferred tax assets are deductible, management believes it is
more likely than not the Company will realize the benefits of these deductible
differences at December 31, 1996.
(c) Statement of Cash Flows:
Under U.S. GAAP, the net change in bank indebtedness for the periods ended
is reflected as a financing activity and not included in the cash position in
the Statement of Cash Flows resulting in the following change:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTH PERIOD SIX MONTH PERIOD
DECEMBER 31, ENDED JUNE 29, ENDED JUNE 28,
1996 1996 1997
------------ ---------------- ----------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Financing activities:
(Decrease) increase in bank
indebtedness................ $ (432,260) $ (45,169) $ 771,082
</TABLE>
The Statement of Cash Flows' major categories for the periods ended would
then be presented as follows:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTH PERIOD SIX MONTH PERIOD
DECEMBER 31, ENDED JUNE 29, ENDED JUNE 28,
1996 1996 1997
------------ ---------------- ----------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Operating activities............. $ 497,402 $ 92,961 $ (532,752)
Financing activities............. 1,354,649 1,756,608 676,183
Investing activities............. (1,852,051) (1,849,569) (143,431)
----------- ----------- -----------
Change in cash position.......... -- -- --
Cash position, beginning of
period......................... -- -- --
----------- ----------- -----------
Cash position, end of period..... $ -- $ -- $ --
=========== =========== ===========
</TABLE>
15. SUBSEQUENT EVENTS:
In November, 1997, the Company agreed to sell for cash substantially all of
its assets and to cease operating. The sale resulted in the Company incurring a
loss before income taxes of approximately $1,600,000.
In December 1997, it was determined that the balance still owing at that
time from Blue Giant Europe was uncollectible and accordingly a write-off of
$120,000 was recorded.
In 1995, there was an industrial accident, as a consequence of which the
Ministry of Labour launched an action against the Company. In April 1998, this
action was settled, resulting in the Company having to pay an amount of $140,000
in excess of the amount accrued at June 28, 1997 and December 31, 1996.
F-47
<PAGE> 155
CLARK MATERIAL HANDLING COMPANY
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
(IN THOUSANDS)
The following unaudited pro forma combined financial information (the
"Unaudited Pro Forma Combined Financial Information") does not give effect to
the Offering or the Samsung Forklift Acquisition.
On November 7, 1997, CLARK closed its acquisitions of substantially all of
the assets and certain liabilities of Blue Giant USA Corporation ("BGU") and
Blue Giant Canada Limited ("BGC") (collectively, "Blue Giant") in two separate
purchase business combinations effective November 1, 1997. Although separate
legal entities, BGU and BGC were under the common control of substantially the
same stockholder group. The purchase price for the acquisitions comprised $9,365
in cash (of which $200 was paid to a shareholder of Blue Giant under a
noncompete agreement), an obligation payable over three years totaling $1,105
under a noncompete agreement and a consulting agreement with a shareholder of
Blue Giant and related expenses of $333. The purchase price was allocated to the
estimated fair value of the tangible and intangible net assets acquired, with
the residual being allocated to goodwill.
The Unaudited Pro Forma Combined Financial Information gives effect to the
acquisitions of BGU and BGC as if such events had occurred at the beginning of
each respective period. The Unaudited Pro Forma Combined Financial Information
has been derived from the application of pro forma adjustments to the historical
financial statements of the Company and Blue Giant. The Unaudited Pro Forma
Combined Financial Information reflects the effects of the purchase allocation
described above and the resultant amortization, along with other adjustments
directly attributable to the transaction. The pro forma adjustments are
described in the accompanying notes.
The Unaudited Pro Forma Combined Financial Information is presented for
informational purposes only and does not purport to represent what the Company's
results of operations would actually have been if the aforementioned events had
occurred on the dates specified or to project the Company's results of
operations for any future periods. The Unaudited Pro Forma Combined Financial
Information should be read in conjunction with the historical financial
statements of the Company, BGU and BGC, and notes thereto, included elsewhere
herein.
P-1
<PAGE> 156
CLARK MATERIAL HANDLING COMPANY
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
TWELVE MONTHS ENDED JUNE 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
TWELVE MONTHS FOUR MONTHS ENDED
ENDED OCTOBER 31, 1997(1)
JUNE 30, 1998 -------------------- PRO FORMA COMBINED
CLARK BGU BGC ADJUSTMENTS PRO FORMA
-------------- -------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Net sales.......................... $528,407 $5,418 $5,494 $(5,266)(2) $534,053
Cost of goods sold................. 463,221 4,308 5,044 (5,258)(2) 467,115
(250)(3)
35(4)
15(5)
-------- ------ ------ ------- --------
Gross profit....................... 65,186 1,110 450 192 66,938
Engineering, selling and
administrative expenses.......... 41,952 1,063 222 91(6) 43,328
-------- ------ ------ ------- --------
Income from operations............. 23,234 47 228 101 23,610
Other income (expense):
Interest income.................. 428 -- 14 (97)(7) 345
Interest expense................. (15,148) (42) (71) 113(8) (15,148)
Other income (expense) -- net.... 390 40 77 (250)(3) 257
-------- ------ ------ ------- --------
Income before income taxes......... 8,904 45 248 (133) 9,064
Provision for income taxes......... 821 14 74 (14)(9) 895
-------- ------ ------ ------- --------
Net income....................... $ 8,083 $ 31 $ 174 $ (119) $ 8,169
======== ====== ====== ======= ========
</TABLE>
P-2
<PAGE> 157
CLARK MATERIAL HANDLING COMPANY
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
TWELVE MONTHS ENDED JUNE 30, 1998
(IN THOUSANDS)
(1) The acquisition of BGU and BGC was effective November 1, 1997 and their
results of operations have been included in the consolidated statement of
operations of CLARK from that date.
(2) Eliminates intercompany sales and cost of goods sold between BGU and BGC.
(3) Reclassifies purchase discounts from other income to cost of goods sold. As
the Company is achieving greater success at reducing its material costs
through a reduction in the number of suppliers and increased discounts, the
amount of discounts are increasing. Accordingly, the Company intends to
record purchase discounts as cost of goods sold in the future. Purchase
discounts were not material in prior periods.
(4) Eliminates depreciation expense relative to BGU's manufacturing facility
($15) and increases rental expense relative to that facility ($50). Pursuant
to the transaction, CLARK is not acquiring BGU's manufacturing facility but
rather is leasing it over a five year term at $150 per annum.
(5) Reflects amortization of goodwill over an expected useful life of 40 years.
(6) Reflects amortization of noncompete agreements entered into with certain of
the sellers' shareholders.
(7) Reflects a reduction in interest income arising from the Company's use of
$9,698 in cash to acquire BGU and BGC.
(8) Removes the interest expense of BGU and BGC (as part of the transaction,
their short and long-term debt was not assumed by the Company).
(9) Adjusts income taxes to reflect (a) a lack of tax benefit associated with
the pro forma adjustments and (b) the elimination of the tax provision
relating to BGU. The Company is in a net NOL position in the United States
(where no provision for taxes currently payable is required) and has not
recorded a deferred tax provision because of the uncertainty surrounding the
ultimate realizability of the Company's net deferred tax assets. The tax
provision for BGC has not been adjusted because BGC operates in a foreign
tax jurisdiction.
P-3
<PAGE> 158
CLARK MATERIAL HANDLING COMPANY
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED TEN MONTHS ENDED
DECEMBER 31, OCTOBER 31, 1997(1)
1997 -------------------- PRO FORMA COMBINED
CLARK BGU BGC ADJUSTMENTS PRO FORMA
------------ -------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Net sales.......................... $489,294 $12,590 $12,705 $ (5,402)(2) $509,187
Cost of goods sold................. 431,127 9,893 10,728 (5,402)(2) 446,454
87(3)
21(4)
-------- ------- ------- ---------- --------
Gross profit..................... 58,167 2,697 1,977 (108) 62,733
Engineering, selling and
administrative expenses.......... 37,133 2,249 1,541 227(5) 41,150
-------- ------- ------- ---------- --------
Income from operations........... 21,034 448 436 (335) 21,583
Other income (expense):
Interest income.................. 809 -- 14 (258)(6) 565
Interest expense................. (15,086) (114) (174) 288(7) (15,086)
Other income (expense)-net....... 1,598 111 174 -- 1,883
-------- ------- ------- ---------- --------
Income before income taxes....... 8,355 445 450 (305) 8,945
Provision for income taxes......... 484 166 141 (166)(8) 625
-------- ------- ------- ---------- --------
Net income....................... $ 7,871 $ 279 $ 309 $ (139) $ 8,320
======== ======= ======= ========== ========
</TABLE>
P-4
<PAGE> 159
CLARK MATERIAL HANDLING COMPANY
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
(1) The acquisition of BGU and BGC was effective November 1, 1997, and their
results of operations have been included in the consolidated statement of
operations of CLARK from that date.
(2) Eliminates intercompany sales and cost of goods sold between BGU and BGC.
(3) Eliminates depreciation expense relative to BGU's manufacturing facility
($38) and increases rental expense relative to that facility ($125).
Pursuant to the transaction, CLARK did not acquire BGU's manufacturing
facility but rather is leasing it over a five year term at $150 per annum.
(4) Reflects amortization of goodwill over an expected useful life of 40 years.
(5) Reflects amortization of noncompete agreements entered into with certain of
the sellers' shareholders.
(6) Reflects a reduction in interest income arising from the Company's use of
$9,698 in cash to acquire BGU and BGC.
(7) Removes the interest expense of BGU and BGC (as part of the transaction,
their short and long-term debt was not assumed by the Company).
(8) Adjusts income taxes to reflect (a) a lack of tax benefit associated with
the pro forma adjustments and (b) the elimination of the tax provision
relating to BGU. The Company is in a net NOL position in the United States
(where no provision for taxes currently payable is required) and has not
recorded a deferred tax provision because of the uncertainty surrounding the
ultimate realizability of the Company's net deferred tax assets. The tax
provision for BGC has not been adjusted because BGC operates in a foreign
tax jurisdiction.
P-5
<PAGE> 160
- ------------------------------------------------------
- ------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THOSE TO WHICH IT
RELATES, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER
TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH SOLICITATION IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................ i
Disclosure Regarding Forward-Looking
Statements......................... ii
Summary.............................. 1
Risk Factors......................... 20
Use of Proceeds...................... 27
Capitalization....................... 28
Selected Historical Financial Data... 29
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 31
The Exchange Offers.................. 37
Certain Federal Income Tax
Considerations Relating to the
Exchange Offers.................... 47
Business............................. 48
The Samsung Forklift Acquisition..... 56
Management........................... 57
Ownership of the Company............. 60
Certain Relationships and Related
Transactions....................... 63
Description of Certain
Indebtedness....................... 65
Description of Notes................. 67
Description of Preferred Stock....... 86
Description of Preferred Stock
Exchange Notes..................... 92
Certain Federal Income Tax
Considerations..................... 97
Plan of Distribution................. 101
Legal Matters........................ 101
Independent Accountants.............. 101
Index to Financial Statements........ F-1
</TABLE>
UNTIL DECEMBER 17, 1998 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE NEW SECURITIES, WHETHER OR NOT
PARTICIPATING IN THE ORIGINAL DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
PROSPECTUS
[CLARK LOGO]
CLARK MATERIAL
HANDLING COMPANY
OFFER TO EXCHANGE
10 3/4% SERIES D SENIOR NOTES DUE 2006
FOR ALL OUTSTANDING
10 3/4% SERIES C SENIOR NOTES DUE 2006
AND
10 3/4% SERIES D SENIOR NOTES DUE 2006
FOR ALL OUTSTANDING
10 3/4% SERIES B SENIOR NOTES DUE 2006
AND
13% SENIOR EXCHANGEABLE SERIES B
PREFERRED STOCK DUE 2007
FOR ALL OUTSTANDING
13% SENIOR EXCHANGEABLE SERIES A
PREFERRED STOCK DUE 2007
SEPTEMBER 18, 1998
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 161
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law provides in relevant
part that a corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that such person is or was a director, officer, employee, or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action, suit or proceeding if
such person acted in good faith and in a manner such person reasonably believed
to be in or not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
such person's conduct was unlawful.
In addition, Section 145 provides that a corporation may indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person is or was a director, officer, employee or agent of the corporation, or
is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection with the defense or settlement
of such action or suit if such person acted in good faith and in a manner such
person reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Delaware Court
of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Delaware Court of Chancery or
such other court shall deem proper.
Section 145 further provides that nothing in the above-described provisions
shall be deemed exclusive of any other rights to indemnification or advancement
of expenses to which any person may be entitled under any bylaw, agreement, vote
of stockholders or disinterested directors or otherwise.
The By-laws of the Company provide for the indemnification of any person
who was or is party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that such person is or
was a director or officer of the Company or a constituent corporation absorbed
in a consolidation or merger, or is or was serving at the request of the Company
or a constituent corporation absorbed in a consolidation or merger, as a
director or officer of another corporation, partnership, joint venture, trust or
other enterprise, or is or was a director or officer of the Company serving at
its request as an administrator, trustee or other fiduciary of one or more of
the employee benefit plans of the Company or other enterprise, against expenses
(including attorneys' fees), liability and loss actually and reasonably incurred
or suffered by such person in connection with such proceedings, whether or not
the indemnified liability arises or arose from any threatened, pending or
completed proceeding by or in the right of the Company, except to the extent
that such indemnification is prohibited by applicable law. The By-laws of the
Company also provide that such indemnification shall not be deemed exclusive of
any other rights to which those indemnified may be entitled as a matter of law
or under any by-law, agreement, vote of stockholders or otherwise.
Section 102(b)(7) of the Delaware General Corporation Law provides that a
corporation may in its certificate of incorporation eliminate or limit the
personal liability of a director to the corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director except for
liability; for any breach of the director's duty of loyalty to the corporation
or its stockholders; for acts or omissions not in good faith or
II-1
<PAGE> 162
which involve intentional misconduct or a knowing violation of law; under
Section 174 of the Delaware General Corporation Law (pertaining to certain
prohibited acts including unlawful payment of dividends or unlawful purchase or
redemption of the corporation's capital stock); or for any transaction from
which the director derived an improper personal benefit. The Certificate of
Incorporation of the Company contains a provision so limiting the personal
liability of directors of the Company.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
3.1 Certificate of Incorporation, as amended, of the Company+
3.2 By-laws of the Company (incorporated by reference to Exhibit
3.2 to the Company's Registration Statement on Form S-4,
Registration No. 333-18957)
4.1 Indenture dated as of November 27, 1996 between the Company
and United States Trust Company of New York, as Trustee
(incorporated by reference to Exhibit 4.1 to the Company's
Registration Statement on Form S-4, Registration No.
333-18957)
4.2 Registration Rights Agreement dated as of November 27, 1996
among the Company, Jefferies & Company, Inc. and Bear,
Stearns & Co. Inc. (incorporated by reference to Exhibit 4.2
to the Company's Registration Statement on Form S-4,
Registration No. 333-18957)
4.3 Form of 10 3/4% Senior Notes due 2006 (included in Exhibit
4.1) (incorporated by reference to Exhibit 4.3 to the
Company's Registration Statement on Form S-4, Registration
No. 333-18957)
4.4 Indenture dated as of July 17, 1998 between the Company and
United States Trust Company of New York, as Trustee+
4.5 Registration Rights Agreement dated as of July 17, 1998
among the Company, Jeffries & Company, Inc. and Bear,
Stearns & Co. Inc.+
4.6 Registration Rights Agreement dated as of July 17, 1998
among the Company, Jeffries & Company, Inc. and Bear,
Stearns & Co. Inc.+
4.7 Form of 10 3/4% Senior Notes due 2006 (included in Exhibit
4.4)
4.8 Indenture dated as of July 17, 1998 between the Company and
U.S. Trust Company of Texas, N.A.+
4.9 First Supplemental Indenture dated as of August 18, 1998
between the Company and United States Trust Company of New
York, as Trustee+
5.1 Opinion of Dechert Price & Rhoads
5.2 Opinion of Michael J. Grossman, general counsel to the
Company
10.1 Purchase Agreement dated November 22, 1996 among the
Company, Jefferies & Company, Inc. and Bear, Stearns & Co.
Inc. (incorporated by reference to Exhibit 10.1 to the
Company's Registration Statement on Form S-4, Registration
No. 333-18957)
10.2 Loan and Security Agreement dated November 27, 1996 by and
between Congress Financial Corporation and the Company
(incorporated by reference to Exhibit 10.2 to the Company's
Registration Statement on Form S-4, Registration No.
333-18957)
10.3 Stock and Asset Purchase and Sale Agreement, dated as of
November 9, 1996 among Terex Corporation, and certain of its
subsidiaries and the Company (incorporated by reference to
Exhibit 10.3 to the Company's Registration Statement on Form
S-4, Registration No. 333-18957)
10.4 Service Agreement dated as of November 27, 1996 between
Terex Corporation and the Company (incorporated by reference
to Exhibit 10.4 to the Company's Registration Statement on
Form S-4, Registration No. 333-18957).
10.5 Indemnity as to Letters of Credit, Performance Bonds, Appeal
Bonds, Guaranties, etc. dated November 27, 1996 by the
Company in favor of Terex Corporation, for itself and as
successor to CMH Acquisition Corp., CMH Acquisition
International Corp., Clark Material Handling Company and
Clark Material Handling International, Inc. (incorporated by
reference to Exhibit 10.5 to the Company's Registration
Statement on Form S-4, Registration No. 333-18957)
10.6 Employment Agreement dated as of November 27, 1996 between
Holdings and Dr. Martin M. Dorio (incorporated by reference
to Exhibit 10.6 to the Company's Registration Statement on
Form S-4, Registration No. 333-18957)
</TABLE>
II-2
<PAGE> 163
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
10.7 Tax Sharing Agreement made as of November 27, 1996 between
Holdings and the Company (incorporated by reference to
Exhibit 10.7 to the Company's Registration Statement on Form
S-4, Registration No. 333-18957)
10.8 Stock Purchase Agreement, dated as of May 27, 1992, by and
between Clark Equipment Company and Terex Corporation
(incorporated by reference to Exhibit 10.8 to the Company's
Registration Statement on Form S-4, Registration No.
333-18957)
10.9 First Amendment to the Stock Purchase Agreement, dated as of
July 31, 1992, by and between Clark Equipment Company and
Terex Corporation (incorporated by reference to Exhibit 10.9
to the Company's Registration Statement on Form S-4,
Registration No. 333-18957)
10.10 Trademark Assignment Agreement, dated as of July 31, 1992,
by and between Clark Equipment Company and Clark Material
Handling Company (incorporated by reference to Exhibit 10.10
to the Company's Registration Statement on Form S-4,
Registration No. 333-18957)
10.11 Second Amended and Restated General Operating Agreement,
dated November 29, 1990, by and between Clark Material
Handling Company and Chase Manhattan Leasing Company, Inc.
(incorporated by reference to Exhibit 10.11 to the Company's
Registration Statement on Form S-4, Registration No.
333-18957)
10.12 Second Amendment to the Second Amended and Restated General
Operating Agreement, dated April 15, 1994, by and among
Clark Material Handling Company, Drexel Industries, Inc. and
Clark Credit Corporation (incorporated by reference to
Exhibit 10.12 to the Company's Registration Statement on
Form S-4, Registration No. 333-18957)
10.14 Assignment of Second Amended and Restated General Operating
Agreement, dated March 22, 1995, by and between Clark
Material Handling Company, Clark Credit Corporation, f/k/a
Chase Manhattan Leasing Company, and Associates Commercial
Corporation (incorporated by reference to Exhibit 10.14 to
the Company's Registration Statement on Form S-4,
Registration No. 333-18957)
10.15 Master Software License and Service Agreement, dated May 17,
1996, between Clark Material Handling Company and SDRC
Operations (incorporated by reference to Exhibit 10.15 to
the Company's Registration Statement on Form S-4,
Registration No. 333-18957)
10.16 Letter Agreement, dated October 26, 1995, between Clark
Material Handling Company, Manufacturers Distribution
Services, Inc. and Maine Rubber International (incorporated
by reference to Exhibit 10.16 to the Company's Registration
Statement on Form S-4, Registration No. 333-18957)
10.17 MCI Services Agreement, effective as of July 1, 1995,
between MCI Telecommunications Corporation and Clark
Material Handling Company (incorporated by reference to
Exhibit 10.17 to the Company's Registration Statement on
Form S-4, Registration No. 333-18957)
10.18 Agreement for Systems Operations Services, dated as of March
2, 1992, between Clark Material Handling Company and
Integrated Systems Solutions Corporation, as amended by
Amendments #1 through #5 (incorporated by reference to
Exhibit 10.18 to the Company's Registration Statement on
Form S-4, Registration No. 333-18957)
10.19 Supply Agreement, dated December 14, 1994, between Clark
Material Handling Company and Funk Manufacturing Company
(incorporated by reference to Exhibit 10.19 to the Company's
Registration Statement on Form S-4, Registration No.
333-18957)
10.20 Supply Agreement, dated July 1, 1995, between Clark Material
Handling Company and Funk Manufacturing Company
(incorporated by reference to Exhibit 10.20 to the Company's
Registration Statement on Form S-4, Registration No.
333-18957)
10.21 Agreement, dated June 1, 1983, between Clark Equipment
Company and Mitsubishi Corporation, Mitsubishi Heavy
Industries, Ltd. and Mitsubishi Motors Corporation, as
amended (incorporated by reference to Exhibit 10.24 to the
Company's Registration Statement on Form S-4, Registration
No. 333-18957)
10.22 Master Contract for Purchase and Sale, dated July 17, 1995,
between Clark Material Handling Company and Custom Tool and
Manufacturing Company (incorporated by reference to Exhibit
10.25 to the Company's Registration Statement on Form S-4,
Registration No. 333-18957)
10.23 Supply Agreement, dated December 20, 1991, between Clark
Material Handling Company and Dixson, Inc. (incorporated by
reference to Exhibit 10.26 to the Company's Registration
Statement on Form S-4, Registration No. 333-18957)
</TABLE>
II-3
<PAGE> 164
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
10.24 Lease Agreement, dated as of April 15, 1987, between Vergil
D. Kelly and Kenny Angelucci and Clark Equipment Company
with respect to 172 Trade Street, Lexington, Kentucky, as
amended by Amendment #1 to Lease dated April 15, 1987
(incorporated by reference to Exhibit 10.27 to the Company's
Registration Statement on Form S-4, Registration No.
333-18957)
10.25 Standard Form Dealer Sales Agreements between Clark Material
Handling Company and domestic dealer entities (incorporated
by reference to Exhibit 10.28 to the Company's Registration
Statement on Form S-4, Registration No. 333-18957)
10.26 Agreement, dated as of September 12, 1995, by and between
Clark Material Handling Company and Nissan Forklift
Corporation, North America (incorporated by reference to
Exhibit 10.29 to the Company's Registration Statement on
Form S-4, Registration No. 333-18957)
10.27 License Agreement, dated as of November 27, 1996, between
Holdings and the Company (incorporated by reference to
Exhibit 10.30 to the Company's Registration Statement on
Form S-4, Registration No. 333-18957)
10.28 Asset Purchase Agreement, dated as of November 6, 1997,
between Clark Material Handling of Canada Ltd. and Blue
Giant Limited (incorporated by reference to Exhibit 10.28 to
the Company's Annual Report on Form 10-K for the year ended
December 31, 1997)
10.29 Asset Purchase Agreement, dated as of October 31, 1997,
between Blue Giant Corporation and Blue Giant USA
Corporation (incorporated by reference to Exhibit 10.29 to
the Company's Annual Report on Form 10-K for the year ended
December 31, 1997)
10.30 Asset Purchase Agreement, dated as of June 5, 1998, by and
between the Company and Samsung Heavy Industries Co., Ltd.+
10.31 Purchase Agreement dated as of July 13, 1998 among the
Company, Jeffries & Company, Inc. and Bear, Stearns, & Co.
Inc.+
12.1 Statement of Ratio of Earnings to Fixed Charges+
21.1 Subsidiaries of the Company+
23.1 Consent of Dechert Price & Rhoads (included in Exhibit 5.1)
23.2 Consent of PricewaterhouseCoopers LLP
23.3 Consent of Raughton & Company
23.4 Consent of KPMG
23.5 Consent of Michael J. Grossman, general counsel to the
Company (included in Exhibit 5.2)
24 Power of Attorney+
25 Statement of Eligibility and Qualification, Form T-1, of
United States Trust Company of New York+
99.1 Form of C Note Letter of Transmittal
99.2 Form of Notice of Guaranteed Delivery for the Series C Notes
99.3 Form of B Note Letter of Transmittal
99.4 Form of Notice of Guaranteed Delivery for the Series B Notes
99.5 Form of Preferred Stock Letter of Transmittal
99.6 Form of Notice of Guaranteed Delivery for the Preferred
Stock
</TABLE>
- ---------------
+ Previously filed.
(b) Financial Statements Schedules:
Schedules not listed above are omitted because of the absence of the
conditions under which they are required or because the information required by
such omitted schedules is set forth in the financial statements or the notes
thereto.
II-4
<PAGE> 165
ITEM 22. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and
(iii) to include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
(2) that, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof; and
(3) to remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(c) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this Form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through the date
of responding to the request.
(d) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-5
<PAGE> 166
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment No. 1 to the Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Lexington, State of Kentucky, on the 18th day of September, 1998.
CLARK MATERIAL HANDLING COMPANY
By: DR. MARTIN M. DORIO
------------------------------------
Dr. Martin M. Dorio
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to the Registration Statement has been signed below by the
following persons in the capacities indicated on September 18, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
MARTIN M. DORIO President and Chief Executive Officer and
- --------------------------------------------------- Director (Principal Executive Officer)
Dr. Martin M. Dorio
* Vice President, Finance, and Treasurer
- --------------------------------------------------- (Principal Financial and Accounting Officer)
Joseph F. Lingg
* Director
- ---------------------------------------------------
Thomas J. Snyder
* Director
- ---------------------------------------------------
Michael A. Delaney
* Director
- ---------------------------------------------------
James A. Urry
* Director
- ---------------------------------------------------
Diether Klingelnberg
*By: MARTIN M. DORIO
---------------------------------------------
Dr. Martin M. Dorio
Attorney-in-Fact
</TABLE>
II-6
<PAGE> 167
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
below-named Registrant has duly caused this Amendment No. 1 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Lexington, State of Kentucky, on the 18th day of
September, 1998.
BLUE GIANT CORPORATION
By: DR. MARTIN M. DORIO
------------------------------------
Dr. Martin M. Dorio
President
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to the Registration Statement has been signed below by the
following persons in the capacities indicated on September 18, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
MARTIN M. DORIO President and Director
- --------------------------------------------------- (Principal Executive Officer)
Dr. Martin M. Dorio
JOSEPH F. LINGG Vice President, Treasurer, Controller
- --------------------------------------------------- (Principal Financial and Accounting Officer)
Joseph F. Lingg
</TABLE>
II-7
<PAGE> 168
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
below-named Registrant has duly caused this Amendment No. 1 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Lexington, State of Kentucky, on the 18th day of
September, 1998.
HYDROLECTRIC LIFT TRUCKS, INC.
By: DR. MARTIN M. DORIO
------------------------------------
Dr. Martin M. Dorio
President
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to the Registration Statement has been signed below by the
following persons in the capacities indicated on September 18, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
MARTIN M. DORIO President and Director
- --------------------------------------------------- (Principal Executive Officer)
Dr. Martin M. Dorio
JOSEPH F. LINGG Vice President, Treasurer, Controller
- --------------------------------------------------- (Principal Financial and Accounting Officer)
Joseph F. Lingg
</TABLE>
II-8
<PAGE> 1
EXHIBIT 5.1
[LETTERHEAD OF DECHERT PRICE & RHOADS]
September 18, 1998
CLARK Material Handling Company
Blue Giant Corporation
Hydrolectric Lift Trucks, Inc.
172 Trade Street
Lexington, Kentucky 40511
Re: CLARK Material Handling Company
Form S-4 Registration Statement
Registration No. 333-62845
Gentlemen and Ladies:
We have acted as special counsel for CLARK Material Handling
Company, a Delaware corporation (the "Issuer"), Blue Giant Corporation, a
Delaware corporation ("Blue Giant"), and Hydrolectric Lift Trucks, Inc., an Ohio
corporation ("HLT"), in connection with the filing by the Issuer, Blue Giant and
HLT of a Registration Statement on Form S-4 (Registration No. 333-62845) (the
"Registration Statement") with the Securities and Exchange Commission for the
purpose of registering the issuance of up to $150,000,000 aggregate principal
amount of the Issuer's 10-3/4% Senior Notes Due 2006 (the "Exchange Notes"), the
guarantees thereof by Blue Giant (the "Blue Giant Exchange Guarantee") and HLT
(the "HLT Exchange Guarantee", and together with the Blue Giant Exchange
Guarantee, the "Exchange Guarantees") and up to $40,000,000 aggregate
liquidation preference amount of the Issuer's 13% Senior Exchangeable Preferred
Stock Due 2007 (the "Exchange Preferred Stock") under the Securities Act of
1933, as amended (the "Act"). The Exchange Notes are to be issued in exchange
for an equal aggregate principal amount of the Issuer's
<PAGE> 2
CLARK Material Handling Company
Blue Giant Corporation
Hydrolectric Lift Trucks, Inc.
September 18, 1998
Page 2
outstanding 10-3/4% Senior Notes Due 2006 (the "Existing Notes") and the
Guarantors' guarantee thereof pursuant to the Registration Rights Agreement
among the Issuer, Jefferies & Company, Inc. ("Jefferies") and Bear, Stearns &
Co. Inc. ("Bear Stearns") filed as Exhibit 4.5 to the Registration Statement.
The Exchange Preferred Stock is to be issued in exchange for an equal aggregate
liquidation preference amount of the Issuer's outstanding 13% Senior
Exchangeable Preferred Stock Due 2007 (the "Existing Preferred Stock") pursuant
to the Registration Rights Agreement among the Issuer, Jefferies and Bear
Stearns filed as Exhibit 4.6 to the Registration Statement. As used herein, Blue
Giant and HLT are hereinafter sometimes referred to individually as a
"Guarantor" and collectively as the "Guarantors." The Exchange Notes and
Exchange Guarantees are to be issued pursuant to the terms of the indenture (the
"Indenture") among the Issuer, the Guarantors and United States Trust Company of
New York, as trustee (the "Trustee"), filed as Exhibit 4.4 to the Registration
Statement, as amended by the First Supplemental Indenture (the "First
Supplemental Indenture") among the Issuer, the Guarantors and the Trustee, filed
as Exhibit 4.9 to the Registration Statement. As used herein, the Indenture and
the First Supplemental Indenture shall hereafter be referred to collectively as
the "Indenture". The Indenture is to be qualified under the Trust Indenture Act
of 1939, as amended (the "TIA").
In connection with the foregoing, we have reviewed such
records, documents, agreements and certificates, and examined such questions of
law, as we have considered necessary or appropriate for the purpose of this
opinion. In making our examination of records, documents, agreements and
certificates, we have assumed the authenticity of the same, the correctness of
the information contained therein, the genuineness of all signatures, the
authority of all persons entering and maintaining records or executing
documents, agreements and certificates (other than persons executing documents,
agreements and certificates on behalf of the Issuer, Blue Giant and HLT), and
the conformity to authentic originals of all items submitted to us as copies
(whether certified, conformed, photostatic or by other electronic means) of
records, documents, agreements or certificates. In rendering our opinion, we
have relied as to factual matters upon certificates of public officials and
certificates and representations of officers of the Issuer and the Guarantors.
We have assumed that the Indenture has been duly authorized,
executed and delivered by the Trustee and constitutes a legal, valid and binding
agreement of the Trustee. In addition, we have assumed that there will be no
changes in applicable law between the date of this opinion and the date of
issuance and delivery of the Exchange Notes and the Exchange Guarantees.
Based upon the foregoing, and having regard for such
additional legal considerations as we deem relevant, we are of the opinion that:
1. The Exchange Notes have been duly authorized by the Issuer
and when the Registration Statement has been declared effective, when the
Indenture has been duly qualified under the TIA, when the Exchange Notes have
been duly executed by the Issuer and when the Exchange Notes have been duly
authenticated by the Trustee in accordance with the terms of the
<PAGE> 3
CLARK Material Handling Company
Blue Giant Corporation
Hydrolectric Lift Trucks, Inc.
September 18, 1998
Page 3
Indenture and issued and delivered against exchange of the Existing Notes in
accordance with the terms set forth in the prospectus which is included in the
Registration Statement, the Exchange Notes will be valid and binding obligations
of the Issuer, subject to bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance, fraudulent transfer and similar laws affecting creditors'
rights and remedies generally and general principles of equity.
2. The Exchange Guarantees have been duly authorized by Blue
Giant and HLT, as applicable, and when the Registration Statement has been
declared effective, when the Indenture has been duly qualified under the TIA,
when the Exchange Notes have been duly executed by the Issuer, when the Exchange
Guarantees have been duly executed by the applicable Guarantor and when the
Exchange Notes have been duly authenticated by the Trustee in accordance with
the terms of the Indenture and issued and delivered against exchange of the
Existing Notes in accordance with the terms set forth in the prospectus which is
included in the Registration Statement, the Exchange Guarantees will constitute
the legal, valid and binding obligation of each applicable Guarantor in
accordance with its terms, subject to bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance, fraudulent transfer and similar laws
affecting creditors' rights and remedies generally and general principles of
equity.
3. The Exchange Preferred Stock, when issued and delivered
against exchange of Existing Preferred Stock in accordance with the terms set
forth in the prospectus which is included in the Registration Statement, will be
duly authorized, validly issued, fully paid and non-assessable.
In rendering our opinion as to HLT and paragraph 2 of this
opinion letter, we have relied solely on the opinion of Michael J. Grossman,
Esq., Vice President and General Counsel, CLARK Material Handling Company, of
even date herewith. A copy of Mr. Grossman's opinion is attached hereto, and our
opinion is subject to any qualifications set forth therein.
This opinion is rendered to the Issuer and the Guarantors in
connection with the filing of the Registration Statement and for no other
purpose. We express no opinion as to the laws of any jurisdiction other than the
laws of the United States of America, the State of New York and the General
Corporation Law of the State of Delaware.
We hereby consent to the filing of this opinion as Exhibit 5.1
to the Registration Statement and to the use of our name under the caption
"Legal Matters" in the prospectus which is included in the Registration
Statement.
Very truly yours,
/s/ Dechert Price & Rhoads
<PAGE> 1
EXHIBIT 5.2
[LETTERHEAD OF CLARK MATERIAL HANDLING COMPANY]
September 18, 1998
Hydrolectric Lift Trucks, Inc.
172 Trade Street
Lexington, Kentucky 40511
Dechert Price & Rhoads
4000 Bell Atlantic Tower
1717 Arch Street
Philadelphia, PA 19103
Re: CLARK Material Handling Company
Form S-4 Registration Statement
Registration No. 333-62845
Gentlemen and Ladies:
I have acted as general counsel for Hydrolectric Lift Trucks,
Inc. ("HLT"), in connection with the filing by CLARK Material Handling Company,
a Delaware corporation (the "Issuer"), Blue Giant Corporation, a Delaware
corporation ("Blue Giant"), and HLT of a Registration Statement on Form S-4
(Registration No. 333-62845) (the "Registration Statement"), with the Securities
and Exchange Commission for the purpose of registering the issuance of up to
$150,000,000 aggregate principal amount of the Issuer's 10-3/4% Senior Notes Due
2006 (the "Exchange Notes") and the guarantees thereof by HLT (the "HLT Exchange
Guarantee") and Blue Giant under the Securities Act of 1933, as amended (the
"Act"). The Exchange Notes are to be issued in exchange for an equal aggregate
principal amount of the Issuer's outstanding 10-3/4% Senior Notes Due 2006 (the
"Existing Notes") and HLT's and Blue Giant's guarantees thereof pursuant to the
Registration Rights Agreement among the Issuer, Jefferies & Company, Inc. and
Bear, Stearns & Co. Inc. filed as Exhibit 4.5 to the Registration Statement. The
Exchange Notes and HLT Exchange Guarantee are to be issued pursuant to the terms
of the indenture (the "Indenture") among the Issuer, Blue Giant, HLT and United
States Trust Company of New York, as trustee (the "Trustee"), filed as Exhibit
4.4 to the Registration Statement, as amended by the First Supplemental
Indenture (the "First Supplemental Indenture") among the Issuer, the Guarantors
and the Trustee, filed as Exhibit 4.9 to the Registration Statement. As used
herein, the Indenture and the First Supplemental Indenture shall hereafter be
referred to collectively as the "Indenture". The Indenture is to be qualified
under the Trust Indenture Act of 1939, as amended (the "TIA").
<PAGE> 2
Hydrolectric Lift Trucks, Inc.
September 18, 1998
Page 2
In connection with the foregoing, I have reviewed such
records, documents, agreements and certificates, and examined such questions of
law, as I have considered necessary or appropriate for the purpose of this
opinion. In making my examination of records, documents, agreements and
certificates, I have assumed the authenticity of the same, the correctness of
the information contained therein, the genuineness of all signatures, the
authority of all persons entering and maintaining records or executing
documents, agreements and certificates (other than persons executing documents,
agreements and certificates on behalf of HLT), and the conformity to authentic
originals of all items submitted to me as copies (whether certified, conformed,
photostatic or by other electronic means) of records, documents, agreements or
certificates. In rendering my opinion, I have relied as to factual matters upon
certificates of public officials and certificates and representations of
officers of HLT.
Based upon the foregoing, I am of the opinion that the
Exchange Guaranty has been duly authorized by HLT.
This opinion is rendered to HLT and Dechert Price & Rhoads
("DP&R") in connection with the filing of the Registration Statement. DP&R may
rely on this opinion for the sole purpose of rendering its opinion of even date
herewith in connection with the filing of the Registration Statement. This
opinion may not be relied upon by DP&R for any other purpose, or relied upon by
any other person, firm or corporation (other than HLT) for any purpose without
my prior written consent. I express no opinion as to the laws of any
jurisdiction other than the laws of the United States of America and, solely to
the limited extent necessary to give the opinion expressed herein and for no
other purposes whatsoever, the Ohio General Corporation Law.
I hereby consent to the filing of this opinion as Exhibit 5.2
to the Registration Statement and to the use of my name under the caption "Legal
Matters" in the prospectus which is included in the Registration Statement. In
giving the foregoing consent, I do not admit that I come within the category of
persons whose consent is required by the Act or the rules and regulations
promulgated thereunder.
Very truly yours,
CLARK Material Handling Company
/s/ Michael J. Grossman
Michael J. Grossman
Vice President, Secretary and General Counsel
<PAGE> 1
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-4 of CLARK Material Handling Company of our
report dated February 24, 1998 relating to the financial statements of CLARK
Material Handling Company, which appears in such Prospectus. We also consent to
the reference to us under the heading "Independent Accountants" in such
Prospectus.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Cincinnati, Ohio
September 17, 1998
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Amendment #1 to Form S-4 of Clark Material Handling
Company of our report dated March 21, 1997 relating to the financial statements
of Blue Giant USA Corporation, which appears in such Prospectus. We also consent
to the reference to us under the heading "Independent Accountants" in such
Prospectus.
/s/ RAUGHTON & COMPANY
Raughton & Company
Pell City, Alabama
September 17, 1998
<PAGE> 1
Exhibit 23.4
The Board of Directors
Blue Giant Canada Limited
We consent to the inclusion of our report dated February 20, 1997 except for
note 15 which is as of April 8, 1998, with respect to the balance sheet of Blue
Giant Canada Limited as of December 31, 1996 and the statements of earnings and
retained earnings and changes in financial position for the year then ended,
which report appears in the Form S-4 of Clark Material Handling Company.
KPMG
Chartered Accountants
Richmond Hill, Canada
September 17, 1998
<PAGE> 1
EXHIBIT 99.1
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON OCTOBER 23,
1998, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS OF EXISTING NOTES MAY BE
WITHDRAWN AT ANY TIME PRIOR TO 5:00 P.M. ON THE EXPIRATION DATE.
CLARK MATERIAL HANDLING COMPANY
LETTER OF TRANSMITTAL
10 3/4% SENIOR NOTES DUE 2006
TO: UNITED STATES TRUST COMPANY OF NEW YORK,
THE EXCHANGE AGENT
<TABLE>
<S> <C>
By Registered or Certified Mail: By Overnight Courier or By Hand After 4:30 PM on the Expiration Date Only:
United States Trust Company of New York United States Trust Company of New York
P.O. Box 844 770 Broadway, 13th Floor
Cooper Station New York, New York 10003
New York, New York 10276-0844 Attn: Corporate Trust Services
Attn: Corporate Trust Services
By Hand Up to 4:30 PM: By Facsimile:
United States Trust Company of New York United States Trust Company of New York
111 Broadway, Lower Level (212) 780-0582
New York, New York 10003 Attn: Corporate Trust Services
Corporate Trust Services
Confirm by telephone:
(800) 548-6565
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONE LISTED
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS ACCOMPANYING THIS
LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL
IS COMPLETED.
HOLDERS WHO WISH TO BE ELIGIBLE TO RECEIVE NEW NOTES FOR THEIR EXISTING
NOTES PURSUANT TO THE EXCHANGE OFFER MUST VALIDLY TENDER (AND NOT WITHDRAW)
THEIR EXISTING NOTES TO THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE.
The undersigned acknowledges receipt of the Prospectus dated September 18,
1998 (the "Prospectus") of CLARK MATERIAL HANDLING COMPANY (the "Company") and
this Letter of Transmittal (the "Letter of Transmittal"), which together
constitute the Company's Offer to Exchange (the "Exchange Offer") $1,000
principal amount of its 10 3/4% Series D Senior Notes due 2006 (the "New
Notes"), which have been registered under the Securities Act of 1933, as amended
(the "Securities Act"), pursuant to a Registration Statement of which the
Prospectus is a part, for each $1,000 principal amount of its outstanding 10
3/4% Series C Senior Notes due 2006 (the "Existing Notes"), of which $20,000,000
principal amount is outstanding, upon the terms and conditions set forth in the
Prospectus. Other capitalized terms used but not defined herein have the meaning
given to them in the Prospectus.
<PAGE> 2
For each Existing Note accepted for exchange, the holder of such Existing
Note will receive a New Note having a principal amount equal to that of the
surrendered Existing Note. Interest on the New Notes will accrue from the last
interest payment date on which interest was paid on the Existing Notes
surrendered in exchange therefor or, if no interest has been paid on the
Existing Notes, from the date of original issue of the Existing Notes. Holders
of Existing Notes accepted for exchange will be deemed to have waived the right
to receive any other payments or accrued interest on the Existing Notes. The
Company reserves the right, at any time or from time to time, to extend the
Exchange Offer at its discretion, in which event the term "Expiration Date"
shall mean the latest time and date to which the Exchange Offer is extended. The
Company shall notify holders of the Existing Notes of any extension by means of
a press release or other public announcement prior to 9:00 A.M., New York City
time, on the next business day after the previously scheduled Expiration Date.
This Letter of Transmittal is to be used by Holders if: (i) certificates
representing Existing Notes are to be physically delivered to the Exchange Agent
herewith by Holders; (ii) tender of Existing Notes is to be made by book-entry
transfer to the Exchange Agent's account at The Depository Trust Company
("DTC"), pursuant to the procedures set forth in the Prospectus under "The
Exchange Offer -- Procedures for Tendering" by any financial institution that is
a participant in DTC and whose name appears on a security position listing as
the owner of Existing Notes or (iii) tender of Existing Notes is to be made
according to the guaranteed delivery procedures set forth in the prospectus
under "The Exchange Offer -- Guaranteed Delivery Procedures." DELIVERY OF
DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
The term "Holder" with respect to the Exchange Offer means any person: (i)
in whose name Existing Notes are registered on the books of the Company or any
other person who has obtained a properly completed bond power from the
registered Holder; or (ii) whose Existing Notes are held of record by DTC who
desires to deliver such Existing Notes by book-entry transfer at DTC. The
undersigned has completed, executed and delivered this Letter of Transmittal to
indicate the action the undersigned desires to take with respect to the Exchange
Offer.
<PAGE> 3
The instructions included with this Letter of Transmittal must be followed.
Questions and requests for assistance or for additional copies of the
Prospectus, this Letter of Transmittal and the Notice of Guaranteed Delivery may
be directed to the Exchange Agent. See Instruction 10 herein.
HOLDERS WHO WISH TO ACCEPT THE EXCHANGE OFFER
AND TENDER THEIR EXISTING NOTES MUST COMPLETE THIS
LETTER OF TRANSMITTAL IN ITS ENTIRETY.
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE CHECKING ANY BOX BELOW
- --------------------------------------------------------------------------------
DESCRIPTION OF 10 3/4% SENIOR NOTES DUE 2006 (EXISTING NOTES)
<TABLE>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
AGGREGATE PRINCIPAL PRINCIPAL AMOUNT
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) CERTIFICATE AMOUNT REPRESENTED BY TENDERED (IF LESS THAN
(PLEASE FILL IN, IF BLANK) NUMBER(S)* CERTIFICATE(S) ALL)**
------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed by Holders tendering by book-entry transfer.
** Unless indicated in the column labeled "Principal Amount Tendered," any
tendering Holder of Existing Notes will be deemed to have tendered the
entire aggregate principal amount represented by the column labeled
"Aggregate Principal Amount Represented by Certificate(s)." If the space
provided above is inadequate, list the certificate numbers and principal
amounts on a separate signed schedule and affix the list to this Letter of
Transmittal.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 4
------------------------------------------------------------
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 4, 5 AND 6)
To be completed ONLY if certificates for Existing Notes in a
principal amount not tendered or not accepted for exchange, or New Notes
issued in exchange for Existing Notes accepted for exchange, are to be
issued in the name of someone other than the undersigned, or if the
Existing Notes tendered by book-entry transfer that are not accepted for
exchange are to be credited to an account maintained by DTC.
Issue certificate(s) to:
Name:
---------------------------------------------------
Address:
-------------------------------------------------
------------------------------------------------------------
(INCLUDE ZIP CODE)
------------------------------------------------------------
(TAX IDENTIFICATION OR
SOCIAL SECURITY NO.)
------------------------------------------------------------
------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 4, 5 AND 6)
To be completed ONLY if certificates for Existing Notes in a principal
amount not tendered or not accepted for exchange, are to be sent to someone
other than the undersigned, or to the undersigned at an address other than
that shown above.
Mail to:
Name:
---------------------------------------------------
Address:
-------------------------------------------------
------------------------------------------------------------
(INCLUDE ZIP CODE)
------------------------------------------------------------
(TAX IDENTIFICATION OR
SOCIAL SECURITY NO.)
------------------------------------------------------------
<PAGE> 5
[ ] CHECK HERE IF TENDERED EXISTING NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER TO THE EXCHANGE AGENT'S ACCOUNT AT DTC AND COMPLETE THE FOLLOWING:
Name of Tendering Institution:
-----------------------------------------------------------------------------
DTC Book-Entry Account No.:
-----------------------------------------------------------------------------
Transaction Code No.:
-----------------------------------------------------------------------------
[ ] CHECK HERE IF TENDERED EXISTING NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND
COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s):
-----------------------------------------------------------------------------
Window Ticket Number (if any):
-----------------------------------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery:
-----------------------------------------------------------------
IF DELIVERED BY BOOK-ENTRY TRANSFER, COMPLETE THE FOLLOWING:
<TABLE>
<S> <C>
Account Number: --------------------------- Transaction Code Number: ---------------------------
</TABLE>
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name:
-----------------------------------------------------------------------------
Address:
-----------------------------------------------------------------------------
<PAGE> 6
Ladies and Gentlemen:
Subject to the terms and conditions of the Exchange Offer, the undersigned
hereby tenders to the Company the principal amount of Existing Notes indicated
above. Subject to and effective upon the acceptance for exchange of the
principal amount of Existing Notes tendered in accordance with this Letter of
Transmittal, the undersigned sells, assigns and transfers to, or upon the order
of, the Company all right, title and interest in and to the Existing Notes
tendered hereby. The undersigned hereby irrevocably constitutes and appoints the
Exchange Agent its agent and attorney-in-fact (with full knowledge that the
Exchange Agent also acts as the agent of the Company and as Trustee under the
indenture for the Existing Notes and New Notes) with respect to the tendered
Existing Notes with full power of substitution to (i) deliver certificates for
such Existing Notes to the Company, or transfer ownership of such Existing Notes
on the account books maintained by DTC and deliver all accompanying evidence of
transfer and authenticity to, or upon the order of, the Company and (ii) present
such Existing Notes for transfer on the books of the Company and receive all
benefits and otherwise exercise all rights of beneficial ownership of such
Existing Notes, all in accordance with the terms and subject to the conditions
of the Exchange Offer. The power of attorney granted in this paragraph shall be
deemed irrevocable and coupled with an interest.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Existing Notes
tendered hereby and that the Company will acquire good and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances and
not subject to any adverse claim, when the same are acquired by the Company. The
undersigned hereby further represents that any New Notes acquired in exchange
for Existing Notes tendered hereby will have been acquired in the ordinary
course of business of the Holder receiving such New Notes, whether or not such
person is the Holder, that neither the Holder nor any such other person has any
arrangement or understanding with any person to participate in the distribution
of such New Notes within the meaning of the Securities Act of 1993, as amended,
and that neither the Holder nor any such other person is an "affiliate," as
defined in Rule 405 under the Securities Act, of the Company or any of its
subsidiaries.
The undersigned also acknowledges that this Exchange Offer is being made in
reliance on an interpretation by the staff of the Securities and Exchange
Commission (the "SEC") that the New Notes issued in exchange for the Existing
Notes pursuant to the Exchange Offer may be offered for resale, resold and
otherwise transferred by holders thereof (other than any such holder that is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act), without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such New Notes are acquired in
the ordinary course of such holders' business, such holders are not engaging in
and do not intend to engage in a distribution of the New Securities and such
holders have no arrangements with any person to participate in the distribution
of such New Notes. If the undersigned is not a broker-dealer, the undersigned
represents that it is not engaged in, and does not intend to engage in, a
distribution of New Notes. If the undersigned is a broker-dealer that will
receive New Notes for its own account in exchange for Existing Notes that were
acquired as a result of market-making activities or other trading activities, it
acknowledges that it will deliver a prospectus in connection with any resale of
such New Notes; however, by so acknowledging and by delivering a prospectus, the
undersigned will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. The undersigned also acknowledges and agrees that
any person who is a broker-dealer registered under the Exchange Act or is
participating in the Exchange Offer for the purposes of distributing the New
Notes must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any secondary resale transaction of the
New Notes acquired by such person and cannot rely on the position of the staff
at the Commission set forth in certain no-action letters. The undersigned
understands that a secondary resale transaction described in the previous
sentence and any resale of New Notes obtained by such holder or other person in
exchange for Existing Notes acquired by such holder or other person directly
from the Company should be covered by an effective registration statement
containing the selling securityholder information required by Item 507 or Item
508, as applicable, of Regulation S-K of the Commission.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Exchange Agent or the Company to be necessary or
desirable to complete the assignment, transfer and purchase of the Existing
Notes tendered hereby. All authority conferred or agreed to be conferred by this
Letter of Transmittal shall survive the death, incapacity or dissolution of the
undersigned and every obligation of the undersigned under this Letter of
Transmittal shall be binding upon the undersigned's heirs, personal
representatives, successors and assigns, trustees in bankruptcy or other legal
representatives of the undersigned. This tender may be withdrawn only in
accordance with the procedures set forth in "The Exchange Offers -- Withdrawal
Rights" section of the Prospectus.
For purposes of the Exchange Offer, the Company shall be deemed to have
accepted validly tendered Existing Notes when, as and if the Company has given
oral or written notice thereof to the Exchange Agent.
<PAGE> 7
If any tendered Existing Notes are not accepted for exchange pursuant to
the Exchange Offer for any reason, certificates for any such unaccepted Existing
Notes will be returned (except as noted below with respect to tenders through
DTC), without expense, to the undersigned at the address shown below or at a
different address as may be indicated under "Special Delivery Instructions" as
promptly as practicable after the Expiration Date.
The undersigned understands that tenders of Existing Notes pursuant to the
procedures described under the caption "The Exchange Offers -- Procedures for
Tendering" in the Prospectus and in the instructions hereto will constitute a
binding agreement between the undersigned and the Company upon the terms and
subject to the conditions of the Exchange Offer.
Unless otherwise indicated under "Special Payment Instructions," please
issue the certificates representing the New Notes issued in exchange for the
Existing Notes accepted for exchange and return any Existing Notes not tendered
or not exchanged in the name(s) of the undersigned (or in either such event in
the case of the Existing Notes tendered through DTC, by credit to the
undersigned's account, at DTC). Similarly, unless otherwise indicated under
"Special Delivery Instructions," please send the certificates representing the
New Notes issued in exchange for the Existing Notes accepted for exchange and
any certificates for Existing Notes not tendered or not exchanged (and
accompanying documents, as appropriate) to the undersigned at the address shown
below the undersigned's signature(s), unless, in either event, tender is being
made through DTC. In the event that both "Special Payment Instructions" and
"Special Delivery Instructions" are completed, please issue the certificates
representing the New Notes issued in exchange for the Existing Notes accepted
for exchange and return any Existing Notes not tendered or not exchanged in the
name(s) of, and send said certificates to, the person(s) so indicated. The
undersigned recognizes that the Company has no obligation pursuant to the
"Special Payment Instructions" and "Special Delivery Instructions" to transfer
any Existing Notes from the name of the registered Holder(s) thereof if the
Company does not accept for exchange any of the Existing Notes so tendered.
Holders of Existing Notes who wish to tender their Existing Notes and (i)
whose Existing Notes are not immediately available or (ii) who cannot deliver
their Existing Notes, this Letter of Transmittal or any other documents required
hereby to the Exchange Agent, or cannot complete the procedure for book-entry
transfer, prior to the Expiration Date, may tender their Existing Notes
according to the guaranteed delivery procedures set forth in the Prospectus
under the caption "The Exchange Offers -- Guaranteed Delivery Procedures." See
Instruction 1 regarding the completion of the Letter of Transmittal printed
below.
<PAGE> 8
PLEASE SIGN HERE WHETHER OR NOT
EXISTING NOTES ARE BEING PHYSICALLY TENDERED HEREBY
<TABLE>
<S> <C>
X ___________________________________________________ Date _____________________________
X ___________________________________________________ Date _____________________________
Signature(s) of Registered Holder(s)
Or Authorized Signatory
Area Code and Telephone Number: ___________________________________________
</TABLE>
The above lines must be signed by the registered Holder(s) of Existing
Notes as their name(s) appear(s) on the Existing Notes or, if the Existing Notes
are tendered by a participant in DTC, as such participant's name appears on a
security position listing as the owner of Existing Notes, or by person(s)
authorized to become registered Holder(s) by a properly completed bond power
from the registered Holder(s), a copy of which must be transmitted with this
Letter of Transmittal. If Existing Notes to which this Letter of Transmittal
relates are held of record by two or more joint Holders, then all such holders
must sign this Letter of Transmittal. If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation or other
person acting in a fiduciary or representative capacity, such person must (i)
set forth his or her full title below and (ii) unless waived by the Company,
submit evidence satisfactory to the Company of such person's authority to act.
See Instruction 4 regarding the completion of this Letter of Transmittal printed
below.
Name(s): ______________________________________________________________________
(Please Print)
Capacity:______________________________________________________________________
Address: ______________________________________________________________________
(Include Zip Code)
Signature(s) Guaranteed by an Eligible Institution:
(If required by Instruction 4)
_______________________________________________________________________________
(Authorized Signature)
_______________________________________________________________________________
(Title)
_______________________________________________________________________________
(Name of Firm)
Dated: ______________________________
<PAGE> 9
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER AND EXISTING NOTES; GUARANTEED DELIVERY
PROCEDURES. This Letter is to be completed by noteholders, either if
certificates are to be forwarded herewith or if tenders are to be made pursuant
to the procedures for delivery by book-entry transfer set forth in "The Exchange
Offers--Book-Entry Transfer" section of the Prospectus. Certificates for all
physically tendered Existing Notes, or Book-Entry Confirmation, as the case may
be, as well as a properly completed and duly executed Letter (or manually signed
facsimile hereof) and any other documents required by this Letter, must be
received by the Exchange Agent at the address set forth herein on or prior to
the Expiration Date, or the tendering holder must comply with the guaranteed
delivery procedures set forth below. Existing Notes tendered hereby must be in
denominations of principal amount of maturity of $1,000 and any integral
multiple thereof.
Noteholders whose certificates for Existing Notes are not immediately
available or who cannot deliver their certificates and all other required
documents to the Exchange Agent on or prior to the Expiration Date, or who
cannot complete the procedure for book-entry transfer on a timely basis, may
tender their Existing Notes pursuant to the guaranteed delivery procedures set
forth in "The Exchange Offers--Guaranteed Delivery Procedures" section of the
Prospectus. Pursuant to such procedures, (i) such tender must be made through an
Eligible Institution (as defined in Instruction 4 below), (ii) prior to the
Expiration Date, the Exchange Agent must receive from such Eligible Institution
a properly completed and duly executed Letter (or facsimile thereof) and Notice
of Guaranteed Delivery, substantially in the form provided by the Company (by
facsimile transmission, mail or hand delivery), setting forth the name and
address of the holder of Existing Notes and the amount of Existing Notes
tendered, stating that the tender is being made thereby and guaranteeing that
within five New York Stock Exchange ("NYSE") trading days after the date of
execution of the Notice of Guaranteed Delivery, the certificates for all
physically tendered Existing Notes, or a Book-Entry Confirmation, and any other
documents required by this Letter will be deposited by the Eligible Institution
with the Exchange Agent, and (iii) the certificates for all physically tendered
Existing Notes, in proper form for transfer, or Book-Entry Confirmation, as the
case may be, and all other documents required by this Letter, are received by
the Exchange Agent within five NYSE trading days after the date of execution of
the Notice of Guaranteed Delivery.
The method of delivery of this Letter, the Existing Notes and all other
required documents is at the election and risk of the tendering holders, but the
delivery will be deemed made only when actually received or confirmed by the
Exchange Agent. If Existing Notes are sent by mail, it is suggested that the
mailing be made sufficiently in advance of the Expiration Date to permit the
delivery to the Exchange Agent prior to 5:00 p.m., New York City time, on the
Expiration Date.
See "The Exchange Offers" section in the Prospectus.
2. TENDER BY HOLDER. Only a holder of Existing Notes may tender such
Existing Notes in the Exchange Offer. Any beneficial holder of Existing Notes
who is not the registered holder and who wishes to tender should arrange with
the registered holder to execute and deliver this Letter on his or her behalf or
must, prior to completing and executing this Letter and delivering his or her
Existing Notes, either make appropriate arrangements to register ownership of
the Existing Notes in such holder's name or obtain a properly completed bond
power form the registered holder.
3. PARTIAL TENDERS. Tenders of Existing Notes will be accepted only in
integral multiples of $1,000. If less than the entire principal amount of any
Existing Notes is tendered, the tendering holder should fill in the principal
amount tendered in the fourth column of the box entitled "Description of 10 3/4%
Senior Notes due 2006 (Existing Notes)" above. The entire principal amount of
Existing Notes delivered to the Exchange Agent will be deemed to have been
tendered unless otherwise indicated. If the entire principal amount of all
Existing Notes is not tendered, then Existing Notes for the principal amount of
Existing Notes not tendered and a certificate or certificates representing New
Notes issued in exchange for any Existing Notes accepted will be sent to the
Holder at his or her registered address, unless a different address is provided
in the appropriate box on this Letter promptly after the Existing Notes are
accepted for exchange.
4. SIGNATURES ON THIS LETTER; POWERS OF ATTORNEY AND ENDORSEMENTS;
GUARANTEE OF SIGNATURES. If this Letter is signed by the registered holder of
the Existing Notes tendered hereby, the signature must correspond exactly with
the name as written on the face of the certificates without any change
whatsoever.
<PAGE> 10
If any tendered Existing Notes are owned of record by two or more joint
owners, all such owners must sign this Letter.
If any tendered Existing Notes are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many separate
copies of this Letter as there are different registrations of certificates.
When this Letter is signed by the registered holder or holders of the
Existing Notes specified herein and tendered hereby, no endorsements of
certificates or separate powers of attorney are required. If, however, the New
Notes are to be issued, or any untendered Existing Notes are to be reissued, to
a person other than the registered holder, then endorsements of any certificates
transmitted hereby or separate powers of attorney are required. Signatures on
such certificate(s) must be guaranteed by an Eligible Institution.
If this Letter is signed by a person other than the registered holder or
holders of any certificate(s) specified herein, such certificate(s) must be
endorsed or accompanied by appropriate powers of attorney, in either case signed
exactly as the name or names on the registered holder or holders appear(s) on
the certificate(s) and signatures on such certificate(s) must be guaranteed by
an Eligible Institution.
If this Letter or any certificates or powers of attorney are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and unless waived by the Company,
proper evidence satisfactory to the Company of their authority to so act must be
submitted.
Endorsements on certificates for Existing Notes or signatures on powers of
attorney required by this Instruction 4 must be guaranteed by a firm which is a
participant in a recognized signature guarantee medallion program ("Eligible
Institutions").
Signatures on this Letter must be guaranteed by an Eligible Institution
unless the Existing Notes are tendered (i) by a registered holder of Existing
Notes (which term, for purposes of the Exchange Offer, includes any participant
in the Book-Entry Transfer Facility system whose name appears on a security
position listing as the holder of such Existing Notes) who has not completed the
box entitled "Special Issuance Instructions" or "Special Delivery Instructions"
on this Letter, or (ii) for the account of an Eligible Institution.
5. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. Tendering holders should
indicate, in the applicable box or boxes, the name and address to which New
Notes or substitute Existing Notes for principal amounts not tendered or not
accepted for exchange are to be issued or sent, if different from the name and
address of the person signing this Letter of Transmittal (or in the case of
tender of Existing Notes through DTC, if different from DTC). In the case of
issuance in a different name, the taxpayer identification or social security
number of the person named must also be indicated. Noteholders tendering
Existing Notes by book-entry transfer may request that Existing Notes not
exchanged be credited to such account maintained at the Book-Entry Transfer
Facility as such noteholder may designate hereon. If no such instructions are
given, such Existing Notes not exchanged will be returned to the name and
address of the person signing this Letter.
6. TAX IDENTIFICATION NUMBER. Federal income tax law requires that a
holder whose offered Existing Notes are accepted for exchange must provide the
Company (as payer) with his, her or its correct Taxpayer Identification Number
("TIN"), which, in the case of an exchanging holder who is an individual, is his
or her social security number. If the Company is not provided with the correct
TIN or an adequate basis for exemption, such holder may be subject to a $50
penalty imposed by the Internal Revenue Service (the "IRS"), and payments made
with respect to Existing Notes purchased pursuant to the Exchange Offer may be
subject to backup withholding at a 31% rate. If withholding results in an
overpayment of taxes, a refund may be obtained. Exempt holders (including, among
others, all corporations and certain foreign individuals) are not subject to
these backup withholding and reporting requirements. See the enclosed
"Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9."
<PAGE> 11
To prevent backup withholding, each exchanging holder must provide his, her
or its correct TIN by completing the Substitute Form W-9 enclosed herewith,
certifying that the TIN provided is correct (or that such Holder is awaiting a
TIN) and that (i) the holder is exempt from backup withholding, (ii) the holder
has been notified by the IRS that he, she or it is subject to backup withholding
as a result of a failure to report all interest or dividends, or (iii) the IRS
has notified the holder that he, she or it is no longer subject to backup
withholding. In order to satisfy the Exchange Agent that a foreign individual
qualifies as an exempt recipient, such holder must submit a statement signed
under penalty of perjury attesting to such exempt status. Such statements may be
obtained from the Exchange Agent. If the Existing Notes are in more than one
name or are not in the name of the actual owner, consult the Substitute Form W-9
for information on which TIN to report. If you do not provide your TIN to the
Company within 60 days, backup withholding will begin and continue until you
furnish your TIN to the Company.
7. TRANSFER TAXES. The Company will pay all transfer taxes, if any,
applicable to the exchange of Existing Notes pursuant to the Exchange Offer. If,
however, certificates representing New Notes or Existing Notes for principal
amounts not tendered or accepted for exchange are to be delivered to, or are to
be registered or issued in the name of, any person other than the registered
holder of the Existing Notes tendered hereby, or if tendered Existing Notes are
registered in the name of any person other than the person signing this Letter,
or if a transfer tax is imposed for any reason other than the exchange of
Existing Notes pursuant to the Exchange Offer, then the amount of any such
transfer taxes (whether imposed on the registered holder or on any other
persons) will be payable by the tendering holder. If satisfactory evidence of
payment of such taxes or exemption therefrom is not submitted herewith, the
amount of such transfer taxes will be billed directly to such tendering holder.
Except as provided in this Instruction 7, it will not be necessary for
transfer tax stamps to be affixed to the Existing Notes listed in this Letter.
8. WAIVER OF CONDITIONS. The Company reserves the absolute right to amend,
waive or modify specified conditions in the Exchange Offer in the case of any
Existing Notes tendered.
9. NO CONDITIONAL TRANSFERS. No alternative, conditional, irregular or
contingent tenders will be accepted. All tendering holders of Existing Notes, by
execution of this Letter, shall waive any right to receive notice of the
acceptance of their Existing Notes for exchange.
Neither the Company, the Exchange Agent nor any other person is obligated
to give notice of any defect or irregularity with respect to any tender of
Existing Notes nor shall any of them incur any liability for failure to give any
such notice.
10. MUTILATED, LOST, STOLEN OR DESTROYED EXISTING NOTES. Any tendering
holder whose Existing Notes have been mutilated, lost, stolen or destroyed
should contact the Exchange Agent at the address indicated herein for further
instructions.
11. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests
for assistance for additional copies of the Prospectus, this Letter and the
Notice of Guaranteed Delivery may be directed to the Exchange Agent at the
address specified in the Prospectus.
(DO NOT WRITE IN THE SPACE BELOW)
<TABLE>
<CAPTION>
CERTIFICATE EXISTING NOTES EXISTING NOTES
SURRENDERED TENDERED ACCEPTED
- ------------------ ------------------ ------------------
<S> <C> <C>
- ------------------ ------------------ ------------------
- ------------------ ------------------ ------------------
- ------------------ ------------------ ------------------
</TABLE>
Delivery Prepared by
--------------- Checked By
--------------- Date
---------------
<PAGE> 12
<TABLE>
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------
PAYER'S NAME: CLARK MATERIAL HANDLING COMPANY
- ----------------------------------------------------------------------------------------------------------
Name (if joint names, list first and circle the name of the person or
SUBSTITUTE entity whose number you enter in Part 1 below. See instructions if your
FORM W-9 name has changed.)
DEPARTMENT OF THE TREASURY ---------------------------------------------------------------------------
INTERNAL REVENUE SERVICE Address
PAYER'S REQUEST FOR TIN ---------------------------------------------------------------------------
City, state and ZIP code
---------------------------------------------------------------------------
List account number(s) here (optional)
---------------------------------------------------------------------------
----------------------------------------------------------------------------
Part 1--PLEASE PROVIDE YOUR TAXPAYER Social security number
IDENTIFICATION NUMBER ("TIN") IN THE BOX AT or TIN
RIGHT AND CERTIFY BY SIGNING AND DATING ------------------------------
BELOW.
----------------------------------------------------------------------------
Part 2--Check the box if you are NOT subject to backup withholding under
the provisions of section 3408(a)(1)(C) of the Internal Revenue Code
because (1) you have not been notified that you are subject to backup
withholding as a result of failure to report all interest or dividends or
(2) the Internal Revenue Service has notified you that you are no longer
subject to backup withholding.
CERTIFICATION--UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT THE
INFORMATION PROVIDED ON THIS FORM IS TRUE, CORRECT AND COMPLETE.
----------------------------------------------------------------------------
Signature _________________ Date PART 3--AWAITING TIN [ ]
- ----------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE EXCHANGE OFFER. PLEASE
REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER OR SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
<PAGE> 13
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER.--Social Security numbers have nine digits separated by two hyphens: i.e.
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e. 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<C> <S> <C>
- ---------------------------------------------------------
GIVE THE
FOR THIS TYPE OF ACCOUNT: SOCIAL SECURITY
NUMBER OF--
- ---------------------------------------------------------
1. An individual's account The individual
2. Two or more individuals The actual owner of
(joint account) the account or, if
combined funds, any
one of the
individuals(1)
3. Husband and wife The actual owner of
(joint account) the account or, if
joint funds, either
person(1)
4. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
5. Adult and minor The adult or, if
(joint account) the minor is the
only contributor,
the minor(1)
6. Account in the name of guardian The ward, minor, or
or committee for a designated incompetent
ward, minor, or incompetent person(3)
person
7. a. The usual revocable savings The grantor-
trust account (grantor is trustee(1)
also trustee)
b. So-called trust account that The actual owner(1)
is not a legal or valid
trust under State law
8. Sole proprietorship account The Owner(4)
- ---------------------------------------------------------
- ---------------------------------------------------------
GIVE THE EMPLOYER
FOR THIS TYPE OF ACCOUNT: IDENTIFICATION
NUMBER OF--
- ---------------------------------------------------------
9. A valid trust, estate, or Legal entity (Do
pension trust not furnish the
identifying number
of the personal
representative or
trustee unless the
legal entity itself
is not designated
in the account
title.)(5)
10. Corporate account The corporation
11. Religious, charitable, or The organization
educational organization
account
12. Partnership account held in the The partnership
name of the business
13. Association, club, or other The organization
tax-exempt organization
15. Account with the Department of The public entity
Agriculture in the name of a
public entity (such as a State
or local government, school
district, or prison) that
receives agricultural program
payments
- ---------------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate, or pension trust.
NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE> 14
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the internal Revenue Service and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include the
following:
- A corporation.
- A financial institution.
- An organization exempt from tax under section 501(a), or an individual
retirement plan.
- The United States or any agency or instrumentality thereof.
- A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
- A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
- An international organization or any agency, or instrumentality thereof.
- A registered dealer in securities or commodities registered in the U.S. Or
a possession of the U.S.
- A real estate investment trust.
- A common trust fund operated by a bank under section 584(a).
- An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).
- An entity registered at all times under the Investment Company Act of
1940.
- A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to
backup withholding include the following:
- Payments to nonresident aliens subject to withholding under section 1941.
- Payments to partnerships not engaged in a trade or business in the U.S.
and which have at least one nonresident partner.
- Payments of patronage dividends where the amount received is not paid n
money.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
- Payments of interest on obligations issued by individuals. Note: You may
be subject to backup withholding if this interest is $600 or more and in
paid in the course of the payer's trade or business and you have not
provided your correct taxpayer identification number to the payer.
- Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
- Payments described in section 6049(b)(5) to non-resident aliens.
- Payments on tax-free covenant bonds under section 1451.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO
THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO
SIGN AND DATE THE FORM.
Certain payments other than interest, dividends and patronage dividends,
that are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividend,
interest, or other payments to give tax-payer identification numbers to payers
who must report for payments to IRS. IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Beginning January 1, 1994, payers must generally
withhold 31% of taxable interest, dividend, and certain other payments to a
payee who does not furnish a taxpayer identification number to a payer. Certain
penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail
to furnish your taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS.--If you fail to
include any portion of an includible payment for interest, dividends, or
patronage dividends in gross income, such failure will be treated as being due
to negligence and will be subject to a penalty of 5% on any portion of an
under-payment attributable to that failure unless there is clear and convincing
evidence to the contrary.
(3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
<PAGE> 15
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
<PAGE> 1
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
FOR
10 3/4% SENIOR NOTES DUE 2006
CLARK MATERIAL HANDLING COMPANY
As set forth in the Prospectus dated September 18, 1998 (the "Prospectus"),
of CLARK MATERIAL HANDLING COMPANY, (the "Company") and in the accompanying
Letter of Transmittal and instructions thereto (the "Letter of Transmittal"),
this form or one substantially equivalent hereto must be used to accept the
Company's offer to exchange (the "Exchange Offer") all of its outstanding 10
3/4% Series C Senior Notes due 2006 (the "Existing Notes") for its 10 3/4%
Series D Senior Notes due 2006, which have been registered under the Securities
Act of 1933, as amended, if certificates for the Existing Notes are not
immediately available or if the Existing Notes, the Letter of Transmittal or any
other documents required thereby cannot be delivered to the Exchange Agent, or
the procedure for book-entry transfer cannot be completed, prior to 5:00 P.M.,
New York City time, on the Expiration Date (as defined in the Prospectus), this
form may be delivered by an Eligible Institution by hand or transmitted by
facsimile transmission, overnight courier or mail to the Exchange Agent as set
forth below. Capitalized terms used but not defined herein have the meaning
given to them in the Prospectus.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON OCTOBER 23,
1998, UNLESS THE OFFER IS EXTENDED (THE "EXPIRATION DATE"). TENDERS OF EXISTING
NOTES MAY BE WITHDRAWN AT ANY TIME PRIOR TO 5:00 P.M. ON THE BUSINESS DAY PRIOR
TO THE EXPIRATION DATE.
TO: UNITED STATES TRUST COMPANY OF NEW YORK, THE EXCHANGE AGENT
<TABLE>
<S> <C>
By Registered or Certified Mail: By Overnight Courier or By Hand After 4:30 PM
United States Trust Company of New York on the Expiration Date Only:
P.O. Box 844 United States Trust Company of New York
Cooper Station 770 Broadway
New York, New York 10276-0844 New York, New York 10003
Attention: Corporate Trust Services
By Hand Up to 4:30 PM:
United States Trust Company of New York
111 Broadway By Facsimile:
Lower Level United States Trust Company of New York
Corporate Trust Services (212) 780-0582
New York, New York 10006 Attention: Corporate Trust Services
Confirm by telephone:
(800) 548-6565
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS, OR TRANSMISSION OF INSTRUCTIONS
VIA A FACSIMILE, OTHER THAN AS SET FORTH ABOVE, DOES NOT CONSTITUTE A VALID
DELIVERY.
This form is not to be used to guarantee signatures. If a signature on the
Letter of Transmittal to be used to tender Existing Notes is required to be
guaranteed by an "Eligible Institution" under the instructions thereto, such
signature guarantee must appear in the applicable space provided in the Letter
of Transmittal.
<PAGE> 2
Ladies and Gentlemen:
The undersigned hereby tenders to CLARK MATERIAL HANDLING COMPANY, a
Delaware corporation (the "Company"), upon the terms and subject to the
conditions set forth in the Prospectus and the Letter of Transmittal (which
together constitute the "Exchange Offer"), receipt of which is hereby
acknowledged, (number of Existing Notes) Existing Notes pursuant to
the guaranteed delivery procedures set forth in Instruction 1 of the Letter of
Transmittal.
The undersigned understands that tenders of Existing Notes will be accepted
only in principal amounts equal to $1,000 or integral multiples thereof. The
undersigned understand that tenders of Existing Notes pursuant to the Exchange
Offer may not be withdrawn after 5:00 p.m., New York City time, on the business
day prior to the Expiration Date.
All authority herein conferred or agreed to be conferred by this Notice of
Guaranteed Delivery shall survive the death, incapacity or dissolution of the
undersigned and every obligation of the undersigned under this Notice of
Guaranteed Delivery shall be binding upon the heirs, personal representatives,
executors, administrators, successors, assigns, trustees in bankruptcy and other
legal representatives of the undersigned.
NOTE: SIGNATURES MUST BE PROVIDED WHERE INDICATED BELOW.
<TABLE>
<S> <C>
Certificate No(s). for Existing Notes (if
available) Name(s) of Record Holder(s)
- ------------------------------------------------- -------------------------------------------------
- ------------------------------------------------- -------------------------------------------------
PLEASE PRINT OR TYPE
Principal Amount of Existing Notes Address
-------------------------------------------------
- -------------------------------------------------
-------------------------------------------------
Area Code and
Tel. No.
-------------------------------------------------
Signature(s)
-------------------------------------------------
Dated:
-------------------------------------------------
If Existing Notes will be delivered by book-entry
transfer at the Depository Trust Company,
Depository Account No.
-------------------------------------------------
</TABLE>
This Notice of Guaranteed Delivery must be signed by the registered
holder(s) of Existing Notes exactly as its (their) name(s) appear on
certificates for Existing Notes or on a security position listing as the owner
of Existing Notes, or by person(s) authorized to become registered holder(s) by
endorsements and documents transmitted with this Notice of Guaranteed Delivery.
If signature is by a trustee, executor, administrator, guardian,
attorney-in-fact, officer or other person acting in a fiduciary or
representative capacity, such person must provide the following information:
PLEASE PRINT NAME(S) AND ADDRESS(ES)
Name(s):
- --------------------------------------------------------------------------------
Capacity:
- --------------------------------------------------------------------------------
Address(es):
- --------------------------------------------------------------------------------
<PAGE> 3
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member firm of a registered national securities exchange
or of the National Association of Securities Dealers, Inc., or a commercial bank
or trust company having an office or correspondent in the United States or an
"eligible guarantor institution" within the meaning of Rule 17Ad-15 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), hereby (a)
represents that the above named person(s) "own(s)" the Existing Notes tendered
hereby within the meaning of Rule 14e-4 under the Exchange Act, (b) represents
that such tender of Existing Notes complies with Rule 14e-4 under the Exchange
Act and (c) guarantees that delivery to the Exchange Agent of certificates for
the Existing Notes tendered hereby, in proper form for transfer (or confirmation
of the book-entry transfer of such Existing Notes into the Exchange Agent's
Account at the Depository Trust Company, pursuant to the procedures for book-
entry transfer set forth in the Prospectus), with delivery of a properly
completed and duly executed Letter of Transmittal (or manually signed facsimile
thereof) with any required signatures and any other required documents, will he
received by the Exchange Agent at one of its addresses set forth above within
five business days after the Expiration Date.
THE UNDERSIGNED ACKNOWLEDGES THAT IT MUST DELIVER THE LETTER OF TRANSMITTAL
AND EXISTING NOTES TENDERED HEREBY TO THE EXCHANGE AGENT WITHIN THE TIME PERIOD
SET FORTH AND THAT FAILURE TO DO SO COULD RESULT IN FINANCIAL LOSS TO THE
UNDERSIGNED.
Name of Firm
- -------------------------------------------
--------------------------------------
Authorized Signature
Address
- -------------------------------------------------
Name
--------------------------------------
Please Print or Type
- ------------------------------------------------------------
Title
--------------------------------------
Zip Code
Area Code and Tel. No.
- ------------------------------- Date
--------------------------------------
Dated:
- ------------------, 1998
NOTE: DO NOT SEND EXISTING NOTES WITH THIS FORM; EXISTING NOTES SHOULD BE SENT
WITH YOUR LETTER OF TRANSMITTAL SO THAT THEY ARE RECEIVED BY THE EXCHANGE AGENT
WITHIN FIVE BUSINESS DAYS AFTER THE EXPIRATION DATE.
<PAGE> 1
EXHIBIT 99.3
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON OCTOBER 23,
1998, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS OF EXISTING NOTES MAY BE
WITHDRAWN AT ANY TIME PRIOR TO 5:00 P.M. ON THE EXPIRATION DATE.
CLARK MATERIAL HANDLING COMPANY
LETTER OF TRANSMITTAL
10 3/4% SENIOR NOTES DUE 2006
TO: UNITED STATES TRUST COMPANY OF NEW YORK,
THE EXCHANGE AGENT
<TABLE>
<S> <C>
By Registered or Certified Mail: By Overnight Courier or By Hand
United States Trust Company of New York After 4:30 P.M. on the Expiration Date Only:
P.O. Box 844 United States Trust Company of New York
Cooper Station 770 Broadway, 13th Floor
New York, New York 10276-0844 New York, New York 10003
Attn: Corporate Trust Services Attn: Corporate Trust Services
By Hand Up to 4:30 PM: By Facsimile:
United States Trust Company of New York United States Trust Company of New York
111 Broadway, Lower Level (212) 780-0582
Corporate Trust Services Attn: Corporate Trust Services
New York, New York 10003
Confirm by telephone:
(800) 548-6565
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONE LISTED
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS ACCOMPANYING THIS
LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL
IS COMPLETED.
HOLDERS WHO WISH TO BE ELIGIBLE TO RECEIVE NEW NOTES FOR THEIR EXISTING
NOTES PURSUANT TO THE EXCHANGE OFFER MUST VALIDLY TENDER (AND NOT WITHDRAW)
THEIR EXISTING NOTES TO THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE.
The undersigned acknowledges receipt of the Prospectus dated September 18,
1998 (the "Prospectus") of CLARK MATERIAL HANDLING COMPANY (the "Company") and
this Letter of Transmittal (the "Letter of Transmittal"), which together
constitute the Company's Offer to Exchange (the "Exchange Offer") $1,000
principal amount of its 10 3/4% Series D Senior Notes due 2006 (the "New
Notes"), which have been registered under the Securities Act of 1933, as amended
(the "Securities Act"), pursuant to a Registration Statement of which the
Prospectus is a part, for each $1,000 principal amount of its outstanding 10
3/4% Series B Senior Notes due 2006 (the "Existing Notes"), of which
$130,000,000 principal amount is outstanding, upon the terms and conditions set
forth in the Prospectus. Other capitalized terms used but not defined herein
have the meaning given to them in the Prospectus.
<PAGE> 2
For each Existing Note accepted for exchange, the holder of such Existing
Note will receive a New Note having a principal amount equal to that of the
surrendered Existing Note. Interest on the New Notes will accrue from the last
interest payment date on which interest was paid on the Existing Notes
surrendered in exchange therefor or, if no interest has been paid on the
Existing Notes, from the date of original issue of the Existing Notes. Holders
of Existing Notes accepted for exchange will be deemed to have waived the right
to receive any other payments or accrued interest on the Existing Notes. The
Company reserves the right, at any time or from time to time, to extend the
Exchange Offer at its discretion, in which event the term "Expiration Date"
shall mean the latest time and date to which the Exchange Offer is extended. The
Company shall notify holders of the Existing Notes of any extension by means of
a press release or other public announcement prior to 9:00 A.M., New York City
time, on the next business day after the previously scheduled Expiration Date.
This Letter of Transmittal is to be used by Holders if: (i) certificates
representing Existing Notes are to be physically delivered to the Exchange Agent
herewith by Holders; (ii) tender of Existing Notes is to be made by book-entry
transfer to the Exchange Agent's account at The Depository Trust Company
("DTC"), pursuant to the procedures set forth in the Prospectus under "The
Exchange Offer -- Procedures for Tendering" by any financial institution that is
a participant in DTC and whose name appears on a security position listing as
the owner of Existing Notes or (iii) tender of Existing Notes is to be made
according to the guaranteed delivery procedures set forth in the prospectus
under "The Exchange Offer -- Guaranteed Delivery Procedures." DELIVERY OF
DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
The term "Holder" with respect to the Exchange Offer means any person: (i)
in whose name Existing Notes are registered on the books of the Company or any
other person who has obtained a properly completed bond power from the
registered Holder; or (ii) whose Existing Notes are held of record by DTC who
desires to deliver such Existing Notes by book-entry transfer at DTC. The
undersigned has completed, executed and delivered this Letter of Transmittal to
indicate the action the undersigned desires to take with respect to the Exchange
Offer.
<PAGE> 3
The instructions included with this Letter of Transmittal must be followed.
Questions and requests for assistance or for additional copies of the
Prospectus, this Letter of Transmittal and the Notice of Guaranteed Delivery may
be directed to the Exchange Agent. See Instruction 10 herein.
HOLDERS WHO WISH TO ACCEPT THE EXCHANGE OFFER
AND TENDER THEIR EXISTING NOTES MUST COMPLETE THIS
LETTER OF TRANSMITTAL IN ITS ENTIRETY.
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE CHECKING ANY BOX BELOW
- --------------------------------------------------------------------------------
DESCRIPTION OF 10 3/4% SENIOR NOTES DUE 2006 (EXISTING NOTES)
<TABLE>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
AGGREGATE PRINCIPAL PRINCIPAL AMOUNT
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) CERTIFICATE AMOUNT REPRESENTED BY TENDERED (IF LESS THAN
(PLEASE FILL IN, IF BLANK) NUMBER(S)* CERTIFICATE(S) ALL)**
------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed by Holders tendering by book-entry transfer.
** Unless indicated in the column labeled "Principal Amount Tendered," any
tendering Holder of Existing Notes will be deemed to have tendered the
entire aggregate principal amount represented by the column labeled
"Aggregate Principal Amount Represented by Certificate(s)." If the space
provided above is inadequate, list the certificate numbers and principal
amounts on a separate signed schedule and affix the list to this Letter of
Transmittal.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 4
------------------------------------------------------------
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 4, 5 AND 6)
To be completed ONLY if certificates for Existing Notes in a
principal amount not tendered or not accepted for exchange, or New Notes
issued in exchange for Existing Notes accepted for exchange, are to be
issued in the name of someone other than the undersigned, or if the
Existing Notes tendered by book-entry transfer that are not accepted for
exchange are to be credited to an account maintained by DTC.
Issue certificate(s) to:
Name:
---------------------------------------------------
Address:
-------------------------------------------------
------------------------------------------------------------
(INCLUDE ZIP CODE)
------------------------------------------------------------
(TAX IDENTIFICATION OR
SOCIAL SECURITY NO.)
------------------------------------------------------------
------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 4, 5 AND 6)
To be completed ONLY if certificates for Existing Notes in a principal
amount not tendered or not accepted for exchange, are to be sent to
someone other than the undersigned, or to the undersigned at an address
other than that shown above.
Mail to:
Name:
---------------------------------------------------
Address:
-------------------------------------------------
------------------------------------------------------------
(INCLUDE ZIP CODE)
------------------------------------------------------------
(TAX IDENTIFICATION OR
SOCIAL SECURITY NO.)
------------------------------------------------------------
<PAGE> 5
[ ] CHECK HERE IF TENDERED EXISTING NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER TO THE EXCHANGE AGENT'S ACCOUNT AT DTC AND COMPLETE THE FOLLOWING:
Name of Tendering Institution:
-----------------------------------------------------------------------------
DTC Book-Entry Account No.:
-----------------------------------------------------------------------------
Transaction Code No.:
-----------------------------------------------------------------------------
[ ] CHECK HERE IF TENDERED EXISTING NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND
COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s):
-----------------------------------------------------------------------------
Window Ticket Number (if any):
-----------------------------------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery:
-----------------------------------------------------------------
IF DELIVERED BY BOOK-ENTRY TRANSFER, COMPLETE THE FOLLOWING:
<TABLE>
<S> <C>
Account Number: --------------------------- Transaction Code Number: ---------------------------
</TABLE>
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name:
-----------------------------------------------------------------------------
Address:
-----------------------------------------------------------------------------
<PAGE> 6
Ladies and Gentlemen:
Subject to the terms and conditions of the Exchange Offer, the undersigned
hereby tenders to the Company the principal amount of Existing Notes indicated
above. Subject to and effective upon the acceptance for exchange of the
principal amount of Existing Notes tendered in accordance with this Letter of
Transmittal, the undersigned sells, assigns and transfers to, or upon the order
of, the Company all right, title and interest in and to the Existing Notes
tendered hereby. The undersigned hereby irrevocably constitutes and appoints the
Exchange Agent its agent and attorney-in-fact (with full knowledge that the
Exchange Agent also acts as the agent of the Company and as Trustee under the
indenture for the Existing Notes and New Notes) with respect to the tendered
Existing Notes with full power of substitution to (i) deliver certificates for
such Existing Notes to the Company, or transfer ownership of such Existing Notes
on the account books maintained by DTC and deliver all accompanying evidence of
transfer and authenticity to, or upon the order of, the Company and (ii) present
such Existing Notes for transfer on the books of the Company and receive all
benefits and otherwise exercise all rights of beneficial ownership of such
Existing Notes, all in accordance with the terms and subject to the conditions
of the Exchange Offer. The power of attorney granted in this paragraph shall be
deemed irrevocable and coupled with an interest.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Existing Notes
tendered hereby and that the Company will acquire good and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances and
not subject to any adverse claim, when the same are acquired by the Company. The
undersigned hereby further represents that any New Notes acquired in exchange
for Existing Notes tendered hereby will have been acquired in the ordinary
course of business of the Holder receiving such New Notes, whether or not such
person is the Holder, that neither the Holder nor any such other person has any
arrangement or understanding with any person to participate in the distribution
of such New Notes within the meaning of the Securities Act of 1933, as amended,
and that neither the Holder nor any such other person is an "affiliate," as
defined in Rule 405 under the Securities Act, of the Company or any of its
subsidiaries.
The undersigned also acknowledges that this Exchange Offer is being made in
reliance on an interpretation by the staff of the Securities and Exchange
Commission (the "SEC") that the New Notes issued in exchange for the Existing
Notes pursuant to the Exchange Offer may be offered for resale, resold and
otherwise transferred by holders thereof (other than any such holder that is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act), without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such New Notes are acquired in
the ordinary course of such holders' business, such holders are not engaging in
and do not intend to engage in a distribution of the New Securities and such
holders have no arrangements with any person to participate in the distribution
of such New Notes. If the undersigned is not a broker-dealer, the undersigned
represents that it is not engaged in, and does not intend to engage in, a
distribution of New Notes. If the undersigned is a broker-dealer that will
receive New Notes for its own account in exchange for Existing Notes that were
acquired as a result of market-making activities or other trading activities, it
acknowledges that it will deliver a prospectus in connection with any resale of
such New Notes; however, by so acknowledging and by delivering a prospectus, the
undersigned will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. The undersigned also acknowledges and agrees that
any person who is a broker-dealer registered under the Exchange Act or is
participating in the Exchange Offer for the purposes of distributing the New
Securities must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any secondary resale
transaction of the New Securities acquired by such person and cannot rely on the
position of the staff of the Commission set forth in certain no-action letters.
The undersigned understands that a secondary resale transaction described in the
previous sentence and any resale of New Notes obtained by such holder or other
person in exchange for Existing Notes acquired by such holder or other person
directly from the Company should be covered by an effective registration
statement containing the selling securityholder information required by Item 507
or Item 508, as applicable, of Regulation S-K of the Commission.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Exchange Agent or the Company to be necessary or
desirable to complete the assignment, transfer and purchase of the Existing
Notes tendered hereby. All authority conferred or agreed to be conferred by this
Letter of Transmittal shall survive the death, incapacity or dissolution of the
undersigned and every obligation of the undersigned under this Letter of
Transmittal shall be binding upon the undersigned's heirs, personal
representatives, successors and assigns, trustees in bankruptcy or other legal
representatives of the undersigned. This tender may be withdrawn only in
accordance with the procedures set forth in "The Exchange Offers -- Withdrawal
Rights" section of the Prospectus.
For purposes of the Exchange Offer, the Company shall be deemed to have
accepted validly tendered Existing Notes when, as and if the Company has given
oral or written notice thereof to the Exchange Agent.
<PAGE> 7
If any tendered Existing Notes are not accepted for exchange pursuant to
the Exchange Offer for any reason, certificates for any such unaccepted Existing
Notes will be returned (except as noted below with respect to tenders through
DTC), without expense, to the undersigned at the address shown below or at a
different address as may be indicated under "Special Delivery Instructions" as
promptly as practicable after the Expiration Date.
The undersigned understands that tenders of Existing Notes pursuant to the
procedures described under the caption "The Exchange Offers -- Procedures for
Tendering" in the Prospectus and in the instructions hereto will constitute a
binding agreement between the undersigned and the Company upon the terms and
subject to the conditions of the Exchange Offer.
Unless otherwise indicated under "Special Payment Instructions," please
issue the certificates representing the New Notes issued in exchange for the
Existing Notes accepted for exchange and return any Existing Notes not tendered
or not exchanged in the name(s) of the undersigned (or in either such event in
the case of the Existing Notes tendered through DTC, by credit to the
undersigned's account, at DTC). Similarly, unless otherwise indicated under
"Special Delivery Instructions," please send the certificates representing the
New Notes issued in exchange for the Existing Notes accepted for exchange and
any certificates for Existing Notes not tendered or not exchanged (and
accompanying documents, as appropriate) to the undersigned at the address shown
below the undersigned's signature(s), unless, in either event, tender is being
made through DTC. In the event that both "Special Payment Instructions" and
"Special Delivery Instructions" are completed, please issue the certificates
representing the New Notes issued in exchange for the Existing Notes accepted
for exchange and return any Existing Notes not tendered or not exchanged in the
name(s) of, and send said certificates to, the person(s) so indicated. The
undersigned recognizes that the Company has no obligation pursuant to the
"Special Payment Instructions" and "Special Delivery Instructions" to transfer
any Existing Notes from the name of the registered Holder(s) thereof if the
Company does not accept for exchange any of the Existing Notes so tendered.
Holders of Existing Notes who wish to tender their Existing Notes and (i)
whose Existing Notes are not immediately available or (ii) who cannot deliver
their Existing Notes, this Letter of Transmittal or any other documents required
hereby to the Exchange Agent, or cannot complete the procedure for book-entry
transfer, prior to the Expiration Date, may tender their Existing Notes
according to the guaranteed delivery procedures set forth in the Prospectus
under the caption "The Exchange Offers -- Guaranteed Delivery Procedures." See
Instruction 1 regarding the completion of the Letter of Transmittal printed
below.
<PAGE> 8
PLEASE SIGN HERE WHETHER OR NOT
EXISTING NOTES ARE BEING PHYSICALLY TENDERED HEREBY
<TABLE>
<S> <C>
X ___________________________________________________ Date _____________________________
X ___________________________________________________ Date _____________________________
Signature(s) of Registered Holder(s)
Or Authorized Signatory
Area Code and Telephone Number: ___________________________________________
</TABLE>
The above lines must be signed by the registered Holder(s) of Existing
Notes as their name(s) appear(s) on the Existing Notes or, if the Existing Notes
are tendered by a participant in DTC, as such participant's name appears on a
security position listing as the owner of Existing Notes, or by person(s)
authorized to become registered Holder(s) by a properly completed bond power
from the registered Holder(s), a copy of which must be transmitted with this
Letter of Transmittal. If Existing Notes to which this Letter of Transmittal
relates are held of record by two or more joint Holders, then all such holders
must sign this Letter of Transmittal. If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation or other
person acting in a fiduciary or representative capacity, such person must (i)
set forth his or her full title below and (ii) unless waived by the Company,
submit evidence satisfactory to the Company of such person's authority to act.
See Instruction 4 regarding the completion of this Letter of Transmittal printed
below.
Name(s): ______________________________________________________________________
(Please Print)
Capacity:______________________________________________________________________
Address: ______________________________________________________________________
(Include Zip Code)
Signature(s) Guaranteed by an Eligible Institution:
(If required by Instruction 4)
_______________________________________________________________________________
(Authorized Signature)
_______________________________________________________________________________
(Title)
_______________________________________________________________________________
(Name of Firm)
Dated: ______________________________
<PAGE> 9
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER AND EXISTING NOTES; GUARANTEED DELIVERY
PROCEDURES. This Letter is to be completed by noteholders, either if
certificates are to be forwarded herewith or if tenders are to be made pursuant
to the procedures for delivery by book-entry transfer set forth in "The Exchange
Offers--Book-Entry Transfer" section of the Prospectus. Certificates for all
physically tendered Existing Notes, or Book-Entry Confirmation, as the case may
be, as well as a properly completed and duly executed Letter (or manually signed
facsimile hereof) and any other documents required by this Letter, must be
received by the Exchange Agent at the address set forth herein on or prior to
the Expiration Date, or the tendering holder must comply with the guaranteed
delivery procedures set forth below. Existing Notes tendered hereby must be in
denominations of principal amount of maturity of $1,000 and any integral
multiple thereof.
Noteholders whose certificates for Existing Notes are not immediately
available or who cannot deliver their certificates and all other required
documents to the Exchange Agent on or prior to the Expiration Date, or who
cannot complete the procedure for book-entry transfer on a timely basis, may
tender their Existing Notes pursuant to the guaranteed delivery procedures set
forth in "The Exchange Offers--Guaranteed Delivery Procedures" section of the
Prospectus. Pursuant to such procedures, (i) such tender must be made through an
Eligible Institution (as defined in Instruction 4 below), (ii) prior to the
Expiration Date, the Exchange Agent must receive from such Eligible Institution
a properly completed and duly executed Letter (or facsimile thereof) and Notice
of Guaranteed Delivery, substantially in the form provided by the Company (by
facsimile transmission, mail or hand delivery), setting forth the name and
address of the holder of Existing Notes and the amount of Existing Notes
tendered, stating that the tender is being made thereby and guaranteeing that
within five New York Stock Exchange ("NYSE") trading days after the date of
execution of the Notice of Guaranteed Delivery, the certificates for all
physically tendered Existing Notes, or a Book-Entry Confirmation, and any other
documents required by this Letter will be deposited by the Eligible Institution
with the Exchange Agent, and (iii) the certificates for all physically tendered
Existing Notes, in proper form for transfer, or Book-Entry Confirmation, as the
case may be, and all other documents required by this Letter, are received by
the Exchange Agent within five NYSE trading days after the date of execution of
the Notice of Guaranteed Delivery.
The method of delivery of this Letter, the Existing Notes and all other
required documents is at the election and risk of the tendering holders, but the
delivery will be deemed made only when actually received or confirmed by the
Exchange Agent. If Existing Notes are sent by mail, it is suggested that the
mailing be made sufficiently in advance of the Expiration Date to permit the
delivery to the Exchange Agent prior to 5:00 p.m., New York City time, on the
Expiration Date.
See "The Exchange Offers" section in the Prospectus.
2. TENDER BY HOLDER. Only a holder of Existing Notes may tender such
Existing Notes in the Exchange Offer. Any beneficial holder of Existing Notes
who is not the registered holder and who wishes to tender should arrange with
the registered holder to execute and deliver this Letter on his or her behalf or
must, prior to completing and executing this Letter and delivering his or her
Existing Notes, either make appropriate arrangements to register ownership of
the Existing Notes in such holder's name or obtain a properly completed bond
power form the registered holder.
3. PARTIAL TENDERS. Tenders of Existing Notes will be accepted only in
integral multiples of $1,000. If less than the entire principal amount of any
Existing Notes is tendered, the tendering holder should fill in the principal
amount tendered in the fourth column of the box entitled "Description of 10 3/4%
Senior Notes due 2006 (Existing Notes)" above. The entire principal amount of
Existing Notes delivered to the Exchange Agent will be deemed to have been
tendered unless otherwise indicated. If the entire principal amount of all
Existing Notes is not tendered, then Existing Notes for the principal amount of
Existing Notes not tendered and a certificate or certificates representing New
Notes issued in exchange for any Existing Notes accepted will be sent to the
Holder at his or her registered address, unless a different address is provided
in the appropriate box on this Letter promptly after the Existing Notes are
accepted for exchange.
4. SIGNATURES ON THIS LETTER; POWERS OF ATTORNEY AND ENDORSEMENTS;
GUARANTEE OF SIGNATURES. If this Letter is signed by the registered holder of
the Existing Notes tendered hereby, the signature must correspond exactly with
the name as written on the face of the certificates without any change
whatsoever.
<PAGE> 10
If any tendered Existing Notes are owned of record by two or more joint
owners, all such owners must sign this Letter.
If any tendered Existing Notes are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many separate
copies of this Letter as there are different registrations of certificates.
When this Letter is signed by the registered holder or holders of the
Existing Notes specified herein and tendered hereby, no endorsements of
certificates or separate powers of attorney are required. If, however, the New
Notes are to be issued, or any untendered Existing Notes are to be reissued, to
a person other than the registered holder, then endorsements of any certificates
transmitted hereby or separate powers of attorney are required. Signatures on
such certificate(s) must be guaranteed by an Eligible Institution.
If this Letter is signed by a person other than the registered holder or
holders of any certificate(s) specified herein, such certificate(s) must be
endorsed or accompanied by appropriate powers of attorney, in either case signed
exactly as the name or names on the registered holder or holders appear(s) on
the certificate(s) and signatures on such certificate(s) must be guaranteed by
an Eligible Institution.
If this Letter or any certificates or powers of attorney are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and unless waived by the Company,
proper evidence satisfactory to the Company of their authority to so act must be
submitted.
Endorsements on certificates for Existing Notes or signatures on powers of
attorney required by this Instruction 4 must be guaranteed by a firm which is a
participant in a recognized signature guarantee medallion program ("Eligible
Institutions").
Signatures on this Letter must be guaranteed by an Eligible Institution
unless the Existing Notes are tendered (i) by a registered holder of Existing
Notes (which term, for purposes of the Exchange Offer, includes any participant
in the Book-Entry Transfer Facility system whose name appears on a security
position listing as the holder of such Existing Notes) who has not completed the
box entitled "Special Issuance Instructions" or "Special Delivery Instructions"
on this Letter, or (ii) for the account of an Eligible Institution.
5. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. Tendering holders should
indicate, in the applicable box or boxes, the name and address to which New
Notes or substitute Existing Notes for principal amounts not tendered or not
accepted for exchange are to be issued or sent, if different from the name and
address of the person signing this Letter of Transmittal (or in the case of
tender of Existing Notes through DTC, if different from DTC). In the case of
issuance in a different name, the taxpayer identification or social security
number of the person named must also be indicated. Noteholders tendering
Existing Notes by book-entry transfer may request that Existing Notes not
exchanged be credited to such account maintained at the Book-Entry Transfer
Facility as such noteholder may designate hereon. If no such instructions are
given, such Existing Notes not exchanged will be returned to the name and
address of the person signing this Letter.
6. TAX IDENTIFICATION NUMBER. Federal income tax law requires that a
holder whose offered Existing Notes are accepted for exchange must provide the
Company (as payer) with his, her or its correct Taxpayer Identification Number
("TIN"), which, in the case of an exchanging holder who is an individual, is his
or her social security number. If the Company is not provided with the correct
TIN or an adequate basis for exemption, such holder may be subject to a $50
penalty imposed by the Internal Revenue Service (the "IRS"), and payments made
with respect to Existing Notes purchased pursuant to the Exchange Offer may be
subject to backup withholding at a 31% rate. If withholding results in an
overpayment of taxes, a refund may be obtained. Exempt holders (including, among
others, all corporations and certain foreign individuals) are not subject to
these backup withholding and reporting requirements. See the enclosed
"Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9."
<PAGE> 11
To prevent backup withholding, each exchanging holder must provide his, her
or its correct TIN by completing the Substitute Form W-9 enclosed herewith,
certifying that the TIN provided is correct (or that such Holder is awaiting a
TIN) and that (i) the holder is exempt from backup withholding, (ii) the holder
has been notified by the IRS that he, she or it is subject to backup withholding
as a result of a failure to report all interest or dividends, or (iii) the IRS
has notified the holder that he, she or it is no longer subject to backup
withholding. In order to satisfy the Exchange Agent that a foreign individual
qualifies as an exempt recipient, such holder must submit a statement signed
under penalty of perjury attesting to such exempt status. Such statements may be
obtained from the Exchange Agent. If the Existing Notes are in more than one
name or are not in the name of the actual owner, consult the Substitute Form W-9
for information on which TIN to report. If you do not provide your TIN to the
Company within 60 days, backup withholding will begin and continue until you
furnish your TIN to the Company.
7. TRANSFER TAXES. The Company will pay all transfer taxes, if any,
applicable to the exchange of Existing Notes pursuant to the Exchange Offer. If,
however, certificates representing New Notes or Existing Notes for principal
amounts not tendered or accepted for exchange are to be delivered to, or are to
be registered or issued in the name of, any person other than the registered
holder of the Existing Notes tendered hereby, or if tendered Existing Notes are
registered in the name of any person other than the person signing this Letter,
or if a transfer tax is imposed for any reason other than the exchange of
Existing Notes pursuant to the Exchange Offer, then the amount of any such
transfer taxes (whether imposed on the registered holder or on any other
persons) will be payable by the tendering holder. If satisfactory evidence of
payment of such taxes or exemption therefrom is not submitted herewith, the
amount of such transfer taxes will be billed directly to such tendering holder.
Except as provided in this Instruction 7, it will not be necessary for
transfer tax stamps to be affixed to the Existing Notes listed in this Letter.
8. WAIVER OF CONDITIONS. The Company reserves the absolute right to amend,
waive or modify specified conditions in the Exchange Offer in the case of any
Existing Notes tendered.
9. NO CONDITIONAL TRANSFERS. No alternative, conditional, irregular or
contingent tenders will be accepted. All tendering holders of Existing Notes, by
execution of this Letter, shall waive any right to receive notice of the
acceptance of their Existing Notes for exchange.
Neither the Company, the Exchange Agent nor any other person is obligated
to give notice of any defect or irregularity with respect to any tender of
Existing Notes nor shall any of them incur any liability for failure to give any
such notice.
10. MUTILATED, LOST, STOLEN OR DESTROYED EXISTING NOTES. Any tendering
holder whose Existing Notes have been mutilated, lost, stolen or destroyed
should contact the Exchange Agent at the address indicated herein for further
instructions.
11. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests
for assistance for additional copies of the Prospectus, this Letter and the
Notice of Guaranteed Delivery may be directed to the Exchange Agent at the
address specified in the Prospectus.
(DO NOT WRITE IN THE SPACE BELOW)
<TABLE>
<CAPTION>
CERTIFICATE EXISTING NOTES EXISTING NOTES
SURRENDERED TENDERED ACCEPTED
- ------------------ ------------------ ------------------
<S> <C> <C>
- ------------------ ------------------ ------------------
- ------------------ ------------------ ------------------
- ------------------ ------------------ ------------------
</TABLE>
Delivery Prepared by
--------------- Checked By
--------------- Date
---------------
<PAGE> 12
<TABLE>
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------
PAYER'S NAME: CLARK MATERIAL HANDLING COMPANY
- ----------------------------------------------------------------------------------------------------------
Name (if joint names, list first and circle the name of the person or
SUBSTITUTE entity whose number you enter in Part 1 below. See instructions if your
FORM W-9 name has changed.)
DEPARTMENT OF THE TREASURY ---------------------------------------------------------------------------
INTERNAL REVENUE SERVICE Address
PAYER'S REQUEST FOR TIN ---------------------------------------------------------------------------
City, state and ZIP code
---------------------------------------------------------------------------
List account number(s) here (optional)
---------------------------------------------------------------------------
----------------------------------------------------------------------------
Part 1--PLEASE PROVIDE YOUR TAXPAYER Social security number
IDENTIFICATION NUMBER ("TIN") IN THE BOX AT or TIN
RIGHT AND CERTIFY BY SIGNING AND DATING ------------------------------
BELOW.
----------------------------------------------------------------------------
Part 2--Check the box if you are NOT subject to backup withholding under
the provisions of section 3408(a)(1)(C) of the Internal Revenue Code
because (1) you have not been notified that you are subject to backup
withholding as a result of failure to report all interest or dividends or
(2) the Internal Revenue Service has notified you that you are no longer
subject to backup withholding.
CERTIFICATION--UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT THE
INFORMATION PROVIDED ON THIS FORM IS TRUE, CORRECT AND COMPLETE.
----------------------------------------------------------------------------
Signature _________________ Date PART 3--AWAITING TIN [ ]
- ----------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE EXCHANGE OFFER. PLEASE
REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER OR SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
<PAGE> 13
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER.--Social Security numbers have nine digits separated by two hyphens: i.e.
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e. 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<C> <S> <C>
- ---------------------------------------------------------
GIVE THE
FOR THIS TYPE OF ACCOUNT: SOCIAL SECURITY
NUMBER OF--
- ---------------------------------------------------------
1. An individual's account The individual
2. Two or more individuals The actual owner of
(joint account) the account or, if
combined funds, any
one of the
individuals(1)
3. Husband and wife The actual owner of
(joint account) the account or, if
joint funds, either
person(1)
4. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
5. Adult and minor The adult or, if
(joint account) the minor is the
only contributor,
the minor(1)
6. Account in the name of guardian The ward, minor, or
or committee for a designated incompetent
ward, minor, or incompetent person(3)
person
7. a. The usual revocable savings The grantor-
trust account (grantor is trustee(1)
also trustee)
b. So-called trust account that The actual owner(1)
is not a legal or valid
trust under State law
8. Sole proprietorship account The Owner(4)
- ---------------------------------------------------------
- ---------------------------------------------------------
GIVE THE EMPLOYER
FOR THIS TYPE OF ACCOUNT: IDENTIFICATION
NUMBER OF--
- ---------------------------------------------------------
9. A valid trust, estate, or Legal entity (Do
pension trust not furnish the
identifying number
of the personal
representative or
trustee unless the
legal entity itself
is not designated
in the account
title.)(5)
10. Corporate account The corporation
11. Religious, charitable, or The organization
educational organization
account
12. Partnership account held in the The partnership
name of the business
13. Association, club, or other The organization
tax-exempt organization
15. Account with the Department of The public entity
Agriculture in the name of a
public entity (such as a State
or local government, school
district, or prison) that
receives agricultural program
payments
- ---------------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate, or pension trust.
NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE> 14
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the internal Revenue Service and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include the
following:
- A corporation.
- A financial institution.
- An organization exempt from tax under section 501(a), or an individual
retirement plan.
- The United States or any agency or instrumentality thereof.
- A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
- A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
- An international organization or any agency, or instrumentality thereof.
- A registered dealer in securities or commodities registered in the U.S. Or
a possession of the U.S.
- A real estate investment trust.
- A common trust fund operated by a bank under section 584(a).
- An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).
- An entity registered at all times under the Investment Company Act of
1940.
- A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to
backup withholding include the following:
- Payments to nonresident aliens subject to withholding under section 1941.
- Payments to partnerships not engaged in a trade or business in the U.S.
and which have at least one nonresident partner.
- Payments of patronage dividends where the amount received is not paid n
money.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
- Payments of interest on obligations issued by individuals. Note: You may
be subject to backup withholding if this interest is $600 or more and in
paid in the course of the payer's trade or business and you have not
provided your correct taxpayer identification number to the payer.
- Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
- Payments described in section 6049(b)(5) to non-resident aliens.
- Payments on tax-free covenant bonds under section 1451.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO
THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO
SIGN AND DATE THE FORM.
Certain payments other than interest, dividends and patronage dividends,
that are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividend,
interest, or other payments to give tax-payer identification numbers to payers
who must report for payments to IRS. IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Beginning January 1, 1994, payers must generally
withhold 31% of taxable interest, dividend, and certain other payments to a
payee who does not furnish a taxpayer identification number to a payer. Certain
penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail
to furnish your taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS.--If you fail to
include any portion of an includible payment for interest, dividends, or
patronage dividends in gross income, such failure will be treated as being due
to negligence and will be subject to a penalty of 5% on any portion of an
under-payment attributable to that failure unless there is clear and convincing
evidence to the contrary.
(3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
<PAGE> 1
EXHIBIT 99.4
NOTICE OF GUARANTEED DELIVERY
FOR
10 3/4% SENIOR NOTES DUE 2006
CLARK MATERIAL HANDLING COMPANY
As set forth in the Prospectus dated September 18, 1998 (the "Prospectus"),
of CLARK MATERIAL HANDLING COMPANY, (the "Company") and in the accompanying
Letter of Transmittal and instructions thereto (the "Letter of Transmittal"),
this form or one substantially equivalent hereto must be used to accept the
Company's offer to exchange (the "Exchange Offer") all of its outstanding 10
3/4% Series B Senior Notes due 2006 (the "Existing Notes") for its 10 3/4%
Series D Senior Notes due 2006, which have been registered under the Securities
Act of 1933, as amended, if certificates for the Existing Notes are not
immediately available or if the Existing Notes, the Letter of Transmittal or any
other documents required thereby cannot be delivered to the Exchange Agent, or
the procedure for book-entry transfer cannot be completed, prior to 5:00 P.M.,
New York City time, on the Expiration Date (as defined in the Prospectus), this
form may be delivered by an Eligible Institution by hand or transmitted by
facsimile transmission, overnight courier or mail to the Exchange Agent as set
forth below. Capitalized terms used but not defined herein have the meaning
given to them in the Prospectus.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON OCTOBER 23,
1998, UNLESS THE OFFER IS EXTENDED (THE "EXPIRATION DATE"). TENDERS OF EXISTING
NOTES MAY BE WITHDRAWN AT ANY TIME PRIOR TO 5:00 P.M. ON THE BUSINESS DAY PRIOR
TO THE EXPIRATION DATE.
TO: UNITED STATES TRUST COMPANY OF NEW YORK, THE EXCHANGE AGENT
<TABLE>
<S> <C>
By Registered or Certified Mail: By Overnight Courier or By Hand After 4:30 PM on the Expiration Date Only:
United States Trust Company of New York United States Trust Company of New York
P.O. Box 844 770 Broadway
Cooper Station New York, New York 10003
New York, New York 10276-0844 Attention: Corporate Trust Services
By Hand Up to 4:30 PM: By Facsimile:
United States Trust Company of New York United States Trust Company of New York
111 Broadway (212) 780-0582
Lower Level Attention: Corporate Trust Services
Corporate Trust Services
New York, New York 10006 Confirm by telephone:
(800) 548-6565
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS, OR TRANSMISSION OF INSTRUCTIONS
VIA A FACSIMILE, OTHER THAN AS SET FORTH ABOVE, DOES NOT CONSTITUTE A VALID
DELIVERY.
This form is not to be used to guarantee signatures. If a signature on the
Letter of Transmittal to be used to tender Existing Notes is required to be
guaranteed by an "Eligible Institution" under the instructions thereto, such
signature guarantee must appear in the applicable space provided in the Letter
of Transmittal.
<PAGE> 2
Ladies and Gentlemen:
The undersigned hereby tenders to CLARK MATERIAL HANDLING COMPANY, a
Delaware corporation (the "Company"), upon the terms and subject to the
conditions set forth in the Prospectus and the Letter of Transmittal (which
together constitute the "Exchange Offer"), receipt of which is hereby
acknowledged, (number of Existing Notes) Existing Notes pursuant to
the guaranteed delivery procedures set forth in Instruction 1 of the Letter of
Transmittal.
The undersigned understands that tenders of Existing Notes will be accepted
only in principal amounts equal to $1,000 or integral multiples thereof. The
undersigned understand that tenders of Existing Notes pursuant to the Exchange
Offer may not be withdrawn after 5:00 p.m., New York City time, on the business
day prior to the Expiration Date.
All authority herein conferred or agreed to be conferred by this Notice of
Guaranteed Delivery shall survive the death, incapacity or dissolution of the
undersigned and every obligation of the undersigned under this Notice of
Guaranteed Delivery shall be binding upon the heirs, personal representatives,
executors, administrators, successors, assigns, trustees in bankruptcy and other
legal representatives of the undersigned.
NOTE: SIGNATURES MUST BE PROVIDED WHERE INDICATED BELOW.
<TABLE>
<S> <C>
Certificate No(s). for Existing Notes (if
available) Name(s) of Record Holder(s)
- ------------------------------------------------- -------------------------------------------------
- ------------------------------------------------- -------------------------------------------------
PLEASE PRINT OR TYPE
Principal Amount of Existing Notes Address
-------------------------------------------------
- -------------------------------------------------
-------------------------------------------------
Area Code and
Tel. No.
-------------------------------------------------
Signature(s)
-------------------------------------------------
Dated:
-------------------------------------------------
If Existing Notes will be delivered by book-entry
transfer at the Depository Trust Company,
Depository Account No.
-------------------------------------------------
</TABLE>
This Notice of Guaranteed Delivery must be signed by the registered
holder(s) of Existing Notes exactly as its (their) name(s) appear on
certificates for Existing Notes or on a security position listing as the owner
of Existing Notes, or by person(s) authorized to become registered holder(s) by
endorsements and documents transmitted with this Notice of Guaranteed Delivery.
If signature is by a trustee, executor, administrator, guardian,
attorney-in-fact, officer or other person acting in a fiduciary or
representative capacity, such person must provide the following information:
PLEASE PRINT NAME(S) AND ADDRESS(ES)
Name(s):
- --------------------------------------------------------------------------------
Capacity:
- --------------------------------------------------------------------------------
Address(es):
- --------------------------------------------------------------------------------
<PAGE> 3
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member firm of a registered national securities exchange
or of the National Association of Securities Dealers, Inc., or a commercial bank
or trust company having an office or correspondent in the United States or an
"eligible guarantor institution" within the meaning of Rule 17Ad-15 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), hereby (a)
represents that the above named person(s) "own(s)" the Existing Notes tendered
hereby within the meaning of Rule 14e-4 under the Exchange Act, (b) represents
that such tender of Existing Notes complies with Rule 14e-4 under the Exchange
Act and (c) guarantees that delivery to the Exchange Agent of certificates for
the Existing Notes tendered hereby, in proper form for transfer (or confirmation
of the book-entry transfer of such Existing Notes into the Exchange Agent's
Account at the Depository Trust Company, pursuant to the procedures for book-
entry transfer set forth in the Prospectus), with delivery of a properly
completed and duly executed Letter of Transmittal (or manually signed facsimile
thereof) with any required signatures and any other required documents, will he
received by the Exchange Agent at one of its addresses set forth above within
five business days after the Expiration Date.
THE UNDERSIGNED ACKNOWLEDGES THAT IT MUST DELIVER THE LETTER OF TRANSMITTAL
AND EXISTING NOTES TENDERED HEREBY TO THE EXCHANGE AGENT WITHIN THE TIME PERIOD
SET FORTH AND THAT FAILURE TO DO SO COULD RESULT IN FINANCIAL LOSS TO THE
UNDERSIGNED.
Name of Firm
- -------------------------------------------
--------------------------------------
Authorized Signature
Address
- -------------------------------------------------
Name
--------------------------------------
Please Print or Type
- ------------------------------------------------------------
Title
--------------------------------------
Zip Code
Area Code and Tel. No.
- ------------------------------- Date
--------------------------------------
Dated:
- ------------------, 1998
NOTE: DO NOT SEND EXISTING NOTES WITH THIS FORM; EXISTING NOTES SHOULD BE SENT
WITH YOUR LETTER OF TRANSMITTAL SO THAT THEY ARE RECEIVED BY THE EXCHANGE AGENT
WITHIN FIVE BUSINESS DAYS AFTER THE EXPIRATION DATE.
<PAGE> 1
EXHIBIT 99.5
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON OCTOBER 23,
1998, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS OF EXISTING PREFERRED
STOCK MAY BE WITHDRAWN AT ANY TIME PRIOR TO 5:00 P.M. ON THE EXPIRATION DATE.
CLARK MATERIAL HANDLING COMPANY
LETTER OF TRANSMITTAL
13% Senior Exchangeable Preferred Stock Due 2007
TO: UNITED STATES TRUST COMPANY OF NEW YORK,
THE EXCHANGE AGENT
<TABLE>
<S> <C>
By Registered or Certified Mail: By Overnight Courier or By Hand After 4:30 PM on the Expiration Date Only:
United States Trust Company of New York United States Trust Company of New York
P.O. Box 844 770 Broadway, 13th Floor
Cooper Station New York, New York 10003
New York, New York 10276-0844 Attn: Corporate Trust Services
Attn: Corporate Trust Services
By Hand Up to 4:30 PM: By Facsimile:
United States Trust Company of New York United States Trust Company of New York
111 Broadway, Lower Level (212) 780-0582
New York, New York 10003 Attn: Corporate Trust Services
Corporate Trust Services
Confirm by telephone:
(800) 548-6565
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONE LISTED
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS ACCOMPANYING THIS
LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL
IS COMPLETED.
HOLDERS WHO WISH TO BE ELIGIBLE TO RECEIVE NEW PREFERRED STOCK FOR THEIR
EXISTING PREFERRED STOCK PURSUANT TO THE EXCHANGE OFFER MUST VALIDLY TENDER (AND
NOT WITHDRAW) THEIR EXISTING PREFERRED STOCK TO THE EXCHANGE AGENT PRIOR TO THE
EXPIRATION DATE.
The undersigned acknowledges receipt of the Prospectus dated September 18,
1998 (the "Prospectus") of CLARK MATERIAL HANDLING COMPANY (the "Company") and
this Letter of Transmittal (the "Letter of Transmittal"), which together
constitute the Company's Offer to Exchange (the "Exchange Offer") $1,000
liquidation preference amount of its 13% Senior Exchangeable Series B Preferred
Stock due 2007 (the "New Preferred Stock"), which have been registered under the
Securities Act of 1933, as amended (the "Securities Act"), pursuant to a
Registration Statement of which the Prospectus is a part, for each $1,000
liquidation preference amount of its outstanding 13% Senior Exchangeable Series
A Preferred Stock due 2007 (the "Existing Preferred Stock"), of which
$20,000,000 principal amount is outstanding, upon the terms and conditions set
forth in the Prospectus. Other capitalized terms used but not defined herein
have the meaning given to them in the Prospectus.
<PAGE> 2
For each Existing Preferred Stock certificate accepted for exchange, the
holder of such Existing Preferred Stock will receive a New Preferred Stock
certificate having a liquidation preference amount equal to that of the
surrendered Existing Preferred Stock certificate. Dividends on the New Preferred
Stock will accrue from the last dividend payment date on which dividends were
paid on the Existing Preferred Stock surrendered in exchange therefor or, if no
dividends have been paid on the Existing Preferred Stock, from the date of
original issue of the Existing Preferred Stock. Holders of Existing Preferred
Stock accepted for exchange will be deemed to have waived the right to receive
any other payments or accrued dividends on the Existing Preferred Stock. The
Company reserves the right, at any time or from time to time, to extend the
Exchange Offer at its discretion, in which event the term "Expiration Date"
shall mean the latest time and date to which the Exchange Offer is extended. The
Company shall notify holders of the Existing Preferred Stock of any extension by
means of a press release or other public announcement prior to 9:00 A.M., New
York City time, on the next business day after the previously scheduled
Expiration Date.
This Letter of Transmittal is to be used by Holders if: (i) certificates
representing Existing Preferred Stock are to be physically delivered to the
Exchange Agent herewith by Holders; (ii) tender of Existing Preferred Stock is
to be made by book-entry transfer to the Exchange Agent's account at The
Depository Trust Company ("DTC"), pursuant to the procedures set forth in the
Prospectus under "The Exchange Offer -- Procedures for Tendering" by any
financial institution that is a participant in DTC and whose name appears on a
security position listing as the owner of Existing Preferred Stock or (iii)
tender of Existing Preferred Stock is to be made according to the guaranteed
delivery procedures set forth in the prospectus under "The Exchange Offer --
Guaranteed Delivery Procedures." DELIVERY OF DOCUMENTS TO DTC DOES NOT
CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
The term "Holder" with respect to the Exchange Offer means any person: (i)
in whose name Existing Preferred Stock is registered on the books of the Company
or any other person who has obtained a properly completed bond power from the
registered Holder; or (ii) whose Existing Preferred Stock is held of record by
DTC who desires to deliver such Existing Preferred Stock by book-entry transfer
at DTC. The undersigned has completed, executed and delivered this Letter of
Transmittal to indicate the action the undersigned desires to take with respect
to the Exchange Offer.
<PAGE> 3
The instructions included with this Letter of Transmittal must be followed.
Questions and requests for assistance or for additional copies of the
Prospectus, this Letter of Transmittal and the Notice of Guaranteed Delivery may
be directed to the Exchange Agent. See Instruction 10 herein.
HOLDERS WHO WISH TO ACCEPT THE EXCHANGE OFFER
AND TENDER THEIR EXISTING PREFERRED STOCK MUST COMPLETE THIS
LETTER OF TRANSMITTAL IN ITS ENTIRETY.
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE CHECKING ANY BOX BELOW
- --------------------------------------------------------------------------------
DESCRIPTION OF 13% SENIOR EXCHANGEABLE PREFERRED STOCK DUE 2007 (EXISTING
PREFERRED STOCK)
<TABLE>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
AGGREGATE LIQUIDATION PREFERENCE LIQUIDATION PREFERENCE AMOUNT
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) CERTIFICATE AMOUNT REPRESENTED BY TENDERED (IF LESS THAN
(PLEASE FILL IN, IF BLANK) NUMBER(S)* CERTIFICATE(S) ALL)**
- ------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------
--------------------------------------------------------------------------
--------------------------------------------------------------------------
--------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed by Holders tendering by book-entry transfer.
** Unless indicated in the column labeled "Liquidation Preference Amount
Tendered," any tendering Holder of Existing Preferred Stock will be deemed
to have tendered the entire aggregate Liquidation Preference amount
represented by the column labeled "Aggregate Liquidation Preference
Represented by Certificate(s)." If the space provided above is inadequate,
list the certificate numbers and principal amounts on a separate signed
schedule and affix the list to this Letter of Transmittal.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 4
------------------------------------------------------------
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 4, 5 AND 6)
To be completed ONLY if certificates for Existing Preferred Stock in a
liquidation preference amount not tendered or not accepted for exchange, or
New Preferred Stock issued in exchange for Existing Preferred Stock accepted
for exchange, are to be issued in the name of someone other than the
undersigned, or if the Existing Preferred Stock tendered by book-entry
transfer that are not accepted for exchange are to be credited to an account
maintained by DTC.
Issue certificate(s) to:
Name:
---------------------------------------------------
Address:
-------------------------------------------------
------------------------------------------------------------
(INCLUDE ZIP CODE)
------------------------------------------------------------
(TAX IDENTIFICATION OR
SOCIAL SECURITY NO.)
------------------------------------------------------------
------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 4, 5 AND 6)
To be completed ONLY if certificates for Existing Preferred Stock in a
liquidation preference amount not tendered or not accepted for exchange, are
to be sent to someone other than the undersigned, or to the undersigned at an
address other than that shown above.
Mail to:
Name:
---------------------------------------------------
Address:
-------------------------------------------------
------------------------------------------------------------
(INCLUDE ZIP CODE)
------------------------------------------------------------
(TAX IDENTIFICATION OR
SOCIAL SECURITY NO.)
------------------------------------------------------------
<PAGE> 5
[ ] CHECK HERE IF TENDERED EXISTING PREFERRED STOCK ARE BEING DELIVERED BY
BOOK-ENTRY TRANSFER TO THE EXCHANGE AGENT'S ACCOUNT AT DTC AND COMPLETE THE
FOLLOWING:
Name of Tendering Institution:
-----------------------------------------------------------------------------
DTC Book-Entry Account No.:
-----------------------------------------------------------------------------
Transaction Code No.:
-----------------------------------------------------------------------------
[ ] CHECK HERE IF TENDERED EXISTING PREFERRED STOCK ARE BEING DELIVERED PURSUANT
TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND
COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s):
-----------------------------------------------------------------------------
Window Ticket Number (if any):
-----------------------------------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery:
-----------------------------------------------------------------
IF DELIVERED BY BOOK-ENTRY TRANSFER, COMPLETE THE FOLLOWING:
<TABLE>
<S> <C>
Account Number: --------------------------- Transaction Code Number: ---------------------------
</TABLE>
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name:
-----------------------------------------------------------------------------
Address:
-----------------------------------------------------------------------------
<PAGE> 6
Ladies and Gentlemen:
Subject to the terms and conditions of the Exchange Offer, the undersigned
hereby tenders to the Company the liquidation preference amount of Existing
Preferred Stock indicated above. Subject to and effective upon the acceptance
for exchange of the liquidation preference amount of Existing Preferred Stock
tendered in accordance with this Letter of Transmittal, the undersigned sells,
assigns and transfers to, or upon the order of, the Company all right, title and
interest in and to the Existing Preferred Stock tendered hereby. The undersigned
hereby irrevocably constitutes and appoints the Exchange Agent its agent and
attorney-in-fact (with full knowledge that the Exchange Agent also acts as the
agent of the Company and as Registrar and Transfer Agent for the Existing
Preferred Stock and New Preferred Stock) with respect to the tendered Existing
Preferred Stock with full power of substitution to (i) deliver certificates for
such Existing Preferred Stock to the Company, or transfer ownership of such
Existing Preferred Stock on the account books maintained by DTC and deliver all
accompanying evidence of transfer and authenticity to, or upon the order of, the
Company and (ii) present such Existing Preferred Stock for transfer on the books
of the Company and receive all benefits and otherwise exercise all rights of
beneficial ownership of such Existing Preferred Stock, all in accordance with
the terms and subject to the conditions of the Exchange Offer. The power of
attorney granted in this paragraph shall be deemed irrevocable and coupled with
an interest.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Existing
Preferred Stock tendered hereby and that the Company will acquire good and
unencumbered title thereto, free and clear of all liens, restrictions, charges
and encumbrances and not subject to any adverse claim, when the same are
acquired by the Company. The undersigned hereby further represents that any New
Preferred Stock acquired in exchange for Existing Preferred Stock tendered
hereby will have been acquired in the ordinary course of business of the Holder
receiving such New Preferred Stock, whether or not such person is the Holder,
that neither the Holder nor any such other person has any arrangement or
understanding with any person to participate in the distribution of such New
Preferred Stock within the meaning of the Securities Act of 1993, as amended,
and that neither the Holder nor any such other person is an "affiliate," as
defined in Rule 405 under the Securities Act, of the Company or any of its
subsidiaries.
The undersigned also acknowledges that this Exchange Offer is being made in
reliance on an interpretation by the staff of the Securities and Exchange
Commission (the "SEC") that the New Preferred Stock issued in exchange for the
Existing Preferred Stock pursuant to the Exchange Offer may be offered for
resale, resold and otherwise transferred by holders thereof (other than any such
holder that is an "affiliate" of the Company within the meaning of Rule 405
under the Securities Act), without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such New
Preferred Stock is acquired in the ordinary course of such holders' business,
such holders are not engaging in and do not intend to engage in a distribution
of the New Preferred Stock and such holders have no arrangements with any person
to participate in the distribution of such New Preferred Stock. If the
undersigned is not a broker-dealer, the undersigned represents that it is not
engaged in, and does not intend to engage in, a distribution of New Preferred
Stock. If the undersigned is a broker-dealer that will receive New Preferred
Stock for its own account in exchange for Existing Preferred Stock that were
acquired as a result of market-making activities or other trading activities it
acknowledges that it will deliver a prospectus in connection with any resale of
such New Preferred Stock; however, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. The undersigned also
acknowledges and agrees that any person who is a broker-dealer registered under
the Exchange Act or is participating in the Exchange Offer for the purposes of
distributing the New Preferred Stock must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
secondary resale transaction of the New Preferred Stock acquired by such person
and cannot rely on the position of the staff of the Commission set forth in
certain no-action letters. The undersigned understands that a secondary resale
transaction described in the previous sentence and any resale of New Preferred
Stock obtained by such holder or other person in exchange for Existing Preferred
Stock acquired by such holder or other person directly from the Company should
be covered by an effective registration statement containing the selling
securityholder information required by Item 507 or Item 508, as applicable, of
Regulation S-K of the Commission.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Exchange Agent or the Company to be necessary or
desirable to complete the assignment, transfer and purchase of the Existing
Preferred Stock tendered hereby. All authority conferred or agreed to be
conferred by this Letter of Transmittal shall survive the death, incapacity or
dissolution of the undersigned and every obligation of the undersigned under
this Letter of Transmittal shall be binding upon the undersigned's heirs,
personal representatives, successors and assigns, trustees in bankruptcy or
other legal representatives of the undersigned. This tender may be withdrawn
only in accordance with the procedures set forth in "The Exchange Offers --
Withdrawal Rights" section of the Prospectus.
For purposes of the Exchange Offer, the Company shall be deemed to have
accepted validly tendered Existing Preferred Stock when, as and if the Company
has given oral or written notice thereof to the Exchange Agent.
<PAGE> 7
If any tendered Existing Preferred Stock are not accepted for exchange
pursuant to the Exchange Offer for any reason, certificates for any such
unaccepted Existing Preferred Stock will be returned (except as noted below with
respect to tenders through DTC), without expense, to the undersigned at the
address shown below or at a different address as may be indicated under "Special
Delivery Instructions" as promptly as practicable after the Expiration Date.
The undersigned understands that tenders of Existing Preferred Stock
pursuant to the procedures described under the caption "The Exchange Offers --
Procedures for Tendering" in the Prospectus and in the instructions hereto will
constitute a binding agreement between the undersigned and the Company upon the
terms and subject to the conditions of the Exchange Offer.
Unless otherwise indicated under "Special Payment Instructions," please
issue the certificates representing the New Preferred Stock issued in exchange
for the Existing Preferred Stock accepted for exchange and return any Existing
Preferred Stock not tendered or not exchanged in the name(s) of the undersigned
(or in either such event in the case of the Existing Preferred Stock tendered
through DTC, by credit to the undersigned's account, at DTC). Similarly, unless
otherwise indicated under "Special Delivery Instructions," please send the
certificates representing the New Preferred Stock issued in exchange for the
Existing Preferred Stock accepted for exchange and any certificates for Existing
Preferred Stock not tendered or not exchanged (and accompanying documents, as
appropriate) to the undersigned at the address shown below the undersigned's
signature(s), unless, in either event, tender is being made through DTC. In the
event that both "Special Payment Instructions" and "Special Delivery
Instructions" are completed, please issue the certificates representing the New
Preferred Stock issued in exchange for the Existing Preferred Stock accepted for
exchange and return any Existing Preferred Stock not tendered or not exchanged
in the name(s) of, and send said certificates to, the person(s) so indicated.
The undersigned recognizes that the Company has no obligation pursuant to the
"Special Payment Instructions" and "Special Delivery Instructions" to transfer
any Existing Preferred Stock from the name of the registered Holder(s) thereof
if the Company does not accept for exchange any of the Existing Preferred Stock
so tendered.
Holders of Existing Preferred Stock who wish to tender their Existing
Preferred Stock and (i) whose Existing Preferred Stock is not immediately
available or (ii) who cannot deliver their Existing Preferred Stock, this Letter
of Transmittal or any other documents required hereby to the Exchange Agent, or
cannot complete the procedure for book-entry transfer, prior to the Expiration
Date, may tender their Existing Preferred Stock according to the guaranteed
delivery procedures set forth in the Prospectus under the caption "The Exchange
Offers -- Guaranteed Delivery Procedures." See Instruction 1 regarding the
completion of the Letter of Transmittal printed below.
<PAGE> 8
PLEASE SIGN HERE WHETHER OR NOT
EXISTING PREFERRED STOCK ARE BEING PHYSICALLY TENDERED HEREBY
<TABLE>
<S> <C>
X ___________________________________________________ Date _____________________________
X ___________________________________________________ Date _____________________________
Signature(s) of Registered Holder(s)
Or Authorized Signatory
Area Code and Telephone Number: ___________________________________________
</TABLE>
The above lines must be signed by the registered Holder(s) of Existing
Preferred Stock as their name(s) appear(s) on the Existing Preferred Stock
Certificates or, if the Existing Preferred Stock is tendered by a participant in
DTC, as such participant's name appears on a security position listing as the
owner of Existing Preferred Stock, or by person(s) authorized to become
registered Holder(s) by a properly completed stock power from the registered
Holder(s), a copy of which must be transmitted with this Letter of Transmittal.
If Existing Preferred Stock to which this Letter of Transmittal relates are held
of record by two or more joint Holders, then all such holders must sign this
Letter of Transmittal. If signature is by a trustee, executor, administrator,
guardian, attorney-in-fact, officer of a corporation or other person acting in a
fiduciary or representative capacity, such person must (i) set forth his or her
full title below and (ii) unless waived by the Company, submit evidence
satisfactory to the Company of such person's authority to act. See Instruction 4
regarding the completion of this Letter of Transmittal printed below.
Name(s): ______________________________________________________________________
(Please Print)
Capacity:______________________________________________________________________
Address: ______________________________________________________________________
(Include Zip Code)
Signature(s) Guaranteed by an Eligible Institution:
(If required by Instruction 4)
_______________________________________________________________________________
(Authorized Signature)
_______________________________________________________________________________
(Title)
_______________________________________________________________________________
(Name of Firm)
Dated: ______________________________
<PAGE> 9
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER AND EXISTING PREFERRED STOCK; GUARANTEED
DELIVERY PROCEDURES. This Letter is to be completed by stockholders, either if
certificates are to be forwarded herewith or if tenders are to be made pursuant
to the procedures for delivery by book-entry transfer set forth in "The Exchange
Offers--Book-Entry Transfer" section of the Prospectus. Certificates for all
physically tendered Existing Preferred Stock, or Book-Entry Confirmation, as the
case may be, as well as a properly completed and duly executed Letter (or
manually signed facsimile hereof) and any other documents required by this
Letter, must be received by the Exchange Agent at the address set forth herein
on or prior to the Expiration Date, or the tendering holder must comply with the
guaranteed delivery procedures set forth below. Existing Preferred Stock
tendered hereby must be in denominations of principal amount of maturity of
$1,000 and any integral multiple thereof.
Stockholders whose certificates for Existing Preferred Stock are not
immediately available or who cannot deliver their certificates and all other
required documents to the Exchange Agent on or prior to the Expiration Date, or
who cannot complete the procedure for book-entry transfer on a timely basis, may
tender their Existing Preferred Stock pursuant to the guaranteed delivery
procedures set forth in "The Exchange Offers--Guaranteed Delivery Procedures"
section of the Prospectus. Pursuant to such procedures, (i) such tender must be
made through an Eligible Institution (as defined in Instruction 4 below), (ii)
prior to the Expiration Date, the Exchange Agent must receive from such Eligible
Institution a properly completed and duly executed Letter (or facsimile thereof)
and Notice of Guaranteed Delivery, substantially in the form provided by the
Company (by facsimile transmission, mail or hand delivery), setting forth the
name and address of the holder of Existing Preferred Stock and the amount of
Existing Preferred Stock tendered, stating that the tender is being made thereby
and guaranteeing that within five New York Stock Exchange ("NYSE") trading days
after the date of execution of the Notice of Guaranteed Delivery, the
certificates for all physically tendered Existing Preferred Stock, or a
Book-Entry Confirmation, and any other documents required by this Letter will be
deposited by the Eligible Institution with the Exchange Agent, and (iii) the
certificates for all physically tendered Existing Preferred Stock, in proper
form for transfer, or Book-Entry Confirmation, as the case may be, and all other
documents required by this Letter, are received by the Exchange Agent within
five NYSE trading days after the date of execution of the Notice of Guaranteed
Delivery.
The method of delivery of this Letter, the Existing Preferred Stock and all
other required documents is at the election and risk of the tendering holders,
but the delivery will be deemed made only when actually received or confirmed by
the Exchange Agent. If Existing Preferred Stock is sent by mail, it is suggested
that the mailing be made sufficiently in advance of the Expiration Date to
permit the delivery to the Exchange Agent prior to 5:00 p.m., New York City
time, on the Expiration Date.
See "The Exchange Offers" section in the Prospectus.
2. TENDER BY HOLDER. Only a holder of Existing Preferred Stock may tender
such Existing Preferred Stock in the Exchange Offer. Any beneficial holder of
Existing Preferred Stock who is not the registered holder and who wishes to
tender should arrange with the registered holder to execute and deliver this
Letter on his or her behalf or must, prior to completing and executing this
Letter and delivering his or her Existing Preferred Stock, either make
appropriate arrangements to register ownership of the Existing Preferred Stock
in such holder's name or obtain a properly completed stock power form the
registered holder.
3. PARTIAL TENDERS. Tenders of Existing Preferred Stock will be accepted
only in integral multiples of $1,000. If less than the entire liquidation
preference amount of any Existing Preferred Stock Certificate is tendered, the
tendering holder should fill in the liquidation preference amount tendered in
the fourth column of the box entitled "Description of 13% Senior Exchangeable
Preferred Stock due 2007 (Existing Preferred Stock)" above. The entire
liquidation preference amount of Existing Preferred Stock delivered to the
Exchange Agent will be deemed to have been tendered unless otherwise indicated.
If the entire liquidation preference amount of all Existing Preferred Stock is
not tendered, then Existing Preferred Stock for the liquidation preference
amount of Existing Preferred Stock not tendered and a certificate or
certificates representing New Preferred Stock issued in exchange for any
Existing Preferred Stock accepted will be sent to the Holder at his or her
registered address, unless a different address is provided in the appropriate
box on this Letter promptly after the Existing Preferred Stock are accepted for
exchange.
4. SIGNATURES ON THIS LETTER; POWERS OF ATTORNEY AND ENDORSEMENTS;
GUARANTEE OF SIGNATURES. If this Letter is signed by the registered holder of
the Existing Preferred Stock tendered hereby, the signature must correspond
exactly with the name as written on the face of the certificates without any
change whatsoever.
<PAGE> 10
If any tendered Existing Preferred Stock are owned of record by two or more
joint owners, all such owners must sign this Letter.
If any tendered Existing Preferred Stock are registered in different names on
several certificates, it will be necessary to complete, sign and submit as many
separate copies of this Letter as there are different registrations of
certificates.
When this Letter is signed by the registered holder or holders of the Existing
Preferred Stock specified herein and tendered hereby, no endorsements of
certificates or separate powers of attorney are required. If, however, the New
Preferred Stock is to be issued, or any untendered Existing Preferred Stock is
to be reissued, to a person other than the registered holder, then endorsements
of any certificates transmitted hereby or separate powers of attorney are
required. Signatures on such certificate(s) must be guaranteed by an Eligible
Institution.
If this Letter is signed by a person other than the registered holder or
holders of any certificate(s) specified herein, such certificate(s) must be
endorsed or accompanied by appropriate powers of attorney, in either case signed
exactly as the name or names on the registered holder or holders appear(s) on
the certificate(s) and signatures on such certificate(s) must be guaranteed by
an Eligible Institution.
If this Letter or any certificates or powers of attorney are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and unless waived by the Company,
proper evidence satisfactory to the Company of their authority to so act must be
submitted.
Endorsements on certificates for Existing Preferred Stock or signatures on
powers of attorney required by this Instruction 4 must be guaranteed by a firm
which is a participant in a recognized signature guarantee medallion program
("Eligible Institutions").
Signatures on this Letter must be guaranteed by an Eligible Institution
unless the Existing Preferred Stock is tendered (i) by a registered holder of
Existing Preferred Stock (which term, for purposes of the Exchange Offer,
includes any participant in the Book-Entry Transfer Facility system whose name
appears on a security position listing as the holder of such Existing Preferred
Stock) who has not completed the box entitled "Special Issuance Instructions" or
"Special Delivery Instructions" on this Letter, or (ii) for the account of an
Eligible Institution.
5. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. Tendering holders should
indicate, in the applicable box or boxes, the name and address to which New
Preferred Stock or substitute Existing Preferred Stock for liquidation
preference amounts not tendered or not accepted for exchange are to be issued or
sent, if different from the name and address of the person signing this Letter
of Transmittal (or in the case of tender of Existing Preferred Stock through
DTC, if different from DTC). In the case of issuance in a different name, the
taxpayer identification or social security number of the person named must also
be indicated. Stockholders tendering Existing Preferred Stock by book-entry
transfer may request that Existing Preferred Stock not exchanged be credited to
such account maintained at the Book-Entry Transfer Facility as such stockholder
may designate hereon. If no such instructions are given, such Existing Preferred
Stock not exchanged will be returned to the name and address of the person
signing this Letter.
6. TAX IDENTIFICATION NUMBER. Federal income tax law requires that a
holder whose offered Existing Preferred Stock is accepted for exchange must
provide the Company (as payer) with his, her or its correct Taxpayer
Identification Number ("TIN"), which, in the case of an exchanging holder who is
an individual, is his or her social security number. If the Company is not
provided with the correct TIN or an adequate basis for exemption, such holder
may be subject to a $50 penalty imposed by the Internal Revenue Service (the
"IRS"), and payments made with respect to Existing Preferred Stock purchased
pursuant to the Exchange Offer may be subject to backup withholding at a 31%
rate. If withholding results in an overpayment of taxes, a refund may be
obtained. Exempt holders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. See the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9."
<PAGE> 11
To prevent backup withholding, each exchanging holder must provide his, her or
its correct TIN by completing the Substitute Form W-9 enclosed herewith,
certifying that the TIN provided is correct (or that such Holder is awaiting a
TIN) and that (i) the holder is exempt from backup withholding, (ii) the holder
has been notified by the IRS that he, she or it is subject to backup withholding
as a result of a failure to report all interest or dividends, or (iii) the IRS
has notified the holder that he, she or it is no longer subject to backup
withholding. In order to satisfy the Exchange Agent that a foreign individual
qualifies as an exempt recipient, such holder must submit a statement signed
under penalty of perjury attesting to such exempt status. Such statements may be
obtained from the Exchange Agent. If the Existing Preferred Stock is in more
than one name or are not in the name of the actual owner, consult the Substitute
Form W-9 for information on which TIN to report. If you do not provide your TIN
to the Company within 60 days, backup withholding will begin and continue until
you furnish your TIN to the Company.
7. TRANSFER TAXES. The Company will pay all transfer taxes, if any,
applicable to the exchange of Existing Preferred Stock pursuant to the Exchange
Offer. If, however, certificates representing New Preferred Stock or Existing
Preferred Stock for principal amounts not tendered or accepted for exchange are
to be delivered to, or are to be registered or issued in the name of, any person
other than the registered holder of the Existing Preferred Stock tendered
hereby, or if tendered Existing Preferred Stock is registered in the name of any
person other than the person signing this Letter, or if a transfer tax is
imposed for any reason other than the exchange of Existing Preferred Stock
pursuant to the Exchange Offer, then the amount of any such transfer taxes
(whether imposed on the registered holder or on any other persons) will be
payable by the tendering holder. If satisfactory evidence of payment of such
taxes or exemption therefrom is not submitted herewith, the amount of such
transfer taxes will be billed directly to such tendering holder.
Except as provided in this Instruction 7, it will not be necessary for
transfer tax stamps to be affixed to the Existing Preferred Stock listed in this
Letter.
8. WAIVER OF CONDITIONS. The Company reserves the absolute right to amend,
waive or modify specified conditions in the Exchange Offer in the case of any
Existing Preferred Stock tendered.
9. NO CONDITIONAL TRANSFERS. No alternative, conditional, irregular or
contingent tenders will be accepted. All tendering holders of Existing Preferred
Stock, by execution of this Letter, shall waive any right to receive notice of
the acceptance of their Existing Preferred Stock for exchange.
Neither the Company, the Exchange Agent nor any other person is obligated
to give notice of any defect or irregularity with respect to any tender of
Existing Preferred Stock nor shall any of them incur any liability for failure
to give any such notice.
10. MUTILATED, LOST, STOLEN OR DESTROYED EXISTING NOTES. Any tendering
holder whose Existing Preferred Stock have been mutilated, lost, stolen or
destroyed should contact the Exchange Agent at the address indicated herein for
further instructions.
11. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests
for assistance for additional copies of the Prospectus, this Letter and the
Notice of Guaranteed Delivery may be directed to the Exchange Agent at the
address specified in the Prospectus.
(DO NOT WRITE IN THE SPACE BELOW)
<TABLE>
<CAPTION>
EXISTING EXISTING
CERTIFICATE PREFERRED STOCK PREFERRED STOCK
SURRENDERED TENDERED ACCEPTED
- ------------------ ------------------ ------------------
<S> <C> <C>
- ------------------ ------------------ ------------------
- ------------------ ------------------ ------------------
- ------------------ ------------------ ------------------
</TABLE>
Delivery Prepared by
--------------- Checked By
--------------- Date
---------------
<PAGE> 12
<TABLE>
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------
PAYER'S NAME: CLARK MATERIAL HANDLING COMPANY
- ----------------------------------------------------------------------------------------------------------
Name (if joint names, list first and circle the name of the person or
SUBSTITUTE entity whose number you enter in Part 1 below. See instructions if your
FORM W-9 name has changed.)
DEPARTMENT OF THE TREASURY ---------------------------------------------------------------------------
INTERNAL REVENUE SERVICE Address
PAYER'S REQUEST FOR TIN ---------------------------------------------------------------------------
City, state and ZIP code
---------------------------------------------------------------------------
List account number(s) here (optional)
---------------------------------------------------------------------------
----------------------------------------------------------------------------
Part 1--PLEASE PROVIDE YOUR TAXPAYER Social security number
IDENTIFICATION NUMBER ("TIN") IN THE BOX AT or TIN
RIGHT AND CERTIFY BY SIGNING AND DATING ------------------------------
BELOW.
----------------------------------------------------------------------------
Part 2--Check the box if you are NOT subject to backup withholding under
the provisions of section 3408(a)(1)(C) of the Internal Revenue Code
because (1) you have not been notified that you are subject to backup
withholding as a result of failure to report all interest or dividends or
(2) the Internal Revenue Service has notified you that you are no longer
subject to backup withholding.
CERTIFICATION--UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT THE
INFORMATION PROVIDED ON THIS FORM IS TRUE, CORRECT AND COMPLETE.
----------------------------------------------------------------------------
Signature _________________ Date PART 3--AWAITING TIN [ ]
- ----------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE EXCHANGE OFFER. PLEASE
REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER OR SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
<PAGE> 13
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER.--Social Security numbers have nine digits separated by two hyphens: i.e.
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e. 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<C> <S> <C>
- ---------------------------------------------------------
GIVE THE
FOR THIS TYPE OF ACCOUNT: SOCIAL SECURITY
NUMBER OF--
- ---------------------------------------------------------
1. An individual's account The individual
2. Two or more individuals The actual owner of
(joint account) the account or, if
combined funds, any
one of the
individuals(1)
3. Husband and wife The actual owner of
(joint account) the account or, if
joint funds, either
person(1)
4. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
5. Adult and minor The adult or, if
(joint account) the minor is the
only contributor,
the minor(1)
6. Account in the name of guardian The ward, minor, or
or committee for a designated incompetent
ward, minor, or incompetent person(3)
person
7. a. The usual revocable savings The grantor-
trust account (grantor is trustee(1)
also trustee)
b. So-called trust account that The actual owner(1)
is not a legal or valid
trust under State law
8. Sole proprietorship account The Owner(4)
- ---------------------------------------------------------
- ---------------------------------------------------------
GIVE THE EMPLOYER
FOR THIS TYPE OF ACCOUNT: IDENTIFICATION
NUMBER OF--
- ---------------------------------------------------------
9. A valid trust, estate, or Legal entity (Do
pension trust not furnish the
identifying number
of the personal
representative or
trustee unless the
legal entity itself
is not designated
in the account
title.)(5)
10. Corporate account The corporation
11. Religious, charitable, or The organization
educational organization
account
12. Partnership account held in the The partnership
name of the business
13. Association, club, or other The organization
tax-exempt organization
15. Account with the Department of The public entity
Agriculture in the name of a
public entity (such as a State
or local government, school
district, or prison) that
receives agricultural program
payments
- ---------------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate, or pension trust.
NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE> 14
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the internal Revenue Service and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include the
following:
- A corporation.
- A financial institution.
- An organization exempt from tax under section 501(a), or an individual
retirement plan.
- The United States or any agency or instrumentality thereof.
- A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
- A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
- An international organization or any agency, or instrumentality thereof.
- A registered dealer in securities or commodities registered in the U.S. Or
a possession of the U.S.
- A real estate investment trust.
- A common trust fund operated by a bank under section 584(a).
- An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).
- An entity registered at all times under the Investment Company Act of
1940.
- A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to
backup withholding include the following:
- Payments to nonresident aliens subject to withholding under section 1941.
- Payments to partnerships not engaged in a trade or business in the U.S.
and which have at least one nonresident partner.
- Payments of patronage dividends where the amount received is not paid n
money.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
- Payments of interest on obligations issued by individuals. Note: You may
be subject to backup withholding if this interest is $600 or more and in
paid in the course of the payer's trade or business and you have not
provided your correct taxpayer identification number to the payer.
- Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
- Payments described in section 6049(b)(5) to non-resident aliens.
- Payments on tax-free covenant bonds under section 1451.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO
THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO
SIGN AND DATE THE FORM.
Certain payments other than interest, dividends and patronage dividends,
that are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividend,
interest, or other payments to give tax-payer identification numbers to payers
who must report for payments to IRS. IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Beginning January 1, 1994, payers must generally
withhold 31% of taxable interest, dividend, and certain other payments to a
payee who does not furnish a taxpayer identification number to a payer. Certain
penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail
to furnish your taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS.--If you fail to
include any portion of an includible payment for interest, dividends, or
patronage dividends in gross income, such failure will be treated as being due
to negligence and will be subject to a penalty of 5% on any portion of an
under-payment attributable to that failure unless there is clear and convincing
evidence to the contrary.
(3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
<PAGE> 15
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
<PAGE> 1
EXHIBIT 99.6
NOTICE OF GUARANTEED DELIVERY
FOR
13% SENIOR EXCHANGEABLE PREFERRED STOCK DUE 2007
CLARK MATERIAL HANDLING COMPANY
As set forth in the Prospectus dated September 18, 1998 (the "Prospectus"),
of CLARK MATERIAL HANDLING COMPANY, (the "Company") and in the accompanying
Letter of Transmittal and instructions thereto (the "Letter of Transmittal"),
this form or one substantially equivalent hereto must be used to accept the
Company's offer to exchange (the "Exchange Offer") all of its outstanding 13%
Senior Exchangeable Series A Preferred Stock due 2007 (the "Existing Notes") for
its 13% Senior Exchangeable Series B Preferred Stock due 2007, which have been
registered under the Securities Act of 1933, as amended, if certificates for the
Existing Preferred Stock are not immediately available or if the Existing
Preferred Stock, the Letter of Transmittal or any other documents required
thereby cannot be delivered to the Exchange Agent, or the procedure for
book-entry transfer cannot be completed, prior to 5:00 P.M., New York City time,
on the Expiration Date (as defined in the Prospectus), this form may be
delivered by an Eligible Institution by hand or transmitted by facsimile
transmission, overnight courier or mail to the Exchange Agent as set forth
below. Capitalized terms used but not defined herein have the meaning given to
them in the Prospectus.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON OCTOBER 23,
1998, UNLESS THE OFFER IS EXTENDED (THE "EXPIRATION DATE"). TENDERS OF EXISTING
PREFERRED STOCK MAY BE WITHDRAWN AT ANY TIME PRIOR TO 5:00 P.M. ON THE BUSINESS
DAY PRIOR TO THE EXPIRATION DATE.
TO: UNITED STATES TRUST COMPANY OF NEW YORK, THE EXCHANGE AGENT
<TABLE>
<S> <C>
By Registered or Certified Mail: By Overnight Courier or
United States Trust Company of New York By Hand After 4:30 PM on the Expiration Date:
P.O. Box 844 United States Trust Company of New York
Cooper Station 770 Broadway
New York, New York 10276-0844 New York, New York 10003
By Hand Up to 4:30 PM: Attention: Corporate Trust
United States Trust Company of New York By Facsimile:
111 Broadway United States Trust Company of New York
Lower Level (212) 780-0582
Corporate Trust Services Attention: Corporate Trust
New York, New York 10006
Confirm by telephone:
(800) 548-6565
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS, OR TRANSMISSION OF INSTRUCTIONS
VIA A FACSIMILE, OTHER THAN AS SET FORTH ABOVE, DOES NOT CONSTITUTE A VALID
DELIVERY.
This form is not to be used to guarantee signatures. If a signature on the
Letter of Transmittal to be used to tender Existing Preferred Stock is required
to be guaranteed by an "Eligible Institution" under the instructions thereto,
such signature guarantee must appear in the applicable space provided in the
Letter of Transmittal.
<PAGE> 2
Ladies and Gentlemen:
The undersigned hereby tenders to CLARK MATERIAL HANDLING COMPANY, a
Delaware corporation (the "Company"), upon the terms and subject to the
conditions set forth in the Prospectus and the Letter of Transmittal (which
together constitute the "Exchange Offer"), receipt of which is hereby
acknowledged, (number of shares of Existing Preferred Stock) shares of
Existing Preferred Stock pursuant to the guaranteed delivery procedures set
forth in Instruction 1 of the Letter of Transmittal.
The undersigned understands that tenders of Existing Preferred Stock will
be accepted only in liquidation preference amounts equal to $1,000 or integral
multiples thereof. The undersigned understand that tenders of Existing Preferred
Stock pursuant to the Exchange Offer may not be withdrawn after 5:00 p.m., New
York City time, on the business day prior to the Expiration Date.
All authority herein conferred or agreed to be conferred by this Notice of
Guaranteed Delivery shall survive the death, incapacity or dissolution of the
undersigned and every obligation of the undersigned under this Notice of
Guaranteed Delivery shall be binding upon the heirs, personal representatives,
executors, administrators, successors, assigns, trustees in bankruptcy and other
legal representatives of the undersigned.
NOTE: SIGNATURES MUST BE PROVIDED WHERE INDICATED BELOW.
<TABLE>
<S> <C>
Certificate No(s). for Existing Preferred Stock
(if available) Name(s) of Record Holder(s)
- ------------------------------------------------- -------------------------------------------------
- ------------------------------------------------- -------------------------------------------------
PLEASE PRINT OR TYPE
Liquidation Preference Amount of Existing Address
Preferred Stock -------------------------------------------------
- -------------------------------------------------
-------------------------------------------------
Area Code and
Tel. No.
-------------------------------------------------
Signature(s)
-------------------------------------------------
Dated:
-------------------------------------------------
If Existing Preferred Stock will be delivered by
book-entry transfer at the Depository Trust
Company, Depository Account No.
-------------------------------------------------
</TABLE>
This Notice of Guaranteed Delivery must be signed by the registered
holder(s) of Existing Preferred Stock exactly as its (their) name(s) appear on
certificates for Existing Preferred Stock or on a security position listing as
the owner of Existing Preferred Stock, or by person(s) authorized to become
registered holder(s) by endorsements and documents transmitted with this Notice
of Guaranteed Delivery. If signature is by a trustee, executor, administrator,
guardian, attorney-in-fact, officer or other person acting in a fiduciary or
representative capacity, such person must provide the following information:
PLEASE PRINT NAME(S) AND ADDRESS(ES)
Name(s):
- --------------------------------------------------------------------------------
Capacity:
- --------------------------------------------------------------------------------
Address(es):
- --------------------------------------------------------------------------------
<PAGE> 3
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member firm of a registered national securities exchange
or of the National Association of Securities Dealers, Inc., or a commercial bank
or trust company having an office or correspondent in the United States or an
"eligible guarantor institution" within the meaning of Rule 17Ad-15 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), hereby (a)
represents that the above named person(s) "own(s)" the Existing Preferred Stock
tendered hereby within the meaning of Rule 14e-4 under the Exchange Act, (b)
represents that such tender of Existing Preferred Stock complies with Rule 14e-4
under the Exchange Act and (c) guarantees that delivery to the Exchange Agent of
certificates for the Existing Preferred Stock tendered hereby, in proper form
for transfer (or confirmation of the book-entry transfer of such Existing
Preferred Stock into the Exchange Agent's Account at the Depository Trust
Company, pursuant to the procedures for book-entry transfer set forth in the
Prospectus), with delivery of a properly completed and duly executed Letter of
Transmittal (or manually signed facsimile thereof) with any required signatures
and any other required documents, will he received by the Exchange Agent at one
of its addresses set forth above within five business days after the Expiration
Date.
THE UNDERSIGNED ACKNOWLEDGES THAT IT MUST DELIVER THE LETTER OF TRANSMITTAL
AND EXISTING PREFERRED STOCK TENDERED HEREBY TO THE EXCHANGE AGENT WITHIN THE
TIME PERIOD SET FORTH AND THAT FAILURE TO DO SO COULD RESULT IN FINANCIAL LOSS
TO THE UNDERSIGNED.
Name of Firm
- -------------------------------------------
--------------------------------------
Authorized Signature
Address
- -------------------------------------------------
Name
--------------------------------------
Please Print or Type
- ------------------------------------------------------------
Title
--------------------------------------
Zip Code
Area Code and Tel. No.
- ------------------------------- Date
--------------------------------------
Dated:
- ------------------, 1998
NOTE: DO NOT SEND EXISTING PREFERRED STOCK WITH THIS FORM; EXISTING PREFERRED
STOCK SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL SO THAT IT IS RECEIVED BY
THE EXCHANGE AGENT WITHIN FIVE BUSINESS DAYS AFTER THE EXPIRATION DATE.
