<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ___________________ to ______________________
Commission File No. 333-27665
CONTINENTAL GLOBAL GROUP, INC.
------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware 31-1506889
------------------------------- -------------------
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
CO-REGISTRANTS AND SUBSIDIARY GUARANTORS
Continental Conveyor & Equipment Company Delaware 34-1603197
Goodman Conveyor Company Delaware 34-1603196
Continental Global Continental Conveyor
Group, Inc. & Equipment Company Goodman Conveyor Company
438 Industrial Drive 438 Industrial Drive Route 178 South
Winfield, Alabama 35594 Winfield, Alabama 35594 Belton, South Carolina 29627
(205) 487-6492 (205) 487-6492 (864) 338-7793
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
Securities registered pursuant to Section 12(b) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [x] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (sec. 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [x]
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of March 15, 2000 was $-0-.
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.
As of March 15, 2000, there were 100 shares of the registrant's common stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE: None
<PAGE> 2
CONTINENTAL GLOBAL GROUP, INC.
1999 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
Item Page
Number Number
PART I
1 Business 1
2 Properties 4
3 Legal Proceedings 5
4 Submission of Matters to a Vote of Security Holders 5
PART II
5 Market for Registrant's Common Stock and Related
Stockholder Matters 5
6 Selected Financial Data 6
7 Management's Discussion and Analysis of Financial Condition
and Results of Operations 7
7A Quantitative and Qualitative Disclosures about Market Risk 12
8 Financial Statements and Supplementary Data 13
9 Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 39
PART III
10 Directors and Executive Officers of the Registrant 39
11 Executive Compensation 41
12 Security Ownership of Certain Beneficial Owners and Management 42
13 Certain Relationships and Related Transactions 42
PART IV
14 Exhibits, Financial Statement Schedules, and Reports on
Form 8-K 44
Signatures 45
Index of Exhibits 46
<PAGE> 3
PART I
ITEM 1. BUSINESS
GENERAL
Continental Global Group, Inc. (hereinafter referred to as the "Company") is a
holding company organized under the Delaware General Corporation law and
conducts all of its business through its direct and indirect operating
subsidiaries. The Company's direct operating subsidiaries are Continental
Conveyor and Equipment Company ("Continental") and Goodman Conveyor Company
("Goodman"). The Company also owns indirectly all of the capital stock of
Continental Conveyor & Equipment Pty. Ltd. ("CCE Pty. Ltd."), an Australian
holding company that owns all of the capital stock of four Australian operating
companies. The Company also owns indirectly all of the capital stock of
Continental Conveyor Ltd., a U.K. operating company, and Continental MECO (Pty.)
Ltd., a South African operating company. During 1998, the Company purchased the
majority of the assets and assumed certain liabilities constituting a majority
of the operations of Huwood International ("Huwood"), a U.K. belt conveyor
business. The operations of the Company's existing U.K. facilities were merged
with the Huwood operations.
While the Company primarily manages its operations on a geographical basis, the
Company operates in two principal business segments: conveyor equipment and
mobile home products. The conveyor equipment business, which comprised
approximately 84.6%, 84.9%, and 83.4% of net sales for 1999, 1998, and 1997,
respectively, markets its products in four main business areas. The mining
equipment business area includes the design, manufacture and testing (and,
outside the United States, installation, monitoring and maintenance) of complete
belt conveyor systems and components for mining application primarily in the
coal industry. The conveyor components business area manufactures and sells
components for conveyor systems primarily for resale through distributor
networks. The engineered systems business area uses specialized project
management and engineering skills to combine mining equipment products,
purchased equipment, steel fabrication and other outside services for sale as
complete conveyor equipment systems that meet specific customer requirements.
The bulk conveyor equipment business area designs and manufactures a complete
range of conveyor equipment sold to transport bulk materials, such as cement,
lime, food products and industrial waste.
The Company's mobile home products business, which comprised approximately
14.3%, 14.0%, and 15.5% of net sales for 1999, 1998, and 1997, respectively,
manufactures and/or refurbishes axle components for the mobile home industry. As
part of this segment, the Company also sells mounted tires and rims to the
mobile home industry. Included in the other category is primarily the
manufacture and sale of air filtration equipment for use in enclosed
environments, principally in the textile industry. The manufacturing
requirements for these products are generally compatible with conveyor equipment
production and thus maximize utilization of the Company's manufacturing
facilities for its primary products.
Approximately 69.2% or $146.5 million of the Company's 1999 net sales were
produced in the United States, 18.5% or $39.2 million in Australia, and 12.3% or
$26.0 million in other countries.
1
<PAGE> 4
ACQUISITIONS
On August 6, 1998, the Company completed the purchase of assets and assumption
of liabilities constituting a majority of the operations of Huwood International
("Huwood"), a U.K. belt conveyor business and a division of FKI, Plc. Huwood
generated revenues of approximately $13,800,000 for the fiscal year ended March
31, 1998. The purchase price for the net assets was approximately $4,966,000.
The transaction was accounted for as a purchase and accordingly, the results of
operations since the date of acquisition have been included in the consolidated
financial statements. The operations of the Company's existing U.K. facilities
were merged with the Huwood operations.
The Company will continue to search for strategic acquisitions that add
complementary product lines, expand its technological capabilities, broaden its
geographic reach or otherwise support its business strategy and presently is in
discussions with other potential acquisition candidates. There can be no
assurance that the Company will be able to identify other desirable acquisition
candidates or that the Company will be successful in consummating any
acquisition on terms favorable to the Company, if at all.
CUSTOMERS
The Company's conveyor equipment business segment markets its products worldwide
through a variety of marketing channels with different customer focuses. The
Company sells its mining equipment and bulk conveyor equipment products and
services primarily to mining companies and other end users, original equipment
manufactures and engineering contractors. The Company sells its conveyor
components products to original equipment manufactures, engineering contractors
and replacement part distributors, primarily in the following industries:
aggregates, such as rock, gravel, glass and cement materials; coal processing
and mining; pulp, paper and forest products; above ground hard rock and mineral
mining; food and grains; and environmental, sewage and waste water treatment.
The Company sells its engineered systems' products and services primarily to
contractors and end users for applications in coal processing and mining, pulp
and paper, composting systems, grain handling, cement products, open-pit mining
and tunneling. The Company markets its mobile home products business segment
directly to mobile home manufacturers in the United States.
For the year ended December 31, 1999, sales to the Company's largest customer,
A.T. Massey Group, constituted approximately 11.6% of the Company's total net
sales. Sales to A.T. Massey Group were to 22 different mining properties in the
United States. Net sales to the Company's top five conveyor equipment customers
represented approximately 21.6% of the Company's total net sales for 1999.
Although the Company has preferred supplier arrangements with a number of its
major customers pursuant to which the Company and such customers effectively
operate on a long-term basis, such arrangements generally are not governed by
long-term contracts and may be terminated by either party at any time. A
substantial portion of the Company's sales is on a project by project basis.
For the year ended December 31, 1998, sales to A.T. Massey Group constituted
approximately 13.0% of the Company's total net sales and sales to MIM Holdings
were approximately 12.2% of the Company's total net sales. For the year ended
December 31, 1997, sales to A.T. Massey Group constituted approximately 13.1% of
the Company's total net sales.
2
<PAGE> 5
COMPETITION
The Company faces strong competition throughout the world in all of its product
lines. The various markets in which the Company competes are fragmented into a
large number of competitors, many of which are smaller businesses that operate
in relatively specialized or niche areas. In addition, a number of the Company's
competitors have financial and other resources greater than those of the
Company. Competitive considerations vary for each business area, but generally
include quality, price, reliability, availability and service.
SUPPLIERS
The primary raw materials used by the Company to produce its products are steel
and miscellaneous purchased parts such as bearings, electric motors and gear
reducers. All materials are readily available in the marketplace. The Company is
not dependent upon any single supplier for any materials essential to its
business or that are not otherwise commercially available. The Company has been
able to obtain an adequate supply of raw materials and no shortage of raw
materials is currently anticipated.
BACKLOG
Backlog at December 31, 1999, was $29.7 million, a decrease of $17.1 million, or
37% from $46.8 million at December 31, 1998. The decrease is primarily
attributable to a $16.6 million reduction in backlog at the Company's Australian
operations. The Company expects to ship in excess of 95% of the backlogs in
2000.
EMPLOYEES
As of December 31, 1999, the Company had approximately 1,260 employees,
approximately 830 of whom were located in the United States. Approximately 180
of the employees at the Company's Winfield, Alabama facility are represented by
The United Steelworkers of America Union and are covered by a four year
collective bargaining agreement that expires in 2002. Approximately 140 of the
production employees at the Company's United Kingdom and South African
facilities are covered by a collective bargaining agreement that expires in
2000. Approximately 50 of the Company's production employees in Australia are
covered by a collective bargaining arrangement expiring in 2001. The Company has
not experienced any work stoppages since 1971 and believes its relations with
its employees are good.
ENVIRONMENTAL AND HEALTH AND SAFETY MATTERS
The Company is subject to a variety of environmental standards imposed by
federal, state, local and foreign environmental laws and regulations. The
Company is also subject to the federal Occupational Health and Safety Act and
similar foreign and state laws. The Company periodically reviews its procedures
and policies for compliance with environmental and health and safety laws and
regulations and believes that it is in substantial compliance with all such
material laws and regulations applicable to its operations. Historically the
costs of compliance with environmental, health and safety requirements have not
been material to the Company's subsidiaries.
3
<PAGE> 6
ITEM 2. PROPERTIES
The Company conducts its operations through the following primary facilities:
APPROXIMATE
SQUARE PRINCIPAL OWNED/
LOCATION FOOTAGE FUNCTION LEASED
UNITED STATES:
Winfield, Alabama 220,000 Headquarters, Owned
manufacturing
Belton, South Carolina 191,000 Administration, Owned
manufacturing
Salyersville, Kentucky 111,000 Manufacturing Owned
Pueblo, Colorado 75,600 Manufacturing Owned
Eatonton, Georgia 22,000 Administration, Leased(1)
manufacturing
AUSTRALIA:
Gosford, New South Wales 8,765 Administration, Leased(2)
engineering,
and sales
Somersby, New South Wales 42,000 Manufacturing Owned
MacKay, Queensland 32,000 Manufacturing, and Leased(3)
installation
support
Minto, New South Wales 22,173 Manufacturing Owned
ENGLAND
Gateshead, UK 234,810 Administration, Leased(4)
engineering,
sales, and
manufacturing
SOUTH AFRICA
Alrode, South Africa 24,456 Administration, Leased(5)
manufacturing
- -----------
(1) Expires in October 2003. The Company holds an option to buy such property at
the end of the lease term.
(2) Expires in April 2000. The Company will move to Somersby upon expiration.
(3) Current lease is month to month and the Company is looking for smaller
premises.
(4) Expires in August 2003 with option to renew for additional five years with
option to purchase at market value.
(5) Expires in May 2000. The Company is negotiating extension of lease.
In addition to the foregoing facilities, the Company has a number of leased
warehouses and field sales offices in various locations throughout the United
States and Australia. The Company believes that substantially all of its
property and equipment is in a condition appropriate for its operations and that
it has sufficient capacity to meet its current operational needs. Each of the
Company-owned United States facilities is subject to a mortgage securing payment
of indebtedness under the Revolving Credit Facility. In addition, the Company's
owned facilities in Australia are subject to mortgage securing payment of
indebtedness under the Australian Revolving Credit Facility. See Note E,
"Financing Arrangements," to the Consolidated Financial Statements.
4
<PAGE> 7
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any pending legal proceeding which it believes
could have a material adverse effect upon its results of operations or financial
condition, or to any other pending legal proceedings other than ordinary,
routine litigation incidental to its business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the quarter ended December 31, 1999, NES Group, Inc., the Company's sole
stockholder, by written consent, re-elected all members of the Company's Board
of Directors.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company is a direct wholly-owned subsidiary of NES Group, Inc. There is no
established public trading market for the Company's common stock. As of March
15, 2000, the Company had one stockholder. The Company paid no dividends in 1999
or 1998. See Note E, "Financing Arrangements", to the Consolidated Financial
Statements, Part II, Item 8, for limitations on dividends.
5
<PAGE> 8
ITEM 6. SELECTED FINANCIAL DATA
The following table presents selected financial and operating data of the
Company for each of the five years in the period ended December 31, 1999. The
data should be read in conjunction with the Consolidated Financial Statements
and related Notes included in this report on Form 10-K.
<TABLE>
<CAPTION>
1999 1998 (1) 1997 (2) 1996 1995
------------------------------------------------------------
(Data in 000's)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales $211,720 $252,072 $213,517 $143,524 $153,231
Gross profit 31,764 42,936 43,112 28,808 28,283
Operating income 5,316 14,331 20,013 12,037 14,422
Interest expense 15,225 14,658 12,308 2,889 2,506
Net income (loss) (8,728) 1,175 7,838 9,872(3) 11,785
OTHER DATA:
Depreciation and amortization 3,550 3,393 2,708 1,012 894
Operating cash flows (12,261) 8,592 10,176 9,873 10,550
EBITDA (4) 10,240 18,912 22,868 12,841 15,185
Ratio of earnings to fixed
charges (5) -- 1.08 1.64 3.69 4.96
BALANCE SHEET DATA:
Cash and cash equivalents 18,300 26,351 30,883 1,022 295
Total assets 122,903 145,757 129,725 46,499 46,195
Long-term debt, including
current portion 126,028 123,322 129,870 14,143 16,837
Stockholder's equity (deficit) (45,878) (37,506) (35,973) 1,994 (3,862)
</TABLE>
(1) Reflects the acquisition during 1998 of Huwood as described in Note B of
Notes to Consolidated Financial Statements.
(2) Reflects the acquisitions during 1997 of BCE, Hewitt-Robins, and MECO as
described in Note B of Notes to Consolidated Financial Statements.
(3) Includes extraordinary gain on early extinguishment of debt of $932.
(4) EBITDA represents earnings before extraordinary items, interest, taxes,
depreciation, amortization, and restructuring charges. EBITDA has been
included because the Company uses it as one means of analyzing its ability
to service its debt, the Company's lenders use it for the purpose of
analyzing the Company's performance with respect to the credit agreement and
the Indenture, and the Company understands that it is used by certain
investors as a measure of a Company's historical ability to service debt.
(5) Earnings consist of income before income taxes plus fixed charges. Fixed
charges consist of interest expense, amortization of deferred financing
costs and one-third of rent expense from operating leases, which management
believes is a reasonable approximation of an interest factor. Earnings were
inadequate to cover fixed charges in the year ended December 31, 1999, by
$8,728.
6
<PAGE> 9
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth, on a comparative basis, certain income statement
data as a percentage of net sales for the fiscal years ended December 31, 1999,
1998, and 1997.
<TABLE>
<CAPTION>
Year ended December 31
--------------------------------
1999 1998 1997
<S> <C> <C> <C>
Net sales 100.0% 100.0% 100.0%
Cost of products sold 85.0 83.0 79.8
Gross profit 15.0 17.0 20.2
SG&A expenses 11.5 10.2 9.7
Management fee 0.2 0.4 0.8
Amortization expense 0.3 0.3 0.3
Restructuring charge 0.5 0.4 --
Operating income 2.5 5.7 9.4
</TABLE>
YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998
Net Sales
- ---------
Net sales decreased $40.4 million, or 16%, from $252.1 million in 1998 to $211.7
million in 1999. Net sales in the conveyor equipment segment decreased by $34.9
million. The decrease in the conveyor equipment segment primarily resulted from
a decrease in domestic conveyor equipment sales of $16.3 million and a decrease
in sales at the Australian subsidiary of $21.9 million, partially offset by
increased sales in the United Kingdom and South African subsidiaries of $3.3
million. The decrease in domestic conveyor sales is the result of reduced
capital purchases in the U.S. coal industry that the Company believes were
significantly related to excessive coal inventory levels. The sales decrease in
Australia is due to the completion of major projects in the first quarter of
1999 that started in the second quarter of 1998. The Company believes that the
increase in sales in the United Kingdom is primarily attributable to the impact
of the acquisition of Huwood. Net sales in the Company's mobile home products
segment and other segment decreased by $4.9 million and $0.6 million,
respectively. The decrease in the mobile home products segment is attributable
to regional softness in the mobile home market.
Gross Profit
- ------------
Gross profit decreased $11.1 million, or 26%, from $42.9 million in 1998 to
$31.8 million in 1999. Gross profit in the conveyor equipment segment decreased
by $10.1 million and gross profit in the mobile home products segment and other
segment decreased by $0.8 million and $0.2 million, respectively. While gross
profit margins as a percentage of sales in the Company's domestic conveyor
equipment operations showed a small improvement, gross profit decreased by $3.0
million primarily due to decreased sales volume caused by reduced capital
purchases in the U.S. coal industry. Gross profit in the foreign conveyor
equipment operations declined by $7.1 million, primarily in the Australian
operation, in part due to lower sales volume and competitive market conditions,
and primarily due to lower margins resulting from subcontract cost overruns on
major fixed-price contracts in 1999.
7
<PAGE> 10
SG&A Expenses
- -------------
Selling, general, and administrative expenses decreased $1.6 million, or 6%,
from $25.9 million in 1998 to $24.3 million in 1999. This decrease is the result
of the favorable impact of the restructuring initiatives in the foreign
subsidiaries combined with a reduction in domestic manpower that occurred in the
third quarter of 1999.
Operating Income
- ----------------
Operating income decreased $9.0 million, or 63%, from $14.3 million in 1998 to
$5.3 million in 1999. The decrease is the result of the $11.1 million decrease
in gross profit, offset by the $1.6 million decrease in SG&A expenses and a $0.5
million decrease in management fees. Management fees are calculated as 5% of the
Company's Adjusted EBITDA earnings (earnings before interest and estimated
taxes, depreciation, amortization, and miscellaneous expense or income) under
the terms of the Management Agreement with Nesco, Inc.
Restructuring Charges
- ---------------------
The Company incurred restructuring charges of approximately $1,106,000 and
$1,127,000 in 1999 and 1998, respectively, related to its Australian and United
Kingdom subsidiaries. In 1998, the Company executed a plan to close certain
Australian manufacturing facilities and merge the operations with other existing
facilities; in 1999, the Company made further reductions in office staff and
facilities. In the United Kingdom, following the acquisition of Huwood in August
1998, the Company consolidated its existing operations and facilities into the
Huwood operations. These restructuring charges consist primarily of severance of
approximately 210 employees and relocation costs. As of December 31, 1999, the
Company's Australian and United Kingdom subsidiaries have paid approximately
$2,151,000 of the charges incurred to date. The Company anticipates that an
additional cost for relocation of $129,000 will be incurred in 2000. These costs
will be expensed as paid.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
Net Sales
- ---------
Net sales increased $38.6 million, or 18%, from $213.5 million in 1997 to $252.1
million in 1998. Net sales in 1998 include a full year's results from
Hewitt-Robins and MECO, which were acquired on April 1, 1997 and October 17,
1997, respectively, and the current year's results from Huwood, which was
acquired on August 6, 1998. These acquisitions accounted for $28.0 million of
this increase. The Company's Australian subsidiary contributed $14.5 million of
the increase due to the substantial completion of several large contracts during
1998. Net sales at the Company's other foreign subsidiaries increased $5.6
million. This increase was partially offset by a sales decrease of $12.1 million
in the Company's domestic conveyor equipment business due to capital spending
reductions by certain key customers in the mining equipment business area. Sales
in the Company's mobile home products segment increased by $2.2 million and
sales in the Company's other business segment increased by $0.4 million.
Gross Profit
- ------------
Gross profit decreased $0.2 million, or 1%, from $43.1 million in 1997 to $42.9
million in 1998. The acquisitions of Hewitt-Robins, MECO, and Huwood resulted in
an increase of $4.8 million. Gross profit at the Company's domestic conveyor
equipment operations decreased $3.4 million due to reduced sales volumes. Gross
profit at the Company's foreign operations decreased $1.7 million. This decrease
in profit margin was primarily due to lower margins on major contracts in the
Company's Australian operations. Gross profit in the Company's mobile home
products and other business segments increased by $0.1 million.
8
<PAGE> 11
SG&A Expenses
- -------------
Selling, general, and administrative expenses increased $5.0 million, or 24%,
from $20.9 million in 1997 to $25.9 million in 1998. The acquisitions of
Hewitt-Robins, MECO and Huwood accounted for $4.0 million of the increase. SG&A
expenses at the Company's foreign subsidiaries increased by $0.8 million due to
the increase in sales. Of the remaining increase, $0.1 million is attributable
to the Company's mobile home products business segment and $0.2 million is
attributable to corporate expenses at Continental Global, parent company.
Operating Income
- ----------------
Operating income decreased $5.7 million, or 29%, from $20.0 million in 1997 to
$14.3 million in 1998. The decrease is the result of the $0.2 million decrease
in gross profit, combined with an increase in SG&A expenses of $5.0 million, an
increase in amortization expense of $0.1 million, and restructuring charges of
$1.1 million. This was offset by a decrease in management fees of $0.7 million
attributable to Adjusted EBITDA earnings. The restructuring charges relate to
the Company's Australian subsidiary and the consolidation of facilities in the
United Kingdom.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by (used in) operating activities was $(12.3) million, $8.6
million, and $10.2 million for the years ending December 31, 1999, 1998, and
1997, respectively. The decrease in operating cash flows from 1998 to 1999 is
primarily the result of the current year net loss and a net decrease in
operating assets and liabilities. The significant changes in operating assets in
1999 and 1998, specifically accounts receivable, inventories and accounts
payable, are the result of significantly higher 1998 fourth quarter sales at the
Company's Australian subsidiary. The decrease in operating cash flows from 1997
to 1998 is due to lower net income resulting from increased operating expenses
and decreased margins.
Net cash used in investing activities was $2.9 million, $7.9 million, and $22.7
million for the years ending December 31, 1999, 1998 and 1997, respectively. Net
cash used in investing activities in 1999 represents net purchases of property,
plant, and equipment. Investing activities in 1998 include the acquisition of
Huwood for $5.0 million and net purchases of property, plant, and equipment for
$2.9 million. The net cash used in investing activities in 1997 is the result of
the acquisitions of BCE for $7.2 million, Hewitt-Robins for $12.9 million, and
Tufkon for $0.7 million. The acquisition of MECO resulted in an increase in cash
of $1.5 million, net of notes issued. The balance of expenditures for investing
activities in 1997, $3.4 million, represents net purchases of property, plant,
and equipment.
Net cash provided by (used in) financing activities was $7.0 million, $(4.9)
million, and $41.7 million for the years ending December 31, 1999, 1998, and
1997, respectively.
Net cash provided by financing activities in 1999 primarily represents a net
increase in borrowings on notes payable of $6.0 million and proceeds from
long-term obligations of $5.5 million, offset by principal payments on long-term
obligations of $3.2 million. The Company's domestic subsidiaries account for
$5.8 million of the net increase in borrowings on notes payable. The proceeds
from long-term obligations include a note payable of $1.6 million that was used
for the purchase of a previously leased manufacturing facility in Colorado, a
note payable of approximately $0.9 million that was used for the construction of
a new idler line at the Company's domestic operations, and a term loan of
approximately $2.9 million at the Company's Australian subsidiary. The proceeds
of the term loan in Australia were used to pay the outstanding balance of the
BCE Seller Notes for approximately $2.1 million, and the balance for working
capital. The Company also paid distributions for income taxes under the Tax
Payment Agreement of $1.3 million, $1.2 million of which was for 1998 income
taxes.
9
<PAGE> 12
The net cash used in financing activities in 1998 is primarily a result of the
Company's reduction in long-term obligations of $6.4 million. This includes
payment in full of the promissory note payable to Joy Technologies, Inc. in the
amount of $5.2 million. The Company also paid distributions for income taxes
under the Tax Payment Agreement of $0.7 million. This was offset by a net
increase in borrowings on notes payable of $2.2 million.
The net cash provided by financing activities of $41.7 million in 1997 is the
result of the issuance of $120.0 million of senior notes. At the time of the
debt offering, the Company paid dividends to its sole stockholder in the amount
of $40.0 million and paid financing fees in the amount of $5.2 million. In
connection with the BCE acquisition in 1997, $2.9 million was paid to former
shareholders of BCE. The Company reduced its borrowings on notes payable and
long-term obligations by $12.9 million and $18.8 million, respectively. The
Company received proceeds from long-term obligations of $4.8 million. The
Company paid distributions to fund the payment of income taxes under the Tax
Payment Agreement in the amount of $3.3 million.
The Company's primary capital requirements consist of capital expenditures and
debt service. The Company expects current financial resources (working capital)
and funds from operations to be adequate to meet anticipated cash requirements.
In 2000, the Company anticipates capital expenditures of approximately $2.7
million for new and replacement equipment. At December 31, 1999, the Company had
cash and cash equivalents of $18.3 million and a credit facility line with $19.8
million available for use.
INTERNATIONAL OPERATIONS
The Company transacts business in a number of countries throughout the world and
has facilities in the United States, Australia, the United Kingdom, and South
Africa. As a result, the Company is subject to business risks inherent in
non-U.S. operations, including political and economic uncertainty, import and
export limitations, exchange controls and currency fluctuations. The Company
believes that the risks related to its foreign operations are mitigated by the
relative political and economic stability of the countries in which its largest
foreign operations are located. As the U.S. dollar strengthens and weakens
against foreign currencies in which the Company transacts business, its
financial results will be affected. The principal foreign currencies in which
the Company transacts business are the Australian dollar, the British pound
sterling, and the South African rand. The fluctuation of the U.S. dollar versus
other currencies resulted in increases (decreases) to stockholder's equity of
approximately $0.5 million and $(0.8) million for the years ended December 31,
1999 and 1998, respectively.
IMPACT OF YEAR 2000
In prior years, the Company discussed the nature and progress of its plans to
become Year 2000 ready. In late 1999, the Company completed its remediation and
testing of systems. As a result of those planning and implementation efforts,
the Company experienced no significant disruptions in critical information
technology and non-information technology systems and believes those systems
successfully responded to the Year 2000 date change. The Company expended
approximately $1.1 million in connection with remediating its systems. The
Company is not aware of any material problems resulting from Year 2000 issues,
either with its products, its internal systems, or the products and services of
third parties. The Company will continue to monitor its computer applications
and those of its suppliers and vendors throughout the Year 2000 to ensure that
any latent Year 2000 matters that may arise are addressed promptly.
10
<PAGE> 13
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued Statement 133, "Accounting for Derivative
Instruments and Hedging Activities" which, as amended by FASB Statement 137, is
required to be adopted no later than January 1, 2001. Statement 133 requires all
derivatives to be recognized as either assets or liabilities in the balance
sheet and be measured at fair value. The Company is currently evaluating
Statement 133 and because the Company expects to have a minimal use of
derivatives, management does not anticipate that the adoption of the new
Statement will have a material effect on earnings or the financial position of
the Company.
CAUTIONARY STATEMENT FOR SAFE HARBOR PURPOSES
This Management's Discussion and Analysis of Financial Condition and Results of
Operations (MD&A) contains forward-looking statements within the meaning of the
federal securities laws. As a general matter, forward-looking statements are
those focused upon future plans, objectives or performance as opposed to
historical items and include statements of anticipated events or trends and
expectations and beliefs relating to matters that are not historical in nature.
Such forward looking statements are subject to uncertainties and factors
relating to the Company's operations and business environment, all of which are
difficult to predict and many of which are beyond the control of the Company,
that could cause actual results of the Company to differ materially from those
matters expressed in or implied by such forward-looking statements.
11
<PAGE> 14
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The following tables provide information about the Company's financial
instruments that are sensitive to changes in interest rates. The tables present
principal cash flows and related weighted-average interest rates by expected
maturity dates for debt obligations as of December 31, 1999 and 1998.
Interest Rate Sensitivity
Principal Amount by Expected Maturity
Average Interest Rate
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Fair
Value,
As of December 31, 1999: 2000 2001 2002 2003 2004 Thereafter Total 12/31/99
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Long-Term Obligations,
including current
portion
Fixed Rate $2,874 $ 237 $ 257 $ 280 $ 286 $121,200 $125,134 $67,489
Average interest rate 11% 11% 11% 11% 11% 11%
Variable Rate $ 21 $ 12 $ 14 $ 16 $ 18 $ -- $ 81 $ 81
Average interest rate 16% 16% 16% 16% 16%
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Fair
Value,
As of December 31, 1998: 1999 2000 2001 2002 2003 Thereafter Total 12/31/98
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Long-Term Obligations,
including current
portion
Fixed Rate $ -- $ -- $ -- $ -- $ -- $120,000 $120,000 $103,200
Average interest rate 11% 11% 11% 11% 11% 11%
Variable Rate $ 735 $ 735 $ 632 $ -- $ -- $ -- $ 2,102 $ 2,102
Average interest rate 6% 6% 6%
</TABLE>
The Company's interest income and expense are most sensitive to changes in the
general level of U.S. interest rates. In this regard, changes in U.S. interest
rates affect the interest earned on the Company's cash equivalents as well as
interest paid on its debt. To mitigate the impact of fluctuations in U.S.
interest rates, the Company generally borrows on a long-term basis to maintain a
debt structure that is fixed rate in nature.
A portion of the Company's operations consists of manufacturing and sales
activities in foreign jurisdictions. The Company manufactures and sells its
products in the United States, Australia, the United Kingdom, and South Africa.
As a result, the Company's financial results could be significantly affected by
factors such as changes in foreign currency exchange rates or weak economic
conditions in the foreign markets in which the Company distributes its products.
The Company's operating results are exposed to changes in exchange rates between
the U.S. dollar and the Australian dollar, the British pound sterling, and the
South African rand.
12
<PAGE> 15
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
The Report of Independent Auditors and the Consolidated Financial Statements of
Continental Global Group, Inc. for each of the three years in the period ended
December 31, 1999 are included herein.
13
<PAGE> 16
Report of Independent Auditors
To the Stockholder
Continental Global Group, Inc.
We have audited the accompanying consolidated balance sheets of Continental
Global Group, Inc. as of December 31, 1999 and 1998, and the related
consolidated statements of operations, stockholder's equity (deficit), and cash
flows for each of the three years in the period ended December 31, 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Continental Global
Group, Inc. at December 31, 1999 and 1998, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1999, in conformity with accounting principles generally accepted
in the United States.
/s/ Ernst & Young LLP
Cleveland, Ohio
March 28, 2000
14
<PAGE> 17
Continental Global Group, Inc.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
As of December 31
----------------------------
1999 1998
<S> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents $ 18,299,610 $ 26,350,700
Accounts receivable, less allowance for
doubtful accounts of $700,220 in 1999
and $797,043 in 1998 30,469,614 44,423,640
Inventories 31,327,817 32,249,917
Other current assets 1,940,793 2,273,333
----------------------------
Total current assets 82,037,834 105,297,590
Property, plant and equipment 27,007,610 23,815,213
Less accumulated depreciation 10,305,220 8,048,953
----------------------------
16,702,390 15,766,260
Goodwill 19,642,467 19,669,858
Deferred financing costs 3,769,291 4,289,194
Other assets 750,845 734,389
----------------------------
$122,902,827 $145,757,291
============================
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT):
Current liabilities:
Notes payable $ 8,600,499 $ 2,661,508
Trade accounts payable 21,506,028 40,522,707
Accrued compensation and employee benefits 5,090,694 5,342,206
Accrued interest on senior notes 3,300,000 3,300,000
Other accrued liabilities 4,255,416 8,115,497
Current maturities of long-term obligations 3,140,588 1,095,106
----------------------------
Total current liabilities 45,893,225 61,037,024
Senior notes 120,000,000 120,000,000
Other long-term obligations,
less current maturities 2,887,477 2,226,461
Stockholder's equity (deficit):
Common stock, no par value, authorized
1,500 shares, issued and outstanding
100 shares at stated value of $5 per share 500 500
Paid-in capital 1,993,188 1,993,188
Accumulated deficit (45,081,586) (36,203,815)
Accumulated other comprehensive loss (2,789,977) (3,296,067)
----------------------------
(45,877,875) (37,506,194)
----------------------------
$122,902,827 $145,757,291
============================
</TABLE>
See notes to consolidated financial statements.
15
<PAGE> 18
Continental Global Group, Inc.
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Years ended December 31
--------------------------------------------
1999 1998 1997
<S> <C> <C> <C>
Net sales $211,720,429 $252,072,484 $213,517,026
Cost of products sold 179,956,228 209,136,242 170,404,976
--------------------------------------------
Gross profit 31,764,201 42,936,242 43,112,050
Operating expenses:
Selling and engineering 14,980,861 16,486,633 13,658,329
General and administrative 9,276,131 9,394,792 7,187,870
Management fee 466,615 932,820 1,668,489
Amortization expense 618,533 663,478 584,051
Restructuring charge 1,106,345 1,127,482 --
--------------------------------------------
Total operating expenses 26,448,485 28,605,205 23,098,739
--------------------------------------------
Operating income 5,315,716 14,331,037 20,013,311
Other expenses:
Interest expense 15,225,465 14,658,149 12,307,589
Interest income (913,975) (1,568,086) (924,842)
Miscellaneous, net (267,499) (60,786) 449,279
--------------------------------------------
Total other expenses 14,043,991 13,029,277 11,832,026
--------------------------------------------
Income (loss) before foreign
income taxes (8,728,275) 1,301,760 8,181,285
Foreign income taxes -- 127,166 343,342
--------------------------------------------
Net income (loss) $ (8,728,275) $ 1,174,594 $ 7,837,943
============================================
</TABLE>
See notes to consolidated financial statements.
16
<PAGE> 19
Continental Global Group, Inc.
Consolidated Statements of Stockholder's Equity (Deficit)
<TABLE>
<CAPTION>
Accumulated
Partners' Other
Capital Common Paid-in Accumulated Comprehensive
(Deficiency) Stock Capital Deficit Income (Loss) Total
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996 $ 1,888,245 $ -- $ -- $ -- $ 105,443 $ 1,993,688
Transfer of Partners' Capital
and formation of Continental
Global Group, Inc. (1,888,245) 500 1,993,188 -- (105,443) 0
Comprehensive income:
Net income -- -- -- 7,837,943 -- 7,837,943
Foreign currency
translation adjustment -- -- -- -- (2,509,820) (2,509,820)
-----------
Total comprehensive income 5,328,123
Dividend -- -- -- (40,000,000) -- (40,000,000)
Distributions for income taxes -- -- -- (3,294,667) -- (3,294,667)
----------------------------------------------------------------------------------
Balance at December 31, 1997 0 500 1,993,188 (35,456,724) (2,509,820) (35,972,856)
Comprehensive income:
Net income -- -- -- 1,174,594 -- 1,174,594
Foreign currency
translation adjustment -- -- -- -- (786,247) (786,247)
----------
Total comprehensive income 388,347
Distributions for income taxes -- -- -- (1,921,685) -- (1,921,685)
----------------------------------------------------------------------------------
Balance at December 31, 1998 0 500 1,993,188 (36,203,815) (3,296,067) (37,506,194)
Comprehensive income (loss):
Net loss -- -- -- (8,728,275) -- (8,728,275)
Foreign currency
translation adjustment -- -- -- -- 506,090 506,090
----------
Total comprehensive loss (8,222,185)
Distributions for income taxes -- -- -- (149,496) -- (149,496)
----------------------------------------------------------------------------------
Balance at December 31, 1999 $ -- $ 500 $1,993,188 $(45,081,586) $(2,789,977) $(45,877,875)
==================================================================================
</TABLE>
See notes to consolidated financial statements.
17
<PAGE> 20
Continental Global Group, Inc.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Years ended December 31
-------------------------------------------
1999 1998 1997
<S> <C> <C> <C>
Operating activities:
Net income (loss) $ (8,728,275) $ 1,174,594 $ 7,837,943
Adjustments to reconcile net income
to net cash provided by (used in) operating
activities:
Provision for depreciation
and amortization 3,550,219 3,392,540 2,707,750
Amortization of deferred
financing costs 519,903 519,903 389,927
Provision for doubtful accounts 383,223 586,265 168,334
Loss (gain) on disposal of assets (450,868) (79,150) 23,925
Changes in operating assets and
liabilities:
Decrease (increase) in
accounts receivable 14,179,184 (11,166,742) (992,556)
Decrease (increase) in
inventories 1,170,026 (3,406,938) 1,543,591
Decrease (increase) in
other assets 485,303 (1,035,431) 438,157
Increase (decrease) in accounts
payable and other current
liabilities (23,370,152) 18,606,481 (1,940,789)
-------------------------------------------
Net cash provided by (used in) operating activities (12,261,437) 8,591,522 10,176,282
-------------------------------------------
Investing activities:
Purchases of property, plant, and equipment (4,030,367) (3,040,464) (3,638,116)
Proceeds from disposals of PP&E 1,091,350 150,143 208,525
Purchase of BCE, net of notes to seller -- -- (7,189,125)
Purchase of Hewitt-Robins -- -- (12,894,890)
Purchase of Tufkon -- -- (697,673)
Purchase of MECO, less cash acquired and
net of notes issued -- -- 1,507,506
Purchase of Huwood -- (4,966,050) --
--------------------------------------------
Net cash used in investing activities (2,939,017) (7,856,371) (22,703,773)
--------------------------------------------
Financing activities:
Proceeds from issuance of senior notes -- -- 120,000,000
Deferred financing costs -- -- (5,199,024)
Net increase (decrease) in borrowings
on notes payable 6,000,950 2,254,074 (12,859,918)
Proceeds from long-term obligations 5,516,166 -- 4,833,069
Principal payments on long-term obligations (3,212,088) (6,389,046) (18,803,055)
Distributions for income taxes (1,305,562) (745,581) (3,294,667)
Payment to former shareholders of BCE -- -- (2,927,300)
Dividends -- -- (40,000,000)
-------------------------------------------
Net cash provided by (used in) financing activities 6,999,466 (4,880,553) 41,749,105
Effect of exchange rate changes on cash 149,898 (386,631) 639,086
-------------------------------------------
Increase (decrease) in cash and cash equivalents (8,051,090) (4,532,033) 29,860,700
Cash and cash equivalents at beginning of year 26,350,700 30,882,733 1,022,033
-------------------------------------------
Cash and cash equivalents at end of year $ 18,299,610 $26,350,700 $ 30,882,733
===========================================
</TABLE>
See notes to consolidated financial statements.
18
<PAGE> 21
Continental Global Group, Inc.
Notes to Consolidated Financial Statements
December 31, 1999
A. ORGANIZATION
Continental Global Group, Inc. (the "Company") was formed on February 4, 1997,
for the purpose of owning all of the common stock of Continental Conveyor &
Equipment Company ("CCE") and Goodman Conveyor Company ("GCC"). The Company,
which is a holding company with limited assets and operations other than its
investments in its subsidiaries, is a Subchapter S Corporation owned 100% by NES
Group, Inc.
Prior to January 1, 1997, CCE and GCC were limited partnerships under common
control by NES Group, Inc., the 99% limited partner. Effective January 1, 1997,
NES Group, Inc., transferred its interest in the limited partnerships to CCE and
GCC. Effective February 1997, NES Group, Inc. transferred to the Company all of
the outstanding capital stock of CCE and GCC.
B. ACQUISITIONS
On August 6, 1998, the Company completed the purchase of assets and assumption
of liabilities constituting a majority of the operations of Huwood International
(Huwood), a U.K. belt conveyor business and a division of FKI, Plc. Huwood
generated revenues of approximately $13,800,000 for the fiscal year ended March
31, 1998. The purchase price for the net assets was approximately $4,966,000.
The transaction was accounted for as a purchase and accordingly, the results of
operations since the date of acquisition have been included in the consolidated
financial statements. The operations of the Company's existing U.K. facilities
have been merged with the Huwood operations.
On October 17, 1997, the Company completed the acquisition of the MECO Belts
Group (MECO Belts) from Joy Mining Machinery, a subsidiary of Harnischfeger
Industries. MECO Belts is an international conveyor equipment company with
operations in the United States, United Kingdom, South Africa, and Australia.
The purchase price was approximately $7,200,000, including the issuance of a
note payable for $5,244,000, plus the assumption of approximately $5,000,000 of
liabilities. The Company has recorded approximately $100,000 of goodwill related
to the acquisition. The results of operations since the date of acquisition have
been included in the consolidated financial statements. The transaction was
accounted for as a purchase.
On August 8, 1997, the Company acquired substantially all of the assets of the
Tufkon Conveyor Components Division of Wyko, Inc. The purchase price for Tufkon
was approximately $698,000 in cash. The Company has recorded approximately
$350,000 of goodwill related to the acquisition. The results of operations since
the date of acquisition have been included in the consolidated financial
statements. The transaction was accounted for as a purchase.
On April 1, 1997, the Company acquired substantially all of the assets of the
Hewitt-Robins Conveyor Components Division of W.S. Tyler, Incorporated, a
manufacturer of idlers (Hewitt-Robins). The purchase price for Hewitt-Robins,
after working capital adjustments, was approximately $12,900,000 in cash plus
assumption of approximately $1,100,000 of liabilities. The Company has recorded
approximately $12,100,000 of goodwill related to the acquisition. The results of
operations since the date of acquisition have been included in the consolidated
financial statements. The transaction was accounted for as a purchase.
19
<PAGE> 22
Continental Global Group, Inc.
Notes to Consolidated Financial Statements
December 31, 1999
B. ACQUISITIONS -- CONTINUED
On January 7, 1997, the Company purchased the assets of BCE Holding Company Pty.
Ltd. in Australia (BCE), a major manufacturer and supplier of conveyor
equipment. The purchase price was $11,946,000. In addition, the Company
contributed $3,512,000 in capital to BCE after the acquisition. Financing
consisted of an advance on the revolving credit line of approximately
$6,800,000, an addition to the existing term loan of approximately $4,500,000,
and approximately $4,800,000 in seller financing. The Company has recorded
approximately $9,600,000 of goodwill related to the acquisition. The results of
operations since the date of acquisition have been included in the consolidated
financial statements. The transaction was accounted for as a purchase.
C. SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The financial statements include the accounts of the Company and its
wholly-owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated.
REVENUE RECOGNITION
The Company recognizes revenue from sales at the time of shipment.
CASH EQUIVALENTS
The Company considers all highly liquid investments with maturities of three
months or less when purchased to be cash equivalents.
INVENTORIES
Inventories, which consist of raw materials, manufactured and purchased parts,
and work in process are stated at the lower of cost or market. Since inventory
records are maintained on a job order basis, it is not practical to segregate
inventories into their major classes. The cost for approximately 62% and 58% of
inventories at December 31, 1999 and 1998, respectively, is determined using the
last-in, first-out ("LIFO") method with the remainder determined using the
first-in, first-out ("FIFO") method. Had the FIFO method of inventory (which
approximates replacement cost) been used to cost all inventories, inventories
would have increased by approximately $1,527,000 and $2,103,000 at December 31,
1999 and 1998, respectively.
GOODWILL
Goodwill is being amortized on a straight-line basis, primarily over 40 years.
The balance of accumulated amortization of goodwill was approximately $1,610,000
and $1,378,000 at December 31, 1999 and 1998, respectively. The ongoing value
and remaining useful life of goodwill are subject to periodic evaluation and the
Company currently expects the carrying amounts to be fully recoverable. If
events and circumstances indicate that goodwill might be impaired, an
undiscounted cash flow methodology would be used to determine whether an
impairment loss should be recognized.
20
<PAGE> 23
Continental Global Group, Inc.
Notes to Consolidated Financial Statements
December 31, 1999
C. SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED
RESTRUCTURING CHARGES
The Company incurred restructuring charges of approximately $1,106,000 and
$1,127,000 in 1999 and 1998, respectively, related to its Australian and United
Kingdom subsidiaries. In 1998, the Company executed a plan to close certain
Australian manufacturing facilities and merge the operations with other existing
facilities; in 1999, the Company made further reductions in office staff and
facilities. In the United Kingdom, following the acquisition of Huwood in August
1998, the Company consolidated its existing operations and facilities into the
Huwood operations. These restructuring charges consist primarily of severance of
approximately 210 employees and relocation costs. As of December 31, 1999, the
Company's Australian and United Kingdom subsidiaries have paid approximately
$2,151,000 of the charges incurred to date. The Company anticipates that an
additional cost for relocation of $129,000 will be incurred in 2000. These costs
will be expensed as paid.
INCOME TAXES
The Company and its domestic subsidiaries have elected Subchapter S Corporation
Status for United States income tax purposes. Accordingly, the Company's United
States operations are not subject to income taxes as separate entities. The
Company's United States income is included in the income tax returns of the
stockholder. Under the terms of the Tax Payment Agreement with the stockholder,
the Company makes monthly distributions to the stockholder for payment of income
taxes.
The Company has subsidiaries located in Australia, the United Kingdom, and South
Africa which are subject to income taxes in their respective countries. For the
years ended December 31, 1998 and 1997, the Company recorded foreign income tax
expense of $127,166 and $343,342, respectively, related to its United Kingdom
and Australian subsidiaries. Pre-tax income (loss) attributable to foreign
operations was approximately $(8,891,000), $(3,093,000) and $633,000 for the
years ended December 31, 1999, 1998 and 1997, respectively. The Company's
Australian subsidiary paid income taxes of approximately $150,000, $450,000 and
$2,063,000 for the years ended December 31, 1999, 1998 and 1997, respectively.
FOREIGN CURRENCY TRANSLATION
The assets and liabilities of the Company's foreign subsidiaries are translated
at current exchange rates, while revenues and expenses are translated at average
rates prevailing during the year. The effects of exchange rate fluctuations have
been reported in other comprehensive income (loss). The effect on the statements
of operations of transaction gains and losses is insignificant for all years
presented.
COMPREHENSIVE INCOME (LOSS)
Accumulated other comprehensive income (loss) consists entirely of foreign
currency translation adjustments for all years presented.
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 amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
21
<PAGE> 24
Continental Global Group, Inc.
Notes to Consolidated Financial Statements
December 31, 1999
C. SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED
ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued Statement 133, "Accounting for Derivative
Instruments and Hedging Activities" which, as amended by FASB Statement 137, is
required to be adopted in years beginning after June 15, 2000. Statement 133
requires all derivatives to be recognized as either assets or liabilities in the
balance sheet and be measured at fair value. The Company is currently evaluating
Statement 133 and because the Company expects to have a minimal use of
derivatives, management does not anticipate that the adoption of the new
Statement will have a material effect on earnings or the financial position of
the Company.
RECLASSIFICATIONS
Certain amounts from the prior year financial statements have been reclassified
to conform to current year presentation.
D. PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment are stated at cost. The balances of the major
classes of property, plant and equipment at December 31, 1999 and 1998 are as
follows:
<TABLE>
<CAPTION>
1999 1998
----------------------------
<S> <C> <C>
Land and improvements $ 1,159,208 $ 871,234
Buildings and improvements 6,482,426 5,178,317
Machinery and equipment 19,365,976 17,765,662
----------------------------
$27,007,610 $23,815,213
============================
</TABLE>
Depreciation expense for the years ended December 31, 1999, 1998, and 1997, was
$2,931,686, $2,729,062, and $2,123,699, respectively. Depreciation is primarily
computed using the straight-line method based on the expected useful lives of
the assets. The estimated useful lives for buildings and improvements range from
10 to 31.5 years; the estimated useful lives for machinery and equipment range
from 2.5 to 12.5 years.
22
<PAGE> 25
Continental Global Group, Inc.
Notes to Consolidated Financial Statements
December 31, 1999
E. FINANCING ARRANGEMENTS
Long-term obligations consist of the following:
<TABLE>
<CAPTION>
As of December 31
---------------------------
1999 1998
<S> <C> <C>
Senior Notes, interest at 11% payable
semi-annually in arrears, due 2007 $120,000,000 $120,000,000
Note payable by CCE for purchase of
Colorado facility; interest rate of
7.445%; payable in monthly installments
through 5/1/04 1,567,076 --
Note payable by CCE for idler equipment;
interest rate of 8.845%; payable in monthly
installments through 11/27/04 909,717 --
Term loan payable by Australian subsidiary;
interest rate of 7.55%; maturity date of 4/26/00 2,656,800 --
Note payable by South Africa for purchase of
computer system; variable interest rate
(15.551% at 12/31/99); payable in monthly
installments through 12/31/04 81,179 --
BCE Seller Notes -- 2,101,474
Note payable by CCE Pty Ltd -- 91,233
Obligations under capital leases 813,293 1,128,860
---------------------------
126,028,065 123,321,567
Less current maturities 3,140,588 1,095,106
---------------------------
$122,887,477 $122,226,461
===========================
</TABLE>
Maturities of long-term obligations are as follows:
<TABLE>
<S> <C>
2000 $ 3,140,588
2001 614,172
2002 434,321
2003 334,831
2004 304,295
Thereafter 121,199,858
------------
$126,028,065
============
</TABLE>
The $120 million 11% Senior Notes due 2007 ("Senior Notes") are registered under
the Securities Act of 1933. Interest on the notes is payable semi-annually in
arrears. The Senior Notes are redeemable at the option of the Company, in whole
or in part, any time on or after 2002 subject to certain call premiums. The
Senior Notes are guaranteed by the Company's domestic subsidiaries and certain
of its Australian subsidiaries and contain various restrictive covenants that,
among other things, place limitations on the sale of assets, payment of
dividends, and incurring additional indebtedness and restrict transactions with
affiliates.
23
<PAGE> 26
Continental Global Group, Inc.
Notes to Consolidated Financial Statements
December 31, 1999
E. FINANCING ARRANGEMENTS -- CONTINUED
During the second quarter of 1999, the Company's United States operations
purchased a manufacturing facility previously leased in Colorado for $1,600,000.
The purchase was financed through a term note bearing an interest rate of 7.445%
with a maturity date of May 1, 2004. The note is secured by the property. The
Company's United States operations also financed the purchase of equipment for
production of a new idler. This note payable bears an interest rate of 8.845%,
matures on November 27, 2004, and is secured by the equipment.
In July 1999, the Company's Australian subsidiary renegotiated its revolving
credit facility. The new agreement provides for a term loan of approximately
$2,900,000. These proceeds were used to pay the outstanding balance of the BCE
seller notes for approximately $2,100,000 and the balance for working capital.
In the fourth quarter of 1999, the Company's South African subsidiary purchased
a new computer system for approximately $82,000. The purchase was financed
through a note payable maturing on December 31, 2004. The interest rate is
variable and was 15.551% at December 31, 1999.
CCE, GCC and Bank One, Cleveland, NA are parties to a credit facility and
security agreement dated September 14, 1992, as amended, restated and
consolidated through March 28, 2000, ("Revolving Credit Facility") pursuant to
which Bank One has provided CCE and GCC jointly with a line of credit of $30
million. The availability under the Revolving Credit Facility is equal to the
sum of (i) 85% of eligible accounts receivable and (ii) 55% of eligible
inventory. The Revolving Credit Facility is guaranteed by the Company and
secured by a lien on substantially all of the assets of CCE and GCC. In
addition, the Revolving Credit Facility contains certain financial and other
covenants which, among other things, establish minimum debt coverage and net
working capital requirements. The Revolving Credit Facility will be fully
revolving until final maturity on June 30, 2003, and will bear interest at a
fluctuating rate based on the prime rate. At December 31, 1999, the Company had
an outstanding balance under the Revolving Credit Facility of $5,768,503. The
weighted average interest rate for this facility was 8.3% in 1999.
The Company's Australian subsidiary has a revolving credit facility with the
National Australia Bank Limited which provides a line of credit of $3.0 million
(Australian dollars). The facility is secured by a lien on substantially all of
the assets of the BCE subsidiaries, bears interest at a fluctuating rate based
on the base rate of the National Australia Bank, and matures on July 31, 2000.
At December 31, 1999, approximately $1.6 million (Australian dollars) was
available for use. The outstanding balance under this facility at December 31,
1999 was $944,808 (U.S.$). The weighted average interest rate for this facility
was 9.5% and 8.5% in 1999 and 1998, respectively.
The Company's United Kingdom subsidiary has an overdraft facility with the HSBC
Bank of 1.1 million British pounds sterling. The facility is secured by certain
assets of the Subsidiary, bears interest at a fluctuating rate of 2.75% above
the HSBC Bank base rate, and matures in October 2000. At December 31, 1999,
approximately 2,100 pounds was available for use. The outstanding balance under
this facility at December 31, 1999 was $1,773,438 (U.S.$). The weighted average
interest rate for this facility was 8% and 9% in 1999 and 1998, respectively.
24
<PAGE> 27
Continental Global Group, Inc.
Notes to Consolidated Financial Statements
December 31, 1999
E. FINANCING ARRANGEMENTS -- CONTINUED
The Company's South African subsidiary has a credit facility with the Standard
Bank of South Africa of 3.0 million South African rand. The facility is secured
by the trade receivables of the subsidiary and bears interest at a fluctuating
rate of 1.5% above the bank's prime lending rate. The agreement continues
indefinitely until termination by either party with a minimum of three months
written notice. At December 31, 1999, approximately 2.3 million rand was
available for use. The outstanding balance under this facility at December 31,
1999 was $113,750 (U.S.$). The weighted average interest rate for this facility
was 18% and 22% in 1999 and 1998, respectively.
During 1999, 1998, and 1997, the Company paid interest of $14,590,746,
$12,456,957, and $8,153,452, respectively.
F. LEASING ARRANGEMENTS
CCE has a capital lease for land and building with a lease term of ten years
which contains a purchase option exercisable at any time. In addition, CCE, GCC,
and the Company's foreign subsidiaries have numerous capital leases for certain
machinery and equipment. Amortization of these assets is included in
depreciation expense in the statement of operations. Capital lease obligations
of approximately $189,000 and $55,000 were incurred in 1999 and 1998. The gross
amount of assets recorded under capital leases and the related accumulated
amortization at December 31, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
1999 1998
---------------------------
<S> <C> <C>
Asset Balances:
Land $ 20,000 $ 20,000
Buildings 380,000 380,000
Machinery and Equipment 1,890,732 1,856,123
---------------------------
$2,290,732 $2,256,123
===========================
Accumulated Amortization:
Buildings $ 75,397 $ 63,333
Machinery and Equipment 1,041,355 766,080
---------------------------
$1,116,752 $ 829,413
===========================
</TABLE>
25
<PAGE> 28
Continental Global Group, Inc.
Notes to Consolidated Financial Statements
December 31, 1999
F. LEASING ARRANGEMENTS -- CONTINUED
The subsidiaries of the Company also have various leases for office space,
warehouse facilities, office equipment, and automobiles and trucks which are
accounted for as operating leases. Rent expense related to these operating
leases for the years ended December 31, 1999, 1998, and 1997 was approximately
$2,525,000, $2,401,000, and $1,723,000, respectively. Future minimum lease
payments for obligations under capital leases and for operating leases having
initial or remaining noncancelable lease terms in excess of one year are as
follows:
<TABLE>
<CAPTION>
Capital Operating
Leases Leases
----------------------
<S> <C> <C>
2000 $304,040 $ 720,022
2001 447,905 602,490
2002 193,854 534,195
2003 40,032 357,973
2004 -- 36,722
----------------------
Total minimum lease payments 985,831 $2,251,402
Amounts representing interest 172,538 ==========
--------
Present value of net minimum
lease payments (including
current portion of $400,147) $813,293
========
</TABLE>
G. EMPLOYEE BENEFIT PLANS
CCE maintains a defined benefit plan covering all union hourly-paid employees at
its Winfield plant. The contributions of CCE are made in amounts sufficient to
fund the plan's service cost on a current basis and meet the minimum funding
requirements of the Employee Retirement Income Security Act of 1974, as amended.
Actuarial gains and losses are amortized over a 15 year period, and funding of
the initial prior service costs plus interest thereon is over a 30 year period.
The actuarial computations use the "projected unit credit cost method," which
assumed a weighted-average discount rate on benefit obligations of 7.25% and 6%
in 1999 and 1998, respectively, and a weighted-average expected long-term rate
of return on plan assets of 8% and 7% in 1999 and 1998, respectively.
26
<PAGE> 29
Continental Global Group, Inc.
Notes to Consolidated Financial Statements
December 31, 1999
G. EMPLOYEE BENEFIT PLANS -- CONTINUED
The following table sets forth the change in benefit obligation, change in plan
assets, funded status and amounts recognized in the Consolidated Balance Sheets
as of December 31, 1999 and 1998, of the Company's defined benefit plan.
<TABLE>
<CAPTION>
1999 1998
---------------------------
<S> <C> <C>
Change in benefit obligation:
Benefit obligation at
beginning of year $ 5,112,244 $3,221,103
Service cost 140,057 169,558
Interest cost 370,638 193,266
Actuarial loss (gain) (847,619) 1,690,487
Benefits paid (177,706) (162,170)
---------------------------
Benefit obligation at end of year 4,597,614 5,112,244
---------------------------
Change in plan assets:
Fair value of plan assets at
beginning of year 5,260,652 3,960,135
Actual return on plan assets 584,057 1,191,761
Company contributions -- 270,926
Benefits paid (177,706) (162,170)
---------------------------
Fair value of plan assets at end of year 5,667,003 5,260,652
---------------------------
Funded status:
Plan assets in excess of projected
benefit obligation 1,069,389 148,408
Unrecognized prior service cost (300,303) 571,159
Unrecognized net actuarial gain (1,028,512) (763,642)
Unrecognized transition asset (5,412) (8,118)
---------------------------
Accrued benefit cost $ (264,838) $ (52,193)
===========================
</TABLE>
<TABLE>
<CAPTION>
1999 1998 1997
-----------------------------------------
<S> <C> <C> <C>
Components of net
periodic benefit cost:
Service cost $ 140,057 $ 169,558 $ 83,739
Interest cost 370,638 193,266 243,004
Expected return on
plan assets (584,057) (1,191,761) (632,625)
Amortization of prior
service cost 44,416 90,363 117,264
Amortization of
transition asset (2,706) (2,706) (2,706)
Recognized gain 244,297 940,129 346,100
-----------------------------------------
Net periodic benefit cost $ 212,645 $ 198,849 $ 154,776
=========================================
</TABLE>
27
<PAGE> 30
Continental Global Group, Inc.
Notes to Consolidated Financial Statements
December 31, 1999
G. EMPLOYEE BENEFIT PLANS -- CONTINUED
CCE also maintains a defined contribution plan covering substantially all
salaried and non-union hourly employees. CCE makes annual contributions
(approximately $548,000, $564,000, and $452,000, in 1999, 1998 and 1997,
respectively) which fully fund retirement benefits. No participant contributions
to the plan are permitted. CCE also maintains a defined contribution savings and
profit sharing plan which covers substantially all salaried and non-union hourly
employees. Employees may elect to contribute up to 16% of their compensation.
CCE will match (approximately $335,000, $324,000, and $302,000 in 1999, 1998 and
1997, respectively) a percentage of employee contributions up to 6% of each
employee's compensation.
GCC has a retirement savings plan covering all employees meeting certain
eligibility requirements. Under the terms of the plan, GCC voluntarily makes
annual cash contributions based on eligible employees' compensation. Expense for
the years ended December 31, 1999, 1998 and 1997 was approximately $145,000,
$197,000, and $164,000, respectively, which was equal to 2.5% of eligible
employees compensation in 1999 and 3% of eligible employees compensation for
1998 and 1997.
H. RELATED PARTY TRANSACTIONS
Management fees are charged by Nesco, Inc., an affiliate of NES Group, Inc., to
provide general management oversight services, including legal, financial,
strategic planning and business development evaluation for the benefit of the
Company. Effective April 1, 1997, the Company and Nesco, Inc. entered into a new
management agreement under which the Company has agreed to pay Nesco, Inc. fees
for such services equal to 5% of the Company's Adjusted EBITDA earnings
(earnings before interest and estimated taxes, depreciation, amortization and
miscellaneous expense or income). Prior to April 1, 1997, the amount of
management fees paid was based on a percentage of sales. The Company incurred
management fee expenses of approximately $467,000, $933,000, and $1,668,000 for
the years ended December 31, 1999, 1998, and 1997, respectively.
The subsidiaries of the Company have entered into a tax payment agreement with
NES Group, Inc. providing for monthly payments by each subsidiary to NES Group,
Inc. to fund the income tax liability attributable to the Company's operations.
The Company incurred charges to stockholder's equity for income taxes of
approximately $149,000, $1,922,000, and $3,295,000 for the years ended December
31, 1999, 1998, and 1997, respectively. At December 31, 1999 and 1998, the
Company had an accrual for income tax payments owed to NES Group, Inc. of
approximately $20,000 and $1,176,000, respectively.
28
<PAGE> 31
Continental Global Group, Inc.
Notes to Consolidated Financial Statements
December 31, 1999
I. FAIR VALUE OF FINANCIAL INSTRUMENTS AND CONCENTRATION OF RISK
The following methods and assumptions were used by the Company in estimating its
fair value disclosures for financial instruments:
Cash and cash equivalents: The carrying amount reported in the balance sheet for
cash and cash equivalents approximates its fair value.
Accounts receivable and accounts payable: The carrying amounts reported in the
balance sheet for accounts receivable and accounts payable approximate their
fair value.
Notes payable and long-term debt: The carrying amounts of the Company's
borrowings under its short-term revolving credit arrangements and variable rate
long-term debt approximate their fair value. The fair value of the Company's
Senior Notes is based on the quoted market value. The fair value of the
Company's remaining fixed rate long-term debt is based on the present value of
future cash outflows.
The carrying amounts and fair values of the Company's financial instruments at
December 31 are as follows:
<TABLE>
<CAPTION>
1999 1998
Carrying Fair Carrying Fair
Amount Value Amount Value
---------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 18,300 $ 18,300 $ 26,351 $ 26,351
Accounts receivable 30,469 30,469 44,424 44,424
Accounts payable (21,506) (21,506) (40,523) (40,523)
Notes payable (8,601) (8,601) (2,662) (2,662)
Long-term debt 125,215 67,570 122,193 105,393
</TABLE>
Accounts receivable from customers in the coal mining industry were
approximately 66% and 72% at December 31, 1999 and 1998, respectively. The
Company's subsidiaries perform periodic credit evaluations of their customers'
financial condition and generally do not require collateral. Credit losses
relating to customers in the coal mining industry have consistently been within
management's expectations and are comparable to losses for the portfolio as a
whole.
Provisions for credit losses were approximately $383,000, $586,000, and $168,000
in 1999, 1998, and 1997, respectively. Accounts written off, net of recoveries,
were approximately $491,000, $53,000, and $437,000 in 1999, 1998, and 1997,
respectively.
29
<PAGE> 32
Continental Global Group, Inc.
Notes to Consolidated Financial Statements
December 31, 1999
J. SEGMENT INFORMATION
Effective January 1, 1998, the Company adopted FASB Statement No. 131,
"Disclosures about Segments of an Enterprise and Related Information." SFAS No.
131 establishes standards for the way public business enterprises report
information about operating segments in annual financial statements and requires
that those enterprises report selected information about operating segments in
interim financial reports. Statement 131 also establishes standards for related
disclosures about products and services, geographic areas and major customers.
The adoption of Statement 131 did not affect results of operations or financial
position, but did affect the disclosure of segment information.
While the Company primarily manages its operations on a geographical basis, the
Company operates in two principal business segments: conveyor equipment and
mobile home products. The conveyor equipment business, which comprised
approximately 84.6%, 84.9%, and 83.4% of net sales for 1999, 1998, and 1997,
respectively, markets its products in four main business areas. The mining
equipment business area includes the design, manufacture and testing (and,
outside the United States, installation, monitoring and maintenance) of complete
belt conveyor systems and components for mining application primarily in the
coal industry. The conveyor components business area manufactures and sells
components for conveyor systems primarily for resale through distributor
networks. The engineered systems business area uses specialized project
management and engineering skills to combine mining equipment products,
purchased equipment, steel fabrication and other outside services for sale as
complete conveyor equipment systems that meet specific customer requirements.
The bulk conveyor equipment business area designs and manufactures a complete
range of conveyor equipment sold to transport bulk materials, such as cement,
lime, food products and industrial waste.
The Company's mobile home products business manufactures and/or refurbishes axle
components sold directly to mobile home manufacturers. As part of this segment
the Company also sells mounted tires and rims to the mobile home industry.
Included in the other category is primarily the manufacture and sale of air
filtration equipment for use in enclosed environments, principally in the
textile industry. The manufacturing requirements for these products are
generally compatible with conveyor equipment production and thus maximize
utilization of the Company's manufacturing facilities for its primary products.
The Company evaluates performance and allocates resources based on operating
income before restructuring charges and allocation of management fee,
amortization and corporate expenses. The accounting policies of the reportable
segments are the same as those described in the summary of significant
accounting policies under Note C. The Company's reportable segments are business
units that offer different products and services. The reportable segments are
each managed separately because they manufacture and distribute distinct
products.
30
<PAGE> 33
Continental Global Group, Inc.
Notes to Consolidated Financial Statements
December 31, 1999
J. SEGMENT INFORMATION -- CONTINUED
<TABLE>
<CAPTION>
Year ended December 31
1999 1998 1997
----------------------------------
(in thousands)
<S> <C> <C> <C>
Net sales:
Conveyor equipment $179,130 $213,969 $178,037
Mobile home products 30,293 35,204 33,021
Other 2,297 2,899 2,459
----------------------------------
Total net sales $211,720 $252,072 $213,517
==================================
Depreciation and amortization:
Conveyor equipment $ 3,368 $ 3,151 $ 2,498
Mobile home products 121 181 191
Other 10 12 11
Corporate amortization 51 49 8
----------------------------------
Total depreciation and amortization $ 3,550 $ 3,393 $ 2,708
==================================
Segment operating income:
Conveyor equipment $ 7,738 $ 16,425 $ 21,423
Mobile home products 171 943 1,017
Other 119 253 179
----------------------------------
Segment operating income 8,028 17,621 22,619
Restructuring charge 1,106 1,127 --
Management fee 467 933 1,669
Amortization expense 619 663 584
Corporate expense 520 567 353
----------------------------------
Total operating income 5,316 14,331 20,013
Interest expense 15,225 14,658 12,308
Interest income (914) (1,568) (925)
Miscellaneous, net (267) (61) 449
----------------------------------
Income (loss) before income taxes $ (8,728) $ 1,302 $ 8,181
==================================
Segment assets:
Conveyor equipment $ 95,949 $113,542 $ 90,045
Mobile home products 4,891 6,840 5,656
Other 873 887 863
----------------------------------
Total segment assets 101,713 121,269 96,564
Corporate assets 21,190 24,488 33,161
----------------------------------
Total assets $122,903 $145,757 $129,725
==================================
Capital expenditures:
Conveyor equipment $ 3,951 $ 2,891 $ 3,425
Mobile home products 56 140 206
Other 23 9 7
----------------------------------
Total capital expenditures $ 4,030 $ 3,040 $ 3,638
==================================
</TABLE>
31
<PAGE> 34
Continental Global Group, Inc.
Notes to Consolidated Financial Statements
December 31, 1999
J. SEGMENT INFORMATION -- CONTINUED
GEOGRAPHIC AREA DATA
<TABLE>
<CAPTION>
Year ended December 31
1999 1998 1997
--------------------------------------
(in thousands)
<S> <C> <C> <C>
Net sales:
United States $146,733 $168,933 $168,241
Australia 39,223 61,097 41,567
United Kingdom 21,095 18,802 4,689
Other countries 4,994 4,045 616
Eliminations -- transfers (325) (805) (1,596)
--------------------------------------
Total net sales $211,720 $252,072 $213,517
======================================
Operating income (loss):
United States $ 13,670 $ 16,384 $ 18,118
Australia (6,407) (941) 1,538
United Kingdom (1,542) (537) 386
Other countries (432) (575) (29)
Eliminations 27 -- --
--------------------------------------
Total operating income $ 5,316 $ 14,331 $ 20,013
======================================
Long lived assets:
United States $ 8,224 $ 6,109 $ 6,028
Australia 4,882 5,909 6,257
United Kingdom 3,165 3,422 833
Other countries 431 326 123
--------------------------------------
Total long lived assets $ 16,702 $ 15,766 $ 13,241
======================================
</TABLE>
Net sales are attributed to countries based on the location of the subsidiary
where the sale occurs.
In 1999, sales to the Company's largest customer were approximately $24.5
million, or 11.6%, of the Company's total net sales. In 1998, sales to the
Company's two largest customers were approximately $32.7 million and $30.8
million, respectively, or 13.0% and 12.2%, of the Company's total net sales. In
1997, sales to the Company's largest customer were approximately $27.9 million,
or 13.1%, of the Company's total net sales. Sales to these customers are
reported in the net sales for the Conveyor Equipment business segment.
32
<PAGE> 35
Continental Global Group, Inc.
Notes to Consolidated Financial Statements
December 31, 1999
K. GUARANTOR AND NON-GUARANTOR SUBSIDIARIES
Effective September 23, 1999, the Company's domestic subsidiaries, Continental
Conveyor & Equipment Company (CCE) and Goodman Conveyor Company (GCC), and
certain of its Australian subsidiaries, all of which are wholly owned, are the
guarantors of the Senior Notes. Prior to this date, CCE and GCC were the only
guarantors of the Senior Notes. The guarantees are full, unconditional, and
joint and several. Separate financial statements of these guarantor subsidiaries
are not presented as management has determined that they would not be material
to investors. The Company's United Kingdom and South African subsidiaries are
not guarantors of the Senior Notes. The 1999 operations and cash flows of the
Company's guarantor Australian subsidiaries are included in the "Combined
Guarantor Subsidiaries" column in the following summarized consolidating
financial statements.
Summarized consolidating balance sheets for 1999 and 1998 and consolidating
statements of operations and cash flow statements for 1999, 1998, and 1997 for
the Company, the guarantor subsidiaries, and the non-guarantor subsidiaries are
as follows (in thousands):
<TABLE>
<CAPTION>
Combined Combined
The Guarantor Non-Guarantor
Company Subsidiaries Subsidiaries Eliminations Total
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
December 31, 1999:
Current assets:
Cash and cash equivalents $ 17,244 $ 955 $ 101 $ -- $ 18,300
Accounts receivable, net 2,039 24,797 5,759 (2,126) 30,469
Inventories -- 27,578 3,750 -- 31,328
Other current assets 36 1,544 361 -- 1,941
-------------------------------------------------------------------
Total current assets 19,319 54,874 9,971 (2,126) 82,038
Property, plant, and
equipment, net -- 11,259 5,443 -- 16,702
Goodwill, net -- 18,736 907 -- 19,643
Investment in subsidiaries 60,009 19,800 -- (79,809) --
Deferred financing costs 3,769 -- -- -- 3,769
Other assets 141 31 1,099 (520) 751
-------------------------------------------------------------------
Total assets $ 83,238 $104,700 $17,420 $(82,455) $122,903
===================================================================
Current liabilities:
Notes payable $ -- $ 6,779 $ 2,311 $ (489) $ 8,601
Trade accounts payable 387 17,022 6,242 (2,145) 21,506
Accrued compensation and
employee benefits -- 4,553 538 -- 5,091
Accrued interest 3,300 -- -- -- 3,300
Other accrued liabilities 171 3,949 136 (1) 4,255
Current maturities of
long-term obligations -- 3,120 21 -- 3,141
-------------------------------------------------------------------
Total current liabilities 3,858 35,423 9,248 (2,635) 45,894
Senior Notes 120,000 -- -- -- 120,000
Other long-term obligations -- 2,675 212 -- 2,887
Stockholder's equity
(deficit) (40,620) 66,602 7,960 (79,820) (45,878)
-------------------------------------------------------------------
Total liabilities and
stockholder's equity
(deficit) $ 83,238 $104,700 $17,420 $(82,455) $122,903
===================================================================
</TABLE>
33
<PAGE> 36
Continental Global Group, Inc.
Notes to Consolidated Financial Statements
December 31, 1999
K. GUARANTOR AND NON-GUARANTOR SUBSIDIARIES -- CONTINUED
<TABLE>
<CAPTION>
Combined Combined
The Guarantor Non-Guarantor
Company Subsidiaries Subsidiaries Eliminations Total
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
December 31, 1998:
Current assets:
Cash and cash equivalents $ 19,969 $ 684 $ 5,698 $ -- $ 26,351
Accounts receivable, net 292 20,556 25,593 (2,017) 44,424
Inventories -- 24,869 7,381 -- 32,250
Other current assets 38 1,782 4,682 (4,229) 2,273
--------------------------------------------------------------------------
Total current assets 20,299 47,891 43,354 (6,246) 105,298
Property, plant, and
equipment, net -- 6,109 9,657 -- 15,766
Goodwill, net -- 11,921 7,749 -- 19,670
Investment in subsidiaries 58,709 11,892 2,697 (73,298) --
Deferred financing costs 4,289 -- -- -- 4,289
Other assets 192 12,895 476 (12,829) 734
--------------------------------------------------------------------------
Total assets $ 83,489 $90,708 $63,933 $(92,373) $145,757
==========================================================================
Current liabilities:
Notes payable $ -- $ 307 $ 2,662 $ (307) $ 2,662
Trade accounts payable 409 13,079 30,971 (3,936) 40,523
Accrued compensation and
employee benefits -- 4,128 1,214 -- 5,342
Accrued interest 3,300 -- -- -- 3,300
Other accrued liabilities 171 4,675 3,297 (28) 8,115
Current maturities of
long-term obligations -- 147 948 -- 1,095
--------------------------------------------------------------------------
Total current liabilities 3,880 22,336 39,092 (4,271) 61,037
Senior Notes 120,000 -- -- -- 120,000
Other long-term obligations -- 194 14,062 (12,030) 2,226
Stockholder's equity (40,391) 68,178 10,779 (76,072) (37,506)
(deficit)
--------------------------------------------------------------------------
Total liabilities and
stockholder's equity
(deficit) $ 83,489 $90,708 $63,933 $(92,373) $145,757
==========================================================================
</TABLE>
34
<PAGE> 37
Continental Global Group, Inc.
Notes to Consolidated Financial Statements
December 31, 1999
K. GUARANTOR AND NON-GUARANTOR SUBSIDIARIES -- CONTINUED
<TABLE>
<CAPTION>
Combined Combined
Guarantor Non-Guarantor
The Company Subsidiaries Subsidiaries Eliminations Total
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1999:
Net sales $ -- $ 185,710 $ 26,089 $ (79) $211,720
Cost of products sold -- 156,752 23,283 (79) 179,956
----------------------------------------------------------------------
Gross profit -- 28,958 2,806 -- 31,764
Total operating expenses 571 21,123 4,754 -- 26,448
----------------------------------------------------------------------
Operating income (loss) (571) 7,835 (1,948) -- 5,316
Interest expense 13,772 1,268 185 -- 15,225
Interest income (914) -- -- -- (914)
Miscellaneous, net -- 106 (373) -- (267)
----------------------------------------------------------------------
Income (loss) before foreign
income taxes (13,429) 6,461 (1,760) -- (8,728)
Foreign income taxes -- -- -- -- --
----------------------------------------------------------------------
Net income (loss) $(13,429) $ 6,461 $ (1,760) $ -- $ (8,728)
=======================================================================
</TABLE>
<TABLE>
<CAPTION>
Combined Combined
Guarantor Non-Guarantor
The Company Subsidiaries Subsidiaries Eliminations Total
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1998:
Net sales $ - $ 168,933 $ 83,944 $ (805) $ 252,072
Cost of products sold - 135,291 74,650 (805) 209,136
------------------------------------------------------------------------
Gross profit - 33,642 9,294 - 42,936
Total operating expenses 616 16,642 11,347 - 28,605
------------------------------------------------------------------------
Operating income (loss) (616) 17,000 (2,053) - 14,331
Interest expense 13,776 (226) 1,108 - 14,658
Interest income (1,568) - - - (1,568)
Miscellaneous, net - 7 (68) - (61)
------------------------------------------------------------------------
Income (loss) before foreign income (12,824) 17,219 (3,093) - 1,302
taxes
Foreign income taxes - - 127 - 127
------------------------------------------------------------------------
Net income (loss) $ (12,824) $17,219 $(3,220) $ - $ 1,175
========================================================================
</TABLE>
<TABLE>
<CAPTION>
Combined Combined
Guarantor Non-Guarantor
The Company Subsidiaries Subsidiaries Eliminations Total
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1997:
Net sales $ - $ 168,241 $ 46,872 $ (1,596) $ 213,517
Cost of products sold - 133,266 38,735 (1,596) 170,405
------------------------------------------------------------------------
Gross profit - 34,975 8,137 - 43,112
Total operating expenses 353 16,504 6,242 - 23,099
------------------------------------------------------------------------
Operating income (loss) (353) 18,471 1,895 - 20,013
Interest expense 10,328 810 1,170 - 12,308
Interest income (925) - - - (925)
Miscellaneous, net - 357 92 - 449
------------------------------------------------------------------------
Income (loss) before foreign income (9,756) 17,304 633 - 8,181
taxes
Foreign income taxes - - 343 - 343
------------------------------------------------------------------------
Net income (loss) $ (9,756) $ 17,304 $ 290 $ - $ 7,838
========================================================================
</TABLE>
35
<PAGE> 38
Continental Global Group, Inc.
Notes to Consolidated Financial Statements
December 31, 1999
K. GUARANTOR AND NON-GUARANTOR SUBSIDIARIES -- CONTINUED
<TABLE>
<CAPTION>
Combined Combined
Guarantor Non-Guarantor
The Company Subsidiaries Subsidiaries Eliminations Total
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1999:
Net cash provided by (used in)
operating activities $ (12,567) $ 2,657 $ (1,742) $ (609) $ (12,261)
Investing activities:
Purchase of property, plant and
equipment - (3,331) (699) - (4,030)
Proceeds from disposals of PP&E - 51 1,040 - 1,091
Investment in subsidiaries (1,300) 1,300 - - -
------------------------------------------------------------------------
Net cash provided by (used in)
investing activities (1,300) (1,980) 341 - (2,939)
Financing activities:
Net increase (decrease) in
borrowings on notes payable - 6,456 (762) 307 6,001
Proceeds from long-term obligations - 5,434 82 - 5,516
Principal payments on long-term
obligations - (3,039) (173) - (3,212)
Distributions for income taxes - (1,306) - - (1,306)
Distributions for interest on 11,142 (11,142) - - -
senior notes
Intercompany loan activity - (3,361) 3,011 350 -
------------------------------------------------------------------------
Net cash provided by (used in)
financing activities 11,142 (6,958) 2,158 657 6,999
Exchange rate changes on cash - 260 (62) (48) 150
------------------------------------------------------------------------
Increase (decrease) in cash and cash
equivalents (2,725) (6,021) 695 - (8,051)
Cash and cash equivalents at beginning
of year 19,969 6,976 (594) - 26,351
------------------------------------------------------------------------
Cash and cash equivalents at end of
year $ 17,244 $ 955 $ 101 $ - $ 18,300
========================================================================
</TABLE>
36
<PAGE> 39
Continental Global Group, Inc.
Notes to Consolidated Financial Statements
December 31, 1999
K. GUARANTOR AND NON-GUARANTOR SUBSIDIARIES -- CONTINUED
<TABLE>
<CAPTION>
Combined Combined
Guarantor Non-Guarantor
The Company Subsidiaries Subsidiaries Eliminations Total
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1998:
Net cash provided by (used in)
operating activities $ (12,553) $ 15,194 $ 5,595 $ 356 $ 8,592
Investing activities:
Purchase of property, plant and
equipment - (1,204) (1,836) - (3,040)
Proceeds from disposals of PP&E 26 124 - 150
Purchase of Huwood - - (4,966) - (4,966)
Investment in subsidiaries (8,751) 5,061 3,690 - -
------------------------------------------------------------------------
Net cash provided by (used in)
investing activities (8,751) 3,883 (2,988) - (7,856)
Financing activities:
Net increase in borrowings on notes
payable - 307 2,254 (307) 2,254
Principal payments on long-term
obligations - (5,429) (960) - (6,389)
Distributions for income taxes - (746) - - (746)
Distributions for interest on 13,200 (13,200) - - -
senior notes
Intercompany loan activity - (1,647) 1,647 - -
------------------------------------------------------------------------
Net cash provided by (used in)
financing activities 13,200 (20,715) 2,941 (307) (4,881)
Exchange rate changes on cash - - (338) (49) (387)
------------------------------------------------------------------------
Increase (decrease) in cash and cash
equivalents (8,104) (1,638) 5,210 - (4,532)
Cash and cash equivalents at beginning
of year 28,073 2,322 488 - 30,883
------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 19,969 $ 684 $ 5,698 $ - $ 26,351
========================================================================
</TABLE>
37
<PAGE> 40
Continental Global Group, Inc.
Notes to Consolidated Financial Statements
December 31, 1999
K. GUARANTOR AND NON-GUARANTOR SUBSIDIARIES -- CONTINUED
<TABLE>
<CAPTION>
Combined Combined
Guarantor Non-Guarantor
The Company Subsidiaries Subsidiaries Eliminations Total
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1997:
Net cash provided by (used in)
operating activities $ (5,930) $ 17,528 $ (1,422) $ - $ 10,176
Investing activities:
Purchases of property, plant, and
equipment - (1,406) (2,232) - (3,638)
Proceeds from disposals of PP&E - 18 191 - 209
Purchase of BCE, net of notes to - (7,189) - - (7,189)
seller
Purchase of Hewitt-Robins - (12,895) - - (12,895)
Purchase of Tufkon - (698) - - (698)
Purchase of MECO - (175) 1,683 - 1,508
Investment in subsidiaries (49,958) 44,423 5,535 - -
------------------------------------------------------------------------
Net cash provided by (used in)
investing activities (49,958) 22,078 5,177 - (22,703)
Financing activities:
Proceeds from issuance of senior 120,000 - - - 120,000
notes
Deferred financing costs (5,199) - - - (5,199)
Net decrease in borrowings on notes
payable - (12,395) (465) - (12,860)
Proceeds from long-term obligations - 4,547 286 - 4,833
Principal payments on long-term
obligations - (18,001) (802) - (18,803)
Distributions for income taxes - (3,295) - - (3,295)
Distributions for interest on 9,160 (9,160) - - -
senior notes
Payment to former shareholders of - - (2,927) - (2,927)
BCE
Dividends paid (40,000) - - - (40,000)
------------------------------------------------------------------------
Net cash provided by (used in)
financing activities 83,961 (38,304) (3,908) - 41,749
Exchange rate changes on cash - - 639 - 639
------------------------------------------------------------------------
Increase in cash and cash equivalents 28,073 1,302 486 - 29,861
Cash and cash equivalents at beginning
of year - 1,020 2 - 1,022
------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 28,073 $ 2,322 $ 488 $ - $ 30,883
========================================================================
</TABLE>
L. CONTINGENCIES
The Company is not a party to any pending legal proceeding which it believes
could have a material adverse effect upon its results of operations or financial
condition, or to any other pending legal proceedings other than ordinary,
routine litigation incidental to its business.
38
<PAGE> 41
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information regarding the directors and
executive officers of the Company:
Name Age Position with the Company
C. Edward Bryant, Jr. 65 President and Chief Executive Officer
Jimmy L. Dickinson 57 Vice President and Chief Financial Officer
Jerry R. McGaha 61 Senior Vice President of Sales and Engineering
Edward F. Crawford 60 Director
Donald F. Hastings 71 Director
Joseph L. Mandia 58 Director
Robert J. Tomsich 69 Director
John R. Tomsich 33 Director
James W. Wert 53 Director
Set forth below is a brief description of the business experience of each
director and executive officer of the Company.
Mr. Bryant has served as President and Chief Executive Officer of the Company
since its inception. Mr. Bryant has also served as President and Chief Executive
Officer of Continental Conveyor & Equipment Company since 1982 and as Chairman
of the Board of Directors of CCE Pty. Ltd. since 1996.
Mr. Dickinson has served as Vice President and Chief Financial Officer of the
Company since its inception. Mr. Dickinson has also served as Vice President of
Finance of Continental Conveyor & Equipment Company since 1973 and as a Director
of CCE Pty. Ltd. since 1996.
Mr. McGaha has served as Senior Vice President of Sales and Engineering of the
Company since its inception. Mr. McGaha has also served as Senior Vice President
of Sales and Engineering of Continental Conveyor & Equipment Company since 1996
and as Director of CCE Pty. Ltd. since 1996. In addition to the foregoing, Mr.
McGaha was Vice President of Sales and Engineering of Continental Conveyor &
Equipment Company from 1990 to 1996.
Mr. Crawford has served as a Director of the Company since its inception. In
addition to his service with the Company, Mr. Crawford has served as Chairman
and Chief Executive Officer and a Director of Park-Ohio Industries, Inc. since
1992.
Mr. Hastings has served as a Director of the Company since its inception. In
addition to his service with the Company, Mr. Hastings served as Chairman and
Chief Executive Officer and as Director of Lincoln Electric Company from 1992 to
1997. Since 1998, Mr. Hastings has also served as a Director of Paragon
Corporate Holdings, Inc., a sister corporation of the Company.
Mr. Mandia has served as a Director of the Company since its inception. Mr.
Mandia has also served as Group Vice President of Nesco, Inc. since 1988.
39
<PAGE> 42
Mr. Robert Tomsich has served as a Director of the Company since its inception.
In addition, Mr. Robert Tomsich has served as President and Director of Nesco,
Inc. (including predecessors of Nesco, Inc.) since 1956. Since 1997, Mr. Tomsich
has also served as a Director of Paragon Corporate Holdings, Inc., a sister
corporation of the Company. Mr. Robert Tomsich is the father of Mr. John
Tomsich.
Mr. John Tomsich has served as a Director of the Company since its inception. In
addition, Mr. John Tomsich has served as Vice President of Nesco, Inc. since
1995 and in various other management positions with Nesco, Inc. since 1990.
Since 1997, Mr. Tomsich has also served as a Director of Paragon Corporate
Holdings, Inc., a sister corporation of the Company. Mr. John Tomsich is the son
of Mr. Robert Tomsich.
Mr. Wert has served as a Director of the Company since its inception. Prior to
his service with the Company, Mr. Wert held a variety of executive management
positions with KeyCorp, a financial services company based in Cleveland, Ohio,
and KeyCorp's predecessor, Society Corporation. Mr. Wert served as Senior
Executive Vice President and Chief Investment Officer of KeyCorp from 1995 to
1996. Prior to that time, he served as Senior Executive Vice President and Chief
Financial Officer of KeyCorp for two years and Vice Chairman, Director and Chief
Financial Officer of Society Corporation for four years. Since 1993, Mr. Wert
has served as an outside Director, and currently serves as Chairman of the
Executive and Compensation Committees of the Board of Directors, of Park-Ohio
Industries, Inc. Since 1998, Mr. Wert has also served as a Director of Paragon
Corporate Holdings, Inc., a sister corporation of the Company.
40
<PAGE> 43
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth certain information concerning compensation of
the Company's Chief Executive Officer and other most highly compensated officers
of the Company having total annual salary and bonus in excess of $100,000.
<TABLE>
<CAPTION>
OTHER ANNUAL
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION (1)
<S> <C> <C> <C> <C>
C. Edward Bryant, Jr., 1999 $ 230,004 $ 94,817 $ 15,495
President and Chief 1998 200,004 84,513 15,488
Executive Officer 1997 187,344 66,119 15,446
Jerry R. McGaha, 1999 126,660 32,217 14,483
Senior Vice President of 1998 122,400 31,335 14,514
Sales and Engineering 1997 116,600 26,983 12,877
Jimmy L. Dickinson 1999 138,243 64,340 11,243
Vice President and Chief 1998 133,893 52,205 10,509
Financial Officer 1997 125,277 27,436 10,369
</TABLE>
(1) Amounts shown reflect contributions made by the Company on behalf of the
named executives under the Continental Conveyor & Equipment Company Savings
and Profit Sharing Plan and the Continental Conveyor & Equipment Retirement
Plan for Salaried and Hourly (Non-Union) Employees at Salyersville,
Kentucky. No amounts shown were received by any of the named executives.
DIRECTOR COMPENSATION
Each director of the Company not employed by the Company or any entity
affiliated with the Company is entitled to receive $25,000 per year for serving
as a director of the Company. In addition, the Company will reimburse such
director for their travel and other expenses incurred in connection with
attending meetings of the Board of Directors.
41
<PAGE> 44
PART III
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of the outstanding
equity securities of the Company as of March 15, 2000:
<TABLE>
<CAPTION>
Number of Shares Title of Class Name and Address of Beneficial Owner
<S> <C> <C>
100 Common Stock, no par value NES Group, Inc.
6140 Parkland Boulevard
Mayfield Heights, OH 44124
</TABLE>
All of the Company's issued and outstanding capital stock is owned by NES Group,
Inc. which is 100 percent beneficially owned by Mr. Robert J. Tomsich. Mr.
Tomsich may be deemed to be the beneficial owner of the Company's capital stock.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
COMPANY FORMATION AND PROCEEDS FROM THE OFFERING
The Company is a Delaware corporation formed on February 4, 1997, for the
purpose of serving as a holding company for the operations conducted by
Continental (including the BCE Subsidiaries) and Goodman. All of the capital
stock of the Company has been issued to NES Group, Inc., which in turn,
transferred to the Company all of the outstanding capital stock of Continental
and Goodman. As a result, the Company is a wholly owned subsidiary of NES Group,
Inc., and each of Continental and Goodman is a wholly owned subsidiary of the
Company.
TAX PAYMENT AGREEMENT
The Company, Continental, and Goodman (each, a "Subsidiary") have entered into a
tax payment agreement with NES Group, Inc. ("Tax Payment Agreement") providing
for monthly payments by each Subsidiary to NES Group, Inc. in an amount equal to
the greater of (i) the total federal, state, local, and, under certain
circumstances, foreign income tax liability attributable to such Subsidiary's
operations for the monthly period, determined on an annualized basis, and (ii)
one-twelfth the total federal, state, local, and, under certain circumstances,
foreign income tax liability attributable to such Subsidiary's operations for
the year. The tax rates applied to such income are to be based on the maximum
individual federal, state, local, and foreign income tax rates imposed by
Section 1 of the Internal Revenue Code of 1986, as amended, and by the
equivalent provisions of state, local, and foreign income tax laws. These tax
payments will not recognize any future carry-forward or carry-back tax benefits
to the Company, Continental, or Goodman. Future direct and indirect Subsidiaries
of the Company shall also become parties to the Tax Payment Agreement.
42
<PAGE> 45
MANAGEMENT AGREEMENT
Effective April 1, 1997, the Company and Nesco, Inc. entered into a management
agreement ("Management Agreement"), the material terms of which are summarized
below. All of the outstanding capital stock of Nesco, Inc. is beneficially owned
by Robert J. Tomsich. Under the Management Agreement, Nesco, Inc., has agreed to
provide general management oversight services on a regular basis for the benefit
of the Company, in regard to business activities involving financial results,
legal issues, and long term planning relative to current operations and
acquisitions. Business development services include assistance in identifying
and acquiring potential acquisition candidates, including negotiations and
contractual preparations in connection therewith. Financial planning includes
assistance in developing banking relationships and monitoring cash investments
through professional money management accounts. Under the terms of the
Management Agreement, the Company has agreed to pay Nesco, Inc. a management fee
for such services equal to 5% of the Company's earnings before interest and
estimated taxes, depreciation, amortization, and other expense (income). The
aggregate amount expensed for management fees in 1999 under the Management
Agreement was $466,615. The management fee is payable in monthly installments.
The Management Agreement will remain in effect until terminated by either party
upon not less than 60 days written notice prior to an anniversary date of the
Management Agreement.
The Company will also separately employ, as required, independent auditors,
outside legal counsel, and other consulting services. Such services will be paid
directly by the Company.
43
<PAGE> 46
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Documents Filed as Part of this Report:
1. Consolidated Financial Statements.
The consolidated financial statements listed below together with the
report thereon of the independent auditors dated March 28, 2000, are
included in Item 8.
Report of Independent Auditors.
Consolidated Balance Sheets at December 31, 1999 and 1998.
Consolidated Statements of Operations for each of the three years in
the period ended December 31, 1999.
Consolidated Statements of Stockholder's Equity (Deficit) for each
of the three years in the period ended December 31, 1999.
Consolidated Statements of Cash Flows for each of the three years in
the period ended December 31, 1999.
Notes to Consolidated Financial Statements.
2. Financial Statement Schedules
Schedules have been omitted because they are not applicable or the
required information is shown in the Consolidated Financial
Statements or the Notes to the Consolidated Financial Statements.
3. Exhibits Required to be Filed by Item 601 of Regulation S-K.
The information required by this paragraph is contained in the Index
of Exhibits to this report.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the last quarter of the period
covered by this report.
44
<PAGE> 47
SIGNATURES
Pursuant to the requirements of Sections 13 or 15(d) of the Securities Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized on the 28th day of March, 2000.
CONTINENTAL GLOBAL GROUP, INC.
By: /s/ C. Edward Bryant, Jr.
-------------------------
Name: C. Edward Bryant, Jr.
Title: President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the registrant and in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ C. Edward Bryant, Jr. President and Chief Executive Officer March 28, 2000
- -----------------------------------------
C. Edward Bryant, Jr. (Principal Executive Officer)
/s/ Jimmy L. Dickinson Vice President and Chief Financial Officer March 28, 2000
- -----------------------------------------
Jimmy L. Dickinson (Principal Financial Officer and Principal
Accounting Officer)
/s/ Edward F. Crawford Director March 28, 2000
- -----------------------------------------
Edward F. Crawford
/s/ Donald F. Hastings Director March 28, 2000
- -----------------------------------------
Donald F. Hastings
/s/ Joseph L. Mandia Director March 28, 2000
- -----------------------------------------
Joseph L. Mandia
/s/ John R. Tomsich Director March 28, 2000
- -----------------------------------------
John R. Tomsich
/s/ Robert J. Tomsich Director March 28, 2000
- -----------------------------------------
Robert J. Tomsich
/s/ James W. Wert Director March 28, 2000
- -----------------------------------------
James W. Wert
</TABLE>
Supplemental information to be furnished with reports filed pursuant to Section
15(d) of the Act by registrants which have not registered securities pursuant to
Section 12 of the Act.
No annual report to security holders covering the registrant's last fiscal year
and no proxy statement, form of proxy, or other proxy soliciting material with
respect to any annual or other meeting of security holders has been or will be
sent to security holders.
45
<PAGE> 48
Continental Global Group, Inc.
Form 10-K
Index of Exhibits
Exhibit
Number Description of Exhibit
- --------- ----------------------
3.1 Certificate of Incorporation of Continental Global Group, Inc., *
as currently in effect.
3.2 By-Laws of Continental Global Group, Inc., as currently in *
effect.
3.3 Certificate of Incorporation of Continental Conveyor & *
Equipment Company, as currently in effect.
3.4 By-Laws of Continental Conveyor & Equipment Company, as *
currently in effect.
3.5 Certificate of Incorporation of Goodman Conveyor Company, as *
currently in effect.
3.6 By-Laws of Goodman Conveyor Company, as currently in effect. *
4.1 Indenture, dated as of April 1, 1997, among Continental *
Global Group, Inc., Continental Conveyor & Equipment Company,
Goodman Conveyor Company, and the Trustee (containing, as
exhibits, specimens of the Series A Notes and the Series B
Notes).
10.1
(a) Revolving Credit Facility, dated as of September 14, 1992, as *
amended by Amendments I, II, and III, among Continental
Conveyor & Equipment Company, Goodman Conveyor Company, and
Bank One, Cleveland, NA.
(b) Amendment IV, dated as of December 31, 1998, to the Revolving
Credit Facility, dated as of September 14, 1992, among
Continental Conveyor & Equipment Company, Goodman Conveyor
Company, and Bank One, Cleveland, NA. (Filed as Exhibit
10.1 (b) to the Company's Form 10-Q for the quarter ended
March 31, 1999, and is incorporated herein by reference.)
(c) Letter of Amendment, dated as of July 26, 1999, to the
Revolving Credit Facility, dated as of September 14, 1992,
among Continental Conveyor & Equipment Company, Goodman
Conveyor Company, and Bank One, Cleveland, NA. (Filed as
Exhibit 10.1 (c) to the Company's Form 10-Q for the quarter
ended June 30, 1999, and is incorporated herein by reference.)
(d) Letter of Amendment, dated as of November 4, 1999, to the
Revolving Credit Facility, dated as of September 14, 1992,
among Continental Conveyor & Equipment Company, Goodman Conveyor
Company, and Bank One, Cleveland, NA. (Filed as Exhibit 10.1 (d)
to the Company's Form 10-Q for the quarter ended September 30,
1999, and is incorporated herein by reference.)
(e) Amendment VI, dated as of March 28, 2000, to the Revolving
Credit Facility, dated as of September 14, 1992, among
Continental Conveyor & Equipment Company, Goodman Conveyor
Company, and Bank One, Cleveland, NA.
10.2 Asset Purchase Agreement, dated as of March 3, 1997, among *
Continental Conveyor & Equipment Company, Process Technology
Holdings, Inc., and W.S. Tyler Incorporated, relating to the
Hewitt-Robins acquisition
46
<PAGE> 49
Continental Global Group, Inc.
Form 10-K
Index of Exhibits (Continued)
10.3 Management Agreement, dated as of April 1, 1997, between Continental *
Global Group, Inc. and Nesco, Inc.
10.4 Tax Payment Agreement, dated as of April 1, 1997, among Continental *
Global Group, Inc., Continental Conveyor & Equipment Company,
Goodman Conveyor Company, and NES Group, Inc.
10.5 World Wide Purchase and Sale Agreement dated as of October 17, 1997,
by and among Continental Conveyor International Inc., Joy
Technologies, Inc., and certain affiliates of Joy Technologies Inc.
(The "Purchase Agreement"). (All exhibits to the Purchase Agreement
have been omitted, and Registrant will furnish supplementally to the
Commission, upon request, a copy of any omitted exhibit.) (Filed as
Exhibit 2.0 to Form 8-K filed November 3, 1997, and is incorporated
herein by reference.)
10.6 Credit Facility, dated as of July 18, 1999, among Continental
Conveyor & Equipment Pty. Ltd. and its subsidiaries and the National
Australia Bank Limited.
12 Statement regarding computation of ratio of earnings to fixed charges
21 Subsidiaries of registrant
27 Financial Data Schedule (filed electronically only)
* Incorporated by reference from Form S-4 Registration Number 333-27665 filed
under the Securities Act of 1933.
47
<PAGE> 1
Exhibit 10.1 (e)
SIXTH AMENDATORY AGREEMENT
TO
CREDIT FACILITY AND SECURITY AGREEMENT
AND
AMENDMENT TO PROMISSORY NOTE
THIS SIXTH AMENDATORY AGREEMENT TO CREDIT FACILITY AND SECURITY
AGREEMENT AND AMENDMENT TO PROMISSORY NOTE (this "Sixth Amendatory Agreement"),
effective as of March 28, 2000, is entered into by and among BANK ONE, NA, a
national banking association organized and existing under the laws of the United
States of America ("Lender"), with a place of business located at 600 Superior
Avenue, Cleveland, Ohio 44114; CONTINENTAL CONVEYOR & EQUIPMENT COMPANY, a
Delaware corporation ("Continental"), with its principal place of business and
executive offices located as 483 Industrial Drive, P.O. Box 400, Winfield,
Alabama 35594 (the "Continental Principal Place of Business") and GOODMAN
CONVEYOR COMPANY, a Delaware corporation ("Goodman"), with its principal place
of business and executive offices located at U.S. Route 178 South, P.O. Box 866,
Belton, South Carolina 29627 (the "Goodman Principal Business Location") (each
of Continental and Goodman being sometimes referred to herein individually as a
"Borrower" and collectively as the "Borrowers").
W I T N E S S E T H:
-------------------
WHEREAS, pursuant to the terms of that certain Assumption and
Modification Agreement by and between Borrowers and Lender dated as of March 7,
1997, the Borrowers assumed all of the Obligations of CONTINENTAL CONVEYOR &
EQUIPMENT CO. L.P., formerly a limited partnership organized and existing under
the laws of the State of Delaware, and GOODMAN CONVEYOR CO. L.P., formerly a
limited partnership organized and existing under the laws of the State of
Delaware (collectively, the "Original Borrowers") under that certain Credit
Facility and Security Agreement by and among the Original Borrowers and Lender
dated as of September 14, 1992, as amended by a certain First Amendment to
Credit Facility and Security Agreement by and among the Original Borrowers and
Lender executed on August 27, 1993, as further amended by a certain Second
Amendatory Agreement by and among the Original Borrowers and Lender dated as of
October 5, 1994, as further amended by a certain Consolidated Amendment No. 1 to
Credit Facility and Security Agreement by and among the Original Borrowers and
Lender dated as of July 28, 1995, and as further amended by a certain
Consolidated Amendment No. 2 to Credit Facility and Security Agreement by and
among the Original Borrowers and Lender dated as of December 13, 1996,
(collectively, the "Original Loan Agreement"); and
WHEREAS, the Original Loan Agreement was further amended by a certain
Third Amendatory Agreement to Credit Facility and Security Agreement by and
among the Borrowers and Lender dated as of March 28, 1997, by a certain Fourth
Amendatory Agreement by and among the Borrowers and Lender dated as of December,
1998, and by a certain Fifth
1
<PAGE> 2
Amendatory Agreement by and among the Borrowers and Lender dated as of April 29,
1999 (collectively, the Original Loan Agreement, as subsequently amended, is
referred to herein as the "Loan Agreement," all terms defined in said Loan
Agreement being used herein with the same meaning), pursuant to which the Lender
has agreed to loan to the Borrowers up to a maximum aggregate sum of
$30,000,000.00 on a revolving loan basis (the "Revolving Loan"); which Revolving
Loan is evidenced by a Fourth Amended and Restated Replacement Promissory Note
dated March 28, 1997 (the "Note"), such Note being executed and delivered by the
Borrowers to the Lender; and
WHEREAS, the Borrowers and the Lender have agreed to amend the Loan
Agreement to (i) provide for the extension of the maturity of the Revolving
Loan, and (ii) amend certain terms and covenants of the Loan Agreement and
provide for payment by the Borrowers to the Lender of all legal expenses of
Lender in connection with the matters contemplated hereby; and
WHEREAS, the Borrowers and the Lender have agreed to amend the Note to
provide for the extension of the maturity of the obligations evidenced thereby.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained herein, and for other good and valuable
consideration, the Borrowers and the Lender agree as follows:
SECTION I. Amendment of Loan Agreement
A. Subsection (A) of Section 2.3 of the Loan Agreement is, effective
the date hereof, hereby amended and restated to read in its entirety as follows:
"(A) Revolving Loan. Subject at all times to the terms hereof,
the Lender will, until June 30, 2003, make such loans to each Borrower
as from time to time such Borrower requests (the "Revolving Loan")
consisting of advances made by Lender against the value of each
Borrower's respective Eligible Inventory and Eligible Accounts. Such
advances are anticipated to be repaid by Borrowers and thereafter
readvanced by Lender without any premiums or penalty therefor. Subject
to the provisions of Subsection (B) of this Section 2.3, the aggregate
unpaid principal of the Revolving Loan outstanding at any one time
shall not exceed the lesser of (a) the line of credit approved for
Borrowers, which is currently Thirty Million and no/100 Dollars
($30,000,000) or (b) the sum of (i) Eighty-Five percent (85%) of the
unpaid face amount of each Borrower's respective Eligible Accounts (or
such other percentages of each Borrower's Eligible Accounts as may from
time to time be fixed by the Lender upon notice to the Borrowers) and
(ii) the lesser of (1) Fifty-five percent (55%) of the cost or market
value, whichever is lower, determined on a first-in, first-out basis,
of each Borrower's respective Eligible Inventory located at the
Continental Collateral Location or Goodman Collateral Location (or such
other percentages of each Borrower's respective Eligible Inventory as
may from time to time be fixed by the
2
<PAGE> 3
Lender upon notice to the Borrowers) or (2) Twelve Million Dollars
($12,000,000) (or such other dollar amount as may from time to time be
fixed by the Lender upon notice to the Borrowers)."
Except as otherwise modified herein, the remainder of Section 2.3 shall remain
as written originally.
B. Subsection (C) of Section 2.3 of the Loan Agreement is, effective
the date hereof, hereby amended and restated to read in its entirety as follows:
"(C) Payment. The Revolving Loan shall be payable on June 30,
2003, and bear interest as provided in Section 2.4 of this Agreement
and shall otherwise be evidenced by, and repayable in accordance with,
the Revolving Note, as amended from time to time, but in the absence of
such revolving promissory note shall be evidenced by the Lender's
record of disbursements and repayments."
Except as otherwise modified herein, the remainder of Section 2.3 shall remain
as written originally.
C. Section 2.9 of the Loan Agreement is, effective the date hereof,
hereby amended and restated to read in its entirety as follows:
"2.9 Commitment Fee. Borrowers shall, jointly and severally,
pay to Lender on March 28, 2000 and on June 30, 2001 and each
succeeding June 30 thereafter (provided no such fee shall be taken on
June 30, 2003 unless the maturity of the Revolving Loan is extended
beyond said date), a commitment fee (the "Commitment Fee") of
Twenty-five (25) basis points on the amount of the line of credit
approved for Borrowers under the Revolving Loan pursuant to Section
2.3(A) of this Agreement, whether the Borrowers shall be entitled to
request such amount pursuant to Section 2.3(A) of this Agreement or
not."
D. A new Section 2.10 entitled "Unused Line Fee," shall be added to the
Loan Agreement and shall read in its entirety as follows:
"2.10 Unused Line Fee. Borrowers shall, jointly and severally,
pay to Lender an Unused Line Fee in respect of the Revolving Loan
payable quarterly in arrears, beginning on the first day of July, 2000,
and continuing on the first day of each October, January, April and
July thereafter. "Unused Line Fee" means a fee equal to the quotient of
(Y) the product of (i) Twenty-five (25) basis points, multiplied by
(ii) the sum of (A) the amount of the line of credit approved for
Borrowers under the Revolving Loan pursuant to Section 2.3(A) of this
Agreement, whether the Borrowers shall be entitled to request such
amount pursuant to Section 2.3(A) of this Agreement or not, minus (B)
the average principal balance of the Revolving Loan for the period of
calculation, minus (C)
3
<PAGE> 4
the average stated amount of letters of credit issued by the Lender
hereunder and outstanding during the period of calculation, divided by
(Z) four (4).
E. Section 8.1 (T) of the Loan Agreement is, effective the date hereof,
hereby amended and restated to read in its entirety as follows:
"(T) Measured as of the end of each calendar quarter beginning
with the quarter ended March 31, 2000, the Borrowers' (as defined
below) combined operating income (which shall be before deduction for
any Management Fees) for the immediately preceding four quarters shall
be an amount equal to or greater than the sum of $11,000,000, based
upon the Borrowers' fiscal quarter-end financial statements prepared in
accordance with GAAP."
The remainder of Section 8.1 shall remain as written originally.
F. Section 8.2 of the Loan Agreement is, effective the date hereof,
hereby amended by the addition of the following Section 8.2(U):
"(U) Make any advances or loans to any foreign-based
subsidiaries of either of the Borrowers: provided, however, that the
Borrowers, or either of them, may make loans and advances up to a
maximum aggregate principal amount outstanding at any one time of
$7,000,000 to any one or more foreign-based subsidiaries of Continental
Conveyor & Equipment Company during the period beginning October 1,
1999, and ending on June 30, 2003, the maturity date of the Revolving
Loan."
The remainder of Section 8.2 shall remain as written originally.
SECTION II. Amendment of Promissory Note
A. The first two paragraphs of page 1 of the Note are, effective the
date hereof, hereby amended and restated to read in their entirety as follows:
FOR VALUE RECEIVED, CONTINENTAL CONVEYOR & EQUIPMENT COMPANY,
a Delaware corporation, and GOODMAN CONVEYOR COMPANY, a Delaware
corporation (hereinafter each referred to as a "Company" and
collectively as the "Companies"), jointly and severally promise to pay
to the order of BANK ONE, NA (hereinafter referred to as the "Bank"),
the principal amount of Thirty Million and No/Dollars ($30,000,000.00),
or such lesser amount as shall have from time to time been borrowed by
the Companies, on June 30, 2003, or sooner as hereinafter provided,
with interest on the unpaid balance of said principal amount from the
date hereof at the Contract Rate, as defined in the Agreement
hereinafter referred to, which definition is hereby accepted by each
Company, as the same may from time to time be
4
<PAGE> 5
established. If any installment of principal, interest or other amounts
due and payable hereunder are not paid when due, or within any
applicable grace periods, the Companies shall pay interest thereon at
the rate per annum of two-percent (2%) in excess of the Contract Rate,
as the same may from time to time be established.
The Companies jointly and severally agree to pay interest on
the unpaid principal amount outstanding of this Note in monthly
installments commencing on the 1st day of April, 2000, and continuing
on the 1st day of each month thereafter. The unpaid balance of the
principal amount outstanding and all accrued interest thereon shall be
due and payable on June 30, 2003.
B. The fourth paragraph of page 1 of the Note, which paragraph carries
over to page 2 of the Note, is, effective the date hereof, hereby amended and
restated to read in its entirety as follows:
This Note is issued pursuant to and is entitled to the
benefits of a Credit Facility and Security Agreement dated as of
September 14, 1992 by and between CONTINENTAL CONVEYOR & EQUIPMENT CO.
L.P., a limited partnership organized and formerly existing under the
laws of the State of Delaware, and GOODMAN CONVEYOR CO. L.P., a limited
partnership organized and formerly existing under the laws of the State
of Delaware (such partnerships hereinafter referred to as the "Original
Borrowers") and the Bank, as amended by that certain First Amendment to
Credit Facility and Security Agreement executed on August 27, 1993, by
that certain Second Amendatory Agreement dated as of October 5, 1994,
by that certain Consolidated Amendment No. 2 to Credit Facility and
Security Agreement dated as of December 13, 1996, all by and among the
Original Borrowers and the Bank, and as further amended by that Certain
Third Amendatory Agreement by and among the Companies and the Bank
dated March 28, 1997, by that certain Fourth Amendatory Agreement by
and among the Companies and the Bank dated as of December, 1998, by
that certain Fifth Amendatory Agreement by and among the Companies and
the Bank dated as of April 29, 1999, by that certain Sixth Amendatory
Agreement by and among the Companies and the Bank dated as of March 28,
2000, and by any further amendments modifications or restatements
entered into between the Companies and the Bank from time to time
(collectively, the "Agreement"), to which reference is hereby made for
a statement of the rights and obligations of the Bank and the duties
and obligations of each Company in relation thereto; but neither this
reference to said Agreement nor any provisions thereof shall affect or
impair the absolute and unconditional obligation of each Company to pay
the principal of or interest on this Note when due. This Note has been
issued pursuant to the Agreement in substitution for a certain existing
Amended and Restated Replacement Promissory Note (Revolving Loan) dated
July 28, 1995, which was issued in Substitution for a certain Amended
and Restated Promissory Note (Revolving Loan) dated September 14, 1992
(collectively, the "Old Notes").
5
<PAGE> 6
It is understood and acknowledged by each Company that this Note is not
intended as a novation of the obligations of the Original Borrowers and
two Companies under the Old Notes but is merely a restatement of the
obligations thereunder and under the Agreement, after giving effect to
the most recent amendatory agreement thereto.
SECTION III. Conditions Precedent
Each Borrower hereby understands and agrees that the effectiveness of
this Sixth Amendatory Agreement is subject to receipt by the Lender, on or prior
to the date hereof, in form and substance satisfactory to the Lender and its
counsel, of the following:
A. Certificates, dated as of the date hereof, signed by duly
elected officers of each Borrower and to the effect that:
1) As of said date, no Event of Default has occurred and
is continuing and no event has occurred and is
continuing that, with the giving of notice or passage
of time or both, would be an Event of Default;
2) The representations and warranties set forth in
Section 7 of the Loan Agreement are true and correct
as of such date; and
3) Each Borrower is in compliance with all of the terms
and provisions set forth in the Loan Agreement on and
as of said date.
B. Certificates, dated as of the date hereof, of the secretary of
each Borrower certifying (1) that such Borrower's Certificate
of Incorporation has not been amended since the date
originally adopted and such Borrower's By-Laws have not been
amended since the date originally adopted (or certifying that
true, correct and complete copies of any amendments are
attached), (2) that copies of resolutions of the Board of
Directors of such Borrower are attached with respect to the
approval of this Sixth Amendatory Agreement and of the matters
contemplated hereby and authorizing the execution, delivery
and performance by such Borrower of this Sixth Amendatory
Agreement and each other document, instrument, agreement or
note to be delivered pursuant hereto and (3) as to the
incumbency and signatures of the officers of such Borrower
signing this Sixth Amendatory Agreement and each other
document, instrument, agreement or note to be delivered
pursuant hereto.
C. An Acknowledgement, Consent and Agreement, substantially in
the form of Exhibit B attached hereto, with all blanks
completed, duly executed by Continental Global Group, Inc.
6
<PAGE> 7
F. Such other documents as the Lender may reasonably request to
implement this Sixth Amendatory Agreement and the transactions
contemplated hereby.
If Lender shall consummate the transactions contemplated hereby prior
to the fulfillment of any of the conditions precedent set forth above, the
consummation of such transaction shall constitute only an extension of time for
the fulfillment of such conditions, and not a waiver thereof.
SECTION IV. Fees and Expenses
Borrowers shall jointly and severally pay all out-of-pocket fees and
expenses incurred by the Lender in connection with the preparation, negotiation,
execution and delivery of this Sixth Amendatory Agreement, and all other
agreements, documents or certificates required or contemplated hereby,
including, without limitation, all legal fees and expenses of the Lender's legal
counsel in connection therewith.
SECTION V. Acknowledgments Concerning Outstanding Loans
Borrowers hereby acknowledge and agree that as of March 27, 2000, the
current outstanding balance of the Revolving Loan ($3,951,220) and amounts owed
pursuant to letters of credit and/or existing equipment leases, are owed to
Lender without any offset, deduction, defense or counterclaim of any nature
whatsoever.
SECTION VI. References; Credit Documents to Remain in Full Force and Effect
Except as otherwise defined herein, all capitalized terms used herein
shall have the meanings given such terms in the Loan Agreement, as amended
hereby. On and after the effective date of this Sixth Amendatory Agreement, (i)
each reference in the Loan Agreement to "this Agreement", "hereunder", "hereof",
or words of like import referring to the Loan Agreement, and in the Note and
other Credit Documents to the "Loan Agreement", "thereof", or words of like
import referring to the Loan Agreement shall mean and refer to the Loan
Agreement as amended hereby, and (ii) each reference in the Loan Agreement and
in the Note and other Credit Documents to the "Revolving Note", "thereof", or
words of like import referring to the Revolving Note shall mean and refer to the
Note, as amended hereby. Except as modified herein, the Note, the Loan
Agreement, the Credit Documents and all other agreements as to payment,
guarantee of payment or security executed in connection therewith, including
without limitation all mortgages and deeds of trust, shall remain as written
originally and in full force and effect in all respects, and nothing herein
shall affect, modify, limit or impair any of the rights and powers which the
Lender may have thereunder, and are hereby and in all respects ratified and
confirmed.
7
<PAGE> 8
SECTION VII. Applicable Law
This Sixth Amendatory Agreement shall be deemed to be a contract under
the laws of the State of Ohio, and for all purposes shall be construed in
accordance with the laws of the State of Ohio.
SECTION VIII. Counterparts
This Sixth Amendatory Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and any one of the parties hereto may execute this Sixth Amendatory
Agreement by signing any such counterpart.
SECTION IX. Conflicts
If and to the extent the terms of this Sixth Amendatory Agreement
conflict with any term of any prior amendment to the Loan Agreement, then the
terms of this Sixth Amendatory Agreement shall control.
IN WITNESS WHEREOF, the Borrowers and the Lender have caused this Sixth
Amendatory Agreement to be executed by their duly authorized officers as of the
date and year first above written.
BANK ONE, NA CONTINENTAL CONVEYOR &
EQUIPMENT COMPANY
By: By:
--------------------------------- --------------------------------
Name: Rudolf Bentlage Name: C.E. Bryant
Title: Vice President Title: President
GOODMAN CONVEYOR COMPANY
By:
---------------------------------
Name: Larry Kukulski
Title: Vice President
8
<PAGE> 1
Exhibit 10.6
(All figures in Australian dollars)
Ref: PGW.
18 July, 1999
The Directors.
Continental Ace Pty Limited.
Level 2, 40 Mann Street,
GOSFORD. N.S.W. 2250.
Dear Sirs,
OVERDRAFT FACILITY
APPROVAL ADVICE
We are pleased to advise our approval of the following facility:
I. OVERDRAFT FACILITY
Overdraft Limit: $3,000,000.00.
Expiry Date: 31st July, 2000.
Account Number:
The attached Approval sets out the terms and conditions of the Overdraft
Facility. Please take some time to read it to ensure that you understand and
accept the terms and conditions.
We are now preparing your loan and security documentation. We will contact you
when it is ready.
Please call me on 49394312 should you have any questions.
Thank you for allowing the National to be of assistance.
Yours faithfully,
John Incher.
Manager
1
<PAGE> 2
OVERDRAFT FACILITY
APPROVAL ADVICE
Customer's Name: Continental Ace Pty Limited.
Overdraft Limit: $3,000,000.00.
Expiry Date: 31st July, 2000.
Account Number:
This Approval Advice is the contract between you and the Bank for the Overdraft
Facility ("Facility") which is outlined in this Advice. It has been written in
plain English and is designed to be easily read and understood.
If you do have any problems or questions, please ring me on 49394312.
GENERAL
The terms and conditions which will apply to your Facility are those contained
in this Approval Advice and also the Bank's usual terms and conditions for the
operation of current accounts. These terms and conditions are available from any
branch of the Bank.
OVERDRAFT LIMIT
Your Overdraft Limit is $3,000,000.00. The Bank will allow you to overdraw the
Account Number detailed above up to the Overdraft Limit.
The Facility must be kept within the Overdraft Limit. Any excesses over the
Overdraft Limit require the prior approval of the Bank. Excesses will attract an
additional interest charge.
ARRANGING THE FACILITY
You authorise the Bank to open the Facility in your name and to debit to the
account each drawing you make or authorise and any other amount which you must
pay on the date it becomes due.
You may overdraw to the Overdraft Limit. However, the Facility is only available
if:
(a) you overdraw before the Expiry Date; and
(b) the Bank has received each security listed in this Approval Advice in a
form satisfactory to it; and
(c) any property covered by a security has been insured against fire and
other usual risks with an insurer acceptable to the Bank; and
(d) any property covered by a security referred to in (b) and (c) above has
the Bank's interest noted on each insurance policy; and
(e) any necessary corporate or trustee authorisations have been obtained;
and
(f) you are not in default under this Agreement (for example, by not paying
a fee).
2
<PAGE> 3
FACILITY OPERATION
The Facility is to be fully fluctuating in accordance with your agreed working
needs.
You may operate the Facility by cheque or approved card through EFTPOS and the
Bank's Automatic Teller Machine network.
INTEREST RATE
The interest rate under the Facility is VARIABLE.
Your current annual percentage rate is 8.50% per annum, WHICH MAY VARY.
The annual percentage rate is the total of the Bank's Lending Indicator Rate
plus a customer margin of 0.00% per annum. The Bank's Lending Indicator Rate for
the Facility is Base Rate.
Movements in the Bank's Lending Indicator Rate can be monitored by you, as the
rate is published by the Bank in the metropolitan daily press on a Monday
(except Christmas day) under the heading "National Australia Bank Indicator
Rates". Such changes will also be recorded on your bank statement.
The default annual percentage rate is the total of the Bank's Lending Indicator
Rate PLUS the customer margin referred to above, plus a default margin of 4.00%.
The current default annual percentage rate is 12.50% per annum, WHICH MAY VARY.
The Bank calculates interest daily at the annual percentage rate divided by 365
on the unpaid daily balance of the account at the end of each day. The Bank
debits interest to the account on the last Business Day of each month.
If you overdraw more than the Overdraft Limit, with or without the prior
agreement of the Bank, or if you do not pay when required under any of
conditions (a) to (g) of Events of Default, interest on any excess will be
charged at the default annual percentage rate.
This interest is calculated at the default annual percentage rate so long as the
excess or default exists.
The Bank may change the Bank's Lending Indicator Rate, the customer margin and
the default margin. However, the Bank will advise you in writing prior to any
such variation taking effect.
REPAYMENT
You may pay any moneys to the credit of your account at any branch of the Bank
that is open for business or by approved card through one of the Bank's
FlexiTellers (Automatic Teller Machines).
You may also pay any moneys to the credit of your account at any branch of any
other bank in Australia, on the terms and conditions on which the other bank
accepts such transactions.
3
<PAGE> 4
The Bank will use any payment to the credit of your account to pay: firstly,
fees, charges, enforcement expenses (if any) and similar payments; secondly,
interest charges; and thirdly, the outstanding balance of the account.
The whole of the balance owing under the Facility and any other money owing
under this Agreement must be paid to the Bank if you are in default as specified
below AND the default remains unremedied after the Bank gives you a notice
specifying the default.
EVENTS OF DEFAULT
Default occurs when:
(a) there is a breach of any of these terms and conditions of the Facility
or of a provision of any security or other agreement you have with the
Bank; or
(b) the Expiry Date shown above occurs and you owe the Bank any money under
this Agreement; or
(c) if in the Bank's opinion there has been a material adverse change in
your financial position; or
(d) any information given to the Bank at any time is false or, in the
Bank's opinion, misleading; or
(e) you or anyone who gives a security becomes bankrupt or insolvent, or
you or such person goes into liquidation or receivership or has an
administrator appointed; or
(f) you assign your estate, or anyone who gives a security assigns their
estate, to a creditor; or
(g) any security under this Agreement becomes unenforceable.
The Facility will end immediately upon the occurrence of any event referred to
in conditions (a) to (g) or if you are otherwise in default of this Agreement.
Enforcement expenses may become payable by you in the event of a breach or if
you are in default of this Agreement.
SECURITIES
The securities listed below must be received by the Bank to secure the balance
of the Facility and any other amounts you owe the Bank under this Agreement:
1. Existing Registered Mortgage Debenture over the whole of the Company's
assets and uncalled capital and called but unpaid capital.
2. Fresh Interlocking Guarantee and Indemnity - Companies - for $1
1,740,000.00 given by B.C.E. Holdings Pty Limited, Continental Conveyor
and Equipment Pty Limited, Continental Ace Services Pty Limited,
Continental Ace Conveyor Components Pty Limited, Continental Ace Pty
Limited, Continental Control Systems Pty Limited, A Crane Pty Limited
and Continental Meco Pty Limited partly supported by existing
Registered Mortgage Debentures over the whole of the Companys' assets
and uncalled capital and called but unpaid capital, and first
Registered Mortgages over land and buildings situated at Lots 2, 33 and
34 Somersby Falls Road, Somersby, and, 51 Montore Road, Minto.
3. Letter of Offer including Covenants.
4
<PAGE> 5
4. Letter of Awareness.
5. Financial and reporting Covenants.
Each security must be received by the Bank in a form satisfactory to it before
the Facility can be used.
CREDIT FEES AND CHARGES
APPLICATION FEE: $NIL. The Application Fee is now due and will be
debited to the account. The Application Fee is not
refundable.
OVERDRAFT LINE FEE: Initially $12,000.00 payable 31st August, 1999, and
each six months after that and on cancellation of the
Facility (except if that cancellation is in March or
September). This fee may be higher if you exceed the
Overdraft Limit. When due, this fee will be debited
to the Facility. This fee is variable and may change.
REFERENCE FEE: $20.00. We will charge you a Reference Fee:
(a) each day you exceed the Overdraft Limit; and
(b) each day there is a debit transaction on the
Facility while the Overdraft Limit is exceeded.
This fee is variable and may change.
An Account Keeping Fee, which is variable, is charged monthly to your Facility
and consists of a basic charge plus a fee per entry, less any rebate allowable.
Full details are available from your branch.
If, prior to the Expiry Date, you request the Bank to renew the Facility for a
further term, the Bank will conduct a formal review of the Facility to assess
your request. If this is the case, a Renewal Fee currently $250.00 may apply.
This fee is variable and may change.
The sum of all Government Charges and Bank Fees appearing in the attached Loan
Costs Estimate must be paid when we ask.
The Bank's reasonable costs, charges, and legal expenses as well as stamp duty,
search and registration fees in connection with:
(a) this Agreement, the Facility and any agreement or transaction related
to the Facility or the securities; and
(b) any action the Bank takes in connection with its rights and in
recovering amounts you owe it; and
(c) the discharge of any security
must be paid when we ask.
5
<PAGE> 6
If any fees or charges are not paid when we ask, the Bank may debit the Facility
with those fees and charges so that these amounts are included in the amount you
owe the Bank under the Facility.
You agree to pay when we ask the enforcement expenses reasonably incurred by the
Bank in enforcing its rights if you breach this Agreement.
Fees and charges due and payable by you are not refundable.
CO-OPERATION
You agree to:
(a) promptly give the Bank any information it reasonably asks for from time
to time; and
(b) do anything (such as producing and signing documents) that the Bank
reasonably asks you to do to give full effect to these terms and
conditions and the securities.
SET OFF
If you have deposit accounts with the Bank, at anytime without telling you
first, the Bank may use some or all of the credit funds in the deposit accounts
to reduce or payout the Facility.
The Bank will tell you if it does this.
NOTICES
Notices must be in writing.
Any notice, demand, writing or other communication given by the Bank may be
delivered, or sent by post or facsimile to you at your last known place of abode
or business or, if applicable, to your registered office.
Any such notice is taken to be received three days from the date it bears.
If there is more than one of you, a notice to one of you is deemed to be a
notice to all of you.
COVENANTS:
Please refer to the attached Annexures outlining all Covenants relating to
facilities within the Continental Conveyor and Equipment Group.
ACCEPTANCE
PLEASE NOTE, THAT FOR YOUR COMPANY TO ACCEPT THE TERMS AND CONDITIONS CONTAINED
IN THIS LETTER, YOU MUST PROVIDE US WITH A CERTIFIED COPY OF THE BOARD'S
RESOLUTION/S AUTHORISING THE ACCEPTANCE OF THE FACILITY.
6
<PAGE> 7
DEFINITIONS
BANK: means National Australia Bank Limited and its
successors and assigns.
BUSINESS DAY: means a day other than a Saturday or a Sunday or a
day gazetted as a public holiday throughout
Australia.
PERSON: includes, as appropriate, companies and other
incorporated entities.
YOU: means the person/s or entities named in "Customer's
Name" on the first page of this advice. If there are
more than one of you, YOU means each of you
separately and every two or more of you jointly. YOU
includes your successors and assigns.
Date of Approval - 18th July, 1999.
Signed for the Bank
- --------------------------------
Name: John Incher
Title: Business Banking Manager.
7
<PAGE> 8
Guarantee And Indemnity -
Company - Interlocking
TO: NATIONAL AUSTRALIA BANK LIMITED ACN 004 044 937 ("THE BANK")
SCHEDULE
ITEM 1 B.C.E. HOLDINGS PTY LIMITED ACN 003 525 988 a company incorporated in
the State of New South Wales and having its registered address at Level
2, 40 Mann Street, Gosford NSW 2250;
CONTINENTAL CONVEYOR & EQUIPMENT PTY LIMITED ACN 059 870 058 a company
incorporated in the State of Queensland and having its registered
address at Level 2, 40 Mann Street, Gosford NSW 2250;
CONTINENTAL ACE SERVICES PTY LIMITED ACN 056 396 760 a company
incorporated in the State of Queensland and having its registered
address at Level 2, 40 Mann Street, Gosford NSW 2250:
CONTINENTAL ACE CONVEYOR COMPONENTS PTY LIMITED ACN 005 458 373 a
company incorporated in the State of Victoria and having its registered
address at Level 2, 40 Mann Street, Gosford NSW 2250;
CONTINENTAL ACE PTY LIMITED ACN 003 725 915 a company incorporated in
the State of New South Wales and having its registered address at Level
2, 40 Mann Street, Gosford NSW 2250;
CONTINENTAL CONTROL SYSTEMS PTY LIMITED ACN 003 581 897 a company
incorporated in the State of New South Wales and having its registered
address at Level 2, 40 Mann Street, Gosford NSW 2250;
A CRANE PTY LIMITED ACN 003 280 475 a company incorporated in the State
of New South Wales and having its registered address at Level 2, 40
Mann Street, Gosford NSW 2250;
CONTINENTAL MECO PTY LIMITED ACN 001 408 368 a company incorporated in
the State of New South Wales and having its registered address at Level
2, 40 Mann Street, Gosford NSW 2250.
-----------------------------------------------------------------------
ITEM 2 $11,740,000.00 eleven million seven hundred and forty thousand
dollars ("the basic liability")
ITEM 3 Trust Deed dated day of
Deed of Settlement
Name of Trust
Trustee
Settlor
8
<PAGE> 9
WHEREAS
A. The Companies and persons specified in Item 1 of the Schedule executing
this Guarantee are hereinafter collectively called "Guarantors" and
each of which is hereinafter separately referred to as a "Guarantor"
and includes the legal personal representatives of each such person and
in the case of a corporation its successors and assigns and they are
mutually interested or are otherwise concerned in the respective
business of the Guarantors and as customers of the Bank some or all of
the Guarantors have obtained or may hereafter obtain banking
accommodation from the Bank or incur liabilities to the Bank.
B. It is possible that the Guarantors or any one or more of them will in
the future acquire the whole of the issued capital or the whole of the
issued ordinary capital of other companies (hereinafter called "other
Companies") which other Companies may or may not together with the
Guarantors or any of them or with each other become mutually interested
or concerned in the respective businesses of the Guarantors.
C. It is contemplated that the other Companies will become customers of
the Bank and that some or all of them may seek and obtain banking
accommodation from the Bank or incur liabilities to the Bank.
D. It is for the mutual benefit of the Guarantors and the other Companies
that the respective debts or liabilities to the Bank of those of the
Guarantors and the other Companies who for the time being are or may be
customers of the Bank and as such indebted to the Bank should be
secured to the Bank by the mutual guarantees of each other.
IN CONSIDERATION of the Bank at the request of the Guarantors making loans and
advances or providing banking accommodation to all or any one or more of the
Guarantors and the other Companies whether alone or jointly or in conjunction
with any other person and/or in consideration of the Bank forbearing to enforce
immediate payment of the moneys (if any) now due and owing by all or any one or
more of the Guarantors to the Bank each of the Guarantors jointly and severally
agree with and guarantee to and indemnify the Bank and shall keep the Bank
indemnified as follows:-
1. Each of the Guarantors will pay to the Bank on demand (whether any of
the Guarantors or the other companies is then in default or not) the
moneys hereby secured.
2. Each Guarantor indemnities the Bank against:-
(a) any loss the Bank may suffer by reason of any other of the
Guarantors being an infant or an incorporated or
unincorporated body or a committee or a trustee or other
person acting in a fiduciary or representative capacity having
exceeded his powers or being incompetent to borrow, to
otherwise raise funds, or to incur any other liability or
obligation to the Bank;
(b) any loss the Bank may suffer by reason of any other of the
Guarantors becoming bankrupt, going into liquidation, being
placed under official management or making any arrangement,
assignment or composition (including any amount paid to the
Bank which the Bank may subsequently be obliged to pay out on
the ground that the payment of such amount to the Bank was a
preference) and including the amount of any interest (whether
capitalised or current) which does not accrue from the date of
such bankruptcy, liquidation, arrangement, assignment or
composition and/or is not recoverable by reason of the
happening of such event and which would otherwise have accrued
and have been recoverable from a Guarantor under the preceding
9
<PAGE> 10
provisions of this Guarantee, AND it is agreed that in order
to secure the indemnity contained in this paragraph (b) the
Bank may retain any securities held by it for a period of 7
months from the date of any such event, or the date when the
moneys hereby secured are paid in full, whichever date shall
be the later;
(c) all costs, charges and expenses which, in the event of the
insolvency, bankruptcy, liquidation or official management of
or arrangement, assignment or composition by a Guarantor are
incurred by the Bank in defending or commencing any action by
or against any official receiver or trustee in bankruptcy,
receiver or liquidator or official manager of the Guarantor
which in the event of any such action being determined in
favour of the Bank would result in either the Guarantor being
entitled to demand from the Bank all or part of the moneys
already paid to the Bank as aforesaid or the liability of a
Guarantor under this Guarantee being reduced or discharged;
and
(d) all other costs, charges and expenses included in the
expression "the moneys hereby secured".
3. (i) This Guarantee is to be security for the whole of the moneys
and other liabilities which the Guarantors under Clauses 1 and
2 hereof are liable to pay but (subject to sub-clause (ii) of
this clause) the Guarantors and the other Companies shall not,
subject to Clause 4 hereof, be compelled to pay any amount
exceeding an amount (hereinafter called "the limit of the
guarantee") being the aggregate of:-
(a) the basic liability set out in Item 2 of the
Schedule, and
(b) a sum equivalent to one year's interest on the basic
liability calculated at the rate or, if more than one
rate, at the highest rate payable by a Guarantor at
the date of service of demand upon the Guarantor, and
(c) a sum equivalent to the amount of any bank charges
and any other charges, costs and expenses payable
under Clauses 1 and 2 hereof PROVIDED THAT such sum
shall be limited to a sum equivalent to the whole of
such bank charges, other charges, costs and expenses
which have become payable under Clauses 1 and 2
hereof from a date twelve months prior to the date
upon which demand is made upon the Guarantors.
(ii) If no sum appears in Item 2 of the Schedule, or if the words
`unlimited as to amount' (or words to like effect) appear
therein, then the liability of the Guarantors hereunder shall
be unlimited as to amount.
4. From the date of demand upon a Guarantor hereunder until the date of
payment to the Bank, the Guarantors will also pay:-
(a) all bank charges, other charges, costs and expenses of the
type referred to in Clauses 1 and 2 hereof incurred during
that period;
(b) interest on the total of such bank charges, other charges,
costs and expenses; and
(c) interest on the total amount for which the Guarantor is liable
under Clauses 1 and 2 hereof, as limited by Clause 3 hereof.
Such interest will be calculated in the manner and at the rate or rates
determined by the Bank for the time being, compounded and turned into
principal accordingly.
10
<PAGE> 11
5. This Guarantee shall be a continuing guarantee and, without limiting
the generality of the foregoing shall not be affected by:-
(a) any change whatsoever which may take place in the legal
capacity or in the legal rights or obligations of a Guarantor
or the other Companies;
(b) the fact that a Guarantor or the other Companies shall be a
trustee, nominee, partnership, firm, joint holder or joint
venturer;
(c) if a Guarantor is a firm or partnership, any changes which may
from time to time take place in the partners thereof, whether
by death or retirement of any partner or partners or the
admission of any new partner or partners or otherwise
howsoever, and notwithstanding that the firm or partnership no
longer carries on business, and it is agreed that this
Guarantee shall be binding on the Guarantors notwithstanding
that a Guarantor is not, or having once been a member of such
firm or partnership is no longer a member thereof;
(d) if the Guarantors are partners, any changes which may from
time to time take place in the partnership, whether by death
or retirement of any partner or partners, or the admission of
any new partner or partners, or otherwise howsoever and
notwithstanding that the firm no longer carries on business,
and it is agreed that all persons signing this Guarantee shall
continue to be liable hereunder and in addition that the
assets of such partnership or firm from time to time shall be
available to meet the obligations of the Guarantors hereunder;
(e) the Bank recovering judgment against a Guarantor;
(f) the Bank holding or taking any other security for the moneys
hereby secured;
(g) the Bank abandoning or releasing, wholly or partially, or
exchanging, varying, giving up or in any way dealing with any
security which it now holds or may hereafter hold to secure
the moneys hereby secured;
(h) the Bank granting time or other indulgence, compounding or
compromising with or releasing a Guarantor or any person
whatsoever (including any person in any way liable jointly or
in conjunction with a Guarantor or severally) in respect of
any liability to the Bank;
(i) any security held or taken by the Bank in relation to the
indebtedness of a Guarantor being void, defective or informal:
(j) the Bank receiving any dividends in or upon the estate or
assets of a Guarantor or any other person whatsoever
(including any person in any way liable jointly or in
Conjunction with a Guarantor or severally) in respect of any
liability to the Bank;
(k) the payment of any sum or sums into the account of a Guarantor
at any time whilst the Bank provides loans advances or other
banking accommodation to a Guarantor;
(l) the death, lunacy, bankruptcy or official management
liquidation of or any arrangement, assignment or composition
by a Guarantor;
11
<PAGE> 12
(m) the Bank increasing or otherwise varying the limit of loans,
advances and banking accommodation to a Guarantor or any other
person (including increasing such limit in excess of the basic
liability) or otherwise amending or varying or agreeing to the
amendment or variation of the arrangement now or from time to
time hereafter in force between the Bank and a Guarantor or
any other person or replacing the same with new arrangements
and transacting any business with for or on account of a
Guarantor or any other person in its absolute discretion and
without the consent of the Guarantors being necessary;
(n) the fact that the moneys hereby secured may not be or may
cease to be recoverable from a Guarantor or any person liable
in respect thereof for any reason other than that the same
have been paid.
6. The Bank may enforce this Guarantee against a Guarantor notwithstanding
that any bills or other instruments or any liability of a Guarantor
covered by it may be in circulation, outstanding or not then due and
payable.
7. Whilst any moneys or other liabilities are owing or outstanding from a
Guarantor to the Bank (whether or not a Guarantor is liable hereunder
to make payment to the Bank in respect thereof) the Guarantors will not
in any way claim the benefit or seek the transfer of any security or
any part thereof, and generally waive in favour of the Bank all rights
against the Bank and the other Companies and any other person, estates
and assets including rights of subrogation, contribution and
marshalling. Each Guarantor further undertakes to the Bank that, whilst
any moneys or other liabilities are owing or outstanding from a
Guarantor to the Bank, it will not prove in the liquidation or
bankruptcy of any other Guarantor with respect to any amounts owing to
it by that other Guarantor on any account whatsoever.
8. A Guarantor may determine this Guarantee as to further liability by:-
(a) giving written notice of his desire to determine his liability
under this Guarantee at each Branch of the Bank where any of
the Guarantors conduct an account; and
(b) making payment in full of an amount equal to the moneys hereby
secured at the time of delivery of such notice (having regard
in particular to the operation of paragraphs (f) and (g) of
the definition of "the moneys hereby secured") up to the limit
of the guarantee, or provision for such payment.
9. All moneys received by the Bank from or on account of the Guarantors
and the other Companies or any of them (including any dividends upon
the bankruptcy or liquidation of or any arrangement, assignment or
composition by any one or more of the Guarantors and the other
Companies or any of them) or from any other person or from the
realisation or enforcement of any security capable of being applied by
the Bank in reduction of the moneys hereby secured shall be regarded
for all purposes as payments in gross, without any right on the part of
any of the Guarantors to stand in the place of the Bank or claim the
benefit of any moneys so received, until the Guarantors have paid the
moneys hereby secured and so that in the event of any one or more of
the Guarantors becoming bankrupt or making any arrangement, assignment
or composition or going into liquidation the Bank shall be entitled to
prove for the moneys hereby secured up to the limit of the Guarantee.
10. In the event of the insolvency, bankruptcy, official management or
liquidation of or arrangement, assignment or composition by any of the
Guarantors and the other Companies the Bank is authorised by the
Guarantors and the other Companies to prove for all moneys which the
Guarantors and the other Companies shall have paid hereunder and to
retain and to carry to a suspense account and appropriate at the Bank's
discretion any dividends
12
<PAGE> 13
received until the Bank has, with the aid thereof, been paid the moneys
hereby secured in full.
11. This Guarantee and the Bank's rights and remedies hereunder shall not
merge or prejudicially affect nor be merged in or prejudicially
affected by any other security or securities now held or which may
hereafter be held by the Bank but the Bank's rights and remedies under
this Guarantee and any other security as aforesaid shall co-exist
notwithstanding any rule of law or equity to the contrary. This
Guarantee shall be in addition to every such other security. Nothing
herein contained or implied shall merge the remedy of the Bank on any
negotiable instrument or for money lent or for money paid or otherwise
on simple contract.
12. Where this Guarantee is given by a Guarantor as trustee of the trust
shortly described in Item 3 of the Schedule, the liability of a
Guarantor hereunder shall extend to him personally and to him as such
trustee, and each Guarantor warrants that all of the powers and
discretions conferred on him as such trustee are at the date hereof
capable of being validly exercised by him and that the same have not
been varied or revoked and that the same empower and permit a Guarantor
to execute this Guarantee as trustee and that a Guarantor is entitled
to be indemnified out of the trust estate for the liabilities and
obligations assumed by him hereunder.
13. ANY notice or certificate to be given to or demand to be made upon a
Guarantor or any appointment to be made by or on behalf of the Bank
hereunder shall be deemed to be duly given or made if the same be in
writing and be signed by any person purporting to be any class of
Manager or Accountant for the time being of the Bank and if the same be
left at or sent through the post in a prepaid letter addressed to a
Guarantor at the usual place of abode or business of the Guarantor in
the said State or elsewhere last known as such to the person signing
such notice, certificate or demand or delivered personally to a
Guarantor and any such mode of service shall in all respects be valid
and effectual notwithstanding that at the date of such service a
Guarantor may be lunatic, dead, bankrupt or have assigned his estate or
be absent from the said State, or being a company it should be in
receivership or liquidation, whether voluntary or compulsory, and
notwithstanding any other matter or event whatsoever. Any such notice,
certificate or demand if sent through the post as aforesaid shall be
deemed to have been received by a Guarantor at the time when the letter
containing such notice, certificate or demand would in the ordinary
course of post have been delivered.
14. For the purposes of this Guarantee a certificate stating all or any of
the following -
(i) the amount of the moneys hereby secured or any part thereof
(ii) that such an amount falls within a particular paragraph or
sub-paragraph of the definition of the moneys hereby secured;
(iii) that such an amount is owing or payable to the Bank by a
Guarantor or any other person whose indebtedness to the Bank
is intended to be hereby secured;
(iv) that the Bank is entitled to payment thereof on demand,
given to a Guarantor by or on behalf of the Bank is conclusive evidence
of the truth of its contents and binding on a Guarantor.
15. This Guarantee is to remain the property of the Bank after the
liability hereunder has ceased.
16. (a) A Guarantor shall be liable to the Bank hereunder
notwithstanding that any one or more of the persons intended
to be a guarantor in respect of all or any of the
13
<PAGE> 14
obligations intended to be hereby guaranteed shall refuse or
fail to sign or execute this or any other document in respect
thereof and notwithstanding that any purported execution
hereof shall be in any way irregular defective or informal.
(b) In the event that the expression "Guarantor" includes more
than one person and the liability of any one or more of such
persons hereunder is discharged by any principle of law or
equity the other person or persons included in the expression
"Guarantor" shall continue to be bound by this Guarantee.
17. Any existing or future moratorium legislation or regulations shall have
no application to this Guarantee or the moneys hereby secured and such
legislation and regulations are hereby expressly excluded therefrom to
the full extent permitted by law.
18. Except to the extent that such interpretation may be excluded by or be
repugnant to the context when herein used:
"the Bank" includes its assigns;
"this Guarantee" means this Guarantee and Indemnity;
"the moneys hereby secured" means all moneys and amounts now or at any
time hereafter falling within one or more of the following
descriptions:
(a) moneys owing or remaining unpaid to the Bank in any manner or
on any account whatsoever by one or more of the Guarantors and
the other Companies. whether alone or jointly with any other
person and whether as principal or surety;
(b) moneys which the Bank, whether requested so to do or not, has
advanced or paid or become liable to pay to or for or on
behalf of one or more of the Guarantors and the other
Companies;
(c) the amount of any orders, drafts, cheques, promissory notes,
bills of exchange and other instruments in respect of which
any one or more of the Guarantors or any of the other
Companies is or may become liable in any manner whatsoever and
which -
(i) have been accepted, endorsed, discounted or paid by
the Bank for or on behalf of or at the express or
implied request of any one or more of the Guarantors
or any of the other Companies; or
(ii) are held by the Bank as a result of any other
transaction entered into by the Bank for or on behalf
of or at the express or implied request of any one or
more of the Guarantors or any of the other Companies,
whether they have matured or not;
(d) moneys payable for stamp duties (including any credit or
rental business duty and loan instruments duty and any like
duty paid or payable by the Bank on or in respect of any loan
or advances or banking accommodation provided or to be
provided to or at the request of any one or more of the
Guarantors or any of the other Companies) and for discounts,
postages, commissions, charges, exchanges, re-exchanges and
expenses according to the usage and course of business of the
Bank from time to time;
14
<PAGE> 15
(e) the amount of any costs, charges, expenses and liabilities of
any description incurred by the Bank -
(i) in or about the preparation, execution, or stamping
of this Guarantee;
(ii) under this Guarantee or any document executed by a
Guarantor or any of the other Companies in pursuance
hereof or any other security or document, whether of
further assurance or otherwise, given by a Guarantor
or any of the other Companies to the Bank;
(iii) in the exercise or enforcement or attempted exercise
or enforcement of any power or remedy hereunder or
thereunder or which the Bank has or is entitled to
for any reason against a Guarantor or any of the
other Companies,
including the amount of any costs, charges, expenses and
liabilities not previously mentioned in this paragraph but
incurred by the Bank and also the amount of any charges and
disbursements for legal advice and assistance to the Bank as
between solicitor and client;
(f) moneys and amounts which -
(i) are presently owing and payable;
(ii) are owing but not presently payable;
(iii) are owing upon a contingency;
(iv) may become owing or for which the Bank may become
liable by reason wholly or partly of past events or
by reason of anything done or omitted by the Bank or
a Guarantor or any of the other Companies;
(v) may reasonably foreseeably become owing on any
account or in any manner whatsoever by reason of the
relation of banker and customer or by operation of
law or equity or otherwise by reason of anything done
by the Bank with the consent or at the express or
implied request of a Guarantor or any of the other
Companies,
all such moneys and amounts being due or becoming due or to
become due or which may become due as mentioned in this
paragraph by a Guarantor or any of the other Companies to the
Bank;
(g) moneys and amounts referred to in other clauses of this
Guarantee as being added to or otherwise as forming part of
the moneys hereby secured;
(h) interest due or accruing under clauses 3 and 4 or turned into
principal thereunder,
AND it is agreed and specifically acknowledged that -
(A) in this definition each reference to a Guarantor includes a
reference (where the context so permits) to any other person
whose indebtedness to the Bank is intended to be hereby
secured; and
(B) the aforesaid Guarantee and Indemnity extend and apply to and
in relation to each and
15
<PAGE> 16
every item referred to in each paragraph and sub-paragraph of
this definition.
"person" shall include a firm or partnership, a committee, or any
incorporated or unincorporated body;
Words importing the singular shall include the plural and words importing the
masculine gender shall include every other gender.
19. The Guarantors and the other Companies agree and acknowledge that:
(a) this Guarantee is not executed in consequence of any
representation, promise or statement by the Bank, or anyone on
behalf of the Bank, other than any representation, promise or
statement expressly or by implication contained in this
Guarantee, and that this Guarantee is not entered into upon or
subject to any condition not herein expressed or implied, and
(b) no person has any authority to add to, contradict or vary the
terms of this Guarantee, or to waive any of its provisions,
otherwise than by an instrument executed by the Bank by its
duly appointed attorney.
20. (a) Immediately after the Guarantors or any one or more of them
acquires all of the issued capital in one of the other
Companies (the date of such acquisition referred to as the
"Acquisition Date") the Guarantors or any one or more of them
shall give notice thereof to the Bank and if so required by
the Bank shall procure that the other Company shall join in
this Guarantee so as to become a Guarantor on the terms and
conditions set out in sub-clause 20(b).
(b) Another Company may join in this Guarantee by executing this
Guarantee in the space provided hereafter after the heading
"New Guarantors" after the words `This Company in
consideration of the payment of the sum of $1.00 by the Bank
to the Company receipt of which is hereby acknowledged hereby
joins in this Guarantee dated the day of 19 `or other words to
a similar effect whereupon the other Company shall become a
Guarantor and its rights and obligations and the restrictions
imposed upon it hereunder shall be the same in all respects as
if the other Company had joined in this Guarantee as a
Guarantor as from the date of this Guarantee and the rights
and obligations and the restrictions imposed upon the other
Guarantors shall be the same in all respects as if the other
Company had joined in this Guarantee as from the date of this
Guarantee save in each case that none of the other Guarantors
shall have a right of contribution against the other Company
in relation to sums paid by such other Guarantor prior to the
Acquisition Date.
(c) The Bank shall forthwith give notice in writing (at any of the
addresses herein specified for the making of a demand on the
Guarantors and the new Guarantors) of the joining in this
Guarantee of any of the other Companies.
"WARNING: This is an important document which makes the Guarantors fully and
separately responsible for all obligations of all types now or hereafter owing
to the Bank, whether alone or jointly or jointly and severally with any other
person and whether or not the Guarantors have been informed about the size or
type of those obligations. Any mortgage or other security which the Guarantors
have given or hereafter give to the Bank in relation to their own affairs might
very well apply to any moneys due by the Guarantors under this document.
16
<PAGE> 17
Dated this day of 1999.
THE COMMON SEAL of B.C.E. HOLDINGS )
- --------------- ---------------
PTY LIMITED is affixed in accordance with )
- -----------
its Constitution in the presence of: )
- ------------------------------------- -------------------------------------
Signature of authorised person Signature of authorised person
- ------------------------------------- -------------------------------------
Office held Office held
- ------------------------------------- -------------------------------------
Name of authorised person Name of authorised person
(Block letters) (Block letters)
THE COMMON SEAL of CONTINENTAL )
- --------------- -----------
CONVEYOR & EQUIPMENT PTY LIMITED )
- --------------------------------
is affixed in accordance with its Constitution )
in the presence of: )
- ------------------------------------- -------------------------------------
Signature of authorised person Signature of authorised person
- ------------------------------------- -------------------------------------
Office held Office held
- ------------------------------------- -------------------------------------
Name of authorised person Name of authorised person
(Block letters) (Block letters)
17
<PAGE> 18
THE COMMON SEAL of CONTINENTAL )
- --------------- -----------
ACE SERVICES PTY LIMITED is affixed )
- ------------------------
in accordance with its Constitution in the )
presence of: )
- ------------------------------------- -------------------------------------
Signature of authorised person Signature of authorised person
- ------------------------------------- -------------------------------------
Office held Office held
- ------------------------------------- -------------------------------------
Name of authorised person Name of authorised person
(Block letters) (Block letters)
THE COMMON SEAL of CONTINENTAL )
- --------------- -----------
ACE CONVEYORS COMPONENTS PTY )
- ----------------------------
LIMITED is affixed in accordance with its )
- -------
Constitution in the presence of: )
- ------------------------------------- -------------------------------------
Signature of authorised person Signature of authorised person
- ------------------------------------- -------------------------------------
Office held Office held
- ------------------------------------- -------------------------------------
Name of authorised person Name of authorised person
(Block letters) (Block letters)
18
<PAGE> 19
THE COMMON SEAL of CONTINENTAL )
- --------------- -----------
ACE PTY LIMITED is affixed in accordance )
- ---------------
with its Constitution in the presence of: )
- ------------------------------------- -------------------------------------
Signature of authorised person Signature of authorised person
- ------------------------------------- -------------------------------------
Office held Office held
- ------------------------------------- -------------------------------------
Name of authorised person Name of authorised person
(Block letters) (Block letters)
THE COMMON SEAL of CONTINENTAL )
- --------------- -----------
CONTROL SYSTEMS PTY LIMITED is )
- ---------------------------
affixed in accordance with its Constitution in )
the presence of: )
- ------------------------------------- -------------------------------------
Signature of authorised person Signature of authorised person
- ------------------------------------- -------------------------------------
Office held Office held
- ------------------------------------- -------------------------------------
Name of authorised person Name of authorised person
(Block letters) (Block letters)
19
<PAGE> 20
THE COMMON SEAL of A CRANE PTY )
- --------------- -----------
LIMITED is affixed in accordance with its )
- -------
Constitution in the presence of: )
- ------------------------------------- -------------------------------------
Signature of authorised person Signature of authorised person
- ------------------------------------- -------------------------------------
Office held Office held
- ------------------------------------- -------------------------------------
Name of authorised person Name of authorised person
(Block letters) (Block letters)
THE COMMON SEAL of CONTINENTAL )
- --------------- -----------
MECO PTY LIMITED is affixed in )
- ----------------
accordance with its Constitution in the )
presence of: )
- ------------------------------------- -------------------------------------
Signature of authorised person Signature of authorised person
- ------------------------------------- -------------------------------------
Office held Office held
- ------------------------------------- -------------------------------------
Name of authorised person Name of authorised person
(Block letters) (Block letters)
NEW GUARANTORS
This Company hereby joins in this Guarantee dated the day of
19 .
Dated this day of 19 .
20
<PAGE> 21
Ref: PGW.
19 July, 1999
The Directors.
B.C.E. Holdings Pty Limited.
Level 2, 40 Mann Street,
GOSFORD. N.S.W. 2250.
Dear Sirs,
CAPPED RATE BILL FACILITY
The Bank offers to provide to you a Capped Rate Bill Facility ("Facility") upon
the terms and conditions contained in the attached Bill Facility - Letter of
Offer ("Letter of Offer") dated 19th July, 1999, and this letter. This letter
supplements and should be read in conjunction with the Letter of Offer. Terms
defined in the Letter of Offer have the same meaning when used in this letter
unless the context otherwise requires and, in the event of inconsistency between
a provision of this letter and a provision of the Letter of Offer, the provision
in this letter prevails to the extent of that inconsistency.
DESCRIPTION OF THE FACILITY
The Facility is a floating rate bill facility under which, on each Drawdown Date
(as defined below), the Bank will accept Bills drawn and presented by you in
accordance with this letter and the Letter of Offer and discount the Bills at a
rate which is the lower of either:
(a) the Drawdown Rate (as defined below) prevailing on the Drawdown Date,
or
(b) the Cap Rate (as defined below).
The following terms and conditions are applicable to the Facility.
1. FACILITY AMOUNT: The amount set out at Item 4 of the Schedule to the
Letter of Offer.
2. FACILITY TERM: The Facility will commence on the Commencement Date
specified at Item 6 of the Schedule to the Letter of Offer and expire
on or about the date specified at Item 5 of the Schedule to the Letter
of Offer. The Expiry Date is approximate only as the Bank will need to
make some adjustment to conform with market requirements. However, the
Expiry Date will be within 10 days of the selected date.
3. CAP RATE: 4.00 per centum per annum.
4. DRAWDOWN RATE: The Drawdown Rate means in respect of any day the rate
of discount specified by the Bank in its discretion as the usual rate
at which the Bank is prepared to
21
<PAGE> 22
purchase bills of exchange accepted by itself on that day which have a
term and aggregate face amount matching the term and aggregate face
amount of any Bills to be discounted on that day under this Facility.
The Drawdown Rate is a floating rate (expressed as a per centum per
annum yield to maturity) that varies from time to time.
Subject to the terms of the Facility, on each Drawdown Date, Bills will
be discounted at the Drawdown Rate prevailing on that date unless the
Drawdown Rate exceeds the Cap Rate in which case Bills will be
discounted at the Cap Rate.
5. DRAWDOWN DATES AND DRAWDOWN ADVICE: The Drawdown Dates are the dates on
which Bills drawn pursuant to the Facility are discounted. Following
the commencement of this Facility, the Bank will provide you with a
letter listing the Drawdown Dates for the Facility ("Drawdown Advice").
The approximate period between each Drawdown Date will be 90 days.
6. BILL REQUIREMENTS: Bills drawn under this Facility for acceptance and
discount on a Drawdown Date should:
(i) be available to the Bank at least 5 Business Days before the
relevant Drawdown Date.
(ii) be drawn to mature on the next succeeding Drawdown Date or, if
there is no further Drawdown Date, on the Expiry Date.
(iii) have a face amount of $10,000.00 or an integral multiple
thereof and an aggregate face amount of at least $100,000.00
(see point 8 below).
IMPORTANT NOTICE: If Bills are not drawn in accordance with this point
6 or are not available to the Bank by the time referred to in point 6
(i) ("Non-conforming Bills"), the Bank may, in its absolute discretion,
either:
(a) accept any Non-conforming Bills and discount the same
at the Drawdown Rate prevailing when the
Non-conforming Bills are presented whether or not the
Drawdown Rate is higher than the Cap Rate, or
(b) accept any Non-conforming Bills but decline to
discount same.
7. CAP PREMIUM: You must pay the bank a Cap Premium of $14,936-00 in total
in respect of the Facility. The Cap Premium is payable by installments
on each Drawdown Date. The amount of each installment is $3,734-00. The
Bank may debit each installment of the Cap Premium from your account
specified below:
Account Title: Continental Ace Pty Limited.
Account Number:
Branch: Maitland. N.S.W.
IMPORTANT NOTICE: If you fail to pay any installment of the Cap Premium
by the date that installment is due then, without affecting the Bank's
other rights arising from failure to pay
22
<PAGE> 23
any amount under this Facility, the balance of the Cap Premium shall
become immediately due and payable by you and may be debited by the
Bank from your account specified above.
8. PARTIAL DRAWDOWNS: You are not obliged to fully draw the Facility,
however, partial drawdowns will be permitted only if the aggregate face
amount of bills drawn is at least $100,000.00 or an integral multiple
of $10,000.00 thereafter.
Please signify your acceptance of the above terms and conditions by signing the
copy of this letter where indicated.
Yours faithfully
John Incher,
Business Banking Manager
- --------------------------------------------------------------------------------
I/WE CONFIRM OUR ACCEPTANCE OF THE ABOVE TERMS AND CONDITIONS.
- ------------------------------------- -------------------------------------
Signed Signed
- ------------------------------------- -------------------------------------
Name Name
- ------------------------------------- -------------------------------------
Date Date
23
<PAGE> 24
Ref: PGW.
19 July, 1999
The Directors.
B.C.E. Holdings Pty Limited.
Level 2, 40 Mann Street,
GOSFORD. N.S.W. 2250.
Dear Sirs,
CAPPED RATE BILL FACILITY
The Bank offers to provide to you a Capped Rate Bill Facility ("Facility") upon
the terms and conditions contained in the attached Bill Facility - Letter of
Offer ("Letter of Offer") dated 19th July, 1999, and this letter. This letter
supplements and should be read in conjunction with the Letter of Offer. Terms
defined in the Letter of Offer have the same meaning when used in this letter
unless the context otherwise requires and, in the event of inconsistency between
a provision of this letter and a provision of the Letter of Offer, the provision
in this letter prevails to the extent of that inconsistency.
DESCRIPTION OF THE FACILITY
The Facility is a floating rate bill facility under which, on each Drawdown Date
(as defined below), the Bank will accept Bills drawn and presented by you in
accordance with this letter and the Letter of Offer and discount the Bills at a
rate which is the lower of either:
(a) the Drawdown Rate (as defined below) prevailing on the Drawdown Date,
or
(b) the Cap Rate (as defined below).
The following terms and conditions are applicable to the Facility.
1. FACILITY AMOUNT: The amount set out at Item 4 of the Schedule to the
Letter of Offer.
2. FACILITY TERM: The Facility will commence on the Commencement Date
specified at Item 6 of the Schedule to the Letter of Offer and expire
on or about the date specified at Item 5 of the Schedule to the Letter
of Offer. The Expiry Date is approximate only as the Bank will need to
make some adjustment to conform with market requirements. However, the
Expiry Date will be within 10 days of the selected date.
3. CAP RATE: 4.00 per centum per annum.
4. DRAWDOWN RATE: The Drawdown Rate means in respect of any day the rate
of discount specified by the Bank in its discretion as the usual rate
at which the Bank is prepared to
24
<PAGE> 25
purchase bills of exchange accepted by itself on that day which have a
term and aggregate face amount matching the term and aggregate face
amount of any Bills to be discounted on that day under this Facility.
The Drawdown Rate is a floating rate (expressed as a per centum per
annum yield to maturity) that varies from time to time.
Subject to the terms of the Facility, on each Drawdown Date, Bills will
be discounted at the Drawdown Rate prevailing on that date unless the
Drawdown Rate exceeds the Cap Rate in which case Bills will be
discounted at the Cap Rate.
5. DRAWDOWN DATES AND DRAWDOWN ADVICE: The Drawdown Dates are the dates on
which Bills drawn pursuant to the Facility are discounted. Following
the commencement of this Facility, the Bank will provide you with a
letter listing the Drawdown Dates for the Facility ("Drawdown Advice").
The approximate period between each Drawdown Date will be 90 days.
6. BILL REQUIREMENTS: Bills drawn under this Facility for acceptance and
discount on a Drawdown Date should:
(i) be available to the Bank at least 5 Business Days before the
relevant Drawdown Date.
(ii) be drawn to mature on the next succeeding Drawdown Date or, if
there is no further Drawdown Date, on the Expiry Date.
(iii) have a face amount of $10,000.00 or an integral multiple
thereof and an aggregate face amount of at least $100,000.00
(see point 8 below).
IMPORTANT NOTICE: If Bills are not drawn in accordance with this point
6 or are not available to the Bank by the time referred to in point 6
(i) ("Non-conforming Bills"), the Bank may, in its absolute discretion,
either:
(a) accept any Non-conforming Bills and discount the same
at the Drawdown Rate prevailing when the
Non-conforming Bills are presented whether or not the
Drawdown Rate is higher than the Cap Rate, or
(b) accept any Non-conforming Bills but decline to
discount same.
7. CAP PREMIUM: You must pay the bank a Cap Premium of $43,704.00 in total
in respect of the Facility. The Cap Premium is payable by installments
on each Drawdown Date. The amount of each installment is $10,926.00.
The Bank may debit each installment of the Cap Premium from your
account specified below:
Account Title: Continental Ace Pty Limited.
Account Number:
Branch: Maitland. N.S.W.
IMPORTANT NOTICE: If you fail to pay any installment of the Cap Premium
by the date that installment is due then, without affecting the Bank's
other rights arising from failure to pay
25
<PAGE> 26
any amount under this Facility, the balance of the Cap Premium shall
become immediately due and payable by you and may be debited by the
Bank from your account specified above.
8. PARTIAL DRAWDOWNS: You are not obliged to fully draw the Facility,
however, partial drawdowns will be permitted only if the aggregate face
amount of bills drawn is at least $100,000.00 or an integral multiple
of $10,000.00 thereafter.
Please signify your acceptance of the above terms and conditions by signing the
copy of this letter where indicated.
Yours faithfully
John Incher,
Business Banking Manager
- --------------------------------------------------------------------------------
I/WE CONFIRM OUR ACCEPTANCE OF THE ABOVE TERMS AND CONDITIONS.
- ------------------------------------- -------------------------------------
Signed Signed
- ------------------------------------- -------------------------------------
Name Name
- ------------------------------------- -------------------------------------
Date Date
26
<PAGE> 27
BILL FACILITY - LETTER OF OFFER
Maitland Business Banking Centre Branch Date 19th July, 1999
- -------------------------------- -----------------
(Name and Address of Customer) B.C.E. Holdings Pty Limited ACN 003525988,
------------------------------------------------
Level 2, 40 Mann Street, GOSFORD, NSW 2250
- --------------------------------------------------------------------------------
Dear Sirs:
National Australia Bank Limited whose principal office in the State set out in
item 1 of the Schedule is set out in item 2 of the Schedule ("the Bank") hereby
offers to provide to the Drawer a bill acceptance facility not exceeding the
aggregate amount set out in item 4 of the Schedule or such other amount as may
hereafter be agreed upon by the parties in writing ("the Limit") upon the
following terms and conditions:--
1. In this Letter unless the context otherwise requires:--
"Letter" means this Letter as the same may stand amended, varied or
added to from time to time.
"Availability Period" means the period during which the Drawer may draw
Bills and require the Bank to accept the same in accordance with this
Letter commencing on the Commencement Date and ending on the date set
out in item 5 of the Schedule or such later date as the parties hereto
shall agree upon in writing.
"Bills and Bills" has the meaning assigned to the expression "Bill of
Exchange" by the Bills of Exchange Act 1909 of the Commonwealth of
Australia and shall mean any Bill drawn and accepted pursuant to this
Letter of Offer. Any reference in this letter to the drawing,
accepting, or other dealings of or with a Bill of Exchange shall have
the meaning ascribed thereto in that Act and shall also mean drawing or
accepting a Bill of Exchange by means of a facsimile signature.
"Business Day" means any day on which trading banks are open for
business in the place set out in item 1 of the Schedule.
"Commencement Date" means the date as set out in item 6 of the
Schedule.
"Drawer" means the person set out in item 3 of the Schedule, and
includes his successors and permitted assigns.
"Event of Default" means an event under clause 17.
"Expiry Date" means the last day of the Availability Period.
"Facility" means the bill acceptance facility up to the Limit to be
provided by the Bank to the Drawer.
"Maturity Date" means the maturity date of each Bill drawn and accepted
pursuant to this Letter.
A reference in this Letter to any Act of Parliament or to any section
or provision thereof shall be read as though the words "or any
statutory provision substituted therefor" were added to such a
reference. A reference in this Letter to a natural person shall include
his legal personal representatives.
Anything to be done, or which may be done, by the Drawer under this
Letter may be done for or on behalf of the Drawer by a duly appointed
and authorised attorney.
Words denoting the singular number shall include the plural and vice
versa.
Words denoting natural persons only shall include corporations and vice
versa, and words
27
<PAGE> 28
denoting the masculine gender shall include every other gender.
2. Where the Drawer has appointed the Bank as the attorney of the Drawer
in connection with this Letter:
(a) The Bank is not obliged to comply with any request or
direction ("instruction") of the Drawer for the Bank to
exercise its power as attorney,
(b) The Bank may act on verbal instructions or instructions
received by facsimile but may require instructions from the
Drawer to be in writing;
(c) The Bank will not have any liability (and the Drawer shall
indemnify the Bank against any liability) for anything done or
omitted to be done by the Bank acting on instructions which
purport to be instructions of the Drawer.
3. Bills drawn by the Drawer during the Availability Period shall be
accepted by the Bank for the accommodation of the Drawer provided that
the face value of all Bills so accepted by the Bank and outstanding
shall not exceed the Limit at any time.
4. No Bills shall be drawn by the Drawer and the Bank shall have no
obligation to accept any Bills pursuant to this Letter having a
Maturity Date later than the Expiry Date.
5. Bills shall be drawn by the Drawer on the Bank with face values,
payable on such days to such persons and at such places in Australia as
the Drawer and the Bank shall agree
6. The Drawer hereby agrees to observe the several requirements of the
Bills of Exchange Act 1909 as to anything necessary to be done to
ensure the validity of any Bills to be drawn or accepted hereunder or
to attract the benefit of any provisions of that Act.
7. Within the Availability Period and subject to the provisions of this
Letter upon the maturity of each Bill drawn and accepted pursuant to
this Letter the Drawer may draw a replacement Bill having a face value
no greater than the face value of the maturing Bill which shall be
accepted by the Bank. Such replacement Bill shall, except with the
consent of the Bank, be delivered to the Bank at least 5 Business Days
prior to the Maturity Date of the maturing Bill.
8. (a) (i) Subject to sub-clause (ii) hereof, the Drawer shall
pay to the Bank the face value of each Bill on its
Maturity Date.
(ii) Where the Bank:--
(a) provides a Bill discounting facility to the
Drawer; and
(b) has agreed to accept a replacement Bill
(pursuant to clause 7), the obligation of
the Drawer to pay to the Bank the face value
of a maturing Bill on its Maturity Date may,
at the discretion of the Bank, be satisfied
by the Bank:--
(a) debiting the face value of the maturing Bill
to an internal suspense account of the Bank;
(b) accepting the replacement Bill;
(c) crediting the discounted proceeds of the
replacement Bill in reduction of the debit
created to the suspense account; and
(d) debiting the account of the Drawer for the
amount of the remaining balance of the debit
to the suspense account.
(iii) The procedure outlined in sub-clause (ii) hereof,
shall be adopted for administrative convenience only
and shall not prejudice the right of the Bank at any
time to require the Drawer to pay to it the face
value of any Bill on its Maturity Date.
28
<PAGE> 29
(b) The obligations and liabilities of the Drawer hereunder and in
relation to each Bill drawn and accepted hereunder shall
continue notwithstanding that the Bank is/or becomes the
holder of a Bill in its own right on or after its Maturity
Date
(c) The Bank may pay any Bill on or after its Maturity Date
without being under any obligation to enquire as to the title
of the person presenting the same for payment.
9. Upon each Bill being accepted by the Bank the Drawer shall pay to the
Bank an activation fee being the percentage per annum set out in item 7
of the Schedule of the face value of the Bill for the term thereof.
10. Upon each day that the Bank accepts a Bill under the Facility, the
Drawer shall pay to the Bank a drawdown fee of the amount set out in
item 8 of the Schedule. The Bank may increase the drawdown fee during
the Availability Period by giving at least thirty (30) days' notice to
the Drawer of any such increase.
11. During the Availability Period the Drawer shall pay to the Bank a
facility fee being the percentage per annum set out in item 9 of the
Schedule of the amount of the Facility payable in advance as determined
by the Bank. The first of such payments shall be made on the
Commencement Date.
12. The Drawer shall pay to the Bank on demand the application fee set out
in item 10 of the Schedule.
13. The Drawer agrees that the Bank may debit all fees payable by the
Drawer under or in connection with the Facility to the account set out
in item 14 of the Schedule.
14. The obligation of the Bank to accept Bills hereunder shall be subject
to the Drawer's performance of and compliance with his obligations
hereunder.
15. The Drawer represents and warrants to the Bank as follows:--
(a) There is no action suit or proceeding pending or to the
knowledge of the Drawer (or if the Drawer is a corporation --
known to any of its officers) threatened before any Court or
Government agency which may result in this Letter or any
provision thereof being rendered invalid or unenforceable;
(b) The execution and performance of this Letter and the payment
of all amounts due under this Letter will not violate any
provision of any applicable law or Government directive having
the force of law;
(c) A legal valid and binding obligation on the Drawer enforceable
in accordance with its terms is constituted if and whenever a
Bill is accepted by the Bank;
(d) Each Bill required to be accepted by the Bank shall be binding
on the Drawer and enforceable according to its tenor;
(e) If the Drawer is a corporation, the Drawer is duly
incorporated or registered in the State set out in item 11 of
the Schedule and has all requisite power and authority to
enter into and comply with the provisions of this Letter;
(f) If the Drawer is a natural person:--
(i) The Drawer has full capacity to accept the offer
constituted by this Letter and draw Bills pursuant to
this Letter;
(ii) Any statement of assets, liabilities and income given
by the Drawer to the Bank prior to the execution
hereof is true and correct in all particulars.
16. Each request by the Drawer to the Bank to accept a Bill shall
constitute confirmation by the Drawer that at the date thereof no Event
of Default and no event in relation to which the giving of notice or
the passing of time, or both would constitute an Event of Default, has
occurred and that the representations and warranties of the Drawer
contained herein remain true and correct as of that date.
29
<PAGE> 30
17. During the term of the Facility each of the following events and
occurrences shall constitute an Event of Default:--
(a) If the Drawer fails to pay the face value of any Bill to the
Bank on the Maturity Date of such Bill:
(b) If the Drawer fails to pay on the due date any other amount
payable hereunder;
(c) If the Drawer defaults in the performance or observance of any
term or condition of the Facility or of this Letter;
(d) If any order for payment is made or judgment is entered or
signed against the Drawer and the same is not satisfied within
7 days thereafter;
(e) If, in the opinion of the Bank, the Drawer becomes unable to
pay its debts, or the assets or position of the Drawer are not
sufficiently maintained;
(f) If the Drawer fails to make any payment when due, or within
any applicable period of grace, in respect of any financial
obligation or any such obligation shall, by reason of default
on the part of the Drawer, become due or capable of being
declared due prior to its stated maturity;
(g) If the Drawer, without the prior written consent of the Bank,
enters into any arrangement to factor all or any of the
Drawer's book debts or charges or encumbers the whole or any
part of the Drawer's assets or estate;
(h) If at any time the Drawer should fail to pay to the Bank any
moneys from time to time due and payable to the Bank pursuant
to any other arrangement or facility or fail to comply with
any other provision of such arrangement or facility or the
provisions of any security given to the Bank;
(i) If the Drawer is a corporation.--
(i) If the Drawer convenes a meeting of or proposes or
enters into any arrangement or composition for the
benefit of its creditors;
(ii) If an application is made or a resolution is passed
for the winding up of the Drawer or for the reduction
of the capital of the Drawer or notice or intention
to propose such a resolution is given:
(iii) If a receiver and manager, liquidator or provisional
liquidator or an administrator under Part 5.3A of the
Corporations Law is appointed in respect of the
Drawer or the whole or any part of its undertaking
property or assets,
(iv) If the Drawer stops payment generally or ceases or
threatens to cease to carry on its business or the
major part thereof:
(v) If a ground for winding up the Drawer shall arise;
(vi) If, without the prior consent in writing of the Bank,
the Drawer shall sell, assign or transfer the whole
or major part of its undertaking or attempt so to do;
(vii) If the Drawer determines that any portion of its
share capital which has not been already called up
shall not be capable of being called up except in the
event and for the purposes of the company being wound
up;
(j) If the Drawer is a natural person:--
(i) If the Drawer commits an act of bankruptcy;
(ii) If a petition for an order of bankruptcy or
sequestration of the estate of the Drawer is
presented;
(iii) If the Drawer convenes a meeting of or proposes or
enters into any arrangement or composition for the
benefit of his creditors;
(iv) If a receiver is appointed of any part of the
property or the estate of the Drawer.
For the purposes of this clause 17 where the Drawer is a firm or
partnership any Event of Default which occurs in relation to one member
of the firm or partnership shall be deemed to have occurred in relation
to all the members thereof.
18. If an Event of Default occurs the Bank shall have the right to serve a
notice of termination of the Facility on the Drawer Upon service of
such notice the Drawer's right to have Bills accepted by the Bank shall
terminate and all amounts payable hereunder, including an
30
<PAGE> 31
amount equal to the aggregate face value of all Bills accepted by the
Bank hereunder which remain outstanding (notwithstanding that the
Maturity Dates of such outstanding Bills have yet to occur) shall
become immediately due and payable by the Drawer to the Bank.
19. In the event that the Drawer should fail to pay to the Bank the face
value of any Bill either on its Maturity Date or upon service of a
notice of termination of Facility pursuant to clause 18 (whichever the
case may be) the Bank may debit an account in the name of the Drawer
(whether opened by the Bank or the Drawer) with the face value of each
such Bill and any costs expenses and outgoings referred to in clause 22
The overdrawn balance of such account shall bear interest at the rate
calculated in accordance with item 12 of the Schedule from time to time
20. Notwithstanding anything herein contained to the contrary the Bank
shall not be obliged to accept any Bills presented for acceptance
hereunder unless the securities referred to in item 13 of the Schedule
have been executed and have been delivered to the Bank and remain in
full force and effect in respect of all current Bills accepted by the
Bank and Bills so presented to the Bank for acceptance
21. No delay in exercising or omission to exercise any right, power or
remedy accruing to the Bank under this Letter shall affect its right,
power or remedy or be construed to be a waiver of any Event of Default
Each and every right granted to the Bank herein or in connection
herewith or allowed to it at law or in equity shall be cumulative and
may be exercised from time to time.
22. The Drawer shall pay to the Bank the Bank's costs expenses and
outgoings--
(a) Of and incidental to the preparation execution and stamping of
this Letter and the securities herein referred to,
(b) In respect of any other liability of the Bank for stamp duty
under stamp duty legislation of any State or Territory arising
out of this Letter or any transaction hereunder or
contemplated hereby including drawing, accepting, discounting
and negotiating of Bills or for which the Bank or the Drawer
may be liable and which the Bank at its discretion may pay,
(c) Incurred in consequence of any default of the Drawer in the
due performance or observance of any term or condition or
provision binding expressly or by implication on the Drawer
under this Letter:
(d) Of and incidental to the exercise by the Bank of any power
express or implied in this Letter or the securities referred
to herein or in relation to or in respect of any Bill.
23. The Drawer shall indemnify the Bank against any liability which it may
incur on, and any moneys it may pay under, any Bill the Bank may accept
hereunder or in connection with any such Bill including any Bill
accepted or drawn by means of a facsimile signature (and whether or not
such facsimile signature was authorised by the Bank or Drawer). This
indemnity shall be in addition to and not in derogation of any other
indemnity or obligation in favour of the Bank contained herein or given
by the Bills of Exchange Act 1909 or at law or in equity
24. Where the Drawer has appointed the Bank as the attorney of the Drawer
in connection with this Letter:--
(a) the Bank is not obliged to comply with any request or
direction ("instruction") of the Drawer for the Bank to
exercise its powers as attorney;
(b) the Bank may act on verbal instructions or instructions
received by facsimile but may require instructions from the
Drawer to be in writing;
(c) the Bank will not have any liability (and the Drawer shall
indemnify the Bank against
31
<PAGE> 32
any liability) for anything done or omitted to be done by the
Bank acting on instructions which purport to be instructions
of the Drawer.
25. Anything herein required to be done or any payment to be made on a day
which is not a Business Day shall be valid if done or made on the next
succeeding Business Day.
26. This Letter will be construed in accordance with the laws of the State
set out in item 1 of the Schedule.
27. Any notice or demand hereunder may be given by the Bank under the hand
of any class of Manager of the Bank and served by being delivered to
the address or registered office of the Drawer as set out in item 3 of
the Schedule or as last advised to the Bank and may be posted to any of
such addresses by prep aid post and if posted shall be deemed to be
served on the day following the date of posting whether actually
received or not and may be delivered to the Drawer or should the Drawer
be a corporation then to any Director or Secretary of the Drawer.
28. In a case where this Letter is given in respect of the indebtedness of
a firm or partnership.--
(a) this Letter shall continue to be binding notwithstanding any
changes which may from time to time take place in the partners
thereof, whether by the death or retirement of any partner or
partners or the admission of any new partner or partners or
otherwise howsoever, and notwithstanding that the firm or
partnership no longer carries on business;
(b) this Letter shall be binding on the Drawer notwithstanding
that the Drawer is not or having once been a member of the
firm or partnership is no longer a member thereof.
29. In the event of the death of the Drawer prior to the Maturity Date of
any Bill current at the date of such death interest shall accrue to the
Bank pursuant to the provisions of clause 19 in the same manner as if
an account in the name of such deceased Drawer had been debited with
the face value of such Bill pursuant to the provisions of that clause.
30. The drawing of a Bill by the Drawer for acceptance by the Bank after
the date of this Letter shall constitute acceptance by the Drawer of
the Bank's offer to provide the Facility upon the terms and conditions
hereinbefore set out and an acknowledgment that all prior arrangements
are cancelled and that these terms and conditions apply to all Bills so
drawn and accepted prior to such date
31. The Drawer must give the Bank promptly any information it reasonably
asks for from time to time.
Yours faithfully,
Manager
32
<PAGE> 33
SCHEDULE
ITEM 1
State
New South Wales
ITEM 2
Principal Office of the Bank
255 George Street, SYDNEY, N.S.W. 2000
ITEM 3
Name, & Address or Registered Office of Drawer
B.C.E. Holdings Pty Limited ACN 003525988
Level 2, 40 Mann Street
GOSFORD, NSW 2250
ITEM 4
Limit
$3,000,000.00
ITEM 5
End of Availability Period
31/7/2000
ITEM 6
Commencement Date
19/7/1999
ITEM 7
Activation fee
----- % p.a.
ITEM 8
Drawdown fee
$100.00
ITEM 9
Facility fee
1.95 % p.a.
ITEM 10
Application fee
$19,500.00
ITEM 11
State of Incorporation of Drawer
New South Wales
33
<PAGE> 34
ITEM 12
Default Rate
The total of the Bank's Lending Indicator Rate for Base Rate (8.5%)
plus a customer margin of 5.50 % per annum plus a default margin of
4.00 % per annum being 18.00 % per annum.
ITEM 13
Securities
1. Existing Registered Mortgage Debenture over the whole of the
Company's assets and uncalled capital and called but unpaid
capital.
2. Fresh Interlocking Guarantee and Indemnity--companies--for
$11,740,000.00 given by B.C.E. Holdings Pty Limited ACN
003525988, Continental Conveyor and Equipment Pty Limited ACN
059870058, Continental Ace Services Pty Limited ACN 056396760,
Continental Ace Conveyor Components Pty Limited ACN 005458373,
Continental Ace Pty Limited ACN 003725915, Continental Control
Systems Pty Limited ACN 003581897, A Crane Pty Limited ACN
003280475 and Continental Meco Pty Limited ACN 001408368
partly supported by existing Registered Mortgage Debentures
over the whole of the Companys' assets and uncalled capital
and called but unpaid capital and first registered mortgages
over land and buildings situated at Lots 2, 33 and 34 Somersby
Falls Road, and David's Close, Somersby, and 51 Montore Road,
Minto.
3. Letter of Offer including Covenants.
4. Letter of Awareness.
5. Financial and Reporting Covenants.
ITEM 14
Account title
B.C.E. Holdings Pty Limited
Account Number
Branch
Maitland
34
<PAGE> 35
ANNEXURE "A"
The covenants contained herewith in Annexure "A" form part of the Terms and
Conditions for all facilities approved in the name of Continental Conveyor and
Equipment Group.
* Bill facility, $3,000,000.00, the initial term of the facility is to be
restricted to 12 months.
* The Bill facility, $3,000,000.00 is to be subject to principal
reductions of $ 150,000.00 per quarter commencing from drawdown.
* The Bill facility, $ 1,500,000.00 is to be subject to principal
reductions of $300,000.00 per quarter commencing from drawdown.
* The current Documentary Letters of Credit and or Bank Guarantees line
of $4,000,000.00 is to reduce to $3,000,000.00 by 31st December, 1999,
and further to $1,000,000.00 by 31st December, 2000.
* The Bank will require Continental Conveyor & Equipment Company (CCEC)
to provide a Letter of Awareness undertaking to retain its 100%
ownership, to maintain the subsidiary in a solvent position (after
exclusion of Shareholders loans) and to acknowledge the terms and
conditions applying over facilities extended to B.C.E. Holdings Pty
Limited.
* Quarterly information package to be provided within 45 days of the
quarter ended, commencing from the June, 1999, quarter, for each entity
within the Group.
The package is to comprise the following:
- Variance analysis of budget v's actual performance, detailed
comments on variances of more than 10%.
- Revised/updated cashflow forecasts to the financial year end
including assumptions.
- Revised/updated profit and loss forecast to the financial year
end.
* Capital Adequacy (SHF) of $7m (after exclusion of shareholders loans
and intangibles from the equation) to be achieved by 30th June, 1999
and quarterly thereafter.
* Outstanding debtors of less than 90 days and excluding inter company
positions are not to fall below $10m. Sufficient buffer is seen to
allow ready compliance with this covenant, the aged listing as at 1st
May, 1999, indicating $17.7m outstanding in this category.
* Annual accounts of immediate parent CCEC to be provided within 120 days
of books closure.
35
<PAGE> 36
* Quarterly management accounts are to be accompanied by aged listings of
both debtors and creditors.
* Whilst formal subordination of the parent loan of $13,500,000.00 (as at
31st December, 1998) is acknowledged to be in contravention of US
bankers covenants and accordingly is not available. The Bank requires
an undertaking in writing from CCEC not to seek or allow repayment of
these loans during the term of the Bank's facilities without our prior
written approval.
* Annual financial statements signed by the directors for all entities
within the Group (including consolidated accounts) are to be provided
to the Bank within 120 days from the financial year end (31st December,
annually).
* Change of ownership clause.
* Interest cover to be not less than 2 times.
* Dismantling Overdraft Set Off Group Arrangement.
****
36
<PAGE> 37
BILL FACILITY - LETTER OF OFFER
Maitland Business Banking Centre Branch Date 19th July, 1999
- -------------------------------- -----------------
(Name and Address of Customer) B.C.E. Holdings Pty Limited ACN 003525988,
-----------------------------------------------
Level 2, 40 Mann Street, GOSFORD, NSW 2250
- --------------------------------------------------------------------------------
Dear Sirs:
National Australia Bank Limited whose principal office in the State set out in
item 1 of the Schedule is set out in item 2 of the Schedule ("the Bank") hereby
offers to provide to the Drawer a bill acceptance facility not exceeding the
aggregate amount set out in item 4 of the Schedule or such other amount as may
hereafter be agreed upon by the parties in writing ("the Limit") upon the
following terms and conditions:--
1. In this Letter unless the context otherwise requires:--
"Letter" means this Letter as the same may stand amended, varied or
added to from time to time.
"Availability Period" means the period during which the Drawer may draw
Bills and require the Bank to accept the same in accordance with this
Letter commencing on the Commencement Date and ending on the date set
out in item 5 of the Schedule or such later date as the parties hereto
shall agree upon in writing.
"Bills and Bills" has the meaning assigned to the expression "Bill of
Exchange" by the Bills of Exchange Act 1909 of the Commonwealth of
Australia and shall mean any Bill drawn and accepted pursuant to this
Letter of Offer. Any reference in this letter to the drawing,
accepting, or other dealings of or with a Bill of Exchange shall have
the meaning ascribed thereto in that Act and shall also mean drawing or
accepting a Bill of Exchange by means of a facsimile signature.
"Business Day" means any day on which trading banks are open for
business in the place set out in item 1 of the Schedule.
"Commencement Date" means the date as set out in item 6 of the
Schedule.
"Drawer" means the person set out in item 3 of the Schedule, and
includes his successors and permitted assigns.
"Event of Default" means an event under clause 17.
"Expiry Date" means the last day of the Availability Period.
"Facility" means the bill acceptance facility up to the Limit to be
provided by the Bank to the Drawer.
"Maturity Date" means the maturity date of each Bill drawn and accepted
pursuant to this Letter.
A reference in this Letter to any Act of Parliament or to any section
or provision thereof shall be read as though the words "or any
statutory provision substituted therefor" were added to such a
reference.
A reference in this Letter to a natural person shall include his legal
personal representatives.
Anything to be done, or which may be done, by the Drawer under this
Letter may be done for or on behalf of the Drawer by a duly appointed
and authorised attorney.
Words denoting the singular number shall include the plural and vice
versa.
Words denoting natural persons only shall include corporations and vice
versa, and words
37
<PAGE> 38
denoting the masculine gender shall include every other gender.
2. Where the Drawer has appointed the Bank as the attorney of the Drawer
in connection with this Letter:
(a) The Bank is not obliged to comply with any request or
direction ("instruction") of the Drawer for the Bank to
exercise its power as attorney,
(b) The Bank may act on verbal instructions or instructions
received by facsimile but may require instructions from the
Drawer to be in writing;
(c) The Bank will not have any liability (and the Drawer shall
indemnify the Bank against any liability) for anything done or
omitted to be done by the Bank acting on instructions which
purport to be instructions of the Drawer.
3. Bills drawn by the Drawer during the Availability Period shall be
accepted by the Bank for the accommodation of the Drawer provided that
the face value of all Bills so accepted by the Bank and outstanding
shall not exceed the Limit at any time.
4. No Bills shall be drawn by the Drawer and the Bank shall have no
obligation to accept any Bills pursuant to this Letter having a
Maturity Date later than the Expiry Date.
5. Bills shall be drawn by the Drawer on the Bank with face values,
payable on such days to such persons and at such places in Australia as
the Drawer and the Bank shall agree
6. The Drawer hereby agrees to observe the several requirements of the
Bills of Exchange Act 1909 as to anything necessary to be done to
ensure the validity of any Bills to be drawn or accepted hereunder or
to attract the benefit of any provisions of that Act.
7. Within the Availability Period and subject to the provisions of this
Letter upon the maturity of each Bill drawn and accepted pursuant to
this Letter the Drawer may draw a replacement Bill having a face value
no greater than the face value of the maturing Bill which shall be
accepted by the Bank. Such replacement Bill shall, except with the
consent of the Bank, be delivered to the Bank at least 5 Business Days
prior to the Maturity Date of the maturing Bill.
8. (a) (i) Subject to sub-clause (II) hereof, the Drawer shall
pay to the Bank the face value of each Bill on its
Maturity Date.
(ii) Where the Bank:--
(a) provides a Bill discounting facility to the
Drawer; and
(b) has agreed to accept a replacement Bill
(pursuant to clause 7), the obligation of
the Drawer to pay to the Bank the face value
of a maturing Bill on its Maturity Date may,
at the discretion of the Bank, be satisfied
by the Bank:--
(a) debiting the face value of the maturing Bill
to an internal suspense account of the Bank;
(b) accepting the replacement Bill;
(c) crediting the discounted proceeds of the
replacement Bill in reduction of the debit
created to the suspense account; and
(d) debiting the account of the Drawer for the
amount of the remaining balance of the debit
to the suspense account.
(iii) The procedure outlined in sub-clause (ii) hereof,
shall be adopted for administrative convenience only
and shall not prejudice the right of the Bank at any
time to require the Drawer to pay to it the face
value of any Bill on its Maturity Date.
38
<PAGE> 39
(b) The obligations and liabilities of the Drawer hereunder and in
relation to each Bill drawn and accepted hereunder shall
continue notwithstanding that the Bank is/or becomes the
holder of a Bill in its own right on or after its Maturity
Date
(c) The Bank may pay any Bill on or after its Maturity Date
without being under any obligation to enquire as to the title
of the person presenting the same for payment.
9. Upon each Bill being accepted by the Bank the Drawer shall pay to the
Bank an activation fee being the percentage per annum set out in item 7
of the Schedule of the face value of the Bill for the term thereof.
10. Upon each day that the Bank accepts a Bill under the Facility, the
Drawer shall pay to the Bank a drawdown fee of the amount set out in
item 8 of the Schedule. The Bank may increase the drawdown fee during
the Availability Period by giving at least thirty (30) days' notice to
the Drawer of any such increase.
11. During the Availability Period the Drawer shall pay to the Bank a
facility fee being the percentage per annum set out in item 9 of the
Schedule of the amount of the Facility payable in advance as determined
by the Bank. The first of such payments shall be made on the
Commencement Date.
12. The Drawer shall pay to the Bank on demand the application fee set out
in item 10 of the Schedule.
13. The Drawer agrees that the Bank may debit all fees payable by the
Drawer under or in connection with the Facility to the account set out
in item 14 of the Schedule.
14. The obligation of the Bank to accept Bills hereunder shall be subject
to the Drawer's performance of and compliance with his obligations
hereunder.
15. The Drawer represents and warrants to the Bank as follows:--
(a) There is no action suit or proceeding pending or to the
knowledge of the Drawer (or if the Drawer is a corporation --
known to any of its officers) threatened before any Court or
Government agency which may result in this Letter or any
provision thereof being rendered invalid or unenforceable;
(b) The execution and performance of this Letter and the payment
of all amounts due under this Letter will not violate any
provision of any applicable law or Government directive having
the force of law;
(c) A legal valid and binding obligation on the Drawer enforceable
in accordance with its terms is constituted if and whenever a
Bill is accepted by the Bank;
(d) Each Bill required to be accepted by the Bank shall be binding
on the Drawer and enforceable according to its tenor;
(e) If the Drawer is a corporation, the Drawer is duly
incorporated or registered in the State set out in item 11 of
the Schedule and has all requisite power and authority to
enter into and comply with the provisions of this Letter;
(f) If the Drawer is a natural person:--
(i) The Drawer has full capacity to accept the offer
constituted by this Letter and draw Bills pursuant to
this Letter;
(ii) Any statement of assets, liabilities and income given
by the Drawer to the Bank prior to the execution
hereof is true and correct in all particulars.
16. Each request by the Drawer to the Bank to accept a Bill shall
constitute confirmation by the Drawer that at the date thereof no Event
of Default and no event in relation to which the giving of notice or
the passing of time, or both would constitute an Event of Default, has
occurred and that the representations and warranties of the Drawer
contained herein remain true and correct as of that date.
39
<PAGE> 40
17. During the term of the Facility each of the following events and
occurrences shall constitute an Event
of Default:--
(a) If the Drawer fails to pay the face value of any Bill to the
Bank on the Maturity Date of such Bill:
(b) If the Drawer fails to pay on the due date any other amount
payable hereunder;
(c) If the Drawer defaults in the performance or observance of any
term or condition of the Facility or of this Letter;
(d) If any order for payment is made or judgment is entered or
signed against the Drawer and the same is not satisfied within
7 days thereafter;
(e) If, in the opinion of the Bank, the Drawer becomes unable to
pay its debts, or the assets or position of the Drawer are not
sufficiently maintained;
(f) If the Drawer fails to make any payment when due, or within
any applicable period of grace, in respect of any financial
obligation or any such obligation shall, by reason of default
on the part of the Drawer, become due or capable of being
declared due prior to its stated maturity;
(g) If the Drawer, without the prior written consent of the Bank,
enters into any arrangement to factor all or any of the
Drawer's book debts or charges or encumbers the whole or any
part of the Drawer's assets or estate;
(h) If at any time the Drawer should fail to pay to the Bank any
moneys from time to time due and payable to the Bank pursuant
to any other arrangement or facility or fail to comply with
any other provision of such arrangement or facility or the
provisions of any security given to the Bank;
(i) If the Drawer is a corporation.--
(i) If the Drawer convenes a meeting of or proposes or
enters into any arrangement or composition for the
benefit of its creditors;
(ii) If an application is made or a resolution is passed
for the winding up of the Drawer or for the reduction
of the capital of the Drawer or notice or intention
to propose such a resolution is given:
(iii) If a receiver and manager, liquidator or provisional
liquidator or an administrator under Part 5.3A of the
Corporations Law is appointed in respect of the
Drawer or the whole or any part of its undertaking
property or assets,
(iv) If the Drawer stops payment generally or ceases or
threatens to cease to carry on its business or the
major part thereof:
(v) If a ground for winding up the Drawer shall arise;
(vi) If, without the prior consent in writing of the Bank,
the Drawer shall sell, assign or transfer the whole
or major part of its undertaking or attempt so to do;
(vii) If the Drawer determines that any portion of its
share capital which has not been already called up
shall not be capable of being called up except in the
event and for the purposes of the company being wound
up;
(j) If the Drawer is a natural person:--
(i) If the Drawer commits an act of bankruptcy;
(ii) If a petition for an order of bankruptcy or
sequestration of the estate of the Drawer is
presented;
(iii) If the Drawer convenes a meeting of or proposes or
enters into any arrangement or composition for the
benefit of his creditors;
(iv) If a receiver is appointed of any part of the
property or the estate of the Drawer.
For the purposes of this clause 17 where the Drawer is a firm or
partnership any Event of Default which occurs in relation to one member
of the firm or partnership shall be deemed to have occurred in relation
to all the members thereof.
18. If an Event of Default occurs the Bank shall have the right to serve a
notice of termination of the Facility on the Drawer Upon service of
such notice the Drawer's right to have Bills accepted by the Bank shall
terminate and all amounts payable hereunder, including an
40
<PAGE> 41
amount equal to the aggregate face value of all Bills accepted by the
Bank hereunder which remain outstanding (notwithstanding that the
Maturity Dates of such outstanding Bills have yet to occur) shall
become immediately due and payable by the Drawer to the Bank.
19. In the event that the Drawer should fail to pay to the Bank the face
value of any Bill either on its Maturity Date or upon service of a
notice of termination of Facility pursuant to clause 18 (whichever the
case may be) the Bank may debit an account in the name of the Drawer
(whether opened by the Bank or the Drawer) with the face value of each
such Bill and any costs expenses and outgoings referred to in clause 22
The overdrawn balance of such account shall bear interest at the rate
calculated in accordance with item 12 of the Schedule from time to time
20. Notwithstanding anything herein contained to the contrary the Bank
shall not be obliged to accept any Bills presented for acceptance
hereunder unless the securities referred to in item 13 of the Schedule
have been executed and have been delivered to the Bank and remain in
full force and effect in respect of all current Bills accepted by the
Bank and Bills so presented to the Bank for acceptance
21. No delay in exercising or omission to exercise any right, power or
remedy accruing to the Bank under this Letter shall affect its right,
power or remedy or be construed to be a waiver of any Event of Default
Each and every right granted to the Bank herein or in connection
herewith or allowed to it at law or in equity shall be cumulative and
may be exercised from time to time.
22. The Drawer shall pay to the Bank the Bank's costs expenses and
outgoings--
(a) Of and incidental to the preparation execution and stamping of
this Letter and the securities herein referred to,
(b) In respect of any other liability of the Bank for stamp duty
under stamp duty legislation of any State or Territory arising
out of this Letter or any transaction hereunder or
contemplated hereby including drawing, accepting, discounting
and negotiating of Bills or for which the Bank or the Drawer
may be liable and which the Bank at its discretion may pay,
(c) Incurred in consequence of any default of the Drawer in the
due performance or observance of any term or condition or
provision binding expressly or by implication on the Drawer
under this Letter:
(d) Of and incidental to the exercise by the Bank of any power
express or implied in this Letter or the securities referred
to herein or in relation to or in respect of any Bill.
23. The Drawer shall indemnify the Bank against any liability which it may
incur on, and any moneys it may pay under, any Bill the Bank may accept
hereunder or in connection with any such Bill including any Bill
accepted or drawn by means of a facsimile signature (and whether or not
such facsimile signature was authorised by the Bank or Drawer). This
indemnity shall be in addition to and not in derogation of any other
indemnity or obligation in favour of the Bank contained herein or given
by the Bills of Exchange Act 1909 or at law or in equity
24. Where the Drawer has appointed the Bank as the attorney of the Drawer
in connection with this Letter:--
(a) the Bank is not obliged to comply with any request or
direction ("instruction") of the Drawer for the Bank to
exercise its powers as attorney;
(b) the Bank may act on verbal instructions or instructions
received by facsimile but may require instructions from the
Drawer to be in writing;
(c) the Bank will not have any liability (and the Drawer shall
indemnify the Bank against any liability) for anything done or
omitted to be done by the Bank acting on instructions which
purport to be instructions of the Drawer.
41
<PAGE> 42
25. Anything herein required to be done or any payment to be made on a day
which is not a Business Day shall be valid if done or made on the next
succeeding Business Day.
26. This Letter will be construed in accordance with the laws of the State
set out in item 1 of the Schedule.
27. Any notice or demand hereunder may be given by the Bank under the hand
of any class of Manager of the Bank and served by being delivered to
the address or registered office of the Drawer as set out in item 3 of
the Schedule or as last advised to the Bank and may be posted to any of
such addresses by prep aid post and if posted shall be deemed to be
served on the day following the date of posting whether actually
received or not and may be delivered to the Drawer or should the Drawer
be a corporation then to any Director or Secretary of the Drawer.
28. In a case where this Letter is given in respect of the indebtedness of
a firm or partnership.--
(a) this Letter shall continue to be binding notwithstanding any
changes which may from time to time take place in the partners
thereof, whether by the death or retirement of any partner or
partners or the admission of any new partner or partners or
otherwise howsoever, and notwithstanding that the firm or
partnership no longer carries on business;
(b) this Letter shall be binding on the Drawer notwithstanding
that the Drawer is not or having once been a member of the
firm or partnership is no longer a member thereof.
29. In the event of the death of the Drawer prior to the Maturity Date of
any Bill current at the date of such death interest shall accrue to the
Bank pursuant to the provisions of clause 19 in the same manner as if
an account in the name of such deceased Drawer had been debited with
the face value of such Bill pursuant to the provisions of that clause.
30. The drawing of a Bill by the Drawer for acceptance by the Bank after
the date of this Letter shall constitute acceptance by the Drawer of
the Bank's offer to provide the Facility upon the terms and conditions
hereinbefore set out and an acknowledgment that all prior arrangements
are cancelled and that these terms and conditions apply to all Bills so
drawn and accepted prior to such date
31. The Drawer must give the Bank promptly any information it reasonably
asks for from time to time.
Yours faithfully,
Manager
42
<PAGE> 43
SCHEDULE
ITEM 1
State
New South Wales
ITEM 2
Principal Office of the Bank
255 George Street, SYDNEY, N.S.W. 2000
ITEM 3
Name, & Address or Registered Office of Drawer
B.C.E. Holdings Pty Limited ACN 003525988
Level 2, 40 Mann Street
GOSFORD, NSW 2250
ITEM 4
Limit
$1,500,000.00
ITEM 5
End of Availability Period
31/10/2000
ITEM 6
Commencement Date
19/7/1999
ITEM 7
Activation fee
----- % p.a.
ITEM 8
Drawdown fee
$100.00
ITEM 9
Facility fee
1.95% p.a.
ITEM 10
Application fee
$10,000.00
ITEM 11
State of Incorporation of Drawer
New South Wales
43
<PAGE> 44
ITEM 12
Default Rate
The total of the Bank's Lending Indicator Rate for Base Rate (8.5%)
plus a customer margin of 5.50 % per annum plus a default margin of
4.00 % per annum being 18.00 % per annum.
ITEM 13
Securities
1. Existing Registered Mortgage Debenture over the whole of the
Company's assets and uncalled capital and called but unpaid
capital.
2. Fresh Interlocking Guarantee and Indemnity--companies--for
$11,740,000.00 given by B.C.E. Holdings Pty Limited ACN
003525988, Continental Conveyor and Equipment Pty Limited ACN
059870058, Continental Ace Services Pty Limited ACN 056396760,
Continental Ace Conveyor Components Pty Limited ACN 005458373,
Continental Ace Pty Limited ACN 003725915, Continental Control
Systems Pty Limited ACN 003581897, A Crane Pty Limited ACN
003280475 and Continental Meco Pty Limited ACN 001408368
partly supported by existing Registered Mortgage Debentures
over the whole of the Companys' assets and uncalled capital
and called but unpaid capital and first registered mortgages
over land and buildings situated at Lots 2, 33 and 34 Somersby
Falls Road, and David's Close, Somersby, and 51 Montore Road,
Minto.
3. Letter of Offer including Covenants.
4. Letter of Awareness.
5. Financial and Reporting Covenants.
ITEM 14
Account title
B.C.E. Holdings Pty Limited
Account Number
Branch
Maitland
44
<PAGE> 45
ANNEXURE "A"
The covenants contained herewith in Annexure "A" form part of the Terms and
Conditions for all facilities approved in the name of Continental Conveyor and
Equipment Group.
* Bill facility, $3,000,000.00, the initial term of the facility is to be
restricted to 12 months.
* The Bill facility, $3,000,000.00 is to be subject to principal
reductions of $ 150,000.00 per quarter commencing from drawdown.
* The Bill facility, $ 1,500,000.00 is to be subject to principal
reductions of $300,000.00 per quarter commencing from drawdown.
* The current Documentary Letters of Credit and or Bank Guarantees line
of $4,000,000.00 is to reduce to $3,000,000.00 by 31st December, 1999,
and further to $1,000,000.00 by 31st December, 2000.
* The Bank will require Continental Conveyor & Equipment Company (CCEC)
to provide a Letter of Awareness undertaking to retain its 100%
ownership, to maintain the subsidiary in a solvent position (after
exclusion of Shareholders loans) and to acknowledge the terms and
conditions applying over facilities extended to B.C.E. Holdings Pty
Limited.
* Quarterly information package to be provided within 45 days of the
quarter ended, commencing from the June, 1999, quarter, for each entity
within the Group.
The package is to comprise the following:
- Variance analysis of budget v's actual performance, detailed
comments on variances of more than 10%.
- Revised/updated cashflow forecasts to the financial year end
including assumptions.
- Revised/updated profit and loss forecast to the financial year
end.
* Capital Adequacy (SHF) of $7m (after exclusion of shareholders loans
and intangibles from the equation) to be achieved by 30th June, 1999
and quarterly thereafter.
* Outstanding debtors of less than 90 days and excluding inter company
positions are not to fall below $10m. Sufficient buffer is seen to
allow ready compliance with this covenant, the aged listing as at 1st
May, 1999, indicating $17.7m outstanding in this category.
* Annual accounts of immediate parent CCEC to be provided within 120 days
of books closure.
45
<PAGE> 46
* Quarterly management accounts are to be accompanied by aged listings of
both debtors and creditors.
* Whilst formal subordination of the parent loan of $13,500,000.00 (as at
31st December, 1998) is acknowledged to be in contravention of US
bankers covenants and accordingly is not available. The Bank requires
an undertaking in writing from CCEC not to seek or allow repayment of
these loans during the term of the Bank's facilities without our prior
written approval.
* Annual financial statements signed by the directors for all entities
within the Group (including consolidated accounts) are to be provided
to the Bank within 120 days from the financial year end (31st December,
annually).
* Change of ownership clause.
* Interest cover to be not less than 2 times.
* Dismantling Overdraft Set Off Group Arrangement.
****
46
<PAGE> 1
Exhibit 12
Continental Global Group, Inc.
Computation of Ratio of Earnings to Fixed Charges
(In thousands, except for ratios)
<TABLE>
<CAPTION>
Years ended December 31
----------------------------------------------------------
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Computation of Earnings:
Income (loss) before extraordinary
item and foreign income taxes $ (8,728) $ 1,302 $ 8,181 $ 8,940 $11,785
Add:
Interest expense 15,225(1) 14,658(1) 12,308(2) 2,889 2,506
Amortization of deferred
financing costs -- -- -- 27 16
Portion of rent expense
representative of
an interest factor 815 800 523 407 455
----------------------------------------------------------
Earnings $ 7,312 $16,760 $21,012 $12,263 $14,762
==========================================================
Computation of Fixed Charges:
Interest expense $ 15,225 $14,658 $12,308 $ 2,889 $ 2,506
Amortization of deferred
financing costs -- -- -- 27 16
Portion of rent expense
representative of an
interest factor 815 800 523 407 455
----------------------------------------------------------
Fixed Charges $ 16,040 $15,458 $12,831 $ 3,323 $ 2,977
==========================================================
Ratio of Earnings to Fixed Charges --(3) 1.08 1.64 3.69 4.96
==========================================================
</TABLE>
(1) Amortization of deferred financing costs of $520 is included in 1999 and
1998 interest expense.
(2) Amortization of deferred financing costs of $390 is included in 1997
interest expense.
(3) Earnings were inadequate to cover fixed charges in the year ended December
31, 1999 by $8,728.
<PAGE> 1
Exhibit 21
Continental Global Group, Inc.
Subsidiaries of the Registrant at March 15, 2000
Jurisdiction of
Incorporation
Subsidiaries (1) or Organization Parent Company
Continental Conveyor & Delaware Continental Global Group, Inc.
Equipment Company
Continental Conveyor & Australia Continental Conveyor &
Equipment Pty. Ltd. Equipment Company
BCE Holdings Pty. Ltd. Australia Continental Conveyor &
Equipment Pty. Ltd.
Continental ACE Pty. Ltd. Australia BCE Holdings Pty. Ltd.
Continental ACE Services Australia BCE Holdings Pty. Ltd.
Pty. Ltd.
Continental ACE Conveyor Australia BCE Holdings Pty. Ltd.
Components Pty. Ltd.
A. Crane Pty. Ltd. Australia BCE Holdings Pty. Ltd.
Continental Control Australia BCE Holdings Pty. Ltd. - 60%
Systems Pty. Ltd. Continental Conveyor &
Equipment Pty. Ltd. - 40%
Continental Conveyor Delaware Continental Conveyor &
International Inc. Equipment Company
Continental FSW Ltd. United Kingdom Continental Conveyor
International Inc.
Continental Conveyor Ltd. United Kingdom Continental FSW Ltd.
Continental MECO South Africa Continental Conveyor
(Proprietary) Ltd. International Inc.
MECO McCallum Pty. Ltd. Australia Continental Conveyor &
Equipment Pty. Ltd.
Goodman Conveyor Company Delaware Continental Global Group, Inc.
(1) Each of the subsidiaries listed is 100% owned by its parent company, except
for Continental Control Systems Pty. Ltd.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements listed on pages 15-16 of this Form 10-K and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0001039785
<NAME> CONTINENTAL GLOBAL GROUP, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 18,300
<SECURITIES> 0
<RECEIVABLES> 30,469
<ALLOWANCES> 700
<INVENTORY> 31,328
<CURRENT-ASSETS> 82,038
<PP&E> 27,008
<DEPRECIATION> 10,305
<TOTAL-ASSETS> 122,903
<CURRENT-LIABILITIES> 45,893
<BONDS> 120,000
0
0
<COMMON> 1
<OTHER-SE> (45,878)
<TOTAL-LIABILITY-AND-EQUITY> 122,903
<SALES> 211,720
<TOTAL-REVENUES> 211,720
<CGS> 179,956
<TOTAL-COSTS> 179,956
<OTHER-EXPENSES> 467
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,225
<INCOME-PRETAX> (8,728)
<INCOME-TAX> 0
<INCOME-CONTINUING> (8,728)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,728)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
