SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 1999
Commission Registrant; State of Incorporation; IRS EMPLOYER
File Number Address; and Telephone Number Identification No.
333-52529 MMH HOLDINGS, INC. 39-1924039
(a Delaware Corporation)
4915 South Howell Avenue, 2nd Floor
Milwaukee, Wisconsin 53207
(414) 486-6100
333-52527 MORRIS MATERIAL HANDLING, INC. 39-1716155
(a Delaware Corporation)
4915 South Howell Avenue, 2nd Floor
Milwaukee, Wisconsin 53207
(414) 486-6100
Indicate by check mark whether the registrants (1) have 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
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days.
Yes X No__
Indicate the number of shares outstanding of each of the issuers' classes of
common stock, as of the latest practicable date (September 10, 1999):
MMH Holdings, Inc. Nonvoting common stock, $.01 Par Value,
1,930 shares outstanding. Voting common stock,
$.01 Par Value, 10,169 shares outstanding.
Morris Material Handling, Inc. Common stock, $.01 Par Value, 100 shares
outstanding. MMH Holdings, Inc. holds all of
the outstanding common stock of
Morris Material Handling, Inc.
<PAGE>
MMH HOLDINGS, INC.
MORRIS MATERIAL HANDLING, INC.
INDEX
Introduction 2
Part I -Financial Statements:
MMH Holdings, Inc.
Condensed Balance Sheets 3
Condensed Statements of Operations and Comprehensive Income (Loss) 4
Condensed Statements of Cash Flows 5
Statements of Preferred Stock and Shareholders' Equity 6
Morris Material Handling, Inc.
Condensed Balance Sheets 7
Condensed Statements of Operations and Comprehensive Income (Loss) 8
Condensed Statements of Cash Flows 9
Statements of Shareholder's Equity 10
Notes to Financial Statements of
MMH Holdings, Inc. and
Morris Material Handling, Inc. 11
Management's Discussion and Analysis of
Financial Condition and Results of Operations of
MMH Holdings, Inc. and
Morris Material Handling, Inc. 23
Part II - Other Information:
Item 1. Legal Proceedings 32
Item 2. Changes in Securities 32
Item 3. Defaults upon Senior Securities 32
Item 4. Submission of Matters to a Vote of Security Holders 32
Item 5. Other Information 32
Item 6. Exhibits and Reports on Form 8-K 32
Introduction
MMH Holdings, Inc. ("Holdings") is a holding company whose sole direct
subsidiary is Morris Material Handling, Inc. ("MMH"), a manufacturer,
distributor and service provider of "through-the-air" material handling
equipment with operations in the United States, United Kingdom, South Africa,
Singapore, Canada, Australia, Thailand, Chile and Mexico. Unless the context
requires otherwise, references to the "Company" in this combined 10-Q are to
MMH, its subsidiaries and their predecessors. For periods prior to March 30,
1998, references to the Company are to the "through-the-air" material handling
equipment business (the "MHE Business") of Harnischfeger Corporation ("HarnCo")
and those subsidiaries and affiliates of HarnCo that were engaged therein.
This combined Form 10-Q is separately filed by MMH Holdings, Inc. and by Morris
Material Handling, Inc. The unaudited interim financial statements presented in
this combined report (collectively, the "Financial Statements") include the
financial statements of Holdings, as well as separate financial statements for
MMH. Information contained herein relating to any individual Registrant is filed
by such Registrant on its own behalf.
Certain sections of this Form 10-Q, including "Management's Discussion and
Analysis of Financial Condition and Results of Operations," contain various
forward looking statements within the meaning of Section 21E of the Securities
Exchange Act of 1934, which represent management's expectations or beliefs
concerning future events. The forward looking statements include, without
limitation, the ability of the Registrants to meet their future liquidity needs.
The Registrants caution that those statements are further qualified by important
factors that could cause actual results to differ from those in the forward
looking statements. Certain factors that might cause such a difference are
detailed herein under "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Cautionary Factors."
2
<PAGE>
<TABLE>
MMH HOLDINGS, INC.
CONDENSED BALANCE SHEETS
(Dollars in Thousands)
ASSETS
<CAPTION>
July 31, October, 31
1999 1998
----------- -----------
(Unaudited)
Current Assets
<S> <C> <C>
Cash and cash equivalents $ 2,153 $ 2,534
Accounts receivable-net 63,561 81,947
Inventories 43,568 42,561
Other current assets 14,798 11,467
--------- ---------
124,080 138,509
--------- ---------
Property, Plant and Equipment
Cost 70,116 67,649
Less accumulated depreciation (29,822) (26,579)
--------- ---------
40,294 41,070
--------- ---------
Other Assets
Goodwill 42,184 39,843
Debt financing costs 17,313 18,905
Deferred income taxes 65,979 65,979
Other 9,997 6,691
--------- ---------
135,473 131,418
--------- ---------
299,847 310,997
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term notes payable and current
portion of long-term obligations (Note 5) $ 3,467 $ 2,262
Revolving Credit Facility borrowings (Note 5) 7,203 --
Bank overdrafts 1,889 1,252
Trade accounts payable 22,221 32,893
Advance payments and progress billings 10,037 9,399
Accrued interest 6,444 2,201
Other current liabilities 21,783 29,946
--------- ---------
73,044 77,953
Revolving Credit Facility Borrowings (Note 5) 18,000 1,200
Term Loans (Note 5) 49,713 52,225
Acquisition Facility Line Borrowings (Note 5) 7,430 6,194
Senior Notes 200,000 200,000
Other Long-Term Borrowings 2,572 2,205
Deferred Income Taxes 2,578 2,698
Other Long-Term Liabilities 1,487 --
Minority Interest 521 364
Commitments and Contingencies (Note 6)
Mandatorily Redeemable Preferred Stock 104,911 95,351
Shareholders' Equity (160,409) (127,193)
--------- ---------
299,847 310,997
========= =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
<TABLE>
MMH HOLDINGS, INC.
CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
(Dollars in Thousands)
<CAPTION>
For the Three Months For the Nine Months
Ended July 31, Ended July 31,
--------------------- -------------------
1999 1998 1999 1998
--------- ----------- -------- ----------
Revenues
<S> <C> <C> <C> <C>
Net Sales $ 72,709 $ 74,426 $ 212,478 $ 231,675
Other Income - Net 453 391 600 1,117
--------- --------- --------- ---------
73,162 74,817 213,078 232,792
Cost of Sales 52,210 52,152 157,266 167,324
Selling, General and
Administrative Expenses 18,298 14,582 53,585 44,096
HII Management Fee -- -- -- 1,155
Non-Recurring Employee Benefit Costs -- -- -- 1,906
--------- --------- --------- ---------
Operating Income 2,654 8,083 2,227 18,311
Interest Expense - Net
HII Affiliates -- -- -- (1,448)
Third Party (7,521) (7,013) (21,952) (9,716)
--------- --------- --------- ---------
Income (Loss) Before
Income Taxes and Minority Interest (4,867) 1,070 (19,725) 7,147
Provision for Income Taxes (576) (450) (1,641) (2,896)
Minority Interest 13 (4) 40 34
--------- --------- --------- ---------
Net Income (Loss) (5,430) 616 (21,326) 4,285
Foreign Currency Translation
Adjustments (869) (765) (2,246) (2,285)
--------- --------- --------- ---------
Comprehensive Income (Loss) $ (6,299) $ (149) $ (23,572) $ 2,000
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
<TABLE>
MMH HOLDINGS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Dollars in Thousands)
<CAPTION>
For the Nine Months
Ended July 31,
----------------------
1999 1998
----------------------
Operating Activities
<S> <C> <C>
Net income (loss) $ (21,326) $ 4,285
Add (deduct) - items not
affecting cash used for operating activities:
Depreciation and amortization 6,057 5,196
Amortization of debt financing costs 1,603 655
Deferred income taxes - net 41 411
Divestiture bonus -- 1,216
Other (40) (34)
Changes in working capital,
excluding the effects of acquisition
opening balance sheets:
Accounts receivable 18,212 4,246
Inventories 34 (5,563)
Other current assets (3,762) (2,466)
Trade accounts payable and bank overdrafts (10,512) (14,104)
Advance payments and progress billings 366 941
Accrued warranties (145) (1,428)
Accrued interest 4,243 6,884
Other current liabilities (6,958) (375)
Activity with parent and other affiliates-net -- 1,748
--------- ---------
Net cash provided by (used for)operating activities (12,187) 1,612
--------- ---------
Investment and Other Transactions
Capital Expenditures - net (6,208) (3,556)
Acquisition of businesses-net of cash acquired (5,070) (3,203)
Net issuance of loans to senior management (80) (900)
Other - net (570) (941)
--------- ---------
Net cash used for investment and other transactions (11,928) (8,600)
--------- ---------
Financing Activities
Changes in short-term debt,
notes payable and Revolving Credit
Facility borrowings 23,916 6,324
Proceeds from Acquisition Line borrowings 1,235 --
Proceeds from Senior Note Offering -- 200,000
Proceeds from New Credit Facility -- 55,000
Redemption of common stock and preferred stock -- (287,000)
Net proceeds from issuance of
Series A preferred stock and related common shares -- 57,094
Stock redemption transaction costs -- (3,181)
Debt financing costs -- (18,889)
Repayments of long-term obligations (1,388) (338)
--------- ---------
Net cash provided by financing activities 23,763 9,010
--------- ---------
Effect of Exchange Rate Changes on
Cash and Cash Equivalents (29) 28
--------- ---------
Increase (Decrease) in Cash and Cash Equivalents (381) 2,050
Cash and Cash Equivalents
Beginning of Period 2,534 1,532
--------- ---------
End of Period $ 2,153 $ 3,582
========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
<TABLE>
MMH HOLDINGS, INC.
STATEMENTS OF PREFERRED STOCK AND SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED JULY 31, 1999
(UNAUDITED)
(Dollars in Thousands)
Preferred Stock
-----------------------------------------------------------------------------------------------
Series A Series B Series C
-----------------------------------------------------------------------------------------------
Shares Carrying Shares Carrying Shares Carrying
Outstanding Value Outstanding Value Outstanding Value Total
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at October 31, 1998 61,188 $ 59,217 5,105 $ 5,156 30,678 $ 30,978 $ 95,351
Net loss -- -- -- -- -- -- --
Change in
foreign currency translation -- -- -- -- -- -- --
Net issuance
of loans to senior management -- -- -- -- -- -- --
Preferred stock dividends 3,667 5,665 313 483 1,918 2,976 9,124
Amortization of
preferred stock discount -- 436 -- -- -- -- 436
-----------------------------------------------------------------------------------------------
Balance at July 31, 1999 64,855 $ 65,318 5,418 $ 5,639 32,596 $ 33,954 $ 104,911
===============================================================================================
</TABLE>
<TABLE>
<CAPTION>
Common Stock Parent Accumulated
------------------- Investment/ Other Total
Shares Par Additional Comprehensive Retained Shareholders'
Outstanding Value Paid-in-Capital Loss Earnings Equity
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at October 31, 1998 10,889 $-- $(121,860) $ (2,741) $ (2,592) $(127,193)
Net loss -- -- -- -- (21,326) (21,326)
Change in
foreign currency translation -- -- -- (2,246) -- (2,246)
Net issuance
of loans to senior management -- -- -- -- (80) (80)
Preferred stock dividends -- -- -- -- (9,128) (9,128)
Amortization of
preferred stock discount -- -- -- -- (436) (436)
-----------------------------------------------------------------------------------------------
Balance at July 31, 1999 10,889 $-- $(121,860) $ (4,987) $ (33,562) $(160,409)
===============================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
<TABLE>
MORRIS MATERIAL HANDLING, INC.
CONDENSED BALANCE SHEETS
(Dollars in Thousands)
<CAPTION>
July 31, October 31,
1999 1998
------------ -------------
(Unaudited)
ASSETS
Current Assets
<S> <C> <C>
Cash and cash equivalents $ 2,153 $ 2,534
Accounts receivable-net 63,561 81,947
Inventories 43,568 42,561
Other current assets 14,798 11,467
--------- ---------
124,080 138,509
--------- ---------
Property, Plant and Equipment
Cost 70,116 67,649
Less accumulated depreciation (29,822) (26,579)
--------- ---------
40,294 41,070
--------- ---------
Other Assets
Goodwill 42,184 39,843
Debt financing costs 17,313 18,905
Deferred income taxes 65,979 65,979
Other 9,997 6,691
--------- ---------
135,473 131,418
--------- ---------
$ 299,847 $ 310,997
========= =========
LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities
Short-term notes payable and current
portion of long-term obligations (Note 5) $ 3,467 $ 2,262
Revolving Credit Facility borrowings (Note 5) 7,203 --
Bank overdrafts 1,889 1,252
Trade accounts payable 22,221 32,893
Advance payments and progress billings 10,037 9,399
Accrued interest 6,444 2,201
Other current liabilities 21,783 29,946
--------- ---------
73,044 77,953
Revolving Credit Facility Borrowings (Note 5) 18,000 1,200
Term Loans (Note 5) 49,713 52,225
Acquisition Facility Line Borrowings (Note 5) 7,430 6,194
Senior Notes 200,000 200,000
Other Long-Term Borrowings 2,572 2,205
Deferred Income Taxes 2,578 2,698
Other Long-Term Liabilities 1,487 --
Minority Interest 521 364
Commitments and Contingencies (Note 6)
Shareholder's Equity (55,498) (31,842)
--------- ---------
$ 299,847 $ 310,997
========= =========
</TABLE>
The accompanying notes are an intergral part of the financial statements
7
<PAGE>
<TABLE>
MORRIS MATERIAL HANDLING, INC.
CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
(Dollars in Thousands)
<CAPTION>
For the Three Months For the Nine Months
Ended July 31, Ended July 31,
----------------------- ----------------------
1999 1998 1999 1998
----------- ---------- --------- ----------
Revenues
<S> <C> <C> <C> <C>
Net Sales $ 72,709 $ 74,426 $ 212,478 $ 231,675
Other Income - Net 453 391 600 1,117
--------- --------- --------- ---------
73,162 74,817 213,078 232,792
Cost of Sales 52,210 52,152 157,266 167,324
Selling, General and
Administrative Expenses 18,298 14,582 53,585 44,096
HII Management Fee -- -- -- 1,155
Non-Recurring Employee Benefit Costs -- -- -- 1,906
--------- --------- --------- ---------
Operating Income 2,654 8,083 2,227 18,311
Interest Expense - Net
HII Affiliates -- -- -- (1,448)
Third Party (7,521) (7,013) (21,952) (9,716)
--------- --------- --------- ---------
Income (Loss) Before
Income Taxes and Minority Interest (4,867) 1,070 (19,725) 7,147
Provision for Income Taxes (576) (450) (1,641) (2,896)
Minority Interest 13 (4) 40 34
--------- --------- --------- ---------
Net Income (Loss) (5,430) 616 (21,326) 4,285
Foreign Currency Translation
Adjustments (869) (765) (2,246) (2,285)
--------- --------- --------- ---------
Comprehensive Income (Loss) $ (6,299) $ (149) $ (23,572) $ 2,000
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
<TABLE>
MORRIS MATERIAL HANDLING, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Dollars in Thousands)
For the Nine Months
Ended July 31,
1999 1998
-----------------------
Operating Activities
<S> <C> <C>
Net income (loss) $ (21,326) $ 4,285
Add (deduct) - items not affecting cash
used for operating activities:
Depreciation and amortization 6,057 5,196
Amortization of debt financing costs 1,603 655
Deferred income taxes - net 41 411
Divestiture bonus -- 1,216
Other (40) (34)
Changes in working capital, excluding the effects
of acquisition opening balance sheets:
Accounts receivable 18,212 4,246
Inventories 34 (5,563)
Other current assets (3,762) (2,466)
Trade accounts payable and bank overdrafts (10,512) (14,104)
Advance payments and progress billings 366 941
Accrued warranties (145) (1,428)
Accrued interest 4,243 6,884
Other current liabilities (6,958) (375)
Activity with parent and other affiliates-net -- 1,748
--------- ---------
Net cash provided by (used for) operating activities (12,187) 1,612
--------- ---------
Investment and Other Transactions
Capital expenditures - net (6,208) (3,556)
Acquisition of businesses - net of cash acquired (5,070) (3,203)
Net issuance of loans to senior management (80) (900)
Other - net (570) (941)
--------- ---------
Net cash used for investment and other transactions (11,928) (8,600)
--------- ---------
Financing Activities
Changes in short-term debt, notes
payable and Revolving Credit
Facility borrowings 23,916 6,324
Proceeds from Acquisition Facility Line borrowings 1,235 --
Proceeds from Senior Note Offering -- 200,000
Proceeds from New Credit Facility -- 55,000
Dividend to and redemption of shares held by Holdings -- (233,087)
Debt Financing Costs -- (18,889)
Repayments of long-term obligations (1,388) (338)
--------- ---------
Net cash provided by financing activities 23,763 9,010
--------- ---------
Effect of Exchange Rate Changes on
Cash and Cash Equivalents (29) 28
--------- ---------
Increase (Decrease) in Cash and Cash Equivalents (381) 2,050
Cash and Cash Equivalents
Beginning of Period 2,534 1,532
--------- ---------
End of Period $ 2,153 $ 3,582
========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
<TABLE>
MORRIS MATERIAL HANDLING, INC.
STATEMENT OF SHAREHOLDER'S EQUITY
FOR THE NINE MONTHS ENDED JULY 31, 1999
(UNAUDITED)
(Dollars in Thousands)
----------------------------------------------------------------------------------
Common Stock Parent Accumulated
-------------- Investment/ Other Total
Shares Par Additional Comprehensive Retained Shareholder's
Outstanding Value Paid-in-Capital Loss Earnings Equity
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at October 31, 1998 100 $-- $(33,392) $ (2,741) $ 4,291 $(31,842)
Net loss -- -- -- -- (21,326) (21,326)
Change in foreign
currency translation -- -- -- (2,246) -- (2,246)
Distribution to Holdings -- -- -- -- (4) (4)
Net issuance of loans to
senior management -- -- -- -- (80) (80)
----------------------------------------------------------------------------------
Balance at July 31, 1999 100 $-- $(33,392) $ (4,987) $(17,119) $(55,498)
==================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
MMH HOLDINGS, INC.
MORRIS MATERIAL HANDLING, INC.
NOTES TO FINANCIAL STATEMENTS
UNAUDITED
(Dollar amounts in thousands unless indicated)
Note 1 - Basis of Presentation
On January 28, 1998, Harnischfeger Industries, Inc. ("HII") reached an agreement
with MHE Investments, Inc. ("MHE Investments"), an affiliate of Chartwell
Investments Inc. ("Chartwell"), for the sale of an approximately 80 percent
common ownership interest in HII's Material Handling Equipment Business (the
"MHE Business"). As more fully described in Note 2, the resulting transactions
(the "Recapitalization"), which closed on March 30, 1998 (the "Recapitalization
Closing"), led to a significant change in the capital structure and a
reorganization of the underlying legal entities of the MHE Business. As a result
of the Recapitalization, MMH Holdings, Inc. ("Holdings"), a pre-existing company
engaged in the MHE Business, became an indirect holding company for the
operating entities engaged in the MHE Business. Specifically, Morris Material
Handling, Inc. ("MMH" and collectively with its subsidiaries and their
predecessors, the "Company"), a newly formed wholly-owned direct subsidiary of
Holdings, directly or indirectly acquired the various operating entities engaged
in the MHE Business. Holdings was recapitalized in order to effect the
redemption of certain shares of common stock of Holdings held by Harnischfeger
Corporation ("HarnCo"). As a result of the reorganization of the legal entities
of the MHE Business, Holdings and MMH became the successor companies to the MHE
Business. The transactions have been accounted for as a recapitalization and
accordingly, the financial statements presented herewith reflect the underlying
historical accounting basis of the MHE Business.
For periods prior to the Recapitalization Closing, the financial statements
presented represent the combined financial statements of the entities comprising
the MHE Business. For purposes hereof, it is assumed that Holdings has
historically owned the capital stock of MMH, that all of the assets of the MHE
Business were owned by subsidiaries of MMH and that, immediately prior to the
consummation of the Recapitalization, the historical combined financial
statements of Holdings were identical to those of the Company.
All significant intercompany balances and transactions have been eliminated.
Payables and receivables with HII and affiliates prior to the Recapitalization
are recorded as a component of parent investment.
The accompanying unaudited financial statements should be read in conjunction
with the combined 1998 Annual Report on Form 10-K of Holdings and the Company.
In the opinion of management, all adjustments, normal and recurring in nature,
necessary for a fair presentation of results of operations and financial
position have been included in the accompanying balance sheets and statements of
operations. The results of operations for the three months and nine months ended
July 31, 1999, respectively, are not, however, indicative of the results which
may be expected for fiscal 1999.
Note 2 - Recapitalization Transaction
The Recapitalization was effectuated pursuant to the January 28, 1998
Recapitalization Agreement among MHE Investments, HarnCo and certain of HII's
affiliates. Pursuant to this agreement, HarnCo and other HII affiliates effected
a number of transactions which resulted in Holdings owning, directly or
indirectly, the equity interests of all of the operating entities engaged in the
MHE Business. Holdings, in turn, formed MMH as a wholly owned subsidiary to
directly or indirectly hold the various operating entities engaged in the MHE
Business.
The principal transactions effected as part of the Recapitalization were the
following: (i) MHE Investments acquired (x) 7,907 shares of Holdings' common
stock for $25.1 million and (y) $28.9 million liquidation preference of
Holdings' 12 1/2% Series C Junior Voting Exchangeable Preferred Stock (the
"Series C Junior Voting Preferred Stock") from HarnCo, (ii) Holdings redeemed
certain shares of its common stock and Series C Junior Voting Preferred Stock
held by HarnCo for $287 million in cash (including a $5 million prepayment of a
potential post-closing redemption price adjustment) and approximately $4.8
million liquidation preference of Holdings' 12 1/4% Series B Junior Exchangeable
11
<PAGE>
Preferred Stock (the "Series B Junior Preferred Stock"); and (iii) HarnCo
retained 2,261 shares of Holdings' common stock.
To finance the Recapitalization, Holdings sold $60 million of Series A Units,
consisting of $57.7 million liquidation preference of Holdings' 12% Series A
Senior Exchangeable Preferred Stock (the "Series A Senior Preferred Stock") and
$2.3 million of Holdings' non-voting common stock, to institutional investors.
In addition, MMH issued (the "Note Offering") $200 million of aggregate
principal amount of 9 1/2% senior notes due 2008 (the "Senior Notes") and
entered into a senior secured credit facility (the "New Credit Facility") (See
Notes 5 and 6). MMH also entered into a surety arrangement (the "Surety
Arrangement") to provide credit support for its post-Recapitalization Closing
operations. MMH used a portion of the $200 million aggregate proceeds from the
Note Offering and $55 million aggregate borrowings under the New Credit Facility
to redeem certain of its common shares from Holdings and pay Holdings a dividend
which on a combined basis totaled $233.8 million. Holdings, in turn, used the
proceeds from this redemption, together with the proceeds of the sale of the
Series A Units, to finance the cash portion of the redemption price for HarnCo's
shares. The remainder of the proceeds were used by Holdings and MMH (i) to make
loans to senior management to acquire indirect equity interests in Holdings,
(ii) to fund certain transaction fees and expenses and (iii) for general
corporate purposes.
At July 31, 1999, MHE Investments owned approximately 72.6% of the common stock
of Holdings and $32.6 million liquidation preference of the Series C Junior
Voting Preferred Stock and HarnCo owned approximately 20.8% of the common stock
of Holdings and $5.4 million liquidation preference of the Series B Junior
Preferred Stock. The remaining equity interests were held by institutional
investors and consisted of non-voting stock representing approximately 6.6% of
the outstanding common stock of Holdings and $64.9 million liquidation
preference of the Series A Senior Preferred Stock.
Note 3 - Acquisitions
During the nine months ended July 31, 1999, the Company completed one
acquisition with an aggregate purchase price of $3,158, net of cash acquired.
During 1998, the Company completed several acquisitions for an aggregate
purchase price of $8,891, net of cash acquired. These acquisitions were related
to the Company's aftermarket business and were accounted for as purchase
transactions with the purchase prices allocated to the fair value of specific
assets acquired and liabilities assumed. Resultant goodwill of the transactions,
$1,934 for the 1999 transaction and $8,343 for the 1998 transactions, is being
amortized over 30 to 40 years. The 1999 acquisition and one 1998 acquisition
were partially financed by the sellers, resulting in deferred purchase price
which will be paid in 2004 and 2005 (in the case of the 1999 acquisition) and in
installments through 2006 (in the case of one 1998 acquisition).
During the nine months ended July 31, 1999, the Company made final consideration
payments of $1,507 related to two 1998 acquisitions. With respect to a 1995
acquisition, the Company made a final contingent consideration payment of $1,413
in the nine months ended July 31, 1999. Additionally, a payment of $100 was made
toward the 1998 acquisition that was partially financed by the seller. On a pro
forma basis, the 1999 and 1998 acquisitions were not material to results of
operations reported for the nine months ended July 31, 1999 and accordingly,
such information is not presented.
Note 4 - Inventories
Inventories consisted of the following:
<TABLE>
<CAPTION>
July 31, October 31,
1999 1998
--------------- ------------
<S> <C> <C>
Raw material $ 16,997 $ 14,517
Work-in-process 22,547 20,545
Finished parts 11,171 14,910
--------- --------
50,715 49,972
Less excess of current cost
over stated LIFO value (7,147) (7,411)
========== ========
$ 43,568 $ 42,561
========== ========
</TABLE>
12
<PAGE>
Note 5 - Indebtedness
The New Credit Facility and the indenture governing the Senior Notes (the "Note
Indenture") contain a number of covenants that, among other things, limit
Holdings' and its subsidiaries' ability to prepay subordinated indebtedness,
dispose of certain assets, create liens, make capital expenditures, make certain
investments or acquisitions and otherwise restrict corporate activities. In
addition, the New Credit Facility limits Holdings' and its subsidiaries' ability
to incur indebtedness and the Note Indenture limits the Company's and its
subsidiaries' ability to incur indebtedness. The New Credit Facility also
requires Holdings and its subsidiaries to comply with certain financial ratios
and borrowing condition tests based on quarterly measurements of the latest
twelve months results of operations, under which Holdings and its subsidiaries
are required to achieve and maintain certain financial and operating results. A
breach of any of these covenants would result in a default under the Note
Indenture or the New Credit Facility, or both. In the event of any such default,
the lenders under the New Credit Facility and/or the holders of the Senior Notes
could elect to declare all amounts borrowed under the New Credit Facility and/or
the Senior Notes, as applicable, together with accrued interest thereon, to be
due and payable which would also result in an event of default under the Surety
Arrangement.
The Company did not meet certain of the financial covenants under the New Credit
Facility for the period ended January 31, 1999 and did not meet such financial
covenants and certain additional financial covenants for the period ended April
30, 1999. The Company obtained a waiver of such financial covenants through
August 2, 1999. The waiver permitted the Company to borrow certain amounts under
the Revolving Credit Facility to meet its working capital requirements; however
the Company could not, without prior lender consent, (i) borrow any amounts
under the Acquisition Facility, (ii) borrow any amounts under the Revolving
Credit Facility in excess of the aggregate amount of the Revolving Credit
Facility borrowings that the Company has repaid subsequent to January 31, 1999,
or (iii) request the issuance of letters of credit, bid bonds or performance
bonds in an aggregate amount after March 2, 1999 in excess of $5.0 million.
On August 2, 1999, the Company obtained an amendment to the New Credit Facility
(the "Amendment") which cured past financial covenant violations and reset the
financial covenants until April 2001. The Company is in compliance with the
financial covenants under the New Credit Facility, as amended. The Amendment
increased the cash availability under the Revolving Credit Facility from $35.7
million under the previous waiver agreement to $40.7 million. At September 8,
1999, after giving effect to the Amendment, the Company has, subject to certain
conditions, the ability to borrow up to approximately $40.7 million under the
Revolving Credit Facility, of which $19.1 million is outstanding. In addition,
the Company has the ability to obtain letters of credit, bid bonds and
performance bonds in an amount not to exceed $10.0 million in the aggregate of
which $6.3 million have been issued.
In connection with, and as a condition to, the Amendment, certain of the current
indirect equity holders in Holdings purchased a $5.0 million participation in
the New Credit Facility and received certain non-voting equity interests in
Holdings, consisting of 10% of the then outstanding common stock of Holdings
and, subject to certain conditions, the right to receive additional shares of
non-voting common stock of Holdings on December 3, 1999 for a total of 25% of
the outstanding common stock of Holdings.
The Company incurred significant indebtedness in connection with the
Recapitalization. As of September 8, 1999, the Company had approximately $279.4
million of indebtedness outstanding. Since the Recapitalization, the Company has
been able to satisfy its cash requirements from cash generated by operations and
borrowings under the Revolving Credit Facility. However, in order to have
sufficient cash flow to satisfy its future cash needs for operations and debt
service, the Company needs to be able to borrow under the Revolving Credit
Facility in sufficient amounts and will have to materially improve cash
generated from operations in the near future. The Company also anticipates
incurring $2.0 million of cash expenditures during the fourth quarter of fiscal
1999 for severance and reorganization charges associated with continued
restructuring of the Company's operations, in addition to cash needed for
operations and capital expenditures.
Note 6 - Commitments and Contingencies
To secure the performance of sales contracts related to the Company's
operations, MMH was contingently liable to financial institutions and others for
the following at July 31, 1999: (i) $7.1 million of outstanding letters of
credit and surety bonds under the New Credit Facility, (ii) $1.8 million under
the Surety Arrangement for outstanding surety bonds and (iii) $3.8 million of
surety bonds with other institutions. Prior to the Recapitalization Closing, HII
and its affiliates (the "HII Group") provided credit support for the MHE
13
<PAGE>
Business. As part of the Recapitalization, HII agreed to maintain in place
credit support (including letters of credit and surety bonds) in existence at
the Recapitalization Closing and the Company agreed to reimburse HII for any
payments made by the HII Group with respect to such credit support. At July 31,
1999, approximately $27.0 million of HII Group letters of credit and surety
bonds remained outstanding.
As of the Recapitalization Closing, HarnCo retained certain income and other tax
liabilities relating to the MHE Business, all environmental liabilities relating
to previously shared facilities, any liabilities for which HarnCo or its
affiliates have been named as potentially responsible parties with respect to
Superfund sites, and any liabilities arising in connection with claims alleging
exposure to asbestos (to the extent there is insurance coverage therefor) in
connection with the MHE Business prior to the Recapitalization Closing.
Additionally, HarnCo retained all liability for medical and disability benefit
claims for current United States employees made prior to the Recapitalization
Closing and all claims with respect to any of the HII benefit plans for former
United States employees.
HarnCo has been and is currently a defendant in a number of asbestos related
lawsuits and will likely be named in future such actions. Most suits involve
multiple defendants including asbestos manufacturers. MMH has agreed to
indemnify HarnCo and its affiliates with respect to any liabilities in excess of
insurance arising in connection with past and future asbestos litigation
relating to the MHE Business. HII's insurance program included coverage for
asbestos related claim activity through 1986, when coverage for asbestos related
claims ceased to be available. HII's insurer has provided first dollar coverage
for policy periods through 1976. During the 1977 to 1985 policy periods, HII had
a variety of policies, with retention levels ranging from $100,000 to $15.0
million and total coverage limits ranging from $12.5 million to $50.0 million.
To date, HII's insurer has paid all indemnification liabilities relating to
asbestos claims (which amounts have not been material to the MHE Business) but
there can be no assurance such insurers will continue to do so in the future or
that there will be insurance coverage for such claims. In addition, policy
primary aggregate levels were exhausted in certain years, which would require
the participation of excess insurers for future claim activity. Given its
experience to date with such claims, the Company believes that its exposure to
asbestos related claims is not material, but there can be no assurance that such
liability will not in fact be material.
All of the Company's agreements and arrangements with HII and its affiliates
(including those referred to above and those relating to the provision of
services and materials by HII and its affiliates to the Company) could be
materially adversely affected by the fact that on June 7, 1999 (the "Petition
Date"), HII and certain of its United States affiliates (including HarnCo) filed
voluntary petitions for relief under Chapter 11 of the United States Bankruptcy
Code (the "Bankruptcy Code") in the United States Bankruptcy Court for the
District of Delaware (the "HII Bankruptcy"). Certain provisions of the
Bankruptcy Code allow a debtor to avoid, delay and/or reduce its contractual and
other obligations to third parties. There can be no assurance that HII and its
affiliates will not attempt to utilize such provisions to cease performance
under their agreements with the Company. The inability of the Company to receive
the benefits of one or more of these agreements or the termination of ongoing
arrangements between the Company and affiliates of HII could materially
adversely affect the Company's operations and financial performance. In the
event that any of the liabilities retained by HII and its affiliates remain
unsatisfied as of the Petition Date, the Company's right to indemnification for
any such amounts it has paid on behalf of HII and its affiliates may also be
avoided, delayed or reduced.
Each of HII and certain of its affiliates on the one hand, and the Company and
certain of its affiliates, on the other hand, have receivables and payables to
the other which may be affected by the HII Bankruptcy.
In October 1998, the Company received a request to arbitrate a claim from a
former customer which arose out of an accident that occurred in Ireland
involving two cranes sold by the Company in 1992. The claim alleges direct
damages of approximately $12.8 million plus lost revenue due to business
interruption. In addition, the Company has been notified by the port operator of
its intention to pursue a claim against the Company for its damages (which it
estimates are between $4 million and $5 million) arising from the accident.
Management intends to vigorously defend this matter. One of the Company's
insurance carriers has agreed to provide defense coverage for one of the two
cranes involved in the accident and limited indemnification if the Company is
unsuccessful in defending the claim. The Company is continuing to work with its
insurance broker to determine the availability of additional insurance coverage,
if any. The contract between the Company and the claimant provides that the
contract is governed by Irish law and that all disputes are to be resolved by
arbitration in Ireland. While the Company believes it will obtain a favorable
resolution, no assurances can be made as to the final outcome of the claim. If
the Company were found liable for the full amount of the claim, there could be a
material adverse effect on the Company's operations and financial performance.
14
<PAGE>
The Company is a party to various other litigation matters, including product
liability and other claims, which are normal in the course of its operations.
Also, as a normal part of its operations, the Company undertakes certain
contractual obligations and warranties in connection with the sale of products
or services. Although the outcome of these matters cannot be predicted with
certainty, management believes that the resolution of such matters will not have
a material adverse effect on the consolidated results of operations, financial
position or cash flows of Holdings or the Company.
Under the terms of the Recapitalization Agreement, HarnCo retained all liability
for the only two open environmental clean-up claims brought against HarnCo in
the Milwaukee, Wisconsin area. The Company and its management are not aware of
any other material environmental clean-up claim which is pending or is
threatened against the Company, but there can be no assurance that any such
claim will not be asserted against the Company in the future. In addition, as
noted above, the Company's right to indemnification against HarnCo for such
liabilities may be avoided, delayed or reduced as a result of HarnCo's filing
for bankruptcy protection.
Note 7 - Income Taxes
Realization of deferred tax assets is dependent on generating sufficient taxable
income prior to expiration of net operating loss carryforwards. During the
second quarter, the Company re-estimated its future operating results and
determined its deferred tax asset valuation allowance required an increase of
$5.9 million which was recognized as income tax expense. Additional valuation
allowance provisions of $1.9 million were recorded during the third quarter.
Although realization is not assured, management believes it is more likely than
not that the net deferred tax assets recorded will be realized. The amount of
the deferred tax assets not considered realizable, however, could be increased
in the near term if estimates of future taxable income are reduced.
Note 8 - Geographical Information
Geographical information for the nine months ended July 31, 1999 and 1998,
respectively, are as follows:
<TABLE>
<CAPTION>
Sales to Operating End of Period
Total Interarea Unaffiliated Income Identifiable
Net Sales Sales Customers (Loss) Assets
---------------------------------------------------------------
July 31, 1999
<S> <C> <C> <C> <C> <C>
United States $ 130,985 $ -- $ 130,985 $ 2,230 $ 202,038
Europe 36,889 (4,146) 32,743 (3,542) 51,012
Other Foreign 48,750 -- 48,750 3,539 46,797
Interearea
Eliminations (4,146) 4,146 -- -- --
---------------------------------------------------------------
$ 212,478 $ -- $ 212,478 $ 2,227 $ 299,847
===============================================================
</TABLE>
<TABLE>
<CAPTION>
Sales to Operating End of Period
Total Interarea Unaffiliated Income Identifiable
Net Sales Sales Customers (Loss) Assets
---------------------------------------------------------------
July 31, 1998
<S> <C> <C> <C> <C> <C>
United States $ 146,876 $ -- $ 146,876 $ 14,240 $ 204,826
Europe 54,647 (9,154) 45,493 683 58,888
Other Foreign 39,306 -- 39,306 3,388 33,431
Interearea
Eliminations (9,154) 9,154 -- -- --
---------------------------------------------------------------
$ 231,675 $ -- $ 231,675 $ 18,311 $ 297,145
===============================================================
</TABLE>
15
<PAGE>
Note 9 - Supplemental Condensed Financial Information
In connection with the Recapitalization, MMH, a direct wholly-owned subsidiary
of Holdings, issued Senior Notes that are guaranteed by certain of MMH's
subsidiaries (the "Guarantor Subsidiaries"). Each of the Guarantor Subsidiaries
is a wholly-owned subsidiary, directly or indirectly, of MMH and the guarantees
are full, unconditional and joint and several. Both Holdings and MMH are holding
companies with no material operating assets. All of the Company's business
operations are conducted through subsidiaries of MMH and accordingly, both
Holdings and MMH are dependent on the operating subsidiaries of MMH to fund
their cash needs, including debt service and tax obligations.
Separate financial statements of the Guarantor Subsidiaries are not presented
because management has determined that they would not be material to investors.
The following supplemental financial information sets forth the balance sheet,
statement of operations and cash flow information for the Guarantor Subsidiaries
and for MMH's other subsidiaries (the "Non-Guarantor Subsidiaries"). The
supplemental financial information reflects the investments of the Guarantor
Subsidiaries in the Non-Guarantor Subsidiaries using the equity method of
accounting. For purposes of this presentation, it is assumed that, historically,
all of the assets of the MHE Business were wholly-owned by subsidiaries of MMH,
which is an entity that was formed by Holdings in connection with the
Recapitalization and accordingly, the historical financial statements of MMH and
Holdings are identical following completion of the Recapitalization.
16
<PAGE>
<TABLE>
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
JULY 31, 1999
(UNAUDITED)
(Dollars in Thousands)
<CAPTION>
Consolidated
Morris Morris Consolidated
Non Material Material MMH MMH
Guarantor Guarantor Handling Handling Holdings Holdings
Subsidiares Subsidiares Inc. Eliminations Inc. Inc. Eliminations Inc.
------------------------------------------------------------------------------------------
ASSETS
Current Assets
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Cash and cash equivalents $2,046 $107 $- $- $2,153 $- $- $2,153
Accounts receivable - net 59,494 4,067 - - 63,561 - - 63,561
Intercompany accounts receivable 24,163 - 4,500 (28,663) - - - -
Inventories 40,474 3,094 - - 43,568 - - 43,568
Other current assets 7,913 742 6,143 - 14,798 - - 14,798
------------------------------------------------------------------------------------------
134,090 8,010 10,643 (28,663) 124,080 - - 124,080
------------------------------------------------------------------------------------------
Property, Plant and Equipment 37,557 2,737 - - 40,294 - - 40,294
------------------------------------------------------------------------------------------
Other Assets
Goodwill 39,458 2,726 - - 42,184 - - 42,184
Debt financing costs - - 17,313 - 17,313 - - 17,313
Noncurrent intercompany receivable 3,770 - 89,406 (93,176) - - - -
Investment in affiliates (34) - 64,937 (64,903) - (55,498) 55,498 -
Deferred income taxes - - 65,979 - 65,979 - - 65,979
Other 9,965 - 32 - 9,997 - - 9,997
------------------------------------------------------------------------------------------
53,159 2,726 237,667 (158,079) 135,473 (55,498) 55,498 135,473
------------------------------------------------------------------------------------------
$224,806 $13,473 $248,310 $(186,742) $299,847 $(55,498) $55,498 $299,847
==========================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term notes payable and current
portion of long-term obligations $202 $40 $3,225 $- $3,467 $- $- $3,467
Revolving credit facility borrowings 7,203 - - - 7,203 - - 7,203
Bank overdrafts 13 1,876 - - 1,889 - - 1,889
Trade accounts payable 21,159 1,062 - - 22,221 - - 22,221
Intercompany accounts payable 4,500 4,698 19,465 (28,663) - - - -
Advance payments and progress billings 10,037 - - - 10,037 - - 10,037
Accrued interest - - 6,444 - 6,444 - - 6,444
Other current liabilities 21,575 942 (734) - 21,783 - - 21,783
------------------------------------------------------------------------------------------
64,689 8,618 28,400 (28,663) 73,044 - - 73,044
Revolving Credit Facility Borrowings - - 18,000 - 18,000 - - 18,000
Term Loans - - 49,713 - 49,713 - - 49,713
Acquisition Facility Line Borrowings - - 7,430 - 7,430 - - 7,430
Senior Notes - - 200,000 200,000 200,000
Other Long-Term Borrowings 1,974 598 - - 2,572 - - 2,572
Noncurrent Intercompany Payable 89,406 3,770 - (93,176) - - - -
Deferred Income Taxes 2,578 - - - 2,578 - - 2,578
Other Long-Term Liabilities 1,222 265 1,487 1,487
Minority Interest - - - 521 521 - - 521
Mandatorily Redeemable Preferred Stock - - - - - 104,911 - 104,911
Stockholders' Equity 64,937 487 (55,498) (65,424) (55,498) (160,409) 55,498 (160,409)
------------------------------------------------------------------------------------------
$224,806 $13,473 $248,310 $(186,742) $299,847 $(55,498) $55,498 $299,847
==========================================================================================
</TABLE>
17
<PAGE>
<TABLE>
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
OCTOBER 31, 1998
(Dollars in Thousands)
<CAPTION>
Consolidated
Morris Morris Consolidated
Non Material Material MMH MMH
Guarantor Guarantor Handling Handling Holdings Holdings
Subsidiares Subsidiares Inc. Eliminations Inc. Inc. Eliminations Inc.
------------------------------------------------------------------------------------------
ASSETS
Current Assets
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Cash and cash equivalents $2,214 $320 $- $- $2,534 0 0 $2,534
Accounts receivable - net 76,000 5,947 - - 81,947 81,947
Intercompany accounts receivable 20,687 - 6,915 (27,602) - -
Inventories 39,749 2,812 - - 42,561 42,561
Other current assets 5,218 384 5,865 - 11,467 11,467
---------------------------------------------------------------------------------------
143,868 9,463 12,780 (27,602) 138,509 - - 138,509
---------------------------------------------------------------------------------------
Property, Plant and Equipment 38,295 2,775 - - 41,070 41,070
---------------------------------------------------------------------------------------
Other Assets
Goodwill 37,767 2,076 - - 39,843 39,843
Debt financing costs - - 18,905 - 18,905 18,905
Noncurrent intercompany receivable 3,853 - 83,416 (87,269) - -
Investment in affiliates 331 - 66,732 (67,063) - (31,842) 31,842 -
Deferred income taxes - - 65,979 - 65,979 65,979
Other 6,691 - - - 6,691 6,691
---------------------------------------------------------------------------------------
48,642 2,076 235,032 (154,332) 131,418 (31,842) 31,842 131,418
---------------------------------------------------------------------------------------
$230,805 $14,314 $247,812 $(181,934) $310,997 $(31,842) $31,842 $310,997
=======================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term notes payable and current
portion of long-term obligations $122 $40 $2,100 $2,262 $2,262
Bank overdrafts - 1,252 - 1,252 1,252
Trade accounts payable 30,539 2,354 - 32,893 32,893
Intercompany accounts payable 6,915 4,130 16,557 (27,602) - -
Advance payments and progress billings 9,394 5 - 9,399 9,399
Accrued interest - - 2,201 2,201 2,201
Other current liabilities 29,763 1,329 (1,146) 29,946 29,946
---------------------------------------------------------------------------------------
76,733 9,110 19,712 (27,602) 77,953 - - 77,953
---------------------------------------------------------------------------------------
Revolving Credit Facility Borrowings - - 1,200 1,200 1,200
Term loans - - 52,225 - 52,225 52,225
Acquisition Facility Line Borrowings - - 6,194 - 6,194 6,194
Senior Notes - - 200,000 - 200,000 200,000
Other Long-Term Obligations 1,226 656 323 - 2,205 2,205
Noncurrent Intercompany Payable 83,416 3,853 - (87,269) - -
Deferred Income Taxes 2,698 - - - 2,698 2,698
Minority Interest - - - 364 364 364
Mandatorily Redeemable Preferred Stock - - - - - 95,351 95,351
Stockholders' Equity 66,732 695 (31,842) (67,427) (31,842) (127,193) 31,842 (127,193)
---------------------------------------------------------------------------------------
$154,072 $14,314 $247,812 $(181,934) $310,997 $(31,842) $31,842 $310,997
=======================================================================================
</TABLE>
18
<PAGE>
<TABLE>
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
(UNAUDITED)
(Dollars in Thousands)
<CAPTION>
FOR THE NINE MONTHS ENDED JULY 31, 1999
------------------------------------------------------------------------------------------
Consolidated
Morris Morris Consolidated
Non Material Material MMH MMH
Guarantor Guarantor Handling Handling Holdings Holdings
Subsidiares Subsidiares Inc. Eliminations Inc. Inc. Eliminations Inc.
------------------------------------------------------------------------------------------
Revenues
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales $ 200,730 $ 12,347 $ - $ (599) $ 212,478 $- $- $ 212,478
Other Income - net 600 -- -- -- 600 -- -- 600
-------------------------------------------------------------------------------------------
201,330 12,347 -- (599) 213,078 -- -- 213,078
Cost of Sales 148,388 9,477 -- (599) 157,266 -- -- 157,266
Selling, General and
Administrative Expenses 49,340 2,743 1,502 -- 53,585 -- -- 53,585
-------------------------------------------------------------------------------------------
Operating Income (Loss) 3,602 127 (1,502) -- 2,227 -- -- 2,227
Interest (Expense) Income - net
Affiliates (4,719) (281) 5,000 -- -- -- -- --
Third Party (542) (342) (21,068) -- (21,952) -- -- (21,952)
-------------------------------------------------------------------------------------------
Loss Before Income Taxes, Equity in
Earnings (Loss) of Subsidiaries and
Minority Interest (1,659) (496) (17,570) -- (19,725) -- -- (19,725)
Provision for Income Taxes (1,641) -- -- -- (1,641) -- -- (1,641)
Equity in Earnings (Loss) of Subsidiaries (456) -- (3,756) 4,212 -- (21,326) 21,326 --
Minority Interest -- -- -- 40 40 -- -- 40
-------------------------------------------------------------------------------------------
Net Income (Loss) $ (3,756) $ (496) $ (21,326) $ 4,252 $ (21,326) $ (21,326) $ 21,326 $(21,326)
===========================================================================================
</TABLE>
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED JULY 31, 1999
-------------------------------------------------------------------------------------------
Consolidated
Morris Morris Consolidated
Non Material Material MMH MMH
Guarantor Guarantor Handling Handling Holdings Holdings
Subsidiares Subsidiares Inc. Eliminations Inc. Inc. Eliminations Inc.
-------------------------------------------------------------------------------------------
Revenues
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales $ 69,016 $ 3,940 $- $ (247) $ 72,709 $- $- $ 72,709
Other Income - net 453 -- -- -- 453 -- -- 453
-------------------------------------------------------------------------------------------
69,469 3,940 -- (247) 73,162 -- -- 73,162
Cost of Sales 49,386 3,071 -- (247) 52,210 -- -- 52,210
Selling, General and
Administrative Expenses 16,554 917 827 -- 18,298 -- -- 18,298
-------------------------------------------------------------------------------------------
Operating Income (Loss) 3,529 (48) (827) -- 2,654 -- -- 2,654
Interest (Expense) Income - net
Affiliates (1,545) (89) 1,634 -- -- -- -- --
Third Party (237) (102) (7,182) -- (7,521) -- -- (7,521)
-------------------------------------------------------------------------------------------
Loss Before Income Taxes, Equity in
Earnings (Loss) of Subsidiaries and
Minority Interest 1,747 (239) (6,375) -- (4,867) -- -- (4,867)
Provision for Income Taxes (576) -- -- -- (576) -- -- (576)
Equity in Earnings(Loss)of Subsidiaries (226) -- 945 (719) -- (5,430) 5,430 --
Minority Interest -- -- -- 13 13 -- -- 13
-------------------------------------------------------------------------------------------
Net Income (Loss) $ 945 $ (239) $ (5,430) $ (706) $ (5,430) $ (5,430) $ 5,430 $ (5,430)
===========================================================================================
</TABLE>
19
<PAGE>
<TABLE>
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
(UNAUDITED)
(Dollars in Thousands)
<CAPTION>
FOR THE NINE MONTHS ENDED JULY 31, 1998
-------------------------------------------------------------------------------------------
Consolidated
Morris Morris Consolidated
Non Material Material MMH MMH
Guarantor Guarantor Handling Handling Holdings Holdings
Subsidiares Subsidiares Inc. Eliminations Inc. Inc. Eliminations Inc.
--------------------------------------------------------------------------------------------
Revenues
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales $ 219,633 $ 16,449 $ -- $ (4,407) $ 231,675 $ -- $ -- $ 231,675
Other Income - net 1,117 -- -- 1,117 -- -- 1,117
-------------------------------------------------------------------------------------------
220,750 16,449 -- (4,407) 232,792 -- -- 232,792
Cost of Sales 158,828 12,903 -- (4,407) 167,324 -- -- 167,324
Selling, General and
Administrative Expenses 40,507 3,256 333 -- 44,096 -- -- 44,096
HII Management Fee 1,155 -- -- -- 1,155 -- -- 1,155
Non-Recurring Employee Benefit Costs 690 -- 1,216 -- 1,906 -- -- 1,906
-------------------------------------------------------------------------------------------
Operating Income (Loss) 19,570 290 (1,549) -- 18,311 -- -- 18,311
Interest (Expense) Income - net
Affiliates (3,726) (124) 2,402 -- (1,448) -- -- (1,448)
Third Party (204) (401) (9,111) -- (9,716) -- -- (9,716)
-------------------------------------------------------------------------------------------
Income (Loss) Before Income
Taxes, Equity in Earnings (Loss)
of Subsidiaries and Minority Interest 15,640 (235) (8,258) -- 7,147 -- -- 7,147
Provision for Income Taxes (2,896) -- -- -- (2,896) -- -- (2,896)
Equity in Earnings(Loss)of Subsidiaries (201) -- 12,543 (12,342) -- 4,285 (4,285) --
Minority Interest -- -- -- 34 34 -- -- 34
-------------------------------------------------------------------------------------------
Net Income (Loss) $ 12,543 $ (235) $ 4,285 $ (12,308) $ 4,285 $ 4,285 $ (4,285) $ 4,285
===========================================================================================
</TABLE>
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED JULY 31, 1998
-------------------------------------------------------------------------------------------
Consolidated
Morris Morris Consolidated
Non Material Material MMH MMH
Guarantor Guarantor Handling Handling Holdings Holdings
Subsidiares Subsidiares Inc. Eliminations Inc. Inc. Eliminations Inc.
------------------------------------------------------------------------------------------
Revenues
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales $ 70,422 $ 5,135 $ -- $ (1,131) $ 74,426 $ -- $ -- $ 74,426
Other Income - net 391 -- -- -- 391 -- -- 391
-------------------------------------------------------------------------------------------
70,813 5,135 -- (1,131) 74,817 -- -- 74,817
Cost of Sales 49,252 4,031 -- (1,131) 52,152 -- -- 52,152
Selling, General and
Administrative Expenses 13,400 932 250 -- 14,582 -- -- 14,582
HII Management Fee -- -- -- -- -- -- -- --
Non-Recurring Employee
Benefit Costs -- -- -- -- -- -- -- --
-------------------------------------------------------------------------------------------
Operating Income (Loss) 8,161 172 (250) -- 8,083 -- -- 8,083
Interest (Expense) Income-net
Affiliates (1,651) (37) 1,688 -- -- -- -- --
Third Party (6) (119) (6,888) -- (7,013) -- -- (7,013)
-------------------------------------------------------------------------------------------
Income (Loss) Before Income
Taxes, Equity in Earnings (Loss)
of Subsidiaries and Minority Interest 6,504 16 (5,450) -- 1,070 -- -- 1,070
Benefit (Provision) for
Income Taxes (450) -- -- -- (450) -- -- (450)
Equity in Earnings(Loss)of Subsidiaries 12 -- 6,066 (6,078) -- 616 (616) --
Minority Interest -- -- -- (4) (4) -- -- (4)
-------------------------------------------------------------------------------------------
Net Income (Loss) $ 6,066 $ 16 $ 616 $ (6,082) $ 616 $ 616 $ (616) $ 616
==========================================================================================
</TABLE>
20
<PAGE>
<TABLE>
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF
CASH FLOWS
FOR THE NINE MONTHS ENDED JULY 31, 1999
(UNAUDITED)
(Dollars in Thousands)
<CAPTION>
-------------------------------------------------------------------------------------------
Consolidated
Morris Morris Consolidated
Non Material Material MMH MMH
Guarantor Guarantor Handling Handling Holdings Holdings
Subsidiares Subsidiares Inc. Eliminations Inc. Inc. Eliminations Inc.
------------------------------------------------------------------------------------------
Operating Activities
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net income (loss) $ (3,756) $ (496) $(21,326) $ 4,252 $(21,326) $(21,326) $ 21,326 $(21,326)
Add (deduct) - items not
affecting cash used
for operating activities:
Depreciation and amortization 5,837 220 -- -- 6,057 -- -- 6,057
Amortization of debt financing costs -- -- 1,603 -- 1,603 -- -- 1,603
Equity in (earnings) loss of subsidiaries 456 -- 3,756 (4,212) -- 21,326 (21,326) --
Deferred income taxes - net -- -- 41 -- 41 -- -- 41
Other -- -- -- (40) (40) -- -- (40)
Changes in working capital,
excluding the effects of acquisition opening
balance sheets:
Accounts receivable 17,410 802 -- -- 18,212 -- -- 18,212
Inventories 404 (370) -- -- 34 -- -- 34
Other current assets (5,528) (367) 2,133 -- (3,762) -- -- (3,762)
Trade accounts payable and
bank overdrafts (10,075) (437) -- -- (10,512) -- -- (10,512)
Accrued interest -- -- 4,243 -- 4,243 -- -- 4,243
Other current liabilities (10,358) 302 3,319 -- (6,737) -- -- (6,737)
------------------------------------------------------------------------------------------
Net cash provided by (used for)
operating activities (5,610) (346) (6,231) -- (12,187) -- -- (12,187)
------------------------------------------------------------------------------------------
Investment and Other Transactions
Capital expenditures - net (6,117) (91) -- -- (6,208) -- -- (6,208)
Acquisition of businesses -
net of cash acquired (5,070) -- -- -- (5,070) -- -- (5,070)
Net issuance of loans to
senior management -- -- (80) -- (80) -- -- (80)
Other - net (841) 271 -- -- (570) -- -- (570)
------------------------------------------------------------------------------------------
Net cash used for investment
and other transactions (12,028) 180 (80) -- (11,928) -- -- (11,928)
------------------------------------------------------------------------------------------
Financing Activities
Changes in short-term debt, notes payable
and Revolving Credit Facility borrowings 7,149 (31) 16,798 -- 23,916 -- -- 23,916
Proceeds from Acquisition
Facility Line borrowings -- -- 1,235 -- 1,235 -- -- 1,235
Distribution from parent 10,334 -- (10,334) -- -- -- -- --
Repayments of long-term obligations -- -- (1,388) -- (1,388) -- -- (1,388)
------------------------------------------------------------------------------------------
Net cash provided by (used for)
financing activities 17,483 (31) 6,311 -- 23,763 -- -- 23,763
------------------------------------------------------------------------------------------
Effect of Exchange Rate
Changes on Cash and Cash Equivalents (13) (16) -- -- (29) -- -- (29)
------------------------------------------------------------------------------------------
Decrease in Cash and Cash Equivalents (168) (213) -- -- (381) -- -- (381)
Cash and Cash Equivalents
Beginning of Period 2,214 320 -- -- 2,534 -- -- 2,534
------------------------------------------------------------------------------------------
End of Period $ 2,046 $ 107 $ -- $ -- $ 2,153 $ -- $ -- $ 2,153
==========================================================================================
</TABLE>
21
<PAGE>
<TABLE>
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT
OF CASH FLOWS
FOR THE NINE MONTHS ENDED JULY 31, 1998
(UNAUDITED)
(Dollars in Thousands)
<CAPTION>
------------------------------------------------------------------------------------------
Consolidated
Morris Morris Consolidated
Non Material Material MMH MMH
Guarantor Guarantor Handling Handling Holdings Holdings
Subsidiares Subsidiares Inc. Eliminations Inc. Inc. Eliminations Inc.
------------------------------------------------------------------------------------------
Operating Activities
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net income (loss) $ 12,543 $ (235) $ 4,285 $ (12,308) $ 4,285 $ 4,285 $ (4,285) $ 4,285
Add (deduct) - items not
affecting cash used for
operating activities:
Depreciation and amortization 4,857 339 -- -- 5,196 -- -- 5,196
Amortization of debt financing costs -- -- 655 -- 655 -- -- 655
Equity in (earnings) loss of subsidiaries 201 -- (12,543) 12,342 -- (4,285) 4,285 --
Deferred income taxes-net 411 -- -- -- 411 -- -- 411
Divestiture bonus -- -- 1,216 -- 1,216 -- -- 1,216
Other -- -- -- (34) (34) -- -- (34)
Changes in working capital, excluding the
effects of acquisition opening balance sheets:
Accounts receivable 2,771 1,475 -- -- 4,246 -- -- 4,246
Inventories (7,011) 1,448 -- -- (5,563) -- -- (5,563)
Other current assets (639) (1,090) (737) -- (2,466) -- -- (2,466)
Trade accounts payable and
bank overdrafts (11,446) (2,658) -- -- (14,104) -- -- (14,104)
Accrued interest -- -- 6,884 -- 6,884 -- -- 6,884
Other current liabilities (2,262) 1,400 -- -- (862) -- -- (862)
Activity with parent and
other affiliates-net 4,745 (595) (2,402) -- 1,748 -- -- 1,748
------------------------------------------------------------------------------------------
Net cash provided by (used for)
operating activities 4,170 84 (2,642) -- 1,612 -- -- 1,612
------------------------------------------------------------------------------------------
Investment and Other Transactions
Capital expenditures - net (3,450) (106) -- -- (3,556) -- -- (3,556)
Acquisition of businesses -
net of cash acquired (3,203) -- -- -- (3,203) -- -- (3,203)
Net issuance of loans to
senior management -- -- (900) -- (900) -- -- (900)
Other - net (1,147) 206 -- -- (941) -- -- (941)
------------------------------------------------------------------------------------------
Net cash provided by (used for)
investment and other transactions (7,800) 100 (900) -- (8,600) -- -- (8,600)
------------------------------------------------------------------------------------------
Financing Activities
Changes in short-term debt,
notes payable and Revolving
Credit Facility borrowings 6,361 (37) -- -- 6,324 -- -- 6,324
Proceeds from Senior Note Offering -- -- 200,000 -- 200,000 -- -- 200,000
Proceeds from New Credit Facility -- -- 55,000 -- 55,000 -- -- 55,000
Redemption of shares held by Holdings -- -- (233,087) -- (233,087) 233,087 -- --
Redemption of common stock and
preferred stock -- -- -- -- -- (287,000) -- (287,000)
Net proceeds from issuance of
Series A preferred stock and
related common shares -- -- -- -- -- 57,094 -- 57,094
Stock redemption transactions costs -- -- -- -- -- (3,181) -- (3,181)
Debt financing costs -- -- (18,889) -- (18,889) -- -- (18,889)
Distribution from parent (856) -- 856 -- -- -- -- --
Repayments of long-term obligations -- -- (338) -- (338) -- -- (338)
------------------------------------------------------------------------------------------
Net cash provided by (used for)
financing activities 5,505 (37) 3,542 -- 9,010 -- -- 9,010
------------------------------------------------------------------------------------------
Effect of Exchange Rate Changes on Cash
and Cash Equivalents 38 (10) -- -- 28 -- -- 28
------------------------------------------------------------------------------------------
Increase in Cash and Cash Equivalents 1,913 137 -- -- 2,050 -- -- 2,050
Cash and Cash Equivalents
Beginning of Period 1,393 139 -- -- 1,532 -- -- 1,532
------------------------------------------------------------------------------------------
End of Period $ 3,306 $ 276 $ -- $ -- $ 3,582 $ -- $ -- $ 3,582
==========================================================================================
</TABLE>
22
<PAGE>
MMH HOLDINGS, INC.
MORRIS MATERIAL HANDLING, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Financial
Statements and the related notes thereto included previously in this document.
The Company's fiscal year ends October 31. Consequently, any reference to any
particular fiscal year means the fiscal year ended October 31 of such year.
General
The Company is a leading international provider of "through-the-air" material
handling products and services used in most manufacturing industries. The
Company's original equipment operations design and manufacture a comprehensive
line of industrial cranes, hoists and component products. Through its
aftermarket operations, the Company provides a variety of related products and
services, including replacement parts, repair and maintenance services and
product modernizations. In recent years, the Company has shifted its orientation
from an original equipment-focused United States manufacturer to a full service
international provider with a significant emphasis on the high margin
aftermarket business. The Company's revenues are derived principally from the
sale of industrial overhead cranes, component products and aftermarket products
and services.
Recapitalization. Historically, the Company conducted its business as one of
several operating units of Harnischfeger Industries, Inc. ("HII"). Prior to
March 30, 1998, the core United States operations of the Company were conducted
directly by HarnCo, while the remainder of the Company's operations throughout
the world were conducted through a number of entities owned, directly or
indirectly, by HII and its affiliates.
On January 28, 1998, HII reached an agreement with MHE Investments, Inc. ("MHE
Investments"), a newly formed affiliate of Chartwell Investments Inc., for the
sale of an approximately 80 percent common ownership interest in the MHE
Business. Pursuant to this agreement, HarnCo and other HII affiliates effected a
number of transactions (the "Transactions" or the "Recapitalization") that
resulted in Holdings, a preexisting company engaged in the MHE Business,
acquiring, through MMH, its newly formed wholly-owned subsidiary, the equity
interests of all of the operating entities engaged in the MHE Business. As a
result of the reorganization of the MHE Business' legal entities, Holdings and
the Company became the successor companies to the MHE Business. The Transactions
are accounted for as a recapitalization for financial reporting purposes.
Accordingly, the historical basis of the Company's assets and liabilities was
not impacted by the Transactions.
In conjunction with the Recapitalization, which closed on March 30, 1998 (the
"Recapitalization Closing"), Holdings sold $60.0 million of Series A Units,
consisting of $57.7 million liquidation preference of Holdings' Series A Senior
Exchangeable Preferred Stock (the "Holdings Series A Senior Preferred Stock")
and 720 shares of non-voting common stock, to institutional investors. In
addition, MMH sold $200.0 million aggregate principal amount of its 9 1/2%
Senior Notes due 2008 (the "Senior Notes") and entered into a senior secured
credit facility ("the New Credit Facility"). The New Credit Facility included
$55.0 million of term loans, a revolving credit facility (the "Revolving Credit
Facility") and an acquisition facility (the "Acquisition Facility"). The
Revolving Credit Facility provided the Company with up to $70.0 million of
available borrowings (of which $15.0 million is required under the indenture
that governs the Senior Notes (the "Note Indenture") to be reserved for issuance
of letters of credit) for working capital, acquisitions and other corporate
purposes, subject to compliance with certain conditions. The Acquisition
Facility permitted the Company to borrow up to $30.0 million until the third
anniversary of the Recapitalization Closing to finance acquisitions, subject to
compliance with certain conditions. As discussed below, the New Credit Facility
was amended on August 2, 1999. See "Liquidity and Capital Resources." As
amended, the New Credit Facility provides $52.9 million of term loans, the
Revolving Credit Facility provides $50.7 million of available borrowings ($10.0
million of which is required to be reserved for issuance of letters of credit),
and the Acquisition Facility provides for $12.4 million of borrowings ($7.4
million of which was previously funded by the lenders under the New Credit
Facility and $5.0 million of which was funded by indirect equity holders in
Holdings) for acquisitions and general corporate purposes.
At the Recapitalization Closing, (i) MHE Investments paid HarnCo $54.0 million
for 72.6% of Holdings' common stock (the "Holdings Common Stock") (after giving
effect to the Transactions) and approximately $28.9 million liquidation
23
<PAGE>
preference of Holdings' Series C Junior Voting Exchangeable Preferred Stock (the
"Holdings Series C Junior Voting Preferred Stock"), (ii) Holdings redeemed
certain shares of Holdings Common Stock and Holdings Series C Junior Voting
Preferred Stock from HarnCo for $282.0 million in cash (subject to potential
post-Recapitalization adjustments as to which an additional $5.0 million was
provided to HarnCo) and approximately $4.8 million liquidation preference of
Holdings' Series B Junior Exchangeable Preferred Stock (the "Holdings Series B
Junior Preferred Stock"), and (iii) HarnCo retained approximately 20.8% of the
Holdings Common Stock (after giving effect to the Transactions).
On August 27, 1999, Holdings issued additional shares of its non-voting common
stock in connection with the August 2, 1999 amendment of the New Credit
Facility. As a result, at September 8, 1999, MHE Investments owns approximately
65.3% of the Holdings Common Stock, HarnCo owns approximately 18.7% of the
Holdings Common Stock, institutional investors own approximately 6.0% of the
Holdings Common Stock, and certain indirect equity holders in MHE Investments
own approximately 10.0% of the Holdings Common Stock.
Until the Recapitalization Closing, HII and HarnCo performed a number of
functions necessary to the operations of the Company in accordance with past
practices, including manufacturing certain products and providing certain
information systems, administrative services and credit support. Holdings' and
MMH's historical financial statements include charges allocated to the MHE
Business by HII for these products and services. Because the Company operates
independently of HII since the Recapitalization Closing, however, Holdings' and
MMH's historical performance may not be indicative of future financial results.
At the Recapitalization Closing, MMH entered into a number of agreements
pursuant to which HII and its affiliates will continue to provide to MMH and to
its subsidiaries located in the United States, on an interim basis and under
substantially the same terms and conditions as before the closing, certain
products and services. In addition, HII and MMH entered into a credit
indemnification agreement (the "Credit Indemnification Agreement") pursuant to
which HII will maintain in place the credit support obligations in existence at
the Recapitalization Closing but have no further duty to extend, renew or enter
into any new credit support obligations (except as to the MHE Business
obligations existing at the Recapitalization Closing). Under the Credit
Indemnification Agreement, MMH is required to pay HII, in advance, an annual fee
equal to 1% of the amounts outstanding under each letter of credit and bond
provided by HII and its affiliates (approximately $27.0 million as of July 31,
1999). MMH estimates that the amount to be paid for calendar year 1999 is
$223,000. MMH paid a pro-rated fee of $290,000 for calendar year 1998. HII is
required to refund the Company on a quarterly basis a pro-rata portion of the
annual fee for any reductions in the outstanding amount of credit that occurred
during such quarter. In addition, the Company will reimburse HII for certain
future fees and expenses. The Company also entered into a surety arrangement
(the "Surety Arrangement") to provide credit support for its
post-Recapitalization Closing operations.
In connection with the Recapitalization, the Company also entered into a
trademark license agreement with an affiliate of HarnCo, pursuant to which the
Company has the right to use the P&H trademark with respect to all MHE Business
products on a worldwide exclusive basis from the date of the Recapitalization
Closing until 15 years after the earlier to occur of a sale of Holdings to a
third party or a public offering of the common stock of Holdings, the Company or
their parents or successors (and for an additional seven years thereafter for
aftermarket products and services). The royalty fee for use of the trademark is
0.75% of the aggregate net sales of the MHE Business for the ten year period
which commenced March 30, 1999. The Company accrued $778,000 of expenses for
royalty fees in the period from March 30, 1999 to July 31, 1999.
As discussed below, however, the Company could be materially adversely affected
by the fact that HII and certain of its United States affiliates have recently
filed for bankruptcy protection. See "Recent Developments."
For income tax purposes, Holdings and MMH were deemed to acquire the assets of
the MHE Business pursuant to Section 338(h)(10) of the Internal Revenue Code of
1986, as amended, in connection with the Transactions. Accordingly, the
Recapitalization increased the tax basis of certain assets and created
tax-deductible goodwill, which will generate significant future tax deductions
to reduce taxable income.
Acquisitions
During the nine months ended July 31, 1999, the Company completed one
acquisition with an aggregate purchase price of $3.2 million, net of cash
acquired. During 1998, the Company completed several acquisitions for an
aggregate purchase price of $8.9 million, net of cash acquired. These
acquisitions were related to the Company's aftermarket business and were
accounted for as purchase transactions with the purchase prices allocated to the
24
<PAGE>
fair value of specific assets acquired and liabilities assumed. Resultant
goodwill of the transactions, $1.9 million for the 1999 transaction and $8.3
million for the 1998 transactions, is being amortized over 30 to 40 years. The
1999 acquisition and one 1998 acquisition were partially financed by the
sellers, resulting in deferred purchase price which will be paid in 2004 and
2005 (in the case of the 1999 acquisition) and in installments through 2006 (in
the case of one 1998 acquisition).
During the nine months ended July 31, 1999, the Company made final consideration
payments of $1.5 million related to two 1998 acquisitions. With respect to a
1995 acquisition, the Company made a final contingent consideration payment of
$1.4 million in the nine months ended July 31, 1999. Additionally, a payment of
$100,000 was made toward the 1998 acquisition that was partially financed by the
seller. On a pro forma basis, the 1999 and 1998 acquisitions were not material
to results of operations reported for the nine months ended July 31, 1999 and
accordingly, such information is not presented.
Recent Developments
On June 7, 1999 (the "Petition Date"), HII and certain of its United States
affiliates (including HarnCo) filed voluntary petitions for relief under Chapter
11 of the United States Bankruptcy Code (the "Bankruptcy Code") in the United
States Bankruptcy Court for the District of Delaware (the "HII Bankruptcy").
Certain provisions of the Bankruptcy Code allow a debtor to avoid, delay and/or
reduce its contractual and other obligations to third parties. There can be no
assurance that HII and its affiliates will not attempt to utilize such
provisions to cease performance under their agreements with the Company. The
inability of the Company to receive the benefits of one or more of these
agreements or the termination of ongoing arrangements between the Company and
affiliates of HII could materially adversely affect the Company's operations and
financial performance. In the event that any of the liabilities retained by HII
and its affiliates remain unsatisfied as of the Petition Date, the Company's
right to indemnification for any such amounts it has paid on behalf of HII and
its affiliates may also be avoided, delayed or reduced.
Each of HII and certain of its affiliates on the one hand, and the Company and
certain of its affiliates, on the other hand, have receivables and payables to
the other which may be affected by the HII Bankruptcy. The Company estimates
that a net amount of approximately $0.7 million of receivables due it and its
affiliates may be so affected.
Results of Operations
The following table sets forth certain financial data for the periods indicated.
<TABLE>
<CAPTION>
SUPPLEMENTAL FINANCIAL DATA
(Dollars in Millions)
Three Months Ended Three Months Ended Nine Months Ended Nine Months Ended
July 31, 1999 July 31, 1998 July 31, 1999 July 31, 1998
------------------- ------------------- ------------------- ------------------
------------------- ------------------- ------------------- ------------------
Percent of Percent of Percent of Percent of
$ net sales $ net sales $ net sales $ net sales
------------------- ------------------- ------------------- ------------------
------------------- ------------------- ------------------- ------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales 72.7 100.0% 74.4 100.0% 212.5 100.0% 231.7 100.0%
Other income - net 0.5 0.7% 0.4 0.5% 0.6 0.3% 1.1 0.5%
Cost of sales 52.2 71.8% 52.2 70.2% 157.3 74.0% 167.3 72.2%
Selling, general and
administrative expenses 18.3 25.2% 14.6 19.6% 53.6 25.2% 44.1 19.0%
Other costs -- 0.0% -- 0.0% -- 0.0% 3.1 1.3%
Operating income 2.7 3.7% 8.1 10.9% 2.2 1.0% 18.3 7.9%
Interest expense (7.5) -10.3% (7.0) -9.4% (22.0) -10.4% (11.2) -4.8%
Tax provision (0.6) -0.8% (0.5) -0.7% (1.6) -0.8% (2.9) -1.3%
Net income (loss) (5.4) -7.4% 0.6 0.8% (21.3) -10.0% 4.3 1.9%
</TABLE>
Nine months ended July 31, 1999 as Compared to Nine months ended July 31, 1998
Net sales for the nine months ended July 31, 1999 ("First Nine Months 1999")
decreased $19.2 million or 8.3% to $212.5 million from $231.7 million for the
nine months ended July 31, 1998 ("First Nine Months 1998"). The decrease in net
sales was primarily caused by the following: (i) a decrease of $9.4 million in
engineered crane sales worldwide largely due to the fact that First Nine Months
25
<PAGE>
1998 included $8.4 million in container crane sales in the United Kingdom
without any corresponding sales in First Nine Months 1999; (ii) a decrease of
$9.2 million in hoists and component sales primarily resulting from a softness
in certain European and Asian markets; (iii) a $3.1 million decrease in standard
crane sales primarily caused by decreased sales in Europe and South Africa,
offset, in part, by increased sales in the United States, Mexico and Australia;
(iv) a decrease in overall parts sales of $2.7 million caused primarily by
delays by certain suppliers; and (v) a decrease in modernization sales of $0.9
million. These decreases were partially offset by an increase in service sales
of $6.1 million.
Cost of sales decreased $10.0 million or 6.0% to $157.3 million in First Nine
Months 1999 from $167.3 million in First Nine Months 1998 primarily due to the
lower sales volumes described above. However, cost of sales increased as a
percentage of net sales from 72.2% in First Nine Months 1998 to 74.0% in First
Nine Months 1999 due to the lower level of volume in manufacturing operations
tied to the decrease in machine sales. Additionally, the Company experienced
$1.6 million in special charges during First Nine Months 1999 related to revised
estimates of inventory obsolescence, warranty reserves and contract completion
costs.
Selling, general and administrative expenses increased $9.5 million or 21.5% to
$53.6 million in First Nine Months 1999 from $44.1 million in First Nine Months
1998. The primary cause was $3.3 million of special charges related to
provisions for certain delinquent accounts receivable and changes in management
(severance and recruiting costs). Additional causes were: (i) the increased
administrative resources necessary to replace functions formerly performed by
HII and their affiliates, including information systems and certain accounting
and human resource functions; (ii) increased consulting costs; and (iii)
increases due to the fiscal 1999 and 1998 acquisitions. Selling, general and
administrative expenses in First Nine Months 1999 also included approximately
$0.7 million of management fees compared to $0.3 million in First Nine Months
1998. Additionally, selling, general and administrative expenses in First Nine
Months 1999 included approximately $0.8 million in royalties owed to HII for use
of the P&H trademark after March 30, 1999. These increases were offset by
savings incurred due to the fiscal 1998 restructuring of the United Kingdom and
United States manufacturing operations and other cost-reduction measures. The
Company also anticipates incurring $2.0 million of cash expenditures during the
fourth quarter of fiscal 1999 for severance and reorganization charges
associated with continued restructuring of the Company's operations, in addition
to cash needed for operations and capital expenditures.
Parent management fees allocated by HII (prior to the Recapitalization), which
represented an allocation of HII's corporate expenses, were $1.2 million in
First Nine Months 1998. Additionally, $1.2 million of incentives to certain
members of management and $0.7 million of non-recurring employee benefit costs,
both related to the Recapitalization and restructuring of the Company, were
recognized in First Nine Months 1998.
Approximately $22.0 million in interest expense was recorded in First Nine
Months 1999. The components include $17.7 million related to the debt issued in
connection with the Recapitalization and related commitment fees, $1.8 million
related to borrowings for working capital and acquisition funding, a $0.4
million fee paid in conjunction with the waiver of the debt covenant violations,
$0.4 million related to other borrowings, $1.6 million in amortization of
financing costs recognized during the Recapitalization and $0.1 in amortization
of a credit support fee payable to HII. Interest expense for First Nine Months
1998 included $1.5 million related to borrowings from HII and affiliates (prior
to the Recapitalization), $8.2 million related to the debt issued in connection
with the Recapitalization, $0.6 million on borrowings for working capital, $0.7
million in amortization of financing costs and $0.2 million in amortization of a
credit support fee payable to HII. The Company paid $16.0 million in interest,
waiver fees and commitment fees during First Nine Months 1999.
Realization of deferred tax assets is dependent on generating sufficient taxable
income prior to expiration of net operating loss carryforwards. During First
Nine Months 1999, the Company re-estimated its future operating results and
determined its deferred tax asset valuation allowance required an increase of
$7.8 million which was recognized as income tax expense. Although realization is
not assured, management believes it is more likely than not that the net
deferred tax assets recorded will be realized. The amount of deferred tax assets
not considered realizable, however, could be increased in the near term if
estimates of future taxable income are reduced.
The tax expense recorded of $1.6 million resulted primarily from profitable
operations in Canada and from state income tax liabilities.
The Company's backlog of orders at July 31, 1999 was approximately $94.2 million
compared to approximately $83.3 million at July 31, 1998. Bookings in First Nine
Months 1999 were $209.3 million compared to $217.3 million in First Nine Months
1998.
26
<PAGE>
Three Months Ended July 31, 1999 as Compared to Three Months Ended July 31, 1998
Net sales for the three months ended July 31, 1999 ("Third Quarter 1999")
decreased $1.7 million or 2.3% to $72.7 million from $74.4 million for the three
months ended July 31, 1998 ("Third Quarter 1998"). The decrease in net sales was
primarily caused by the following: (i) a decrease of $2.2 million in hoists and
component sales primarily resulting from a softness in particular Asian markets;
(ii) a $1.7 million decrease in modernization sales; and (iii) a decrease of
$1.1 million in engineered crane sales worldwide due to decreases in container
crane sales in the United Kingdom. These decreases were partially offset by
increases in standard cranes ($1.3 million), overall service sales ($1.1
million) and overall parts sales ($0.9 million).
Cost of sales remained consistent at $52.2 million in Third Quarter 1999
compared to Third Quarter 1998 despite the lower sales volumes described above.
Cost of sales increased as a percentage of net sales from 70.2% in Third Quarter
1998 to 71.8% in Third Quarter 1999 due to the lower level of volume in
manufacturing operations tied to the decrease in machine sales. Additionally,
the Company experienced $0.2 million in special charges related to contract
completion costs.
Selling, general and administrative expenses increased $3.7 million or 25.3% to
$18.3 million in Third Quarter 1999 from $14.6 million in Third Quarter 1998.
The primary causes were the increased administrative resources necessary to
replace functions, formerly performed by HII and their affiliates, including
information systems and certain accounting and human resource functions and
increases due to the fiscal 1999 and 1998 acquisitions. Also, selling, general
and administrative expenses in Third Quarter 1999 included approximately $0.6
million in royalties owed to HII for use of the P&H trademark and $0.4 million
in special severance charges related to continued company restructuring. These
increases were offset by savings incurred due to the fiscal 1998 restructuring
of the United Kingdom and United States manufacturing operations and other
cost-reduction measures.
Approximately $7.5 million in interest expense was recorded in Third Quarter
1999. The components included $5.9 million related to the debt issued in
connection with the Recapitalization and related commitment fees, $0.8 million
related to borrowings for working capital and acquisition funding, $0.1 million
related to other borrowings, $0.6 million in amortization of financing costs
recognized during the Recapitalization and $0.1 in amortization of a credit
support fee payable to HII. Interest expense for Third Quarter 1998 consisted of
$6.1 million related to the debt issued in connection with the Recapitalization,
$0.1 million for working capital, $0.6 million in amortization of financing
costs and $0.2 in amortization of a credit support fee payable to HII. The
Company paid $2.2 million in interest, waiver fees and commitment fees during
Third Quarter 1999.
The tax expense recorded of $0.6 million in Third Quarter 1999 resulted
primarily from profitable operations in Canada and from state income tax
liabilities.
The Company's backlog of orders at July 31, 1999 was approximately $94.2 million
compared to approximately $83.3 million at July 31, 1998. Bookings in Third
Quarter 1999 were $69.7 million compared to $54.2 million in Third Quarter 1998.
The change in bookings was primarily due to several large orders in Third
Quarter 1999 which did not occur in Third Quarter 1998.
Liquidity and Capital Resources
The majority of the Company's sales of products and services are recorded as
products are shipped or services are rendered. Revenue on certain long-term
contracts is recorded using the percentage-of-completion method. Net cash flow
from operations is affected by the volume of, and the timing of payments under,
percentage-of-completion long-term contracts.
Net cash used for operating activities was $12.2 million in First Nine Months
1999 compared to net cash flow provided by operating activities of $1.6 million
in First Nine Months 1998. The $13.8 million decrease in operating cash flow was
due primarily to a $25.6 million decrease in net income, offset by an $11.6
million increase in cash flow resulting from a net decrease in working capital
and a $1.8 million increase in depreciation and amortization.
Net cash used for investment and other transactions for First Nine Months 1999
and First Nine Months 1998 was $11.9 million and $8.6 million, respectively.
During the First Nine Months 1999, $5.1 million of cash was used for an
acquisition related to the Company's aftermarket business and for payments made
with respect to three earlier acquisitions versus $3.2 million used for 1998
acquisitions. Additionally, capital expenditures increased to $6.2 million in
First Nine Months 1999 from $3.6 million in First Nine Months 1998. The First
Nine Months 1999 expenditures included computers and upgrades, new operating
system software, office and warehouse consolidations and manufacturing
equipment.
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Net cash provided by financing activities was $23.8 million in First Nine Months
1999 versus net cash provided by financing activities of $9.0 million in First
Nine Months 1998. Net borrowings included $22.6 million under the Revolving
Credit Facility in the United States, Canada and the United Kingdom. The Company
also borrowed $1.2 million under the Acquisition Credit Facility.
The Company did not meet certain of the financial covenants under the New Credit
Facility for the period ended January 31, 1999 and did not meet such financial
covenants and certain additional financial covenants for the period ended April
30, 1999. The Company obtained a waiver of such financial covenants through
August 2, 1999. The waiver permitted the Company to borrow certain amounts under
the Revolving Credit Facility to meet its working capital requirements; however
the Company could not, without prior lender consent, (i) borrow any amounts
under the Acquisition Facility, (ii) borrow any amounts under the Revolving
Credit Facility in excess of the aggregate amount of the Revolving Credit
Facility borrowings that the Company has repaid subsequent to January 31, 1999,
or (iii) request the issuance of letters of credit, bid bonds or performance
bonds in an aggregate amount after March 2, 1999 in excess of $5.0 million.
On August 2, 1999, the Company obtained an amendment to the New Credit Facility
(the "Amendment") which cured past financial covenant violations and reset the
financial covenants until April 2001. The Company is in compliance with the
financial covenants under the New Credit Facility, as amended. The Amendment
increased the cash availability under the Revolving Credit Facility from $35.7
million under the previous waiver agreement to $40.7 million. At September 8,
1999, after giving effect to the Amendment, the Company has, subject to certain
conditions, the ability to borrow up to approximately $40.7 million under the
Revolving Credit Facility, of which $19.1 million is outstanding. In addition,
the Company has the ability to obtain letters of credit, bid bonds and
performance bonds in an amount not to exceed $10.0 million in the aggregate of
which $6.3 million have been issued.
In connection with, and as a condition to, the Amendment, certain of the current
indirect equity holders in Holdings purchased a $5.0 million participation in
the New Credit Facility and received certain non-voting equity interests in
Holdings, consisting of 10% of the then outstanding Holdings Common Stock and,
subject to certain conditions, the right to receive additional shares of
non-voting Common Stock of Holdings on December 3, 1999 for a total of 25% of
the outstanding Holdings Common Stock.
The Company incurred significant indebtedness in connection with the
Recapitalization. As of September 8, 1999, the Company had approximately $279.4
million of indebtedness outstanding. The Company also anticipates incurring $2.0
million of cash expenditures during the fourth quarter of fiscal 1999 for
severance and reorganization charges associated with continued restructuring of
the Company's operations, in addition to cash needed for operations and capital
expenditures. Since the Recapitalization, the Company has been able to satisfy
its cash requirements from cash generated by operations and borrowings under the
Revolving Credit Facility. However, in order to have sufficient cash flow to
satisfy its future cash needs for operations and debt service, the Company needs
to be able to borrow under the Revolving Credit Facility in sufficient amounts
and will have to materially improve cash generated from operations in the near
future. The limitations on the Company's ability to borrow under the Revolving
Credit Facility under the terms of the amended New Credit Facility could
constrain the Company's growth and result in the Company not having sufficient
cash flow to satisfy its future cash needs for operations and debt service.
Cautionary Factors
This report contains or may contain forward looking statements by or on behalf
of Holdings and the Company. Such statements are based upon management's current
expectations and are subject to risks and uncertainties that could cause the
Company's actual results to differ materially from those contemplated in the
statements. Readers are cautioned not to place undue reliance on these forward
looking statements. In addition to the assumptions and other factors referred to
specifically in connection with such statements, factors that could cause the
Company's actual results to differ materially from those contemplated include,
among others, the following:
o The Company did not meet certain of the financial covenants under the New
Credit Facility for the period ended January 31, 1999 and did not meet such
financial covenants and certain additional financial covenants for the
period ended April 30, 1999. The Company obtained a waiver of such
financial covenants through August 2, 1999. On August 2, 1999, the Company
obtained an amendment to the New Credit Facility (the "Amendment") which
cured past financial covenant violations and reset the financial covenants
until April 2001. The Amendment increased the cash availability under the
Revolving
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Credit Facility from $35.7 million under the previous waiver agreement to
$40.7 million. At September 8, 1999, after giving effect to the Amendment,
the Company has, subject to certain conditions, the ability to borrow up to
approximately $40.7 million under the Revolving Credit Facility, of which
$19.1 million is outstanding. In addition, the Company has the ability to
obtain letters of credit, bid bonds and performance bonds in an amount not
to exceed $10.0 million in the aggregate of which $6.3 million have been
issued. The Company will need to significantly improve operations in order
to meet the original financial covenants under the New Credit Facility when
these take effect again in April 2001. In the event the Company's financial
results do not improve significantly and the Company is unable to negotiate
additional amendments or obtain satisfactory waivers of the financial
covenants under the New Credit Facility for periods after April 2001, the
lenders under the New Credit Facility could elect to declare all amounts
borrowed under the New Credit Facility, together with accrued interest
thereon, to be due and payable, which would result in an event of default
under the Note Indenture and the Surety Arrangement and permit acceleration
of the Company's obligations thereunder. In such event, there can be no
assurance that the Company would have sufficient assets to pay indebtedness
then outstanding under the New Credit Facility, the Senior Notes and
obligations under the Surety Arrangement. Additionally, such an event could
have a material adverse effect on the Company's ability to obtain certain
customer orders.
o The Company incurred significant indebtedness in connection with the
Recapitalization. As of September 8, 1999, the Company had approximately
$279.4 million of indebtedness outstanding. The Company also anticipates
incurring $2.0 million of cash expenditures during the fourth quarter of
fiscal 1999 for severance and reorganization charges associated with
continued restructuring of the Company's operations, in addition to cash
needed for operations and capital expenditures. Since the Recapitalization,
the Company has been able to satisfy its cash requirements from cash
generated by operations and borrowings under the Revolving Credit Facility.
However, in order to have sufficient cash flow to satisfy its future cash
needs for operations and debt service, the Company needs to be able to
borrow under the Revolving Credit Facility in sufficient amounts and will
have to materially improve cash generated from operations in the near
future. The limitations on the Company's ability to borrow under the
Revolving Credit Facility under the terms of the amended New Credit
Facility could constrain the Company's growth and result in the Company not
having sufficient cash flow to satisfy its future cash needs for operations
and debt service.
o On June 7, 1999, HII and certain of its United States affiliates
(including HarnCo) filed voluntary petitions for relief under Chapter 11 of
the Bankruptcy Code in the United States Bankruptcy Court for the District
of Delaware. Certain provisions of the Bankruptcy Code allow a debtor to
avoid, delay and/or reduce its contractual and other obligations to third
parties. There can be no assurance that HII and its affiliates will not
attempt to utilize such provisions to cease performance under their
agreements and arrangements with the Company. The inability of the Company
to receive the benefits of one or more of these agreements or the
termination of ongoing arrangements between the Company and affiliates of
HII (including those relating to the provision of services and materials by
HII and its affiliates to the Company) could materially adversely affect
the Company's operations and financial performance. In the event that any
of the liabilities retained by HII and its affiliates in connection with
the Recapitalization remain unsatisfied as of the Petition Date, the
Company's right to indemnification for any such amounts it has paid on
behalf of HII and its affiliates may also be avoided, delayed or reduced.
Each of HII and certain of its affiliates on the one hand, and the Company
and certain of its affiliates, on the other hand, have receivables and
payables to the other which may be affected by the HII Bankruptcy.
o The Company's principal business includes designing, manufacturing,
marketing and servicing large cranes for the capital goods industries. Long
periods of time are often necessary to plan, design and build these
machines. With respect to these machines, there are risks of customer
acceptance and start-up or performance problems. Large amounts of capital
are required to be devoted by some of the Company's customers to purchase
these machines and to finance the steel mills, paper mills and other
facilities that use these machines. The Company's success in obtaining and
managing sales opportunities can affect the Company's financial
performance. In addition, some projects are located in undeveloped or
developing economies where business conditions are less predictable.
o The Company has operations and assets located in Canada, Mexico, Chile,
the United Kingdom, South Africa, Thailand, Australia and Singapore and is
establishing joint ventures in Malaysia and Saudi Arabia. The Company also
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sells its products through distributors and agents in over 50 countries,
some of which are merely ad hoc arrangements and may be terminated at any
time. The Company's international operations (including Canada, Mexico,
Chile, South Africa, Australia and the United Kingdom) accounted for 36.2%,
41.8% and 36.1% of the Company's aggregate net sales in 1998, 1997 and
1996, respectively, and 38.4% and 36.6% in First Nine Months 1999 and First
Nine Months 1998, respectively. Although historically, exchange rate
fluctuations and other international factors have not had a material impact
on the Company's business, financial condition or results of operations,
international operations expose the Company to a number of risks, including
currency exchange rate fluctuations, trade barriers, exchange controls,
risk of governmental expropriation, political and legal risks and
restrictions, foreign ownership restrictions and risks of increases in
taxes. The inability of the Company, or limitations on its ability, to
conduct its foreign operations or distribute its products internationally
could adversely affect the Company's operations and financial performance.
o The markets in which the Company operates are highly competitive. Both
domestically and internationally, the Company faces competition from a
number of different manufacturers in each of its product lines, some of
which have greater financial and other resources than the Company. The
principal competitive factors affecting the Company include performance,
functionality, price, brand recognition, customer service and support,
financial strength and stability, and product availability. There can be no
assurance that the Company will be able to compete successfully with its
existing competitors or with new competitors. Failure to compete
successfully could have a material adverse effect on the Company's
financial condition, liquidity and results of operations.
o The Company's business is affected by the state of the United States and
global economy in general, and by the varying economic cycles of the
industries in which its products are used. There can be no assurance that
any future condition of the United States economy or the economies of the
other countries in which the Company does business will not have an adverse
effect on the Company's business, operations or financial performance.
Year 2000 Compliance
The Year 2000 issue arises as a result of computer programs having been written,
and systems having been designed, using two digits rather than four to define
the applicable year. Consequently, such software has the potential to recognize
a date using "00" as the year 1900 rather than the year 2000. This could result
in a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices, or engage in similar normal business activities.
Since 1996, the Company has been engaged in resolving its Year 2000 issues,
first as a subsidiary of HII, and now on its own as an independent entity. After
the Recapitalization, the Company established its own Year 2000 teams. These
teams performed site audits at each of the Company's operations in order to
identify and address all Year 2000 issues related to both information technology
("IT") systems and internally used manufacturing and administrative equipment.
Hardware and software technology guidelines have been implemented worldwide in
order to ensure that all systems are Year 2000 compliant before January 1, 2000.
In addition, management periodically monitors the status of the Company's Year
2000 remediation plans. The Company has now completed its internal assessment
phase and is in the process of carrying out its internal remediation phase.
With respect to non-IT systems, such as heating and ventilation systems,
security systems and machine tools, the Company has sought representations from
the relevant vendors that the systems are Year 2000 compliant. The Company has
received such assurances from a number of non-IT system vendors and does not
expect to encounter any significant unresolved Year 2000 issues with respect to
such systems. In addition, in the event that there are any unresolved Year 2000
issues with respect to its non-IT systems, the Company believes it could obtain
replacement services either internally or from third parties without significant
disruptions to its operations.
During Third Quarter 1999, the Company's operations in Oak Creek, Wisconsin
replaced their existing business system, formerly shared with HarnCo. The
decision to replace the system was based solely on the need to move off of the
shared system. The vendor of the replacement system has represented to the
Company that the new system is Year 2000 compliant (which representation has
been confirmed by an outside consultant). The Company has sought and received
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representations from the applicable vendors that the business systems used in
the United Kingdom, South Africa, Australia, Singapore, Canada, and Mexico are
either already Year 2000 compliant or will be before January 1, 2000. The
operating system used in the North American distribution and service business
was made compliant during the second fiscal quarter by applying the vendor
supplied upgrade.
The Company is also engaged in assessing and addressing Year 2000 issues with
significant vendors. The Company has sought, and continues to seek, assurances
from all of its vendors with respect to Year 2000 issues. The Company does not,
however, control the systems of other companies, and cannot assure that these
systems will be timely converted and, if not converted, would not have an
adverse effect on the Company's business operations. In the event that the
Company and/or its significant vendors or suppliers do not complete their Year
2000 compliance efforts, the Company could experience disruptions in its
operations. Disruptions in the economy generally resulting from Year 2000 issues
also could affect the Company. With respect to products sold by the Company,
management believes that any liability for Year 2000 compliance will not be
material.
The Company has used and will continue to use all necessary internal resources
to resolve any Year 2000 issues. The Company plans to complete its Year 2000
remediation by September 30, 1999. Total expenses on the project through July
31, 1999 were approximately $1.5 million and were primarily related to expenses
for repair or replacement of software and hardware, expenses associated with
facilities, products and supplier reviews and project management expenses.
Expected incremental costs related to Year 2000 are $0.3 million.
The costs of the project and the date on which the Company plans to complete its
Year 2000 remediation are based on management's estimates, which were derived
from utilizing numerous assumptions of future events including the continued
availability of certain resources, third party modification plans and other
factors. However, there can be no guarantee that these estimates will be
achieved and actual results could differ significantly from those plans.
Specific factors that might cause differences from management's estimates
include, but are not limited to, the availability and cost of personnel trained
in this area, the ability to locate and correct relevant computer codes, and
similar uncertainties. Management believes that the Company is devoting the
necessary resources to identify and resolve significant Year 2000 issues in a
timely manner.
Future Accounting Changes
The Financial Accounting Standards Board (FASB) has issued SFAS No. 133
"Accounting for Derivative Instruments and Hedging Activities" which is
effective for periods beginning after June 15, 2000. Due to the Company's
current limited use of derivative instruments, the adoption of this statement is
not expected to have a material effect on the Company's financial condition or
results of operations. SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information," was also issued by the FASB and is
effective for fiscal years beginning after December 15, 1997. This statement
establishes standards for the way that business enterprises report information,
financial and descriptive, about operating segments in annual financial
statements and requires that those enterprises report selected information about
operating segments in interim financial reports issued to shareholders. It also
establishes standards for related disclosures about products and services,
geographic areas and major customers. The Company is in the process of
evaluating the effect of SFAS No. 131 on its financial statements. In February
1998, the FASB issued SFAS No. 132, "Employers' Disclosures about Pensions and
Other Postretirement Benefits" which is effective for fiscal years beginning
after December 31, 1997. This standard's objective is to improve pension and
other postretirement benefits disclosures.
Quantitative and Qualitative Disclosures about Market Risk
The Company is potentially exposed to market risk associated with changes in
foreign exchange and interest rates. From time to time the Company will enter
into derivative financial instruments to hedge these exposures. An instrument
will be treated as a hedge if it is effective in offsetting the impact of
volatility in the Company's underlying interest rate and foreign exchange rate
exposures. The Company does not enter into derivatives for speculative purposes.
There have been no material changes in the Company's market risk exposures as
compared to those discussed in the Company's 1998 Annual Report on Form 10-K.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
In October 1998, the Company received a request to arbitrate a claim from a
former customer which arose out of an accident that occurred in Ireland
involving two cranes sold by the Company in 1992. The claim alleges direct
damages of approximately $12.8 million plus lost revenue due to business
interruption. In addition, the Company has been notified by the port operator of
its intention to pursue a claim against the Company for its damages (which it
estimates are between $4 million and $5 million) arising from the accident.
Management intends to vigorously defend this matter. One of the Company's
insurance carriers has agreed to provide defense coverage for one of the two
cranes involved in the accident and limited indemnification if the Company is
unsuccessful in defending the claim. The Company is continuing to work with its
insurance broker to determine the availability of additional insurance coverage,
if any. The contract between the Company and the claimant provides that the
contract is governed by Irish law and that all disputes are to be resolved by
arbitration in Ireland. While the Company believes it will obtain a favorable
resolution, no assurances can be made as to the final outcome of the claim. If
the Company were found liable for the full amount of the claim, there could be a
material adverse effect on the Company's operations and financial performance.
The Company is also involved from time to time in various other routine
litigation incident to its operations, including product liability and other
claims. Although the outcome of those matters cannot be predicted with
certainty, management believes that any such pending or threatened litigation
will not have a material adverse effect on its consolidated results of
operations and financial condition.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit Exhibit Description
Number
4.17 Amendment No. 2 dated as of August 2, 1999 to the Credit
Agreement dated as of March 30, 1998 among (i) MMH Holdings,
Inc., (ii) Morris Material Handling, Inc., (iii) Morris
Material Handling, LLC, (iv) Morris Material Handling
Equipment Limited, (v) Mondel ULC, (vi) Kaverit Steel and
Crane ULC, (vii) the Banks referred to therein, (viii) the
New York branch of Credit Agricole Indosuez, as syndication
agent, (ix) BankBoston, N.A., as documentation agent and (x)
Canadian Imperial Bank of Commerce, as administrative agent
and collateral agent.
4.18 Subordination and Participation Agreement dated as of August
2, 1999 among (i) Canadian Imperial Bank of Commerce; (ii)
the Selling Banks listed therein; (iii) Martin Crane L.L.C.;
(iv) MMH Holdings, Inc.; (v) Morris Material Handling, Inc.
and Morris Material Handling, LLC; and (vi) the Subsidiaries
listed therein.
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27.1 Financial Data Schedule
27.2 Financial Data Schedule
(b) Reports on Form 8-K
The Registrants filed no reports on Form 8-K during the
quarter ended July 31, 1999
33
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrants have duly caused this report to be signed on their behalf by the
undersigned thereunto duly authorized.
MMH HOLDINGS, INC.
Date: September 14, 1999 /s/ David D. Smith
-------------------
David D. Smith
Vice President - Finance
(Principal Financial Officer)
MORRIS MATERIAL HANDLING, INC.
Date: September 14, 1999 /s/ David D. Smith
-------------------
David D. Smith
Vice President - Finance
(Principal Financial Officer)
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AMENDMENT NO. 2 (the "Amendment") dated as of August 2, 1999 to
the Credit Agreement dated as of March 30, 1998 (as the same has been,
or may hereafter be, amended, amended and restated, supplemented or
otherwise modified, renewed or replaced from time to time, the "Credit
Agreement"), among (i) MMH HOLDINGS, INC., a Delaware corporation
("Holdings"), (ii) MORRIS MATERIAL HANDLING, INC., a Delaware
corporation (the "Company"), (iii) MORRIS MATERIAL HANDLING, LLC
(formerly known as Material Handling, LLC), a Delaware limited
liability company, (iv) MORRIS MATERIAL HANDLING EQUIPMENT LIMITED
(formerly known as Morris Material Handling, Ltd.), a company
organized under the laws of England and Wales, (v) MONDEL ULC, an
unlimited liability company organized under the laws of Nova Scotia,
(vi) KAVERIT STEEL AND CRANE ULC, an unlimited liability company
organized under the laws of Nova Scotia, (vii) the Banks referred to
therein, (viii) the New York branch of CREDIT AGRICOLE INDOSUEZ, as
syndication agent for the Banks, (ix) BANKBOSTON, N.A., as
documentation agent for the Banks and (x) CANADIAN IMPERIAL BANK OF
COMMERCE, as administrative agent and collateral agent for the Banks
(in such capacities, the "Administrative Agent").
INTRODUCTORY STATEMENT
All capitalized terms not otherwise defined in this Amendment
are used herein as defined in the Credit Agreement.
The Company has requested that the Credit Agreement be amended
to modify certain provisions thereof as hereinafter set forth.
In consideration of the mutual agreements contained herein and
other good and valuable consideration, the parties hereto hereby agree as
follows:
SECTION 1. Amendment to the Credit Agreement. Subject to the
provisions of Section 6 hereof, the Credit Agreement is hereby amended effective
as of the Effective Date (such term being used herein as defined in Section 6
hereof) as follows:
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<PAGE>
(A) The first paragraph of the Agreement is hereby amended by
deleting the phrase "the lending institutions listed in Annex I (each, a "Bank"
and, collectively, the "Banks")" and inserting the phrase "the Banks referred to
herein" in lieu thereof.
(B) Clause (ii)(b) of the second WHEREAS clause appearing on
page 1 of the Agreement is hereby amended in its entirety to read as follows:
"(b) with respect to the Acquisition Term Loans, either (1) to
provide financing for acquisitions and to pay related fees and
expenses or (2) to provide working capital to the Borrowers and their
Subsidiaries and for general corporate or business purposes of the
Borrowers and their Subsidiaries, in each case, on the terms and
subject to the conditions set forth in this Agreement."
(C) The first paragraph of Section 1.01 of the Agreement is
hereby amended (i) by inserting the parenthetical phrase "(including, without
limitation, Section 1.12 hereof)" in the second line immediately after the words
"conditions herein set forth" appearing therein and (ii) by deleting the words
"in connection with Designated Acquisitions" appearing in clause (ii) of such
paragraph.
(D) Section 1.01(b) of the Agreement is hereby amended in its
entirety to read as follows:
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<PAGE>
"(b) Subject to the limitations set forth in Section 1.12 hereof,
Loans under the Acquisition Portion of the Loan Facility (each an
"Acquisition Term Loan") (i) shall be made to a U.S. Borrower after
the Closing Date and prior to the Acquisition Term Loan Commitment
Termination Date; provided, however, that the U.S. Borrowers shall not
be entitled to request or receive from the Banks, and the Banks shall
have no obligation whatsoever to fund, any Acquisition Term Loans in
excess of the Acquisition Term Loans outstanding prior to the
effective date of Amendment No. 2 in the aggregate principal amount of
$7,430,082.82 (it being understood that the Banks shall make
Acquisition Term Loans which are Sponsor Loans and which have been
funded pursuant to, and in accordance with, the Sponsor Participation
Agreement); and provided, further, however, that any Acquisition Term
Loan to be made on or after the effective date of Amendment No. 2
shall only be made pursuant to the Additional Sponsor Participation
and in accordance with Section 1.12 hereof, (ii) shall, at the option
of the Applicable Borrower, be Base Rate Loans or Reserve Adjusted
Eurodollar Loans; provided that all Acquisition Term Loans made by the
applicable Banks having an Acquisition Term Loan Commitment pursuant
to the same Borrowing shall, unless otherwise specifically provided
herein, consist entirely of Loans of the same Type (provided that
partial conversions are permitted in accordance with Section 1.06),
(iii) shall not exceed for any Bank at any time outstanding the
Acquisition Term Loan Commitment of such Bank at such time, and (iv)
shall not be made pursuant to a particular Notice of Borrowing if the
aggregate principal amount of Acquisition Term Loans then outstanding,
after giving effect to the Acquisition Term Loan requested by such
Notice of Borrowing, would exceed the Total Acquisition Term Loan
Commitment or be contrary to the limitations set forth in Section 1.12
hereof. Once repaid, Acquisition Term Loans may not be reborrowed."
(E) Section 1.01(c) of the Agreement is hereby amended (i) by
inserting the phrase "subject to the limitations set forth in Section 1.12
hereof," at the beginning thereof, immediately preceding the word "Loans" and
(ii) by inserting the following new subclause immediately preceding subclause
(y) appearing in clause (v) of such section:
"(x) the applicable borrowing limitations set forth in Section 1.12
hereof or"
(F) Section 1.01(d) of the Agreement is hereby amended (i) by
inserting the phrase "Subject to the limitations set forth in Section 1.12
hereto," at the beginning thereof, immediately preceding the words "Swingline
Loans", (ii) by inserting the words "or letters of credit or guaranty or bonds"
at the end of the first clause (ii) appearing therein immediately after the
words "Reserve Adjusted Eurodollar Loans" and (iii) by inserting the following
new subclause immediately preceding subclause (y) appearing in clause (v) of
such section:
"(x) the applicable borrowing limitations set forth in Section 1.12
hereof or"
(G) Section 1.01(e) of the Agreement is hereby amended in its
entirety to read as follows:
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<PAGE>
"(e) Notice to the Administrative Agent (which shall give notice
to all Revolving Facility Banks) (i) may be given on any Business Day,
(A) in the sole discretion of the U.S. Swingline Bank with respect to
the U.S. Swingline Loans, (B) in the sole discretion of the U.K.
Swingline Bank with respect to the U.K. Swingline Loans and (C) in the
sole discretion of the Canadian Swingline Bank with respect to the
Canadian Swingline Loans and (ii) shall be deemed to be automatically
given by each Swingline Bank with respect to all Swingline Loans upon
the occurrence of an Event of Default under Section 8.05 (with respect
to Holdings or the Company or any of its Significant Subsidiaries) or
upon the exercise of any of the remedies provided in the last
paragraph of Section 8, that the Dollar Equivalent of such Swingline
Bank's outstanding Swingline Loans to the Applicable Borrower shall be
funded with a Borrowing in Dollars of Revolving Loans or in the case
of outstanding U.K. Swingline Letters of Credit, shall be supported by
the issuance of a Letter of Credit in Dollars naming the U.K.
Swingline Bank as the beneficiary thereof in the face amount equal to
the Dollar Equivalent of the aggregate face amount of such outstanding
U.K. Swingline Letters of Credit. In any such case, either (x)
Revolving Loans in Dollars, for the benefit of the U.S. Borrowers,
constituting Base Rate Loans (each such Borrowing, a "Mandatory
Borrowing") shall be made on the immediately succeeding Business Day
by all Revolving Facility Banks pro rata based on each Bank's Dollar
Percentage and the proceeds thereof shall be applied directly to the
Applicable Swingline Bank to repay such Swingline Bank for such
outstanding Swingline Loans (other than U.K. Swingline Letters of
Credit) or (y) in the case of U.K. Swingline Letters of Credit, an
Issuing Bank shall issue a Letter of Credit pursuant to Section 1.13
hereof naming the U.K. Swingline Bank as beneficiary, which Letter of
Credit shall be in the face amount equal to the aggregate Dollar
Equivalent of the face amount of such outstanding U.K. Swingline
Letters of Credit. Any Swingline Loan (other than a U.K. Swingline
Letter of Credit) that is denominated in a currency other than Dollars
shall be converted into Dollars immediately upon such notice at the
Spot Rate. Each Revolving Facility Bank hereby irrevocably agrees to
make Revolving Loans upon one Business Day's notice pursuant to each
Mandatory Borrowing in the amount and in the manner specified in the
preceding sentence and on the date specified in writing by the
Applicable Swingline Bank and an Issuing Bank agrees to issue the
aforementioned Letter of Credit upon one (1) Business Day's notice and
on the date specified in writing by the Administrative Agent
notwithstanding (i) that the amount of any Mandatory Borrowing may not
comply with the Minimum Borrowing Amount otherwise required hereunder
or in the case of the issuance of the Letter of Credit, all the
conditions in Section 1.13 being complied with, (ii) whether any
conditions specified in Section 4 are then satisfied, (iii) whether a
Default or an Event of Default then exists, (iv) the date of such
Mandatory Borrowing or issuance of Letter of Credit, as applicable and
(v) the amount of the Total Revolving Loan Commitment at such time. In
the event that any Mandatory Borrowing cannot be made or a Letter of
Credit issued for any reason on the date otherwise required above
(including, without limitation, as a result of the commencement of a
proceeding under the Bankruptcy Code with respect to any of the
Borrowers), then each such Revolving Facility Bank hereby agrees that
it shall forthwith purchase (as of the date the Mandatory Borrowing or
issuance of the Letter of Credit would otherwise have occurred, but
adjusted for the Dollar Equivalent of any payments received from the
Applicable Borrower (or Borrowers) on or after such date and prior to
such purchase) from the applicable Swingline Bank such participations
in the outstanding Swingline Loans as shall be necessary to cause such
Revolving Facility Banks to share in the Dollar Equivalent of such
Swingline Loans ratably based upon their Dollar Percentage; provided
that (x) all interest payable on the Swingline Loans (including the
commission on letters of credit or guaranty or bonds issued by the
U.K. Swingline Bank as U.K. Swingline Loans) shall be for the account
of the applicable Swingline Bank until the date as of which the
respective participation is required to be purchased and, to the
extent attributable to the purchased participation, shall be payable
to the participant from and after such date and (y) at the time any
purchase of participations pursuant to this sentence is actually made,
the purchasing Revolving Facility Bank shall be required to pay the
applicable Swingline Bank interest on the principal amount of the
participation purchased for each day from and including the day upon
which the Mandatory Borrowing would otherwise have occurred to but
excluding the date of payment for such participation, and at the rate
otherwise applicable to Revolving Loans maintained as Base Rate Loans
hereunder."
(H) Section 1.03(a) of the Agreement is hereby amended (i) by
deleting the words "and, in the case of a Loan under the Acquisition Portion,
that all additional conditions under Section 4.03" appearing in the sixth,
seventh and eighth lines thereof and (ii) by adding the phrase ", the
limitations set forth in Section 1.12 hereof," immediately after the words "the
Borrowing Base" in clause (ii) of such Section 1.03(a).
(I) Section 1.03(d) of the Agreement is hereby amended by
inserting the following text after the words "on the date" appearing in the
seventh line of such section:
"or, with respect to U.K. Swingline Letters of Credit, not later than
10:00 a.m. (London time) three Business Days prior to the date,"
(J) Section 1.08(e) of the Agreement is hereby amended in its
entirety to read as follows:
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"(e) Notwithstanding anything to the contrary contained in this
Agreement, interest on all Loans shall accrue from and including the
date of any Borrowing to but excluding the date of any repayment
thereof and shall be payable (i) monthly in arrears on the last
Business Day of each month, beginning August 31, 1999 and (ii) on any
prepayment (on the amount prepaid), at maturity (whether by
acceleration or otherwise) and, after such maturity, on demand.
Notwithstanding the foregoing, interest payable at the rate provided
in Section 1.08(d) shall be payable on demand."
(K) Section 1.09 of the Agreement is hereby amended by
deleting the words "be a one, two, three, six or, if available by all the Banks
and only with respect to Dollar Loans, twelve month period" appearing at the end
of the first paragraph of such section and inserting the words "be a one or
three month period" in lieu thereof.
(L) Section 1.12 of the Agreement is hereby amended in its
entirety to read as follows:
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"1.12. Amount of Outstanding Loans and Commitments; Limitations
on Outstanding Loan Amounts. (A) Notwithstanding anything to the
contrary contained in this Agreement, upon the effectiveness of
Amendment No. 2, (i) the aggregate principal amount of outstanding A
Term Loans shall be $18,375,000 and the Total A Term Loan Commitment
shall be $18,375,000; (ii) the aggregate principal amount of
outstanding B Term Loans shall be $34,562,500 and the Total B Term
Loan Commitment shall be $34,562,500; (iii) the aggregate principal
amount of outstanding Acquisition Term Loans shall be $12,430,082.82
($7,430,082.82 of such Acquisition Term Loans shall have been funded
by the Banks and $5,000,000 of such Acquisition Term Loans shall have
been funded by the Sponsors (in accordance with, and as contemplated
by, the Sponsor Participation Agreement)) and the Total Acquisition
Term Loan Commitment shall be $30,000,000 in accordance with, and as
provided in, the Sponsor Participation Agreement; (iv) the aggregate
principal amount of outstanding Revolving Loans shall be
$25,061,106.42 and the Total Revolving Loan Commitment shall be
$50,700,000 (including up to $10,000,000 of Letters of Credit); (v)
the aggregate principal amount of outstanding U.S. Swingline Loans
shall be $3,500,000 and the Total U.S. Swingline Loan Commitment shall
be $6,000,000; (vi) the dollar equivalent amount of the aggregate
principal amount of outstanding U.K. Swingline Loans (as determined by
the Administrative Agent) shall be $868,750.20 and the Total U.K.
Swingline Loan Commitment shall be $6,000,000; and (vii) the aggregate
principal amount of outstanding Canadian Swingline Loans shall be $0
and the Total Canadian Swingline Loan Commitment shall be $3,000,000.
Notwithstanding anything to the contrary contained in this Agreement
and subject to the borrowing limitations set forth in this Section
1.12, (a) in no event shall the sum of (without duplication) the
aggregate principal amount of all Term Loans, Acquisition Term Loans
and Revolving Loans of any Bank plus such Bank's participation in the
Dollar Equivalent of Letter of Credit Usage, at any time exceed such
Bank's portion of the Total Commitment, (b) in no event shall the sum
of the aggregate principal amount of all Term Loans, Acquisition Term
Loans, Revolving Loans and the Dollar Equivalent of Swingline Loans
from all Banks plus the Dollar Equivalent of Letter of Credit Usage at
any time exceed the Total Commitment, (c) in no event shall the
aggregate principal amount of all Acquisition Term Loans exceed the
Total Acquisition Term Loan Commitment or the borrowing limitations
set forth in this Section 1.12, (d) in no event shall the Revolving
Loans, the Dollar Equivalent of Swingline Loans and the Dollar
Equivalent of Letter of Credit Usage, after giving effect to all
Revolving Loans, Swingline Loans and Letters of Credit then requested,
exceed the Total Revolving Loan Commitment, (e) in no event shall the
aggregate principal amount of all Revolving Loans, the Dollar
Equivalent of Swingline Loans and the Dollar Equivalent of Letter of
Credit Usage, after giving effect to all Revolving Loans, Swingline
Loans and Letters of Credit then requested, exceed the lesser of the
Borrowing Base or the applicable borrowing limitations set forth in
this Section 1.12, (f) in no event shall the aggregate principal
amount of all Revolving Loans and the Dollar Equivalent of all
Swingline Loans (other than U.K. Swingline Letters of Credit) exceed
the borrowing limitations set forth in this Section 1.12, (g) in no
event shall the sum of the aggregate maximum outstanding Letter of
Credit Usage in respect of the Dollar Equivalent of all Letters of
Credit plus the aggregate maximum outstanding U.K. Swingline Letter of
Credit Usage in respect of the Dollar Equivalent of all U.K. Swingline
Letters of Credit exceed the limitations set forth in this Section
1.12 or elsewhere in this Agreement and (h) in no event shall the
aggregate principal Dollar Equivalent of Swingline Loans exceed the
applicable Maximum Swingline Amount. Once repaid, none of the A Term
Loans, the B Term Loans or the Acquisition Term Loans may be
reborrowed.
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(B) The U.S. Borrowers hereby agree that neither of them shall
request that the Banks fund Acquisition Term Loans, and neither of
them shall be entitled to receive any Acquisition Term Loans funded by
the Banks, in either case, in excess of the Acquisition Term Loans
outstanding prior to the effective date of Amendment No. 2 in the
aggregate principal amount of $7,430,082.82. The parties hereto hereby
agree that, as contemplated by the Sponsor Participation Agreement,
any additional Acquisition Term Loan that may be requested by the U.S.
Borrowers to be made pursuant to the Additional Sponsor Participation
after the effective date of Amendment No. 2 (it being understood this
does not include the $5,000,000 Acquisition Term Loan to be made on or
prior to the effective date of Amendment No. 2 and funded by the
Sponsors, in accordance with, and as provided in, the Sponsor
Participation Agreement) (i) may be made by any of the Sponsors
(and/or another participant acceptable to the Administrative Agent and
the Required Banks) (it being understood that the Sponsors shall not
be obligated to make any such Loans), (ii) must be approved in writing
by the Administrative Agent, the Required Banks and each Sponsor (or
other acceptable participant, if applicable) which chooses to fund
such additional Acquisition Term Loan and (iii) shall be deemed to be
a Sponsor Loan when made.
(C) Notwithstanding any other provision of this Agreement to the
contrary, (i) the aggregate principal amount of all outstanding
Revolving Loans and the aggregate Dollar Equivalent of all outstanding
Swingline Loans (other than U.K. Swingline Letters of Credit) may not
exceed $40,700,000 at any time and (ii) the sum of the aggregate
maximum outstanding Letter of Credit Usage in respect of the Dollar
Equivalent of all Letters of Credit plus the aggregate maximum
outstanding U.K. Swingline Letter of Credit Usage in respect of the
Dollar Equivalent of all U.K. Swingline Letters of Credit may not
exceed $10,000,000 at any time; provided, however, that the aggregate
principal amount of all outstanding Revolving Loans may be increased
so that the aggregate principal amount of all outstanding Revolving
Loans and the aggregate Dollar Equivalent of all outstanding Swingline
Loans (other than U.K. Swingline Letters of Credit) exceeds
$40,700,000, solely by an amount equal to any amount drawn under any
Letter of Credit or any U.K. Swingline Letter of Credit but, (1) in no
event may the aggregate principal amount of all outstanding Revolving
Loans, the aggregate Dollar Equivalent of all outstanding Swingline
Loans and the Dollar Equivalent of Letter of Credit Usage exceed
$50,700,000 at any time and (2) if the aggregate principal amount of
all outstanding Revolving Loans and the aggregate Dollar Equivalent of
all outstanding Swingline Loans (other than U.K. Swingline Letters of
Credit) exceeds $40,700,000 solely because of a drawing under a Letter
of Credit or a U.K. Swingline Letter of Credit, then the $10,000,000
limit set forth in clause (ii) shall be reduced by such amount drawn
under such Letter of Credit or such U.K. Swingline Letter of Credit."
(M) Clause (iv) appearing in Section 1.13(a) of the Agreement
is hereby amended in its entirety to read as follows:
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"(iv) the U.S. Borrowers shall not request that any Issuing Bank
issue, and no Issuing Bank shall issue, any Letter of Credit if, after
giving effect to such issuance and the issuance of all other requested
Letters of Credit, the sum of the then outstanding Letter of Credit
Usage in respect of the Dollar Equivalent of all Letters of Credit
plus the outstanding U.K. Swingline Letter of Credit Usage in respect
of the Dollar Equivalent of all U.K. Swingline Letters of Credit (in
each case, including, without limitation, any increase in the amount
that may become available under any Letter of Credit or U.K. Swingline
Letter of Credit then outstanding or being requested pursuant to the
terms of such Letter of Credit or U.K. Swingline Letter of Credit, as
applicable) would exceed $10,000,000"
(N) Subsections 2 and 3 of Section 1.13(f) of the Agreement
are hereby amended in their entirety to read as follows:
"(2) The Applicable Borrower agrees to pay to the Administrative
Agent for distribution to each Bank having a Revolving Loan Commitment
in respect of each Letter of Credit outstanding, such Bank's pro rata
share of a commission equal to 3.50% per annum of the maximum amount
available from time to time to be drawn under such outstanding Letters
of Credit, payable in arrears on and through the last day of each
month and calculated on the basis of a 360-day year and the actual
number of days elapsed. Upon the happening and during the continuance
of an Event of Default described in Section 8.01, the commission
referred to in the preceding sentence shall be 5.50% per annum.
(3) The Applicable Borrower agrees to pay to each Issuing Bank in
respect of each Letter of Credit a commission equal to .125% per annum
of the maximum amount available at any time to be drawn under such
Letter of Credit issued by such Issuing Bank, payable in arrears on
and through the last day of each month and calculated on the basis of
a 360-day year and the actual number of days elapsed or, if the
maximum amount available to be drawn under such Letter of Credit is
the Dollar Equivalent of $40,000 or less, $500 per annum, payable in
arrears on the last day of each month."
(O) The parenthetical phrase appearing in the proviso at the
end of Section 1.13(g) of the Agreement is hereby amended in its entirety to
read as follows:
"(as determined by a final judgment of a court of competent
jurisdiction)."
(P) The last paragraph of Section 1.13(i) of the Agreement is
hereby amended by deleting the words "or out of the wrongful dishonor by such
Issuing Bank of a proper demand for payment under the Letters of Credit issued
by it" appearing therein and inserting the parenthetical phrase "(as determined
by a final judgment of a court of competent jurisdiction)" in lieu thereof.
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(Q) Section 1.14 of the Agreement is hereby amended (i) by
deleting the following parenthetical phrase "(or, with respect to Pounds
Sterling loans referred to in paragraph (a), the U.K. Swingline Bank)" appearing
in the first paragraph of such section and (ii) by adding the following new
section to the end thereof:
"(g) all U.K. Swingline Loans and Canadian Swingline Loans,
plus all Letter of Credit Usage on the day of any
requested Borrowing comprised of Revolving Loans and/or
U.S. Swingline Loans."
(R) The following new sections are hereby added at the end
of Section 1 of the Agreement:
"1.18. Reporting by the Swingline Banks.
Each of the Swingline Banks hereby agrees that on
each Business Day, by no later than 12:00 noon (New
York City time), it shall notify the Administrative
Agent in writing of (a) the aggregate outstanding
principal amount of Swingline Loans and any other
credit accommodations made by such Swingline Bank to
the Borrowers (including, without limitation, any
Swingline Loan or credit accommodation to be made by
the applicable Swingline Bank on such Business Day)
and (b) the nature of any such other credit
accommodations.
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1.19. U.K. Swingline Letters of Credit. (a) U.K. Swingline
Letters of Credit. Subject to the terms and conditions of this
Agreement and in reliance upon the representations and warranties of
the Borrowers set forth herein and in the other Credit Documents, the
U.K. Borrower may request, in accordance with the provisions of this
Section 1.19 that the U.K. Swingline Bank issue U.K. Swingline Letters
of Credit for the account of the U.K. Borrower; provided that (i) the
U.K. Borrower shall not request the U.K. Swingline Bank issue any U.K.
Swingline Letter of Credit and the U.K. Swingline Bank shall not issue
any U.K. Swingline Letter of Credit, if after giving effect to such
issuance the sum of (A) the Dollar Equivalent amount of U.K. Swingline
Letter of Credit Usage on the date of such issuance, after giving
effect to the issuance of all U.K. Swingline Letters of Credit subject
to outstanding requests for issuance, plus (B) the Dollar Equivalent
amount of U.K. Swingline Loans (exclusive of U.K. Swingline Letters of
Credit) then outstanding, after giving effect to the making of all
U.K. Swingline Loans then requested by all outstanding but unfunded
Notices of Borrowing, would exceed the Total U.K. Swingline Loan
Commitment then in effect; (ii) the U.K. Borrower shall not request
that the U.K. Swingline Bank issue any U.K. Swingline Letter of Credit
and the U.K. Swingline Bank shall not issue any U.K. Swingline Letter
of Credit if after giving effect to such issuance, the sum of the
amount described in clause (i) above, plus the Dollar Equivalent of
Letter of Credit Usage on the date of such issuance after giving
effect to the issuance of all Letters of Credit subject to outstanding
requests for issuance, plus the Dollar Equivalent of Revolving Loans
and Swingline Loans (other than U.K. Swingline Loans) then outstanding
after giving effect to the making of all Revolving Loans and Swingline
Loans (other than U.K. Swingline Loans) then requested would exceed
(x) the Borrowing Base as shown in the Borrowing Base Certificate that
was last delivered pursuant to Section 6.01; provided such Borrowing
Base Certificate was required to be delivered pursuant to and was in
compliance with Section 6.01 or was delivered after the Borrowing Base
Certificate last required to be delivered pursuant to Section 6.01 or
(y) the limitations set forth in Section 1.12 or (z) the Total
Revolving Loan Commitment then in effect; (iii) the U.K. Borrower
shall not request that the U.K. Swingline Bank issue any U.K.
Swingline Letter of Credit which would cause any of the limitations
set forth in Section 1.12, Section 1.13 or elsewhere in this Agreement
to be violated; and (iv) in no event shall the U.K. Swingline Bank
issue any U.K. Swingline Letter of Credit having an expiration date
later than thirty (30) Business Days prior to the Revolving Maturity
Date (after giving effect to any possible renewal of such U.K.
Swingline Letter of Credit).
Each U.K. Swingline Letter of Credit may provide that the U.K.
Swingline Bank may (but shall not be required to) pay the beneficiary
thereof upon the occurrence of an Event of Default and the
acceleration of the maturity of the U.K. Swingline Loans or, if
payment is not then due to the beneficiary, provide for the deposit of
funds in an account to secure payment to the beneficiary and that any
funds so deposited shall be paid to the beneficiary of the U.K.
Swingline Letter of Credit if conditions to such payment are satisfied
or returned to the U.K. Swingline Bank (or, if all Obligations shall
have been paid in full, to the U.K. Swingline Borrower) if no payment
to the beneficiary has been made and the final date available for
drawings under the applicable U.K. Swingline Letter of Credit has
passed. Each payment or deposit of funds by the U.K. Swingline Bank as
provided in this paragraph shall be treated for all purposes of this
Agreement as a drawing duly honored by the U.K. Swingline Bank under
the related U.K. Swingline Letter of Credit.
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(b) Request for Issuance. Whenever the U.K. Borrower desires the
issuance of a U.K. Swingline Letter of Credit, it shall deliver to the
U.K. Swingline Bank (with a copy to the Administrative Agent) a
request for issuance of a U.K. Swingline Letter of Credit no later
than Noon (London time) at least three Business Days, or such shorter
period as may be agreed to by the U.K. Swingline Bank in any
particular instance, in advance of the proposed date of issuance;
provided that a U.K. Swingline Letter of Credit denominated in a
currency other than U.S. Dollars, Canadian Dollars or Pounds Sterling
will be issued as soon as available, which may be more than three
Business Days after the request therefor. The request for issuance
with respect to any U.K. Swingline Letter of Credit shall specify (i)
the proposed date of issuance (which shall be a business day in London
and Chicago) of such U.K. Swingline Letter of Credit, (ii) the face
amount and currency of such U.K. Swingline Letter of Credit, (iii) the
expiration date of such U.K. Swingline Letter of Credit and (iv) the
name and address of the beneficiary of such U.K. Swingline Letter of
Credit. Prior to the date of issuance, the U.K. Borrower shall specify
a precise description of the documents and the verbatim text of any
certificate to be presented by the beneficiary of such U.K. Swingline
Letter of Credit which, if presented by such beneficiary prior to the
expiration date of the U.K. Swingline Letter of Credit, would require
the U.K. Swingline Bank to make payment under the U.K. Swingline
Letter of Credit; provided that the U.K. Swingline Bank, in its sole
judgment, may require changes in any such documents and certificates;
and provided, further, that no U.K. Swingline Letter of Credit shall
require payment against a conforming draft to be made thereunder
earlier than Noon in the time zone of the U.K. Swingline Bank on the
Business Day (which shall be a business day under the laws of London
and Chicago) three Business Days following the Business Day (which
shall be a Business Day under the laws of London and Chicago) that
such draft is presented. In determining whether to pay under any U.K.
Swingline Letter of Credit, the U.K. Swingline Bank shall be
responsible only to determine that the documents and certificates
required to be delivered under that U.K. Swingline Letter of Credit
have been delivered and that they comply on their face with the
requirements of that U.K. Swingline Letter of Credit.
Following the occurrence of a Default or an Event of Default, the
U.K. Swingline Bank may require the U.K. Borrower to deposit cash
collateral with the U.K. Swingline Bank having a value, as determined
by the U.K. Swingline Bank, equal to 105% of the aggregate face amount
of all U.K. Swingline Letters of Credit.
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(c) Payment of Amounts Drawn Under U.K. Swingline Letters of
Credit. In the event of any request for drawing under any U.K.
Swingline Letter of Credit by the beneficiary thereof, the U.K.
Swingline Bank shall notify the U.K. Borrower and the Administrative
Agent on or before the date on which the U.K. Swingline Bank intends
to honor such drawing, and the U.K. Borrower shall reimburse the U.K.
Swingline Bank on the day on which such drawing is honored in an
amount in same day funds equal to the amount of and in the same
currency as such drawing; provided that, anything contained in this
Agreement to the contrary notwithstanding, (i) unless the U.K.
Borrower shall have notified the U.K. Swingline Bank and the
Administrative Agent prior to Noon (London time) on the Business Day
of the date of such drawing that the U.K. Borrower intends to
reimburse the U.K. Swingline Bank for the amount of such drawing with
funds other than the proceeds of U.K. Swingline Loans, the U.K.
Borrower shall be deemed to have timely given a Notice of Borrowing to
the U.K. Swingline Bank requesting U.K. Swingline Loans on the
Business Day following the date on which such drawing is honored in an
amount equal to the Dollar Equivalent amount of such drawing, and (ii)
the U.K. Swingline Bank shall, on the date of such drawing, make U.K.
Swingline Loans in the amount of such drawing, the proceeds of which
shall be applied to reimburse the U.K. Swingline Bank for the Dollar
Equivalent amount of such drawing.
(d) Compensation.
(i) The U.K. Borrower agrees to pay the following amounts with
respect to all U.K. Swingline Letters of Credit:
(x) with respect to drawings made under any U.K. Swingline
Letter of Credit, interest, payable on demand, on the amount paid
by the U.K. Swingline Bank in respect of each such drawing from
and including the date of the drawing through the date such
amount is reimbursed by the U.K. Borrower (including any such
reimbursement out of the proceeds of Swingline Loans pursuant to
Section 1.19(c)) at a rate which is equal to the interest rate
then applicable to U.K. Swingline Loans for the period from the
date of such drawing to and including the first Business Day
after the date of such drawing and thereafter at a rate equal to
2% per annum in excess of the rate of interest otherwise payable
under this Agreement for U.K. Swingline Loans during such period;
provided that amounts reimbursed after 2:00 p.m. (London time) on
any date shall be deemed to be reimbursed on the next succeeding
Business Day;
(y) with respect to the issuance, amendment or transfer of
each U.K. Swingline Letter of Credit and each drawing made
thereunder, documentary and processing charges in accordance with
the U.K. Swingline Bank's standard schedule for such charges in
effect at the time of such amendment, transfer or drawing, as the
case may be.
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(ii) The U.K. Borrower agrees to pay to the U.K. Swingline
Bank in respect of each U.K. Swingline Letter of Credit
outstanding for the sole account of the U.K. Swingline Bank a
commission equal to 3.50% per annum of the maximum amount
available from time to time to be drawn under such outstanding
U.K. Swingline Letters of Credit, payable in arrears on and
through the last day of each month and calculated on the basis of
a 360-day year and the actual number of days elapsed or such
other basis as may be agreed to between the U.K. Swingline Bank
and the U.K. Borrower. Upon the happening and during the
continuance of an Event of Default, the commission referred to in
the preceding sentence shall be 5.50% per annum. In addition, the
U.K. Borrower agrees to pay to the U.K. Swingline Bank an amount
equal to any costs incurred by the U.K. Swingline Bank as a
result of funding any deposit or other reserve or charge required
by the Bank of England or any other authority which replaces all
or any of its functions and any charge imposed by the Financial
Services Authority or any other authority which replaces all or
any of its functions.
(e) Obligations Absolute. The obligation of the U.K.
Borrower to reimburse the U.K. Swingline Bank for drawings made
under the U.K. Swingline Letters of Credit issued by it shall be
unconditional and irrevocable and shall be paid strictly in
accordance with the terms of this Agreement under all
circumstances including, without limitation, the following
circumstances:
(i) any lack of validity or enforceability of any U.K.
Swingline Letter of Credit;
(ii) the existence of any claim, setoff, defense or other
right that the U.K. Borrower or any Affiliate of the U.K.
Borrower or any other Person may have at any time against a
beneficiary or any transferee of any U.K. Swingline Letter of
Credit (or any persons or entities for whom any such beneficiary
or transferee may be acting), the U.K. Swingline Bank, any Bank
or any other Person, whether in connection with this Agreement,
the transactions contemplated herein or any unrelated
transaction;
(iii) any draft, demand, certificate or any other document
presented under any U.K. Swingline Letter of Credit proving to be
forged, fraudulent, invalid or insufficient in any respect or any
statement therein being untrue or inaccurate in any respect;
(iv) payment by such U.K. Swingline Bank under any U.K.
Swingline Letter of Credit against presentation of a demand,
draft or certificate or other document that does not comply with
the terms of such U.K. Swingline Letter of Credit;
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(v) any other circumstance or happening whatsoever that is
similar to any of the foregoing; or
(vi) the fact that a Default or Event of Default shall have
occurred and be continuing;
provided, in each case, that payment by the U.K. Swingline Bank
under the applicable U.K. Swingline Letter of Credit shall not have
constituted gross negligence or willful misconduct of the U.K.
Swingline Bank under the circumstances in question (as determined by a
final judgment of a court of competent jurisdiction).
(f) Additional Payments. If by reason of (i) any change after the
effective date of Amendment No. 2 in applicable law, regulation, rule,
decree or regulatory requirement or any change in the interpretation
or application by any judicial or regulatory authority of any law,
regulation, rule, decree or regulatory requirement or (ii) compliance
by the U.K. Swingline Bank with any directive, request or requirement
(whether or not having the force of law) of any governmental or
monetary authority including, without limitation, Regulation D:
(x) the U.K. Swingline Bank shall be subject to any tax, levy,
charge or withholding of any nature or to any variation thereof
(except for changes in the rate of tax imposed on the net income or
net profits of such Bank or any tax on or measured by the capital of
the U.K. Swingline Bank or any franchise tax based on the net income
or net profits of such Bank, in any case pursuant to the laws of the
jurisdiction in which its principal office or applicable lending
office is located) or to any penalty with respect to the maintenance
or fulfillment of its obligations under this Section 1.19, whether
directly or by such being imposed on or suffered by the U.K. Swingline
Bank;
(y) any reserve, deposit or similar requirement is or shall be
applicable, imposed or modified in respect of any U.K. Swingline
Letter of Credit issued by the U.K. Swingline Bank; or
(z) there shall be imposed on the U.K. Swingline Bank any other
condition regarding this Section 1.19 or any U.K. Swingline Letter of
Credit;
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and the result of the foregoing is to directly or indirectly
increase the cost to the U.K. Swingline Bank of issuing, making or
maintaining any U.K. Swingline Letter of Credit, or to reduce the
amount receivable in respect thereof by the U.K. Swingline Bank, then
and in any such case the U.K. Swingline Bank shall, as promptly as
practical, but in any event within 90 days, after the U.K. Swingline
Bank obtains actual knowledge that the additional cost is incurred or
the amount received is reduced, notify the U.K. Borrower and the U.K.
Borrower shall pay on demand such amounts as the U.K. Swingline Bank
may specify to be necessary to compensate the U.K. Swingline Bank for
such additional cost or reduced receipt, together with interest on
such amount from the date demanded until payment in full thereof at a
rate per annum equal at all times to the rate applicable to U.K.
Swingline Loans then in effect; provided, however, that if the U.K.
Swingline Bank fails to give such notice within 90 days after it
obtains actual knowledge of such an event, the U.K. Swingline Bank
shall, with respect to compensation payable pursuant to this Section
1.19(f), only be entitled to payment under this Section 1.19(f) for
such costs or other amounts from and after the date 90 days prior to
the date that the U.K. Swingline Bank does give such notice. A
certificate in reasonable detail as to the amount of such increased
cost or reduced receipt, submitted to the U.K. Borrower and the
Administrative Agent by the U.K. Swingline Bank, as the case may be,
shall, absent manifest error, be final, conclusive and binding for all
purposes.
(g) Indemnification; Nature of U.K. Swingline Bank's Duties. In
addition to amounts payable as elsewhere provided in this Section
1.19, without duplication, the U.K. Borrower hereby agrees to protect,
indemnify, pay and save the U.K. Swingline Bank harmless from and
against any and all claims, demands, liabilities, damages, losses,
costs, charges and expenses (including reasonable attorneys' fees and
allocated costs of internal counsel) which such Bank may incur or be
subject to as a consequence, direct or indirect, of (i) the issuance
of the U.K. Swingline Letters of Credit or (ii) the failure of the
U.K. Swingline Bank to honor a drawing under any U.K. Swingline Letter
of Credit as a result of any Governmental Act.
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As between the U.K. Borrower and the U.K. Swingline Bank,
the U.K. Borrower assumes all risks of the acts and omissions of,
or misuse of the U.K. Swingline Letters of Credit issued by the
U.K. Swingline Bank at the U.K. Borrower's request by the
respective beneficiaries of such U.K. Swingline Letters of
Credit. In furtherance and not in limitation of the foregoing,
the U.K. Swingline Bank shall not be responsible: (i) for the
form, validity, sufficiency, accuracy, genuineness or legal
effects of any document submitted by any party in connection with
the application for and issuance of such U.K. Swingline Letters
of Credit, even if it should in fact prove to be in any or all
respects invalid, insufficient, inaccurate, fraudulent or forged;
(ii) for the validity or sufficiency of any instrument
transferring or assigning or purporting to transfer or assign any
such U.K. Swingline Letter of Credit or the rights or benefits
thereunder or proceeds thereof, in whole or in part, that may
prove to be invalid or ineffective for any reason; (iii) for
failure of the beneficiary of any such U.K. Swingline Letter of
Credit to comply fully with conditions required in order to draw
upon such U.K. Swingline Letter of Credit; (iv) for errors,
omissions, interruptions or delays in transmission or delivery of
any messages, by mail, cable, telegraph, telex or otherwise,
whether or not they are in cipher; (v) for errors in
interpretation of technical terms; (vi) for any loss or delay in
the transmission or otherwise of any document required in order
to make a drawing under any such U.K. Swingline Letter of Credit
or of the proceeds thereof; (vii) for the misapplication by the
beneficiary of any such U.K. Swingline Letter of Credit of the
proceeds of any drawing under such U.K. Swingline Letter of
Credit; and (viii) for any consequences arising from causes
beyond the control of the U.K. Swingline Bank, including, without
limitation, any Government Acts. None of the above shall affect,
impair, or prevent the vesting of any of the U.K. Swingline
Bank's rights or powers hereunder.
In furtherance and extension and not in limitation of the
specific provisions hereinabove set forth, any action taken or
omitted by the U.K. Swingline Bank in connection with the U.K.
Swingline Letters of Credit issued by it or the related
certificates, if taken or omitted in good faith, shall not put
the U.K. Swingline Bank under any resulting liability to the U.K.
Borrower.
Notwithstanding anything to the contrary contained in this
Section 1.19, the U.K. Borrower shall have no obligation to
indemnify the U.K. Swingline Bank in respect of any liability
incurred by the U.K. Swingline Bank arising solely out of and to
the extent of the gross negligence or willful misconduct of the
U.K. Swingline Bank (as determined by a final judgment of a court
of competent jurisdiction)."
(S) Section 2.01 of the Agreement is hereby amended by
inserting the phrase "once the Total Revolving Loan Commitment
has been reduced to zero," immediately after the number "(ii)"
appearing in the ninth line of such section.
(T) Section 2.03(a) of the Agreement is hereby amended by
(i) deleting the figure "1/2%" appearing in the first sentence
thereof and inserting the figure "3/4%" in lieu thereof and (ii)
by amending the second sentence thereof in its entirety to read
as follows:
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<PAGE>
"Accrued Commitment Commission shall be due and payable
monthly in arrears on the last Business Day of each month,
commencing with August 31, 1999 and on the Revolving Loan
Commitment Termination Date, based on the actual number of days
elapsed over a year of 360 days."
(U) The following new section is hereby added at the end of
Section 2.03 of the Agreement:
"(c) The Company agrees to pay The First National Bank of
Chicago, the fees set forth in, and at the times required by,
that certain letter agreement dated July 30, 1999 between the
Company and The First National Bank of Chicago, in respect of the
U.K. Swingline Loan."
(V) The second sentence of Section 2.04 of the Agreement is
hereby amended by inserting the words "which restriction is not
able to be cured if violated" immediately after the words "Dollar
Equivalent amount in this Agreement".
(W) The following new Section is hereby added at the end of
Section 2:
"2.07. Interest Adjustments. If the provisions of this
Agreement or any Note would at any time require payment by a
Borrower to a Bank of any amount of interest in excess of the
maximum amount then permitted by the law applicable to any Loan,
the interest payments to that Bank shall be reduced to the extent
and in such a manner as is necessary in order that such Bank
shall not receive interest in excess of such maximum amount. If,
as a result of the foregoing, a Bank shall receive interest
payments hereunder or under a Note in an amount less than the
amount otherwise provided hereunder, such deficit (hereinafter
called the "Interest Deficit") will, to the fullest extent
permitted by applicable law, cumulate and will be carried forward
(without interest) until the termination of this Agreement.
Interest otherwise payable to a Bank hereunder and under a Note
for any subsequent period shall be increased by the maximum
amount of the Interest Deficit that may be so added without
causing such Bank to receive interest in excess of the maximum
amount then permitted by the law applicable to the Loans.
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<PAGE>
The amount of any Interest Deficit relating to a Loan and a
Note shall be treated as a prepayment penalty and shall, to the
fullest extent permitted by applicable law, be paid in full at
the time of any voluntary prepayment by the Borrowers to the
Banks of all the Loans at that time outstanding pursuant to
Section 3.01 hereof. The amount of any Interest Deficit relating
to a particular Loan and Note at the time of any complete payment
of the Loans at that time outstanding (other than a voluntary
prepayment thereof pursuant to Section 3.01 hereof) shall be
canceled and not paid.
(X) Clause (iv) of the first sentence of Section 3.01 of the
Agreement is hereby amended by inserting the words "or any
Acquisition Term Loans" immediately after the words "any Term
Loans" appearing therein.
(Y) Section 3.01 of the Agreement is hereby amended by
adding the following sentence at the end thereof:
"Notwithstanding anything to the contrary contained herein,
the Sponsor Loans may not be prepaid prior to the Sponsor Loan
Repayment Date."
(Z) Section 3.02(A)(a) of the Agreement is hereby amended by
adding the following proviso at the end thereof:
"provided, however, that prior to the Sponsor Loan Repayment
Date, Non-Sponsor Acquisition Term Loans hereunder shall be
prepaid pursuant to this Section 3.02(A)(a) before any of the
Sponsor Loans are prepaid."
(AA) Section 3.02(A)(b) of the Agreement is hereby amended
by deleting "and (ii)" appearing in the fifth line thereof and
inserting the following in lieu thereof:
",(iii) the borrowing limitations set forth in Section 1.12 and
(iii)"
(BB) Section 3.02(A)(f) of the Agreement is hereby amended
by deleting the parenthetical phrase "(after giving effect to the
ability to reinvest any such Net Cash Proceeds pursuant to
Section 7.17)" appearing therein.
(CC) Section 3.02(A)(f) of the Agreement is hereby amended by adding
the following proviso at the end thereof:
"provided, however, that with respect to the Net Cash
Proceeds received by the Company and/or any of its Subsidiaries
from the sale of the Mondel Brake Business, the Company shall
apply or cause to be applied an amount equal to 50% of such Net
Cash Proceeds as provided in Section 3.02(B)(d)."
(DD) Section 3.02(A)(i) of the Agreement is hereby amended
in its entirety to read as follows:
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<PAGE>
"(i) At the Administrative Agent's discretion, on the
Business Day after the date of receipt thereof by the Company
and/or any of its Subsidiaries, the Company shall apply or cause
to be applied an amount equal to (x) 100% of any insurance
proceeds other than Net Proceeds or insurance proceeds of the
type referred to in clause (y) below (less reasonably incurred
costs to recover) received less any portion of such proceeds not
in excess of $3,000,000 attributable to a casualty, so long as
there exists no Event of Default, that is applied or committed to
be applied within a reasonable period of time to repair or
replace the damaged property; provided that any insurance
proceeds received in respect of an inventory loss shall not be
counted towards the $3,000,000 limit and shall not be required to
be applied as a mandatory prepayment pursuant to this Section
3.02(A)(i), and (y) 100% of any business interruption insurance
proceeds (less reasonably incurred costs to recover) over
$3,000,000 attributable to a casualty, in each case as provided
in Section 3.02(B)(a)."
(EE) Section 3.02(A)(j) of the Agreement is hereby amended
by deleting the figure "$10,000,000" appearing therein and
inserting the figure "$1,000,000" in lieu thereof.
(FF) Section 3.02(A)(k) of the Agreement is hereby amended
by deleting the figure "75%" appearing therein and inserting the
figure "100%" in lieu thereof.
(GG) Section 3.02(B)(a) of the Agreement is hereby amended
by adding the following phrase to the beginning thereof,
immediately preceding the word "Prepayments":
"Subject to the terms and provisions of the Sponsor
Participation Agreement,"
(HH) The following new Section is hereby added at the end of
Section 3.02(B) of the Agreement:
19
<PAGE>
"(d) Subject to the terms and provisions of the Sponsor
Participation Agreement, prepayments resulting from the sale of
the Mondel Brake Business to be applied pursuant to this Section
3.02(B)(d) shall be applied as follows: (i) first, on a pro rata
basis among the A Term Loans, the B Term Loans and any
outstanding Acquisition Term Loans as follows: (x) $712,500 of
the applicable Net Cash Proceeds shall be applied in the order of
maturity to the remaining Scheduled A Term Loans Principal
Payments, the remaining Scheduled B Term Loans Principal Payments
and the remaining Scheduled Acquisition Term Loan Principal
Payments and (y) the balance of the applicable Net Cash Proceeds
shall be applied in inverse order of maturity to the remaining
Scheduled A Term Loans Principal Payments, the remaining
Scheduled B Term Loans Principal Payments and the remaining
Scheduled Acquisition Term Loan Principal Payments; provided that
each holder of B Term Loans may, upon reasonable notice to the
Borrowers and the Administrative Agent, decline any such
prepayment, in which case such prepayment shall be applied to
Scheduled A Term Loans Principal Payments and Scheduled
Acquisition Term Loan Principal Payments as aforesaid; (ii)
second, as provided in clauses (ii) and (iii) of Section
3.02(B)(a) above. Amounts applied pursuant to this Section
3.02(B)(d) may not be reborrowed."
(II) Section 3.05(a) of the Agreement is hereby amended by
(i) inserting the words "and U.K. Swingline Letters of Credit"
immediately after the words "Letters of Credit" appearing in the
fourth and fifth lines of such section and (ii) inserting the
words "U.S. Swingline Loans," immediately preceding the words
"U.K. Swingline Loans" in clause (ii) of such section.
(JJ) Section 3.05(b) of the Agreement is hereby amended in
its entirety to read as follows:
20
<PAGE>
"(b) Subject to Section 1.10(f), if on any Computation Date
the Administrative Agent shall have determined that (i) the
aggregate outstanding Revolving Loans and the Dollar Equivalent
amount of the Swingline Loans and Letter of Credit Usage exceed
the lesser of (x) the Total Revolving Loan Commitment, (y) the
borrowing limitations set forth in Section 1.12 and (z) the
Borrowing Base as shown in the Borrowing Base Certificate that
was last delivered pursuant to Section 6.01, provided such
Borrowing Base Certificate was required to be delivered pursuant
to and was in compliance with Section 6.01 or was delivered after
the Borrowing Base Certificate last required to be delivered
pursuant to Section 6.01, (ii) the aggregate outstanding U.K.
Swingline Loans exceed the applicable Maximum Swingline Amount,
(iii) the aggregate outstanding Canadian Swingline Loans exceed
the applicable Maximum Swingline Amount, (iv) the aggregate
outstanding Revolving Loans and the Dollar Equivalent amount of
Swingline Loans (other than U.K. Swingline Letters of Credit)
exceed the limitations set forth in Section 1.12, or (v) the sum
of the Dollar Equivalent amount of Letter of Credit Usage plus
the Dollar Equivalent amount of U.K. Swingline Letter of Credit
Usage exceeds $10,000,000, in each such case due to a change in
applicable rates of exchange between U.S. Dollars, on the one
hand, and Pounds Sterling or Canadian Dollars or any other
applicable currency, on the other hand, then the Administrative
Agent shall give notice to the Applicable Borrowers that a
prepayment of Revolving Loans (or, if no Revolving Loans are
outstanding, payment of unreimbursed drawings under Letters of
Credit or, if none thereof, cash collateralization of outstanding
Letters of Credit), U.K. Swingline Loans (or payment of
unreimbursed drawings under U.K. Swingline Letters of Credit or
if none, cash collateralization of outstanding U.K. Swingline
Letters of Credit) or Canadian Swingline Loans is required or
that certain outstanding Letters of Credit or U.K. Swingline
Letters of Credit must be cash collateralized, as the case may
be, under this subsection, and the Applicable Borrowers agree if
such excess shall not have been prepaid or such Letters of Credit
or U.K. Swingline Letters of Credit cash collateralized (as the
case may be) within five (5) Business Days of such notice or if
within five (5) Business Days such excess has not been eliminated
by changes in currency exchange rates, then the Applicable
Borrowers shall make prepayments (by such repayment of Loans,
payment of unreimbursed drawings or cash collateralization) or
shall cash collateralize Letters of Credit or U.K. Swingline
Letters of Credit such that, after giving effect to such
prepayment or payment, cash collateralization and/or changes in
currency exchange rates, (i) the aggregate outstanding Revolving
Loans and the Dollar Equivalent amount of the Swingline Loans and
Letter of Credit Usage do not exceed the lesser of (x) the Total
Revolving Loan Commitments then available pursuant to Section
1.01(d), (y) the borrowing limitations set forth in Section 1.12
or (z) the Borrowing Base as shown in the Borrowing Base
Certificate that was last delivered pursuant to Section 6.01;
provided such Borrowing Base Certificate was required to be
delivered pursuant to and was in compliance with Section 6.01 or
was delivered after the Borrowing Base Certificate last required
to be delivered pursuant to Section 6.01, (ii) the Dollar
Equivalent amount of aggregate outstanding U.K. Swingline Loans
and Canadian Swingline Loans do not exceed the applicable Maximum
Swingline Amount, (iii) the aggregate outstanding Revolving Loans
and the Dollar Equivalent amount of Swingline Loans (other than
U.K. Swingline Letters of Credit) do not exceed the limitations
set forth in Section 1.12, and (iv) the sum of the Dollar
Equivalent amount of Letter of Credit Usage plus the Dollar
Equivalent amount of U.K. Swingline Letter of Credit Usage that
is not cash collateralized does not exceed $10,000,000."
(KK) Section 4.02(c)(i) of the Agreement is hereby amended by
deleting the date "October 31, 1997" appearing therein and inserting
the date "April 30, 1999" in lieu thereof.
(LL) Section 4.02 of the Agreement is hereby amended by adding
the following new section immediately after section (g) appearing
therein:
"(h) Borrowing Certificate. The Administrative Agent shall have
received a Notice of Borrowing."
(MM) Section 4.03 of the Agreement is hereby deleted in its
entirety.
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<PAGE>
(NN) The following new section is hereby added at the end of Section 4
of the Agreement:
"4.05. Conditions Precedent to All U.K. Swingline Letters of
Credit. The right of the U.K. Borrower to obtain the issuance of any
U.K. Swingline Letter of Credit from the U.K. Swingline Bank is
subject to prior or concurrent satisfaction of all of the following
conditions:
(A) Required Documentation. On or prior to the date of issuance
of a U.K. Swingline Letter of Credit, the U.K. Swingline Bank and the
Administrative Agent shall have received, in accordance with the
provisions of Section 1.19, a request for issuance with respect to
such U.K. Swingline Letter of Credit (the furnishing by the U.K.
Borrower of each such request for issuance shall be deemed to
constitute a representation and warranty of the U.K. Borrower to the
effect that the conditions set forth in 4.02 are satisfied as of the
date of delivery and will be satisfied on the relevant date of
issuance), all other information specified in Section 1.19, and such
other documents as the U.K. Swingline Bank may reasonably require in
connection with the issuance of such U.K. Swingline Letter of Credit.
(B) Conditions. On the date of issuance of each U.K. Swingline
Letter of Credit, all conditions precedent described in Section 4.02
shall be satisfied to the same extent as though the issuance of such
Letter of Credit were the making of a Revolving Loan."
(OO) Section 5.05 of the Agreement is hereby amended in its
entirety to read as follows:
"5.05. Use of Proceeds. (a) The proceeds of all A Term Loans and
B Term Loans to be made to the Company hereunder shall be utilized by
the Company to finance the Recapitalization and to pay related fees
and expenses.
(b) Proceeds of the Revolving Loans, proceeds of the Swingline
Loans and the proceeds of the Acquisition Term Loans made on or after
the effective date of Amendment No. 2, shall be utilized for working
capital and other general corporate purposes (including, without
limitation, to finance Acquisitions to the extent permitted by Section
7.22 hereof).
22
<PAGE>
(c) The proceeds of all Acquisition Term Loans made hereunder
prior to the effective date of Amendment No. 2 have been utilized to
provide the financing required to consummate acquisitions, to pay
related fees and expenses and to pay Indebtedness permitted by Section
7.04(i), all in accordance with the terms and provisions of this
Agreement as in effect prior to the effective date of Amendment No. 2.
(d) Neither the making of any Loan hereunder, nor the use of the
proceeds thereof, will violate or be inconsistent with the provisions
of Regulation G, T, U or X of the Board of Governors of the Federal
Reserve System."
(PP) The last sentence of the last paragraph of Section 5.11(b)
of the Agreement is hereby amended by deleting the date "October 31,
1997" appearing therein and inserting the date "April 30, 1999" in
lieu thereof.
(QQ) Section 5.11(c) of the Agreement is hereby amended in its
entirety to read as follows:
"(c) On May 25, 1999, the Company delivered to the Banks pro
forma consolidated income projections for the Company and its
Subsidiaries, pro forma consolidated balance sheet projections for the
Company and its Subsidiaries and pro forma consolidated cash flow
projections for the Company and its Subsidiaries, all for the fiscal
years ending October 31, 1999 through October 31, 2002, inclusive (the
"Projected Financial Statements"). The assumptions made in preparing
the Projected Financial Statements are reasonable as of the date of
such projections and as of the effective date of Amendment No. 2 and
all material assumptions with respect to the Projected Financial
Statements are set forth therein, it being recognized by the Banks
that such projections as to future events are not to be viewed as
facts and that actual results during the period or periods covered by
any such projections may differ from the projected results."
(RR) The following new section is hereby added at the end of
Section 5 of the Agreement:
"5.25. Bank Accounts. Attached hereto as Schedule 5.25 is a true
and complete list of each bank account maintained by the Company
and/or any of its Subsidiaries and the balance (if any) required to be
maintained in each such account by the applicable financial
institution where such account is located."
23
<PAGE>
(SS) The initial paragraph of each of Section 6 and Section 7 of
the Agreement are hereby amended by adding the following at the end of
each thereof immediately preceding the colon appearing therein:
"and all Letters of Credit and all U.K. Swingline Letters of
Credit have expired or been terminated, cancelled or cash
collateralized in an amount equal to 105% of the face amount of such
Letters of Credit and U.K. Swingline Letters of Credit"
(TT) Section 6.01(l) of the Agreement is hereby amended by
deleting the last sentence appearing therein.
(UU) Section 6.01(m) of the Agreement is hereby amended by
deleting in its entirety the proviso appearing therein.
(VV) Section 6.01 of the Agreement is hereby amended by adding
the following new sections to the end thereof:
"(n) Within twenty (20) Business Days after the last Business Day
of each month, (i) for each bank account maintained by the Company or
any of its Subsidiaries that has either average monthly receipts or an
average monthly balance of $100,000 or more (each a "Specified
Account"), a copy of the summary page (which shows the opening and
closing balances in such account) from the most recently available
monthly bank statement for such account and (ii) a certificate from
the Vice President of Finance, the Treasurer or the Controller of the
Company certifying that attached thereto is a true and complete list
of all Specified Accounts maintained by the Company or any of its
Subsidiaries.
(o) on Thursday of each week (commencing August 19, 1999), a
statement of total cash receipts and total cash disbursements on a
country by country basis for the prior week, together with (A)
comparisons to the amounts set forth in the Company's most recent
projections for such week and (B) projections for the following eight
(8) weeks, including without limitation anticipated payments of Loans,
if any, during such period."
(WW) The first sentence of Section 6.03(b) of the Agreement is
hereby amended by deleting the words "to the extent that such types
and such amounts of insurance are available at commercially reasonable
rates" appearing therein.
(XX) Section 6.13 of the Agreement is hereby amended in its
entirety to read as follows:
24
<PAGE>
"From time to time, at the request of the Administrative Agent or
the Required Banks, the Company will participate, and will cause its
chief financial officer to be available for and to participate, in a
meeting with the Agents and the Banks to be held at reasonable
intervals at locations and times requested by the Administrative Agent
and reasonably satisfactory to the Borrowers."
(YY) Section 6.14 of the Agreement is hereby amended in its
entirety to read as follows:
25
<PAGE>
"6.14. Pledge of Additional Collateral. Subject to the exceptions
set forth in Section 6.12(b), unless the Administrative Agent in its
reasonable discretion consents to any Additional Collateral (as
hereinafter defined) being excluded from the provisions of this
Section 6.14, within 30 days after the acquisition by the Company or
any of its Subsidiaries of (i) Real Property in the United States, the
United Kingdom or Canada; provided that for purposes of this Section
6.14, leased Real Property shall only be included if manufacturing
operations take place on such leased Real Property, (ii) assets (other
than the Real Property) of the type that would have constituted
Collateral (pursuant to any Security Document on the Closing Date or
Effective Date, as applicable) at the Closing Date or the Effective
Date (this clause (ii) shall include, without limitation, such assets
of any Subsidiary described in clause (iii) below) or (iii) capital
stock or other equity interest of any Subsidiary (other than a
Subsidiary of a Non-Guarantor Subsidiary), which shall be limited to
65% of the capital stock or other equity interest in the case of a
Foreign Subsidiary that is not a pass-through entity and where the
pledge would have the effects set forth in clause (a)(i) or (ii) of
the definition of Non-Guarantor Subsidiary (whether by capital
contribution or acquisition) (collectively, (i), (ii) and (iii); the
"Additional Collateral"), the Company will, and will cause each of its
Subsidiaries to, take all necessary action, including, without
limitation, the filing of appropriate financing statements under the
provisions of the UCC, applicable foreign, domestic or local laws,
rules or regulations in each of the offices where such filing is
necessary or appropriate, entering into or amending Security Documents
or, in the case where the Company or any of its Subsidiaries creates
or acquires a Subsidiary, entering into such additional pledge
agreements and security agreements in form and substance satisfactory
to the Collateral Agent (and, in the case of the acquisition of Real
Property in the United States, the United Kingdom or Canada,
satisfaction of the conditions set forth in Sections 4.01(b)(iv),
4.01(q) and 4.01(u) and, in the case of the acquisition of personal
property, satisfaction of the conditions set forth in Sections
4.01(b)(iv) (upon the request of the Collateral Agent) and 4.01(n)),
to grant to the Collateral Agent a perfected first priority Lien in
such Collateral subject to no other Liens other than Prior Liens and
other Liens expressly permitted by the applicable Security Document
pursuant to and to the full extent required by the Security Documents
and this Agreement. Notwithstanding the foregoing, (i) Non-Guarantor
Subsidiaries and (ii) Foreign Subsidiaries to the extent that
Additional Collateral of such Foreign Subsidiaries consisting of
inventory and receivables is not permitted to be pledged to the Banks
by Indebtedness incurred pursuant to Section 7.04(f), shall not be
required to comply with the provisions of the foregoing sentence. The
Borrowers shall use their reasonable best efforts to limit the
collateral that Foreign Subsidiaries acquired after the Effective Date
shall provide to lenders providing the facilities permitted by
Sections 7.04(f) and 7.04(g). All actions taken by the parties in
connection with the pledge of Additional Collateral, including,
without limitation, costs of counsel for the Agents or the Collateral
Agent, shall be for the account of the Borrowers, which shall pay all
sums due on demand."
(ZZ) The heading of Section 6.15 of the Agreement is hereby amended in
its entirety to read as follows:
"6.15. Security Interests. Further Assurances."
(AAA) The following paragraphs are hereby added at the end of
Section 6.15 of the Agreement:
"Upon the request of the Administrative Agent, the Company will,
and will cause its Subsidiaries to, duly execute and deliver, or cause
to be duly executed and delivered, at the cost and expense of the
Borrowers, such further instruments and documents as may be necessary
in the reasonable judgment of the Administrative Agent to carry out
the provisions and purposes of this Agreement and the other Credit
Documents including, without limitation, documentation to effect
further cash management arrangements requested by the Administrative
Agent.
The Company will, and will cause its Subsidiaries to, promptly
undertake to deliver or cause to be delivered to the Administrative
Agent from time to time such other documentation, consents,
authorizations and approvals in form and substance reasonably
satisfactory to the Administrative Agent, as the Administrative Agent
shall deem reasonably necessary or advisable to perfect or maintain
the Liens of the Agent for the benefit of the Banks."
(BBB) Section 6.18 of the Agreement is hereby deleted in its
entirety.
26
<PAGE>
(CCC)Section 6.20 of the Agreement is hereby amended by adding
the following new sections at the end thereof:
"(d) The Company shall, and shall cause its applicable
Subsidiaries to, implement a cash management system acceptable to the
Administrative Agent no later than September 10, 1999; and
(e) No later than September 10, 1999, the Company shall have
delivered to the Administrative Agent (i) a fully executed
Contribution Agreement, (ii) fully executed amendments to certain of
the Credit Documents, (iii) such documents and instruments, all as the
Administrative Agent or its counsel shall reasonably request, in order
to grant, maintain, perfect or confirm the security interests granted
to the Administrative Agent pursuant to the Credit Documents or to
carry out the provisions and purposes of any of the Credit Documents
and (iv) evidence (satisfactory to the Administrative Agent) of the
release of the charge granted by Morris Material Handling Limited
(formerly known as Morris Mechanical Handling Limited) ("MMHL") in
favor of ABN-AMRO BANK, N.V. with respect to MMHL's bank accounts at
ABN-AMRO BANK, N.V."
(DDD) Section 7.01 of the Agreement is hereby amended in its
entirety to read as follows:
"7.01. Conduct of Business. The Company will not, and will not
permit any of its Subsidiaries to, engage in any business other than
the business conducted by the Company and its Subsidiaries prior to
the Closing Date, the MHE Business and any businesses or activities
substantially similar thereto. Holdings will not engage in any
business other than holding the capital stock of its Subsidiaries;
provided that Holdings may hold the capital stock of Subsidiaries
which may engage in other businesses so long as (i) management of the
Company and its Subsidiaries continues to devote substantially all of
its time to the affairs of the Company and its Subsidiaries, (ii) no
resources of the Company and its Subsidiaries are utilized in any such
business, except for Dividends permitted by Section 7.08 and (iii)
Holdings may not provide credit support for any such Subsidiary except
for a limited guarantee to the extent of the fair market value of the
shares of such Subsidiary and supported solely by a pledge of the
shares of such Subsidiary."
(EEE) Section 7.03(c) of the Agreement is hereby amended by
deleting the figure "$5,000,000" appearing therein and inserting the
figure "$1,000,000" in lieu thereof.
27
<PAGE>
(FFF) Section 7.03(p) of the Agreement is hereby amended by
deleting the figure "$12,500,000" appearing therein and inserting the
figure "$2,500,000" in lieu thereof.
(GGG)Section 7.03 of the Agreement is hereby amended by adding
the following new clause to the end thereof:
"(q) Liens not otherwise permitted by the foregoing clauses (a)
through (o), granted to Persons (who are not Affiliates of the
Company) to secure the obligations of the Company or any of its
Subsidiaries under any contract pursuant to which such Person
receiving the Lien has or will be making progress payments to the
Company or any of its Subsidiaries provided, that the aggregate fair
market value of assets subject to Liens permitted by this Section
7.03(q) may not exceed $10,000,000 at any time."
(HHH) Section 7.04(g) is hereby amended in its entirety to read
as follows:
"(g) up to $11,000,000 aggregate principal amount of Indebtedness
at any one time outstanding of the Company's Subsidiaries, the
jurisdiction of incorporation, organization or formation of which is
located in Mexico, Singapore, South Africa or Australia; provided that
the amount of Indebtedness in each such country shall not exceed the
following: (i) $2,000,000 aggregate principal amount at any one time
outstanding in Mexico; (ii) $2,000,000 aggregate principal amount at
any one time outstanding in Singapore; (iii) $2,000,000 aggregate
principal amount at any one time outstanding in South Africa and (iv)
$5,000,000 aggregate principal amount at any one time outstanding in
Australia."
(III) Section 7.04(e) of the Agreement is hereby amended by
deleting the figure "$5,000,000" and by inserting the figure
"$1,000,000" in lieu thereof.
(JJJ) Section 7.04(f) of the Agreement is hereby amended in its
entirety to read as follows:
"(f) Indebtedness of Foreign Subsidiaries incurred to provide
working capital for Designated Acquisitions in an amount not to exceed
$15,000,000 aggregate principal amount outstanding at any time;"
(KKK) Section 7.04(i) of the Agreement is hereby amended by
deleting the words "a Designated Acquisition" appearing therein and inserting
the words "an Acquisition permitted to be made pursuant to the terms of this
Agreement" in lieu thereof.
28
<PAGE>
(LLL) Section 7.04(k) of the Agreement is hereby amended by
deleting the figure "$12,500,000" appearing therein and inserting the figure
"$2,500,000" in lieu thereof.
(MMM) Section 7.05 of the Agreement is hereby amended in its
entirety to read as follows:
"7.05. Capital Expenditures. The Company will not, and will not
permit any of its Subsidiaries to, make Consolidated Capital
Expenditures in any fiscal year for any purpose in excess of the
amounts set forth below for such fiscal year provided, that
Consolidated Capital Expenditures for the fiscal year ended October
31, 1998 shall only be for the period beginning on the Closing Date
and ending on October 31, 1998:
Amount
Fiscal Year ending in Millions
October 31, 1998 ............... $7.5
October 31, 1999 ............... 9.0
October 31, 2000 ................ 6.0
October 31, 2001 ................ 7.5
October 31, 2002 ................ 9.0
October 31, 2003 ................ 9.0
October 31, 2004 ................ 9.0
In addition, the amount of Consolidated Capital Expenditures
permitted by this Section 7.05 for any fiscal year shall be increased
for such year only by an amount equal to 75% of the excess of (x) the
permitted Consolidated Capital Expenditures for the immediately
preceding fiscal year in accordance with the foregoing chart (i.e.
without giving effect to the provisions of this paragraph) over (y)
the amount of Consolidated Capital Expenditures actually made in such
immediately preceding fiscal year."
(NNN) Section 7.06(j) of the Agreement is hereby amended in
its entirety to read as follows:
"(j) investments which the Company and its Subsidiaries are
contractually committed to make pursuant to contracts in existence on
the effective date of Amendment No. 2 as set forth on Schedule 7.06(j)
hereto;"
(OOO) Section 7.06(m) of the Agreement is hereby amended in
its entirety to read as follows:
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<PAGE>
"(m) additional loans, advances and/or investments of a
nature not contemplated by the foregoing clauses (a) through (l)
and (n) through (p); provided that all loans, advances and
investments made in any fiscal year pursuant to this clause (m)
shall not exceed $1,000,000 in the aggregate and $4,000,000 in
the aggregate during the term of this Agreement for the Company
and its Subsidiaries;"
(PPP) Section 7.06(o) of the Agreement is hereby amended in
its entirety to read as follows:
"(o) Designated Acquisitions and any Acquisition permitted under
the terms of this Agreement; and"
(QQQ) Clause (a) of Section 7.07 of the Agreement is hereby
amended by deleting the phrase "of the type described in Section
7.04(b), (c), (d)" appearing therein and inserting the phrase "of
the type described in Section 7.04(b), (c), (d), (h)" in lieu
thereof.
(RRR) Clause (b) of Section 7.07 of the Agreement is hereby
amended by deleting the words "that Indebtedness of the type
described in Section 7.04(i) may be prepaid with Acquisition Term
Loans in accordance with Section 4.03 and" appearing therein.
(SSS)Clause (vi) of Section 7.08 of the Agreement is hereby
amended in its entirety to read as follows:
"(vi) so long as no Default or Event of Default shall have
occurred and be continuing or would result therefrom, from and
after the fifth anniversary of the Closing Date, the Company may
pay Dividends to Holdings in order to permit Holdings to pay cash
dividends on the Preferred Stock."
(TTT)Clause (i) of Section 7.09 of the Agreement is hereby
amended in its entirety to read as follows:
"(i) transactions between or among Credit Parties and
Intercompany Advances;"
(UUU)Section 7.09 of the Agreement is hereby amended by
adding the following new clause at the end thereof:
30
<PAGE>
"and (ix) any transaction between or among any Credit Party
and any Subsidiary of the Company that is not a Credit Party
which transaction (A) is consented to by the Administrative Agent
in its reasonable discretion or (B) does not involve aggregate
consideration in excess of $250,000 for any one transaction or
does not involve aggregate consideration which when added to the
aggregate consideration involved in all other transactions that
have been permitted by this subclause (B) in excess of
$2,500,000."
(VVV)Clause (v) of Section 7.09 of the Agreement is hereby
amended in its entirety to read as follows:
"(v) payments to Chartwell (x) pursuant to the Chartwell
Financial Advisory Agreement on the Closing Date and (y) for
management services pursuant to the Chartwell Management
Consulting Agreement not to exceed $500,000 in cash on or about
each of April 1 and October 1 of each year, plus reasonable
expenses; provided, in the case of (y), that (A) 50% of such fees
due on each such date shall be deferred by Chartwell pursuant to,
and in accordance with, the Sponsor Participation Agreement until
the Sponsor Loan Repayment Date and (B) 100% of such fees shall
accrue and shall not be paid by the Company at any time after the
occurrence and during the continuance of an Event of Default
pursuant to Section 8.01 until such Event of Default is cured,
whereupon (1) if it is prior to the Sponsor Loan Repayment Date,
50% of such accrued and unpaid fees may be paid and (2) if it is
on or after the Sponsor Loan Repayment Date, 100% of such accrued
and unpaid fees may be paid;"
(WWW) Section 7.10 of the Agreement is hereby amended in its
entirety to read as follows:
"7.10. Total Interest Coverage Ratio. The ratio of (i)
Consolidated EBITDA for the Company and its Subsidiaries to (ii)
Consolidated Interest Expense for the Company and its
Subsidiaries, minus any Sponsor Loan Interest, minus the
aggregate amount of new Sponsor Loans actually funded in cash by
the Sponsors pursuant to, and in accordance with, the Sponsor
Participation Agreement, in each case for or during the Test
Period ending on each date listed below, shall not be less than
the ratio set forth opposite such date below:
Test Period ending Ratio
July 31, 1998 .............. 1.35 to 1.0
October 31, 1998 .......... 1.35 to 1.0
January 31, 1999 .......... 1.35 to 1.0
April 30, 1999 ............ 1.17 to 1.0
July 31, 1999 .............. .77 to 1.0
October 31, 1999 ........... .80 to 1.0
January 31, 2000 ........... .88 to 1.0
April 30, 2000 ............ 1.00 to 1.0
July 31, 2000 ............. 1.13 to 1.0
October 31, 2000 .......... 1.13 to 1.0
January 31, 2001 .......... 1.25 to 1.0
April 30, 2001 ............ 1.50 to 1.0
July 31, 2001 ............. 1.50 to 1.0
October 31, 2001 .......... 1.75 to 1.0
January 31, 2002 .......... 1.75 to 1.0
April 30, 2002 ............ 1.75 to 1.0
July 31, 2002 ............. 1.75 to 1.0
October 31, 2002 .......... 2.00 to 1.0
January 31, 2003 .......... 2.00 to 1.0
April 30, 2003 ............ 2.00 to 1.0
July 31, 2003 ............. 2.00 to 1.0
October 31, 2003 .......... 2.00 to 1.0
January 31, 2004 .......... 2.00 to 1.0
April 30, 2004 ............ 2.00 to 1.0
July 31, 2004 ............. 2.00 to 1.0
October 31, 2004 .......... 2.00 to 1.0
January 31, 2005 .......... 2.00 to 1.0"
(XXX) Section 7.11 of the Agreement is hereby amended by
inserting the letter "(a)" at the beginning thereof, immediately preceding the
words "The Company will".
(YYY)The chart appearing in Section 7.11 of the Agreement is hereby amended
in its entirety to read as follows:
Test Period ending Ratio
April 30, 2001 ..... 1.10 to 1.0
July 31, 2001 ...... 1.10 to 1.0
October 31, 2001 ... 1.10 to 1.0
January 31, 2002 ... 1.10 to 1.0
April 30, 2002 ..... 1.10 to 1.0
July 31, 2002 ...... 1.10 to 1.0
October 31, 2002 ... 1.10 to 1.0
January 31, 2003 ... 1.10 to 1.0
April 30, 2003 ..... 1.10 to 1.0
July 31, 2003 ...... 1.10 to 1.0
October 31, 2003 ... 1.10 to 1.0
January 31, 2004 ... 1.10 to 1.0
April 30, 2004 ..... 1.10 to 1.0
July 31, 2004 ...... 1.10 to 1.0
October 31, 2004 ... 1.10 to 1.0
January 31, 2005 ... 1.10 to 1.0"
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<PAGE>
(ZZZ) The following new section is hereby added at the end of
Section 7.11 of the Agreement, immediately after the chart appearing therein:
"(b) The Company will not permit the ratio of (i) Consolidated EBITDA of
the Company and its Subsidiaries to (ii) the sum of the Consolidated Interest
Expense, plus the Consolidated Capital Expenditures, plus the Consolidated Cash
Taxes in each case for the Company and its Subsidiaries, minus any Sponsor Loan
Interest, minus the aggregate amount of new Sponsor Loans actually funded in
cash by the Sponsors pursuant to, and in accordance with, the Sponsor
Participation Agreement, during or for the Test Period ending on each date
listed below, to be less than the ratio set forth opposite such date below:
Test Period Ratio
July 31, 2000 .97 to 1.00
October 31, 2000 .97 to 1.00
January 31, 2001 1.10 to 1.00"
(AAAA) The chart appearing in Section 7.12(a) of the Agreement is hereby
amended in its entirety to read as follows:
Test Period ending Ratio
April 30, 2001 ............ 5.50 to 1.0
July 31, 2001 ............. 5.35 to 1.0
October 31, 2001 .......... 5.00 to 1.0
January 31, 2002 .......... 4.90 to 1.0
April 30, 2002 ............ 4.75 to 1.0
July 31, 2002 ............. 4.60 to 1.0
October 31, 2002 .......... 4.40 to 1.0
January 31, 2003 .......... 4.20 to 1.0
April 30, 2003 ............ 4.00 to 1.0
July 31, 2003 ............. 4.00 to 1.0
October 31, 2003 .......... 4.00 to 1.0
January 31, 2004 .......... 4.00 to 1.0
April 30, 2004 ............ 4.00 to 1.0
July 31, 2004 ............. 4.00 to 1.0
October 31, 2004 .......... 4.00 to 1.0
January 31, 2005 ......... 4.00 to 1.0"
32
<PAGE>
(BBBB) The chart appearing in Section 7.12(b) of the Agreement
is hereby amended in its entirety to read as follows:
Test Period ending Ratio
April 30, 2001 .............. 2.25 to 1.0
July 31, 2001 ............... 2.25 to 1.0
October 31, 2001 ............ 2.25 to 1.0
January 31, 2002 ............ 2.25 to 1.0
April 30, 2002 .............. 2.25 to 1.0
July 31, 2002 ............... 2.25 to 1.0
October 31, 2002 ............ 2.00 to 1.0
January 31, 2003 ............ 2.00 to 1.0
April 30, 2003 .............. 2.00 to 1.0
July 31, 2003 ............... 2.00 to 1.0
October 31, 2003 ............ 2.00 to 1.0
January 31, 2004 ............ 2.00 to 1.0
April 30, 2004 .............. 2.00 to 1.0
July 31, 2004 ............... 2.00 to 1.0
October 31, 2004 ............ 2.00 to 1.0
January 31, 2005 ........... 2.00 to 1.0"
(CCCC) The chart appearing in Section 7.13 of the Agreement is hereby
amended in its entirety to read as follows:
Minimum EBITDA
Test Period ($Millions)
October 31, 1998 ......................... 39.50
January 31, 1999 ........................ 35.60
April 30, 1999 .......................... 30.10
July 31, 1999 ........................... 21.00
October 31, 1999 ........................ 18.25
January 31, 2000 ........................ 20.25
April 30, 2000 .......................... 22.00
July 31, 2000 ........................... 25.50
October 31, 2000 ........................ 29.50
January 31, 2001 ........................ 34.00
April 30, 2001 .......................... 50.40
July 31, 2001 ........................... 50.40
October 31, 2001 ........................ 54.60
January 31, 2002 ........................ 54.60
April 30, 2002 .......................... 57.20
33
<PAGE>
July 31, 2002 ....................... 57.20
October 31, 2002 .................... 61.00
January 31, 2003 .................... 61.00
April 30, 2003 ...................... 61.00
July 31, 2003 ....................... 61.00
October 31, 2003 .................... 61.00
January 31, 2004 .................... 61.00
April 30, 2004 ...................... 61.00
July 31, 2004 ....................... 61.00
October 31, 2004 .................... 61.00
January 31, 2005 .................... 61.00
(DDDD) Section 7.17 (a) of the Agreement is hereby amended in its
entirety to read as follows:
"7.17. Asset Sales. (a) The Company will not, and will not permit any
of its Subsidiaries to, make any Asset Sale except (i) the sale of the
Mondel Brake Business and (ii) Assets Sales made after the effective date
of Amendment No. 2 which on an aggregate basis over the remaining term of
this Agreement, do not involve assets having an aggregate fair market value
of more than $3,000,000; provided, that with regard to any Asset Sale
permitted by this Section 7.17: (A) the sale price of the asset(s) subject
to such Asset Sale shall not be less than the fair market value of such
asset(s) at the time of sale thereof, (B) not less than 90% of the
aggregate sale price of the asset(s) subject to such Asset Sale shall be
payable in cash on the date of such sale, (C) any non-cash proceeds
received from such Asset Sale shall be pledged to the Collateral Agent
pursuant to, and in accordance with, the applicable Security Documents and
shall constitute Collateral, (D) if such sale is to an Affiliate, such sale
shall be made in compliance with Section 7.09, and (E) upon the receipt of
Net Cash Proceeds from such Asset Sale, the Company and its Subsidiaries
shall have complied with the mandatory prepayment and Commitment reduction
provisions of this Agreement."
(EEEE) Section 7.18(iv) of the Agreement is hereby amended by
inserting the words "and in existence on the effective date of Amendment
No. 2 or in connection with Acquisitions permitted to be made pursuant to
the terms of this Agreement" immediately after the words "Designated
Acquisitions" appearing therein.
(FFFF) Clauses (ix), (x) and (xi) of Section 7.18 are hereby amended
in their entirety to read as follows:
34
<PAGE>
"(ix)reserves for adjustments in connection with any Asset Sale which
reserves are established in accordance with GAAP;
(x) guarantees by the Company of obligations not constituting
Indebtedness of its Subsidiaries; and
(xi) customary indemnification and liquidated damage obligations in
connection with sales of assets not constituting Asset Sales, provided such
obligations (A) are given in the ordinary course of the Company's or the
applicable Subsidiary's business, in accordance with past practices and in
the exercise of the Company's or the applicable Subsidiary's reasonable
judgment and (B) are customary given the type and size of the sales
transaction."
(GGGG) Section 7.20 of the Agreement is hereby amended by deleting the
words "under Section 7.17 hereof" appearing therein and inserting the words
"under this Agreement" in lieu thereof.
(HHHH) The following new sections are hereby added at the end of
Section 7 of the Agreement:
"7.21. Cash Management. The Company will not, and will not permit any
of its Subsidiaries to, (a) open or maintain any bank account other than
the bank accounts listed on Schedule 5.25 hereto, without the
Administrative Agent's prior written consent or (b) maintain balances of
collected funds in any accounts (other than those listed on Schedule 5.25
marked with an asterisk and those accounts with respect to which the
applicable financial institution at which such account is maintained has
executed a letter agreement relating to cash management arrangements in
form and substance satisfactory to the Administrative Agent) in an
aggregate amount for the Company and its Subsidiaries taken together, in
excess of $1,000,000 at any one time.
7.22. Acquisitions. The Company will not, and will not permit any of
its Subsidiaries to, make Acquisitions on or after the effective date of
Amendment No. 2, other than an Acquisition (i) which involves assets to be
used in, or a Person engaged in, the MHE Business, (ii) with respect to
which the Banks shall have received at least five (5) Business Days' prior
written notice from the Company or the applicable Subsidiary and (iii)
which is not otherwise prohibited by this Agreement."
(IIII) Section 8.02 of the Agreement is hereby amended by inserting
the word "Holdings," immediately preceding the words "any Credit Party"
appearing therein.
35
<PAGE>
(JJJJ) Section 8.03 of the Agreement is hereby amended in its entirety
to read as follows:
"8.03. Covenants. Holdings or any Credit Party or its respective
Subsidiaries shall (a) default in the due performance or observance by it
of any term, covenant or agreement contained in Section 6.10, 6.12, 6.14,
6.15, 6.16 or Section 7 hereof or Section 1.1 of any Mortgage of Real
Property in the United States or (b) default in the due performance or
observance by it of any other term, covenant or agreement contained in this
Agreement or any Credit Document (other than those referred to in Section
8.01, 8.02, 8.03(a), 8.08 or 8.11) and such default shall continue
unremedied for a period of at least thirty (30) days after the date of such
default; or"
(KKKK) Section 8.04 of the Agreement is hereby amended (i) by
inserting the word "Holdings," at the beginning of subsection (a) thereof
immediately preceding the words "Any Credit Party"; (ii) by inserting the
word "Holdings," immediately preceding the words "all Credit Parties"
appearing in clause (i) of subsection (a) thereof; and by inserting the
word "Holdings," immediately preceding the words "any Credit Party"
appearing in subsection (b) thereof".
(LLLL) Section 8.06 of the Agreement is hereby amended by adding the
words "Employee Benefit Plans or" immediately preceding the words "Foreign
Plans" appearing therein.
(MMMM) Section 8.08 of the Agreement is hereby amended by deleting the
figure "$2,500,000" appearing therein and inserting the figure "$500,000"
in lieu thereof.
(NNNN) Section 8.09 of the Agreement is hereby amended by inserting
the word "Holdings", immediately preceding the words "any Credit Party" and
"all Credit Parties" appearing therein.
(OOOO) The following new section is hereby added to Section 8 of the
Agreement immediately after Section 8.10:
"8.11. Borrowing Base Certificate. The Company shall have failed to
submit any Borrowing Base Certificate to the Administrative Agent within
fifteen (15) Business Days after the end of any month."
(PPPP) Clause (ii) of the last paragraph of Section 8 of the Agreement
is hereby amended by inserting the words "Holdings and" immediately
preceding the words "each Credit Party" appearing therein.
36
<PAGE>
(QQQQ) The definition of "A Term Loan Commitment" appearing in Section
9 of the Agreement is hereby amended in its entirety to read as follows:
"`A Term Loan Commitment' means, with respect to each Bank, the amount
set forth (i) opposite such Bank's name on Schedule 1 hereto in the column
entitled "A Term Loan Commitment" or (ii) in any applicable Assignment and
Assumption Agreement to which it may be a party, as the case may be, as
such amount may be reduced from time to time in accordance with the terms
of this Agreement."
(RRRR) The definition of "Account" appearing in Section 9 of the
Agreement is hereby amended by deleting the following words "and including
accounts for goods shipped or goods subject to a progress, percentage of
completion or similar accounting or payment method, which accounts are
unbilled; provided the invoice for such goods is sent within 15 days of the
date the goods were shipped" from clause (i) appearing therein.
(SSSS) The definition of "Acquisition Term Loan Closing Date"
appearing in Section 9 of the Agreement is hereby deleted in its entirety.
(TTTT) The definition of "Acquisition Term Loan Commitment" appearing
in Section 9 of the Agreement is hereby amended in its entirety to read as
follows:
"`Acquisition Term Loan Commitment' means, with respect to each Bank,
the amount set forth (i) opposite such Bank's name on Schedule 1 hereto in
the column entitled "Acquisition Term Loan Commitment" or (ii) in any
applicable Assignment and Assumption Agreement to which it may be a party,
as the case may be, as such amount may be reduced from time to time in
accordance with the terms of this Agreement."
(UUUU) The definition of "B Term Loan Commitment" appearing in Section
9 of the Agreement is hereby amended in its entirety to read as follows:
"`B Term Loan Commitment' means, with respect to each Bank, the amount
set forth (i) opposite such Bank's name on Schedule 1 hereto in the column
entitled "B Term Loan Commitment" or (ii) in any applicable Assignment and
Assumption Agreement to which it may be a party, as the case may be, as
such amount may be reduced from time to time in accordance with the terms
of this Agreement."
(VVVV) The definition of "Bank" appearing in Section 9 of the
Agreement is hereby amended in its entirety to read as follows:
37
<PAGE>
"`Bank' or `Banks' means the financial institutions whose names appear
at the foot hereof and any assignee of a Bank pursuant to Section 11.04
hereof, and their respective successors."
(WWWW) The definition of "Borrowing Base" appearing in Section 9 of
the Agreement is hereby amended in its entirety to read as follows:
"`Borrowing Base' means an amount equal to the sum (without any double
counting) of (i) 85% of the Eligible Accounts Receivable; provided that the
advance rate shall be 50% for the additional $10,000,000 of Eligible
Accounts Receivable specified in clause (e) of the definition thereof, (ii)
50% of the Eligible Inventory that is not Work in Process Inventory and
(iii) 35% of Work in Process Inventory."
(XXXX) The definition of "Business Day" appearing in Section 9 of the
Agreement is hereby amended by adding the words "are authorized or required
by law to close" immediately after the parenthetical phrase appearing in
the third and fourth lines thereof.
(YYYY) The definition of "Canadian Swingline Loan Commitment"
appearing in Section 9 of the Agreement is hereby amended in its entirety
to read as follows:
"`Canadian Swingline Loan Commitment' means, with respect to each
Bank, the amount set forth (i) opposite such Bank's name on Schedule 1
hereto in the column entitled "Canadian Swingline Loan Commitment" or (ii)
in any applicable Assignment and Assumption Agreement to which it may be a
party, as the case may be, as such amount may be reduced from time to time
in accordance with the terms of this Agreement."
(ZZZZ) The definition of "Computation Date" appearing in Section 9 of
the Agreement is hereby amended by deleting the words "or the U.K.
Swingline Bank, as the case may be," appearing therein.
(AAAAA) The definition of "Consolidated Capital Expenditures"
appearing in Section 9 of the Agreement is hereby amended in its entirety
to read as follows:
38
<PAGE>
"`Consolidated Capital Expenditures" of any Person means, for any
period, the amount required to be included in capital assets on the
consolidated balance sheet of such Person in conformity with GAAP, but
excluding expenditures made in connection with the replacement,
substitution or restoration of assets (i) to the extent financed from
insurance proceeds paid on account of the loss of or damage to the assets
being replaced or restored, (ii) with awards of compensation arising from
the taking by eminent domain or condemnation of the assets being replaced,
(iii) with regard to equipment that is purchased simultaneously with the
trade-in of existing equipment, fixed assets or improvements, the credit
granted by the seller of such equipment for the trade-in of such equipment,
fixed assets or improvements; provided that Consolidated Capital
Expenditures for any such period shall in any event include the cash
purchase price paid in such period in connection with any Acquisition made
on or after the effective date of Amendment No. 2."
(BBBBB The definition of "Contingent Obligations" appearing in Section
9 of the Agreement is hereby amended by deleting the words "and amounts
that are included in Section 7.18" appearing at the end of the first
sentence of such definition.
(CCCCC The definition of "Credit Documents" appearing in Section 9 of
the Agreement is hereby amended by adding the following text "and (v) the
Contribution Agreement" at the end thereof.
(DDDDD The definition of "Designated Acquisition" appearing in Section
9 of the Agreement is hereby amended in its entirety to read as follows:
"`Designated Acquisition' shall mean any Acquisition that (i) was
completed prior to the effective date of Amendment No. 2 and (ii) was
permitted to be made under the terms and provisions of the Credit Agreement
as in effect on the date of such Acquisition."
(EEEEE The parenthetical phrase appearing in the fourth and fifth
lines of the definition of "Eligible Accounts Receivable" appearing in
Section 9 of the Agreement is hereby amended in its entirety to read as
follows:
"(excluding any Unbilled Accounts and any Accounts set forth in
clauses (ii) through (vi) of such definition)"
(FFFFF The definition of "Eligible Inventory" appearing in Section 9
of the Agreement is hereby amended (i) by inserting the words "and goods in
transit between a Credit Party and an Affiliate of a Credit Party" at the
end of clause (B) appearing therein and (ii) by adding the following text
at the end of the first sentence:
"; plus (D) the amount by which Eligible Inventory determined solely
pursuant to clause (A) above shall have been reduced as a result of
percentage of completion accounting provided, such amount has not been
included in the Borrowing Base pursuant to clause (iii) of the definition
thereof."
39
<PAGE>
(GGGGG The definition of "Eurodollar Rate" appearing in Section 9 of
the Agreement is hereby amended by adding the following text at the end of
such definition:
"by a percentage equal to 100% minus the then stated maximum rate of
all reserve requirements (including, without limitation, any marginal,
emergency, supplemental, special or other reserves) applicable to any
member bank of the Federal Reserve System in respect to Eurocurrency
liabilities as defined in Regulation D (or any successor category of
liabilities under Regulation D)"
(HHHHH Clause (e) of the definition of "Excess Cash Flow" appearing in
Section 9 of the Agreement is hereby amended in its entirety to read as
follows:
"(e) for the period from November 1, 1998 through the effective date
of Amendment No. 2, 100% of the funds used on or prior to the date payments
are due under Section 3.02(A)(g), for the applicable period to make
Designated Acquisitions (other than to the extent Acquisition Term Loans or
the $12,500,000 Revolving Loan basket were used in accordance with the
Credit Agreement then in effect)."
(IIIII The definition of "Guarantees" appearing in Section 9 of the
Agreement is hereby amended (i) by deleting the words "U.K. Subsidiary
Guarantee" and inserting the words "U.K. Subsidiary Guarantees" in lieu
thereof and (ii) by deleting the number "6.17" and inserting the phrase
"6.16 or otherwise in connection with the transactions contemplated hereby"
in lieu thereof.
(JJJJJ Clause (viii) of the definition of "Indebtedness" appearing in
Section 9 of the Agreement is hereby amended by deleting the word "net"
appearing therein.
(KKKKK The first proviso of the definition of "Intercompany Advances"
appearing in Section 9 of the Agreement is hereby amended in its entirety
to read as follows:
"provided that the aggregate amount of Intercompany Advances made to a
Foreign Subsidiary of the Company which is a Non-Guarantor Subsidiary shall
not exceed an amount at any time outstanding equal to $14,000,000; and"
(LLLLL Clause (ii) of the second proviso of the definition of
"Intercompany Advances" appearing in Section 9 of the Agreement is hereby
amended by inserting the words "or Acquisitions permitted pursuant to the
terms of this Agreement" immediately after the words "Designated
Acquisitions" appearing therein.
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<PAGE>
(MMMMM The definition of "Interest Margin" appearing in Section 9 of
the Agreement is hereby amended in its entirety to read as follows:
"`Interest Margin' shall mean, in respect of (i) Base Rate Loans,
2.00% and (ii) Reserve Adjusted Eurodollar Loans, 3.50%. The Interest
Margin in respect of Swingline Loans shall be that margin agreed among the
Applicable Borrower, the applicable Swingline Bank and the Administrative
Agent. The Interest Margin in respect of Acquisition Term Loans that are
Sponsor Loans shall be that margin set forth in Section 5 of the Sponsor
Participation Agreement."
(NNNNN The definition of "Letter of Credit" appearing in Section 9 of
the Agreement is hereby amended by inserting the following phrase at the
end thereof:
"but specifically excluding any U.K. Swingline Letter of Credit."
(OOOOO The definition of "Net Cash Proceeds" appearing in Section 9 of
the Agreement is hereby amended in its entirety to read as follows:
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<PAGE>
"`Net Cash Proceeds' means with respect to any Asset Sale: (a) the
aggregate cash proceeds received by the Company or the applicable
Subsidiary (including, without limitation, all cash proceeds received by
way of (i) deferred payment of principal pursuant to a note or installment
receivable or otherwise, but only as and when received and (ii) receivables
retained by the Company or any of its Subsidiaries as part of the sales
consideration), minus (b) reasonable and customary brokerage commissions
and other reasonable and customary fees and direct expenses (including
reasonable and customary fees and expenses of counsel and investment
bankers and reasonable and customary inventory liquidation costs actually
paid by the Company or the applicable Subsidiary) related to such sale,
lease, transfer or other disposition, minus (c) payments made to retire
Indebtedness (other than the Loans) secured by such assets being sold or
otherwise disposed of where payment of such Indebtedness is required in
connection with such sale or disposition provided that (i) with respect to
taxes, expenses shall only include taxes to the extent that taxes are
payable in cash in the current year or in the next succeeding year with
respect to the current year as a result of such Asset Sale; (ii) Net Cash
Proceeds shall not include any amounts or items included in the definition
of Financing Proceeds or Net Financing Proceeds (including in any proviso
appearing therein or exclusion therefrom) and (iii) Net Cash Proceeds shall
not include appropriate amounts to be provided by the Company or a
Subsidiary as a reserve, in accordance with GAAP and approved by the
Administrative Agent, against any liabilities associated with the assets
sold or disposed of in such Asset Sale and retained by the Company or a
Subsidiary after such Asset Sale, including, without limitation, pension
and other post-employment benefit liabilities and liabilities related to
environmental matters or against any indemnification obligations associated
with the assets sold or disposed of in such Asset Sale, provided, however,
that at such time as such amounts are no longer reserved or such reserve is
no longer necessary (but in no event longer than 18 months from the receipt
of such proceeds), any remaining amounts shall become Net Cash Proceeds to
be allocated in accordance with the terms of this Agreement."
(PPPPP The definition of "Obligations" appearing in Section 9 of the
Agreement is hereby amended in its entirety to read as follows:
"`Obligations' means all obligations (a) whether, direct or indirect,
contingent or absolute, of every type or description and at any time
existing, of the Borrowers to make due and punctual payment of (i)
principal of and all interest on the Loans, the Commitment Commission, any
reimbursement obligations in respect of Letters of Credit, costs and
attorneys' fees and all other monetary obligations of any of the Borrowers
to any of the Agents, any Issuing Bank or any Bank under or in respect of
this Agreement, any Note, any other Credit Document or any fee letter, (ii)
all amounts payable by any of the Borrowers to any Bank under any Currency
Protection Agreement or Interest Rate Agreement, provided that the
Administrative Agent shall have received written notice thereof within ten
(10) Business Days after execution of such Currency Protection Agreement or
Interest Rate Agreement and (iii) amounts payable to Canadian Imperial Bank
of Commerce in connection with any bank account maintained by any of the
Borrowers or any other Credit Party at Canadian Imperial Bank of Commerce
or any other banking services provided to any of the Borrowers or any other
Credit Party by Canadian Imperial Bank of Commerce with respect to, or in
any way related to, any of the Credit Documents (including, without
limitation, interest accruing at the then applicable rate provided in this
Agreement after the maturity of the Loans and interest accruing at the then
applicable rate provided in this Agreement after the filing of any petition
in bankruptcy or the commencement of any insolvency, reorganization or like
proceeding, relating to any of the Borrowers, whether or not a claim for
post-filing or post-petition interest is allowed in such proceeding) and
(b) all other obligations of any of the Borrowers or any other Credit Party
pursuant to this Agreement and any other Credit Document."
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<PAGE>
(QQQQQ The definition of "Pledged Securities" appearing in Section 9
of the Agreement is hereby amended in its entirety to read as follows:
"`Pledged Securities' means all Pledged Securities under the U.S.
Security Agreement, the U.K. Security Agreements and the Pledge
Agreements."
(RRRRR The definition of "Real Property" appearing in Section 9 of the
Agreement is hereby amended in its entirety to read as follows:
"`Real Property' means any and all parcels of real property acquired,
leased or otherwise owned by any Credit Party together with, in each case,
all improvements and appurtenant fixtures and equipment, easements and
other property and rights incidental to the ownership, lease or operation
thereof."
(SSSSS Clause (x) of the definition of "Replacement Assets" appearing
in Section 9 of the Agreement is hereby amended by deleting the words "or
in a business similar or reasonably related thereto" appearing therein and
inserting the words "or in a business substantially similar thereto" in
lieu thereof.
(TTTTT The definition of "Revolving Loan Commitment" appearing in
Section 9 of the Agreement is hereby amended in its entirety as follows:
"`Revolving Loan Commitment' means, with respect to each Bank, the
amount set forth (i) opposite such Bank's name on Schedule 1 hereto under
the column entitled "Revolving Loan Commitment," or (ii) in any applicable
Assignment and Assumption Agreement to which it may be a party, as the case
may be, as such amount may be reduced from time to time in accordance with
the terms of this Agreement."
(UUUUU The proviso appearing in the definition of "Swingline Expiry
Date" appearing in Section 9 of the Agreement is hereby amended in its
entirety to read as follows:
"provided that the U.K. Swingline Bank shall give the U.K. Borrower
notice 90 days (or such shorter time period as shall be consented to by the
U.K. Swingline Bank, the U.K. Borrower and the Administrative Agent) in
advance of the then current Swingline Expiry Date of whether the U.K.
Swingline Bank will extend the Swingline Expiry Date with respect to the
U.K. Swingline Loans for a further period of 364 days (or such longer or
shorter period as the U.K. Borrower and the U.K. Swingline Bank may agree)
but not to expire later than the date five Business Days prior to the
Revolving Maturity Date."
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<PAGE>
(VVVVV The definition of "U.K. Swingline Loan" appearing in Section 9
is hereby amended by inserting the following parenthetical phrase at the
end thereof:
"(anysuch documentary letter of credit or guarantee, including any bid
bond or performance bond shall be referred to herein as a "U.K. Swingline
Letter of Credit")"
(WWWWW The definition of "U.K. Swingline Loan Commitment" appearing in
Section 9 of the Agreement is hereby amended in its entirety to read as
follows:
"`U.K. Swingline Loan Commitment' means, with respect to each Bank,
the amount set forth (i) opposite such Bank's name on Schedule 1 hereto
under the column entitled "U.K. Swingline Loan Commitment" or (ii) in any
applicable Assignment and Assumption Agreement to which it may be a party,
as the case may be, as such amount may be reduced from time to time in
accordance with the terms of this Agreement."
(XXXXX The definition of "U.S. Swingline Loan Commitment" is hereby
amended in its entirety to read as follows:
"`U.S. Swingline Loan Commitment' means, with respect to each Bank,
the amount set forth (i) opposite such Bank's name on Schedule 1 hereto
under the column entitled "U.S. Swingline Line Commitment" or (ii) in any
applicable Assignment and Assumption Agreement to which it may be a party,
as the case may be, as such amount may be reduced from time to time in
accordance with the terms of this Agreement."
(YYYYY The following new definitions are hereby added (in the correct
alphabetical sequence) to Section 9 of the Agreement:
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<PAGE>
"`Acquisition' means any transaction pursuant to which the Company or
any of its Subsidiaries (a) acquires equity securities (or warrants,
options or other rights to acquire such securities) of any Person other
than the Company or any Person which is not then a Subsidiary of the
Borrower, pursuant to a solicitation of tenders therefor, or in one or more
negotiated block, market or other transactions not involving a tender
offer, or a combination of any of the foregoing, or (b) makes any Person a
Subsidiary of the Company, or causes any such Person to be merged into the
Company or any of its Subsidiaries, in any case pursuant to a merger,
purchase of assets or any reorganization providing for the delivery or
issuance to the holders of such Person's then outstanding securities, in
exchange for such securities, cash or securities of the Company or any of
its Subsidiaries, or a combination thereof, or (c) purchases all or
substantially all of the business or assets of any Person.
`Additional Sponsor Participation' has the meaning set forth in the
Sponsor Participation Agreement.
`Amendment No. 2' means Amendment No. 2 dated as of August 2, 1999 to
this Agreement.
`Contribution Agreement' means that certain Contribution Agreement (in
form and substance satisfactory to the Administrative Agent) to be executed
by Holdings, the Borrowers and the other Credit Parties, as such agreement
may be amended, supplemented or otherwise modified, renewed or replaced
from time to time.
`Interest Deficit' has the meaning set forth in Section 2.07.
`Mondel Brake Business' means the capital stock or the assets of, and
the business presently conducted by, Mondel.
`Non-Sponsor Acquisition Term Loans' means Acquisition Term Loans that
are not Sponsor Loans.
`Sponsor Loans' has the meaning set forth in the Sponsor Participation
Agreement.
`Sponsor Loan Interest' means, for any period, the aggregate amount of
interest accrued, but not paid in cash, by the U.S. Borrowers in connection
with the Sponsor Loans (pursuant to, and in accordance with, the Sponsor
Participation Agreement) for such period.
`Sponsor Loan Repayment Date' has the meaning set forth in the Sponsor
Participation Agreement.
`Sponsor Participation Agreement' means that certain Participation
Agreement dated as of August 2, 1999 among the Sponsors, Holdings, the
Borrowers, the other Credit Parties and each of the Banks referred to in
Section C of Schedule 1 of such agreement, as such agreement may be
amended, supplemented or otherwise modified, renewed or replaced from time
to time.
`Sponsors' has the meaning set forth in the Sponsor Participation
Agreement.
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<PAGE>
`U.K.Swingline Letter of Credit' has the meaning set forth in the
definition of U.K. Swingline Loan herein.
`U.K. Swingline Letter of Credit Usage' means, as at any date of
determination, the sum of (i) the maximum aggregate amount that is or at
any time thereafter may become available under all U.K. Swingline Letters
of Credit then outstanding plus (ii) the aggregate amount of all drawings
under U.K. Swingline Letters of Credit honored by all U.K. Swingline Banks
and not theretofore reimbursed by the U.K. Borrower.
`Unbilled Accounts' means accounts for goods shipped or goods subject
to a progress, percentage of completion or similar accounting or payment
method, which accounts are unbilled.
`Workin Process Inventory' means Eligible Inventory that is neither
raw materials nor finished goods."
(ZZZZZ The following new section is hereby added at the end of Section
10 of the Agreement:
"10.12. Authorization to Release Lien. The Banks hereby authorize the
Administrative Agent (in its sole discretion) in connection with the sale
or other disposition of any asset included in the Collateral or all of the
capital stock or other equity interests of any Guarantor, to the extent
undertaken in accordance with the terms of this Agreement, to release the
Lien granted to it (for the benefit of Banks) on such asset or capital
stock and/or to release such Guarantor from its obligations under the
Credit Documents; provided, however, that this Section 10.12 does not
modify the provisions of Section 11.12 or Section 7.17 hereof."
(AAAAAA The following new section is hereby added at the end of
Section 11 of the Agreement:
46
<PAGE>
"11.18. No Conflict with the Sponsor Participation Agreement.
Notwithstanding anything to the contrary contained in this Agreement, each
payment from or on behalf of Holdings or any Credit Party in respect of any
of the Obligations relating to the Acquisition Term Loans, which payment is
received by the Administrative Agent, shall be distributed by the
Administrative Agent in accordance with the Sponsor Participation
Agreement. In the event of any inconsistency relating to the Acquisition
Term Loans or the rights of the Sponsors with respect thereto, between the
terms of this Agreement or any Acquisition Term Note on the one hand, and
those of the Sponsor Participation Agreement on the other hand, the terms
of the Sponsor Participation Agreement shall control."
(BBBBBB Annex III to the Agreement is hereby deleted in its entirety.
(CCCCCC Schedule 1 and Schedule 5.25 attached hereto are hereby added
to the Agreement.
SECTION 2. Reduction of the Total Revolving Loan Commitment, the Total
U.S. Swingline Loan Commitment, the total U.K. Swingline Loan Commitment
and the Total Canadian Swingline Loan Commitment. Each of the parties
hereto hereby agrees that as of the Effective Date, (a) the Total Revolving
Loan Commitment shall be permanently reduced to $50,700,000, (b) the Total
U.S. Swingline Loan Commitment shall be permanently reduced to $6,000,000,
(c) the Total U.K., Swingline Loan Commitment shall be permanently reduced
to $6,000,000 and (d) the Total Canadian Swingline Loan Commitment shall be
permanently reduced to $3,000,000.
SECTION 3. Amendments to the Credit Documents. Each of the Banks
hereby consents to the Administrative Agent entering into amendments (in
form and substance satisfactory to the Administrative Agent) to certain of
the Credit Documents (other than the Agreement) as the Administrative Agent
shall determine in its sole discretion to cure any ambiguity, to correct or
supplement any provision in any such Credit Document which may be defective
or inconsistent with any other provision in any of the Credit Documents or
with the intent of any of the Credit Documents, or to make any other
provisions with respect to matters or questions arising under any of the
Credit Documents (other than the Agreement); provided that any amendment
shall not adversely affect the interests of the Banks in any material
respect.
SECTION 4. Confirmation and Acknowledgment of the Obligations;
Release. Each of the Borrowers hereby confirms and acknowledges to the
Agents and the Banks that it is validly and justly indebted to the Agents
and the Banks for the payment of all Obligations without offset, defense,
cause of action or counterclaim of any kind or nature whatsoever. Each of
the Credit Parties, on its own behalf and on behalf of its successors and
assigns, hereby waives, releases and discharges the Agents and each Bank
and all of the affiliates of the Agents and each Bank, and all of the
directors, officers, employees, attorneys and agents of the Agents, each
Bank and such affiliates, from any and all claims, demands, actions or
causes of action (known and unknown) arising out of or in any way relating
to the Credit Documents and any documents, agreements, dealings or other
matters connected with any of the Credit Documents, in each case to the
extent arising (x) on or prior to the date hereof or (y) out of, relating
to, actions, dealings or matters occurring on or prior to the date hereof.
The waivers, releases, and discharges in this Section 4 shall be effective
regardless of whether the conditions to this Amendment are satisfied and
regardless of any other event that may occur or not occur after the date
hereof.
47
<PAGE>
SECTION 5. Agreement by the Borrowers. Notwithstanding that the
Borrowers may not have received prior notice of the engagement of any
counsel, appraisers, consultants or other advisors by an Agent or a Bank,
the Borrowers hereby agree to pay all out-of-pocket costs and expenses of
each of the Agents and each of the Banks as contemplated by Section 11.01
of the Agreement.
SECTION 6. Conditions to Effectiveness. The effectiveness of this
Amendment is subject to the satisfaction in full of the following
conditions precedent on or before August 2, 1999 (the first date on which
all such conditions have been satisfied being herein referred to as the
"Effective Date"):
(A the Administrative Agent shall have received executed counterparts
of this Amendment, which, when taken together, bear the signatures of
Holdings, each of the Credit Parties and those Banks required by Section
11.12 of the Credit Agreement; and
(B the Administrative Agent shall have received executed counterparts
of the Sponsor Participation Agreement (such term being used in this
Amendment as defined in Section 1(YYYYY) above and which agreement shall
include, among other things, the purchase of a participation in the
unfunded Acquisition Term Loan Commitments of certain of the Banks), which
counterparts, when taken together, bear the signatures of the
Administrative Agent, the Sponsors, the Selling Banks (as such term is
defined in the Sponsor Participation Agreement) and all of the Credit
Parties; and
(C the Company shall have received the $5,000,000 in proceeds from the
Acquisition Term Loan to be made on or before the Effective Date and to be
funded pursuant to and as contemplated by the Sponsor Participation
Agreement; and
(D a borrowing base audit shall have been completed by an independent
audit firm which is acceptable to the Administrative Agent, and the scope
and results of such audit shall in all respects be satisfactory to the
Administrative Agent; and
(E The Administrative Agent (for the benefit of the Agents and the
Banks, as applicable) shall have received the following:
(i) an amendment fee in an amount equal to 1/4% of
each such Bank's Total Commitment (after giving
effect to the reductions set forth in Section 2
above); and
(ii) the payment of all invoiced amounts owing to
any of the Agents and any Bank pursuant to
Section 11.01 of the Agreement after giving
effect to Section 5 of this Amendment; and
(F [intentionally omitted]
48
<PAGE>
(G the Borrowers shall have obtained all consents and waivers from any
Governmental Authority or other Person necessary for the execution,
delivery and performance of this Amendment, the Sponsor Participation
Agreement and any other document or transaction contemplated by this
Amendment or the Sponsor Participation Agreement; and
(H No Event of Default (which has not been properly waived in writing)
shall have occurred and then be continuing and no Default or Event of
Default shall occur or be continuing upon the effectiveness of this
Amendment or the Sponsor Participation Agreement or the consummation of the
transactions contemplated by either of the foregoing and the Administrative
Agent shall have received a certificate of the Borrowers with respect to
the foregoing and the matters set forth in subsection (G) above; and
(I all legal matters in connection with this Amendment, the Credit
Documents and/or the Collateral shall be reasonably satisfactory to Morgan,
Lewis & Bockius LLP, counsel for the Administrative Agent.
SECTION 7. Representations and Warranties. Holdings and the Credit
Parties hereby represent and warrant to the Banks that after giving effect
to this Amendment:
(A the representations and warranties contained in the Credit
Agreement and in the other Credit Documents are true and correct in all
material respects on and as of the date hereof as if such representations
and warranties had been made on and as of the date hereof (except to the
extent such representations and warranties expressly relate to an earlier
date); and
(B Holdings and the Credit Parties are in compliance with all the
terms and provisions set forth in the Credit Agreement and the other Credit
Documents and no Default or Event of Default has occurred or is continuing
under the Credit Agreement or will occur upon the effectiveness of this
Amendment or the Sponsor Participation Agreement or the consummation of the
transactions contemplated by either of the foregoing.
SECTION 8. Full Force and Effect. Except as expressly set forth
herein, this Amendment does not constitute a waiver or modification of any
provision of the Credit Agreement or a waiver of any Default or Event of
Default under the Credit Agreement, in either case whether or not known to
any of the Agents or the Banks. Except as expressly amended hereby, the
Credit Agreement shall continue in full force and effect in accordance with
the provisions thereof on the date hereof and the Credit Agreement as
heretofore amended and as amended by this Amendment are hereby ratified and
confirmed. As used in the Credit Agreement, the terms "Credit Agreement",
"this Agreement", "herein", "hereafter", "hereto", "hereof", and words of
similar import, shall, unless the context otherwise requires, mean the
Credit Agreement as amended by this Amendment. References to the terms
"Agreement" or "Credit Agreement" appearing in the Exhibits or Schedules to
the Credit Agreement, shall, unless the context otherwise requires, mean
the Credit Agreement as amended by this Amendment.
49
<PAGE>
SECTION 9. APPLICABLE LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WHICH ARE
APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED WHOLLY WITHIN THE STATE OF
NEW YORK.
SECTION 10. Counterparts. This Amendment may be executed in two or
more counterparts, each of which shall constitute an original, but all of
which when taken together shall constitute but one instrument. Signature
pages may be detached from counterpart documents and reassembled to form
duplicate executed originals. Delivery of an executed counterpart of a
signature page of this Amendment by telecopy shall be effective as delivery
of a manually executed counterpart of this Amendment.
SECTION 11. Expenses. Whether or not this Amendment becomes effective
or the transactions contemplated hereby are consummated, each of the
Borrowers agrees, on a joint and several basis, to pay all out-of-pocket
expenses incurred by the Administrative Agent in connection with the
preparation, execution and delivery of this Amendment and any other
documentation contemplated hereby, including, but not limited to, the fees
and disbursements of counsel for the Administrative Agent.
SECTION 12. Headings. The headings of this Amendment are for the
purposes of reference only and shall not affect the construction of, or be
taken into consideration in interpreting, this Amendment.
SECTION 13. Acknowledgment and Consent by the Guarantors.
(A Each Guarantor hereby acknowledges that it has read this Amendment
and consents to the terms hereof and further confirms and agrees that,
notwithstanding the effectiveness of this Amendment, (i) its obligations
under its Guarantee shall not be impaired or affected and (ii) such
Guarantee is, and shall continue to be, in full force and effect and is
hereby confirmed and ratified in all respects.
(B Each Guarantor hereby confirms and acknowledges that it is validly
and justly indebted to the Agents and the Banks for the payment of all of
the Obligations which it has guaranteed, without offset, defense, cause of
action or counterclaim of any kind or nature whatsoever.
50
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed by their duly authorized officers, all as of the date and
year first written above.
[signature pages follow]
51
<PAGE>
BORROWERS:
MORRIS MATERIAL HANDLING, INC.
By: /s/ Martin L. Ditkof
Name: Martin L. Ditkof
Title: Secretary
MORRIS MATERIAL HANDLING, LLC
By: /s/ Martin L. Ditkof
Name: Martin L. Ditkof
Title: Manager
MORRIS MATERIAL HANDLING
EQUIPMENT LIMITED
By: /s/ Martin L. Ditkof
Name: Martin L. Ditkof
Title: Director
MONDEL ULC
By: /s/ Martin L. Ditkof
Name: Martin L. Ditkof
Title: Secretary
KAVERIT STEEL AND CRANE ULC
By: /s/ Martin L. Ditkof
Name: Martin L. Ditkof
Title: Secretary
52
<PAGE>
GUARANTORS:
MMH HOLDINGS, INC.
By: /s/ Martin L. Ditkof
Name: Martin L. Ditkof
Title: Secretary
MHE TECHNOLOGIES, INC.
By: /s/ David W. Dupert
Name: David W. Dupert
Title: President
PHMH HOLDING COMPANY
By: /s/ David W. Dupert
Name: David W. Dupert
Title: President
MATERIAL HANDLING EQUIPMENT
NEVADA CORPORATION
By: /s/ Martin L. Ditkof
Name: Martin L. Ditkof
Title: Secretary
CMH MATERIAL HANDLING, LLC
By: /s/ Martin L. Ditkof
Name: Martin L. Ditkof
Title: Manager
53
<PAGE>
EPH MATERIAL HANDLING, LLC
By: /s/ Martin L. Ditkof
Name: Martin L. Ditkof
Title: Manager
HARNISCHFEGER DISTRIBUTION &
SERVICE, LLC
By: /s/ Martin L. Ditkof
Name: Martin L. Ditkof
Title: Manager
HPH MATERIAL HANDLING, LLC
By: /s/ Martin L. Ditkof
Name: Martin L. Ditkof
Title: Manager
MERWIN, LLC
By: /s/ Martin L. Ditkof
Name: Martin L. Ditkof
Title: Manager
MORRIS MECHANICAL HANDLING, INC.
By: /s/ Martin L. Ditkof
Name: Martin L. Ditkof
Title: Secretary
54
<PAGE>
MPH CRANE, INC.
By: /s/ Martin L. Ditkof
Name: Martin L. Ditkof
Title: Secretary
NPH MATERIAL HANDLING, INC.
By: /s/ Martin L. Ditkof
Name: Martin L. Ditkof
Title: Secretary
PHME SERVICE, INC.
By: /s/ Martin L. Ditkof
Name: Martin L. Ditkof
Title: Secretary
SPH CRANE & HOIST, INC.
By: /s/ Martin L. Ditkof
Name: Martin L. Ditkof
Title: Secretary
MHE CANADA ULC
By: /s/ Martin L. Ditkof
Name: Martin L. Ditkof
Title: Secretary
55
<PAGE>
3016117 NOVA SCOTIA ULC
By: /s/ Martin L. Ditkof
Name: Martin L. Ditkof
Title: Secretary
HYDRAMACH ULC
By: /s/ Martin L. Ditkof
Name: Martin L. Ditkof
Title: Secretary
BUTTERS ENGINEERING SERVICES LIMITED
By: /s/ Martin L. Ditkof
Name: Martin L. Ditkof
Title: Director
INVERCOE ENGINEERING LIMITED
By: /s/ Martin L. Ditkof
Name: Martin L. Ditkof
Title: Director
LOWFILE LIMITED
By: /s/ Martin L. Ditkof
Name: Martin L. Ditkof
Title: Director
56
<PAGE>
REDCROWN, ULC
By: /s/ Martin L. Ditkof
Name: Martin L. Ditkof
Title: Director
MMH (HOLDINGS) LIMITED
By: /s/ Martin L. Ditkof
Name: Martin L. Ditkof
Title: Director
MORRIS MATERIAL HANDLING LIMITED
By: /s/ Martin L. Ditkof
Name: Martin L. Ditkof
Title: Director
M.M.H. INTERNATIONAL LIMITED
By: /s/ Martin L. Ditkof
Name: Martin L. Ditkof
Title: Director
MORRIS MATERIAL HANDLING MEXICO
S.A. DE C.V.
By: /s/ Peter A. Kerrick
Name: Peter A. Kerrick
Title: Director
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<PAGE>
BIRMINGHAM CRANE & HOIST, INC.
By: /s/ Martin L. Ditkof
Name: Martin L. Ditkof
Title: Secretary
ARIZONA MOTOR AND CONTROL CORPORATION
By: /s/ Martin L. Ditkof
Name: Martin L. Ditkof
Title: Secretary
DAJU HOLDINGS LTD.
By: /s/ Martin L. Ditkof
Name: Martin L. Ditkof
Title: Secretary
OVERHEAD CRANE SERVICE & SUPPLY COMPANY LIMITED
By: /s/ Martin L. Ditkof
Name: Martin L. Ditkof
Title: Secretary
OVERHEAD CRANE SERVICE AND SUPPLY COMPANY (SUDBURY) LIMITED
By: /s/ Martin L. Ditkof
Name: Martin L. Ditkof
Title: Secretary
58
<PAGE>
MORRIS MATERIAL HANDLING
AUSTRALIA PTY LIMITED
By: /s/ Michael John Maddock
Name: Michael John Maddock
Title: Director
MORRIS JDN PTY LIMITED
By: /s/ Michael John Maddock
Name: Michael John Maddock
Title: Director
MORRIS POWERLEC PTY LIMITED
By: /s/ Michael John Maddock
Name: Michael John Maddock
Title: Director
59
<PAGE>
BANKS:
CANADIAN IMPERIAL BANK
OF COMMERCE, individually and as
Administrative Agent and Collateral Agent
By:/s/Lindsay Gordon
Name: Lindsay Gordon
Title: Executive Director
CIBC INC.
By:/s/Lindsay Gordon
Name: Lindsay Gordon
Title: Executive Director
CREDIT AGRICOLE INDOSUEZ, individually and as Syndication Agent
By:/s/Kenneth Kencel
Name: Kenneth J. Kencel
Title: Managing Direcot
By:/s/Patricia Frankel
Name: Patricia Frankel
Title: First Vice President
BANKBOSTON, N.A., individually and as
Documentation Agent
By:/s/Linda EC Alto
Name: Linda EC Alto
Title: Vice President
60
<PAGE>
ABN-AMRO BANK N.V.
By:/s/William J. Fitzgerald
Name: William J. Fitzgerald
Title: Senior Vice President
By:/s/William J. Teresky, Jr.
Name: William J. Teresky, Jr.
Title: Vice President
BANK AUSTRIA CREDITANSTALT
CORPORATE FINANCE, INC.
By:/s/Patrick J. Rounds
Name: Patrick J. Rounds
Title: Vice President
By:/s/Jack R. Bertges
Name: Jack R. Bertges
Title: Senior Vice President
THE FIRST NATIONAL BANK OF CHICAGO
By:/s/Deborah Stevens
Name: Deborah Stevens
Title: Authorized Agent
FIRST UNION NATIONAL BANK
By:/s/Scott Santa Cruz
Name: Scott Santa Cruz
Title: Vice President
61
<PAGE>
FLEET NATIONAL BANK
By:/s/Alisa B. Cure
Name: Alisa B. Cure
Title: Executive Director
ARCHIMEDES FUNDING, L.L.C.
By: ING Capital Advisors, Inc.,
as Collateral Manager
By:/s/Michael D. Hatley
Name: Michael D. Hatley
Title: Managing Director
RIGGS BANK N.A.
By:______________________________
Name:
Title:
FLEET BUSINESS CREDIT CORPORATION
By:/s/Alan F. Lyster, Jr.
Name: Alan F. Lyster, Jr.
Title: Vice President
CRESCENT/MACH I PARTNERS, L.P.
By: TCW Asset Management Company,
Its Investment Manager
By:______________________________
Name:
Title:
<PAGE>
WELLS FARGO BANK, N.A.
By:______________________________
Name:
Title:
PILGRIM PRIME RATE TRUST
By: Pilgrim Investments, Inc.,
as its Investment Manager
By:/s/Jason T. Groom
Name: Jason T. Groom
Title: Assistant Vice President
SENIOR DEBT PORTFOLIO
By: Boston Management and Research,
as Investment Advisor
By:/s/Payson F. Swaffield
Name: Payson F. Swaffield
Title: Vice President
CYPRESSTREE INVESTMENT PARTNERS II, LTD.
By: CypressTree Investment ManagementCompany, Inc., as Portfolio Manager
By:/s/Philip C. Robbins
Name: Philip C. Robins
Title: Principal
62
<PAGE>
INDOSUEZ CAPITAL FUNDING IIA,
LIMITED
By: Indosuez Capital, as Portfolio Advisor
By:/s/Daniel H. Smith
Name: Daniel H. Smith
Title: Authorized Signatory
INDOSUEZ CAPITAL FUNDING IV, L.P.
By: Indosuez Capital, as Portfolio Advisor
By:/s/Daniel H. Smith
Name: Daniel H. Smith
Title: Authorized Signatory
63
<PAGE>
Schedule 1
<PAGE>
Schedule 5.25
Bank Accounts
Subordination and Participation Agreement dated as of August
2, 1999 (as the same may be amended, amended and restated,
supplemented or otherwise modified, renewed or replaced from time
to time, the "Participation Agreement") among (i) Canadian
Imperial Bank of Commerce as administrative agent and as
collateral agent for the Banks referred to in the Credit
Agreement defined below (in such capacities, the "Administrative
Agent"); (ii) each of the banks listed in Section C of Schedule 1
hereto (each, a "Selling Bank" and collectively, the "Selling
Banks"); (iii) Martin Crane L.L.C. (the "Initial Sponsor") and
any other Person (acceptable to the Administrative Agent and the
Required Banks) making any of the Sponsor Loans (as hereinafter
defined) pursuant hereto (each, an "Additional Sponsor" and
collectively, the "Additional Sponsors"); (iv) MMH Holdings,
Inc., a Delaware corporation ("Holdings"); (v) Morris Material
Handling, Inc., a Delaware corporation (the "Company") and Morris
Material Handling, LLC, a Delaware limited liability Company
("MMH LLC"; the Company and MMH LLC may be referred to herein
individually as a "U.S. Borrower" and collectively, as the "U.S.
Borrowers") and (vi) each other Subsidiary of the Company listed
on the signature pages hereto (such Subsidiaries, together with
Holdings and the U.S. Borrowers, shall be referred to herein
collectively as the "Credit Parties").
INTRODUCTORY STATEMENT
Reference is hereby made to that certain Credit Agreement dated as of March
30, 1998 (as heretofore and hereafter amended, amended and restated,
supplemented or otherwise modified, renewed or replaced from time to time,
including, without limitation, by Amendment No. 2, the "Credit Agreement") among
(i) Holdings, (ii) the U.S. Borrowers, (iii) Morris Material Handling Equipment
Limited, a company organized under the laws of England and Wales, (iv) Mondel
ULC, an unlimited liability company organized under the laws of Nova Scotia, (v)
Kaverit Steel and Crane ULC, an unlimited liability company organized under the
laws of Nova Scotia, (vi) the Banks referred to therein, (vii) the New York
branch of Credit Agricole Indosuez, as syndication agent for the Banks, (viii)
BankBoston, N.A., as documentation agent for the Banks and (ix) the
Administrative Agent.
1
<PAGE>
The Banks currently hold the Total Acquisition Term Loan Commitment under
the Credit Agreement and have made Acquisition Term Loans to the U.S. Borrowers
in the aggregate outstanding principal amount of $7,430,083 as of the date
hereof.
The Initial Sponsor desires to purchase from each of the Selling Banks, and
each of the Selling Banks are willing to sell to the Initial Sponsor, an
undivided participating interest in the unfunded Acquisition Term Loan
Commitment of such Selling Bank in the amounts and in accordance with the terms
and conditions hereinafter set forth.
Each of the Sponsors (as hereinafter defined) acknowledges and agrees that
any Acquisition Term Loans that are funded by the Sponsors in accordance with
the terms of this Participation Agreement shall, in all respects, be subordinate
and junior pursuant to the terms of, and as set forth in, this Participation
Agreement, to all Loans made by the Banks and all Bank Obligations (as
hereinafter defined) owing to the Administrative Agent and the Banks pursuant to
the Credit Agreement.
NOW THEREFORE, the parties hereto hereby agree as follows:
1. Definitions: Capitalized terms used herein and not otherwise
defined herein shall have the meanings assigned to such terms in the Credit
Agreement. As used herein, the following terms shall have the meanings set
forth below:
"Additional Sponsor Loan" shall mean any Acquisition Term Loan
made after the Effective Date (such term being used herein as defined
in Amendment No. 2) of Amendment No. 2 (i) which is made to the U.S.
Borrowers pursuant to the Additional Sponsor Participation, (ii) which
is funded by one or more of the Sponsors and (iii) the proceeds of
which are to be utilized for working capital and other general
corporate purposes.
"Additional Sponsor Participation" shall mean the aggregate
amount of the unfunded Acquisition Term Loan Commitments held by the
Selling Banks in which the participations are being purchased pursuant
to Section 2 hereof (which amount as of the date hereof does not
exceed $22,569,917).
"Amendment No. 2" shall mean that certain Amendment No. 2 dated
as of August 2, 1999 to the Credit Agreement.
"Bank Credit Termination Date" shall mean the date on which all
of the Bank Obligations have been repaid in full in cash, each of the
Commitments has been terminated in its entirety and all Letters of
Credit have expired or been terminated, canceled or cash
collateralized in an amount equal to 105% of the face amount of such
Letters of Credit.
2
<PAGE>
"Bank Obligations" shall mean the Obligations other than the Sponsor
Obligations.
"Initial Sponsor Loan" shall have the meaning assigned to such term in
Section 3 hereof.
"Insolvency Event" shall mean (a) any Credit Party or any Subsidiary
thereof commencing any case, proceeding or other action (1) under any existing
or future law of any jurisdiction, domestic or foreign, relating to bankruptcy,
insolvency, reorganization, conservatorship or relief of debtors, seeking to
have an order for relief entered with respect to it, or seeking to adjudicate it
a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment,
winding-up, liquidation, dissolution, composition or other relief with respect
to it or its debts, or (2) seeking appointment of a receiver, trustee,
custodian, conservator or other similar official of it or for all or any
substantial part of its assets; or (b) any Credit Party or any Subsidiary
thereof making a general assignment for the benefit of its creditors or becoming
unable, admitting in writing its inability, or failing generally, to pay its
debts as they become due; or (c) there being commenced against any Credit Party
or any Subsidiary thereof any case, proceeding or other action of a nature
referred to in clause (a) above which (1) results in the entry of an order for
relief or any such adjudication or appointment or (2) remains undismissed,
undischarged or unbonded for a period of 60 days; or (d) there being commenced
against any Credit Party or any Subsidiary thereof any case, proceeding or other
action seeking issuance of a warrant of attachment, execution, distraint or
similar process against all or any substantial part of its assets which results
in the entry of an order for any such relief which shall not have been vacated,
discharged, or stayed or bonded pending appeal within 60 days from the entry
thereof; or (e) any Credit Party or any Subsidiary thereof taking any action in
furtherance of, or indicating its consent to, approval of, authorization of, or
acquiescence in, any of the acts set forth in clause (a), (b), (c) or (d) above.
"Obligations" shall mean all obligations (a) whether, direct or indirect,
contingent or absolute, of every type or description and at any time existing,
of the Borrowers to make due and punctual payment of (i) principal of and all
interest on the Loans, the Commitment Commission, any reimbursement obligations
in respect of Letters of Credit, costs and attorneys' fees and all other
monetary obligations of any of the Borrowers to any of the Agents, any Issuing
Bank or any Bank under or in respect of the Credit Agreement, any Note, any
other Credit Document or any fee letter, (ii) all amounts payable by any of the
3
<PAGE>
Borrowers to any Bank under any Currency Protection Agreement or Interest Rate
Agreement, provided that the Administrative Agent shall have received written
notice thereof within ten (10) Business Days after execution of such Currency
Protection Agreement or Interest Rate Agreement and (iii) amounts payable to
Canadian Imperial Bank of Commerce in connection with any bank account
maintained by any of the Borrowers or any other Credit Party at Canadian
Imperial Bank of Commerce or any other banking services provided to any of the
Borrowers or any other Credit Party by Canadian Imperial Bank of Commerce with
respect to, or in any way related to, any of the Credit Documents (including,
without limitation, interest accruing at the then applicable rate provided in
the Credit Agreement after the maturity of the Loans and interest accruing at
the then applicable rate provided in the Credit Agreement after the filing of
any petition in bankruptcy or the commencement of any insolvency, reorganization
or like proceeding, relating to any of the Borrowers, whether or not a claim for
post-filing or post-petition interest is allowed in such proceeding) and (b) all
other obligations of any of the Borrowers or any other Credit Party pursuant to
the Credit Agreement and any other Credit Document.
"Original Financial Covenants" shall mean the covenants set forth in
Sections 7.10 through 7.13 of the Credit Agreement as in effect on March 30,
1998 (without giving effect to any change in such covenants after such date as a
result of any waiver or amendment to the Credit Agreement).
"Participation" shall have the meaning assigned to such term in Section 2
hereof.
"PIK Interest" shall have the meaning assigned to such term in Section 5
hereof.
"Reimbursement Obligation" shall have the meaning assigned to such term in
Section 7(c)(iii).
"Required Selling Banks" shall mean, at any time, one or more Selling Banks
holding at least 51% of the aggregate Acquisition Term Loan Commitments held by
the Selling Banks (or, if the Acquisition Term Loan Commitments shall have been
terminated, Selling Banks holding at least 51% of the outstanding Acquisition
Term Loans held by the Selling Banks).
4
<PAGE>
"Required Sponsors" shall mean, at any time, one or more Sponsors holding
at least 51% of the outstanding Sponsor Loans (or, if no Sponsor Loans are
outstanding, Sponsors holding at least 51% of the Additional Sponsor
Participation).
"Sponsor Loans" shall mean, collectively, the Initial Sponsor Loan and the
Additional Sponsor Loans.
"Sponsor Loan Repayment Date" shall mean the earlier to occur of (i) the
Bank Credit Termination Date and (ii) the date on which the Company and its
Subsidiaries have met the Original Financial Covenants for more than two (2)
consecutive fiscal quarters, which date shall not be earlier than April 30,
2001.
"Sponsor Obligations" shall mean all obligations of the Borrowers to make
payment, at the times and on the terms set forth herein, of the unpaid principal
amount of and interest on the Sponsor Loans.
"Sponsor Percentage" shall mean, with respect to any Sponsor, the
percentage of the Additional Sponsor Participation purchased by such Sponsor as
set forth in Section A of Schedule 1 hereto.
"Sponsors" shall mean the Initial Sponsor and the Additional Sponsors.
2. Sale and Purchase of a Participating Interest in Unfunded Acquisition
Term Loan Commitments and Acquisition Term Loans. Upon and subject to the terms
and conditions of this Participation Agreement, each Selling Bank hereby agrees
to sell, transfer, and convey to the Initial Sponsor, and the Initial Sponsor
hereby agrees to purchase, acquire and take from each of the Selling Banks by
way of a sale without recourse, an undivided participating interest in the
following:
(1) (i) the percentage and the maximum amount specified on
Schedule 1 (as in effect on the Effective Date) of the unfunded
Acquisition Term Loan Commitment of such Selling Bank pursuant to the
Credit Agreement and (ii) any Acquisition Term Loans hereafter made by
such Selling Bank in respect of such unfunded Acquisition Term Loan
Commitment pursuant to the Credit Agreement, to the extent funded by
the Initial Sponsor in accordance with the terms hereof;
(2) any Acquisition Term Note issued to such Selling Bank, but
only to the extent of any Sponsor Loans funded by the Initial Sponsor;
and
(3) any Credit Documents and any rights with respect to any
Collateral, but only to the extent of any Sponsor Loans funded by the
Initial Sponsor. (1)
5
<PAGE>
After the Effective Date, if there is an Additional Sponsor
which will be funding one or more Additional Sponsor Loans, then each of the
then existing Sponsors hereby agrees to transfer to such Additional Sponsor a
pro rata portion (or such other portion as the Sponsors may agree) of such
existing Sponsor's participation in the unfunded Acquisition Term Loan
Commitment so that such Additional Sponsor shall hold a participation in the
unfunded Acquisition Term Loan Commitment in an amount at least equal to the
Additional Sponsor Loan to be funded by such Additional Sponsor.
Upon and subject to the terms and conditions of this
Participation Agreement, each Selling Bank hereby agrees to sell, transfer, and
convey to each of the Additional Sponsors, if any, and each of the Additional
Sponsors hereby agrees to purchase, acquire and take from each of the Selling
Banks by way of a sale without recourse, an undivided participating interest in
the following:
(x) any Acquisition Term Loans thereafter made by such Selling
Bank in respect of such unfunded Acquisition Term Loan Commitment, pursuant to
the Credit Agreement, to the extent funded by such Additional Sponsor;
(y) any Acquisition Term Note issued to such Selling Bank, but
only to the extent of any Additional Sponsor Loans made by such Additional
Sponsor; and
(z) any Credit Documents and any rights with respect to any
Collateral, but only to the extent of any Additional Sponsor Loans made by such
Additional Sponsor.
With respect to each Sponsor, each of the foregoing
participating interests purchased from the Selling Banks (or the Initial
Sponsor, if applicable) shall be referred to herein as such Sponsor's
"Participation" and shall be deemed to include the right of each of the Sponsors
to receive at the time and on the terms set forth herein, to the extent of its
Participation, an amount equal to the amount of principal and interest received
or collected by the Selling Banks in respect of the Sponsor Loans; provided,
however, that each Sponsor's right to receive such amounts shall be subordinate
and junior (as more fully set forth in Section 7 below) to the rights of the
Administrative Agent and the Banks to receive and retain payment of the Bank
Obligations (the "Retained Interests'). Each of the Selling Banks represents and
warrants to the Sponsors that it is the legal and beneficial owner of the
interests in which it is granting a Participation hereunder and that such
interests are free and clear of any adverse claim. The obligations of the
Selling Banks hereunder are several and not joint.
6
<PAGE>
3. Acquisition Term Loan to be made on the Effective Date of Amendment No.
2. Each of the parties hereto hereby acknowledges and agrees that on the
Effective Date, and as a condition of the effectiveness of Amendment No. 2, the
Selling Banks shall make an Acquisition Term Loan to the U.S. Borrowers in the
principal amount of $5,000,000 (such loan shall be referred to herein as, the
"Initial Sponsor Loan") provided that (a) all conditions precedent to the making
of such loan under the Credit Agreement have been satisfied; (b) 100% of such
Initial Sponsor Loan shall have been funded by the Initial Sponsor pursuant to
and in accordance with this Participation Agreement and (c) the effective date
of Amendment No. 2 occurs on or before August 2, 1999. On the date the Initial
Sponsor Loan is to be made, the Initial Sponsor will purchase its Participation
hereunder and will pay to the Administrative Agent (for the benefit of each
Selling Bank) by wire transfer, in U.S. Dollars, immediately available funds,
$5,000,000 by no later than 2:00 p.m. (New York City time), or such other time
as the Administrative Agent shall agree, on the date the Initial Sponsor Loan is
to be made. The wire transfer instructions for the Administrative Agent are as
follows:
BANK OF NEW YORK
NEW YORK, NY
ABA #021-000-018
FOR ACCOUNT OF: CIBC, NEW YORK BRANCH
ACCOUNT NO. 890-0331-046
FOR FURTHER CREDIT TO: AGENTED LOANS
ACCOUNT NO. 07-09611
ATTENTION: AGENCY SERVICES
REFERENCE: Morris Materials Handling
Notwithstanding anything to the contrary contained in the
Credit Agreement, the Initial Sponsor Loan shall not be made by the Selling
Banks unless and until the Administrative Agent shall have received the full
amount of the Initial Sponsor Loan from the Sponsors in accordance with this
Participation Agreement. The U.S. Borrowers hereby agree to give the Sponsors at
least one (1) prior Business Day notice of the expected Effective Date of
Amendment No. 2.
4. Additional Acquisition Term Loans pursuant to the Additional Sponsor
Participation.
(a) Each of the parties hereto hereby acknowledges and agrees
that (i) no Sponsor shall have any obligation to fund any Additional Sponsor
Loans; and (ii) except as expressly provided in Section 5 below, any such
Additional Sponsor Loans shall only be made in accordance with the provisions of
subsection (B) of Section 1.12 of the Credit Agreement.
7
<PAGE>
(b) If any Sponsor agrees to fund any Additional Sponsor Loan,
then on the date such Additional Sponsor Loan is to be made by the Selling
Banks, such Sponsor shall fund its participation therein and will pay to the
Administrative Agent (on behalf of the Selling Banks) by wire transfer (as
provided in Section 3 above) in U.S. Dollars, in immediately available funds, an
amount equal to such Sponsor's participation in such Additional Sponsor Loan by
no later than 2:00 p.m. (New York City time) on the date the Additional Sponsor
Loan is to be made. The Additional Sponsor Loans may be funded by one or more of
the Sponsors provided, that each Additional Sponsor Loan shall be approved by
the Administrative Agent and the Required Banks prior to the funding thereof.
(c) Each of the parties hereto hereby acknowledges and agrees
that the Banks shall not be required to fund any portion of the Initial Sponsor
Loan or the Additional Sponsor Loans and that any such loans shall be funded
solely by the Sponsors pursuant to, and in accordance with, this Participation
Agreement. Each of the Borrowers acknowledges and agrees that it shall not
request, and it shall not be entitled to receive, any Acquisition Term Loans
funded by the Banks in excess of $7,430,082.82 (which is the amount of
Acquisition Term Loans outstanding as of the date hereof).
5. Terms of the Sponsor Loans.
(1) The outstanding principal amount of the Sponsor Loans shall be payable
to the Sponsors out of funds received by the Administrative Agent on behalf of
the Selling Banks from the Borrowers, in cash, only on the Sponsor Loan
Repayment Date. The Sponsor Loans shall accrue interest on the outstanding
principal amount thereof plus interest accrued thereon from the date the Sponsor
Loans are made until the Sponsor Loan Repayment Date at a rate per annum equal
to the Eurodollar Rate plus 6.00%, compounded monthly (the "PIK Interest").
Interest on the Sponsor Loans shall be payable out of funds received by the
Administrative Agent from the Borrowers, in cash, only on the Sponsor Loan
Repayment Date. Subject to Section 7(c)(iii) hereof and notwithstanding anything
else to the contrary contained in this Participation Agreement, nothing
contained in this Participation Agreement, the Credit Agreement or the
Acquisition Term Notes shall affect the right of the Sponsors to receive payment
of principal and interest payable hereunder in accordance with the terms of this
Participation Agreement.
(2) Except to the extent expressly provided herein or in the Credit
Agreement, the terms of the Sponsor Loans shall be the same as all other
Acquisition Term Loans under the Credit Agreement.
(3) The Administrative Agent, upon determining the applicable interest rate
for the Sponsor Loans for any Interest Period, shall promptly notify the
Sponsors and the applicable U.S. Borrower thereof. Such determination shall,
absent manifest error, be final, conclusive and binding upon all parties hereto.
The Administrative Agent shall not be responsible for any error in connection
with its determination of the applicable interest rate, or any action taken or
omitted to be taken by the Administrative Agent as a result thereof, except for
gross negligence or willful misconduct on the part of the Administrative Agent
as determined by a final order or judgment of a court of competent jurisdiction.
6. Waivers.
8
<PAGE>
(a) Each of the Sponsors acknowledges and agrees that it shall
not be entitled to any of the rights of a participant pursuant to the Credit
Agreement (except the right to repayment pursuant to the terms hereof and the
right to receive interest at the rate provided for herein) and hereby expressly
waives any such rights (including, without limitation, any rights that are
granted under Section 11.04(b) of the Credit Agreement). Each of the Sponsors
hereby agrees that, notwithstanding any term, phrase or provision contained
herein, the Sponsors are purchasing participations in Acquisition Term Loans
made or to be made by the Selling Banks and that all of its rights with respect
to the Sponsor Loans are solely as set forth in this Participation Agreement.
(b) Each of the Selling Banks and each of the Sponsors hereby
waives the obligation of the Borrowers to pay any Commitment Commission on the
Additional Sponsor Participation.
(c) Until the Bank Credit Termination Date shall have
occurred, each of the Sponsors hereby waives any and all rights, claims and
privileges with respect to the Sponsor Loans and the Acquisition Term Loan
Commitment (other than the right of repayment pursuant to this Participation
Agreement, the right to receive interest at the rate provided for herein and any
other right set forth in the Participation Agreement ) and expressly agrees that
all such rights, claims and privileges with respect to the Sponsor Loans (other
than the right of repayment pursuant hereto) and the Acquisition Term Loan
Commitment shall remain with the Banks. Each Sponsor further agrees that, prior
to the Sponsor Loan Repayment Date, all payments received pursuant to the Credit
Agreement (including, without limitation, all scheduled payments and all
mandatory and optional prepayments thereunder) shall be applied to the Bank
Obligations until the Bank Credit Termination Date.
7. Subordination; Repayment.
(1) Subordination. Holdings, each Borrower and each other Credit Party, on
the one hand, and each of the Sponsors, on the other hand, agrees, for itself
and each future holder of the Sponsor Obligations, that the Sponsor Obligations
are expressly "subordinate and junior in right of payment" (as that phrase is
hereinafter defined) to all Bank Obligations. "Subordinate and junior in right
of payment" means that:
(1) no part of the Sponsor Obligations shall have any claim to
the assets of any Credit Party on a parity with or prior to the claim
of the Bank Obligations; and
9
<PAGE>
(2) until the Bank Credit Termination Date, other than payment
due to the Sponsors on the Sponsor Loan Repayment Date in accordance
with Section 5 hereof, no Sponsor will take, demand or receive from
any Credit Party, and no Credit Party will make, give or permit,
directly or indirectly, by set-off, redemption, purchase or in any
other manner, any payment of or security for the whole or any part of
the Sponsor Obligations, including, without limitation, any letter of
credit or similar credit support facility to support payment of the
Sponsor Obligations.
(2) Additional Provisions Concerning Subordination. (i) The Sponsors and
each Credit Party agree that upon the occurrence of any Insolvency Event:
(A) all Bank Obligations shall be paid in full
in cash before any payment or distribution
is made with respect to the Sponsor
Obligations; and
(B) any payment or distribution of assets of any
Credit Party, whether in cash, property or
securities, to which any Sponsor would be
entitled except for the provisions hereof
shall be paid or delivered by such Credit
Party, or any receiver, trustee in
bankruptcy, liquidating trustee, disbursing
agent or other Person making such payment or
distribution, directly to the Administrative
Agent, for the account of the Banks, to the
extent necessary to pay in full in cash all
Bank Obligations, before any payment or
distribution shall be made to any Sponsor.
(ii) If any payment or distribution, whether consisting of
money, property or securities, be collected or received by any Sponsor in
respect of the Sponsor Obligations, such Sponsor forthwith shall deliver the
same to the Administrative Agent for the account of the Banks, in the form
received, duly endorsed to the Administrative Agent, if required, to be applied
to the payment or prepayment of the Bank Obligations until the Bank Obligations
are paid in full in cash. Until so delivered, such payment or distribution shall
be held in trust by such Sponsor as the property of the Banks, segregated from
other funds and properly held by such Sponsor.
(3) Rights. (i) So long as the Bank Obligations have not been paid in full
in cash, whether or not any "Insolvency Event" has occurred,
(A) no Sponsor will (1) exercise or seek to exercise any
rights or exercise any remedies with respect to any
Collateral, any Credit Document or this Participation
Agreement (other than the right to receive payment
under Section 5 hereof on or after the Sponsor Loan
Repayment Date) or (2) institute any action or
proceeding with respect to such rights or remedies,
including without limitation, any action of
foreclosure or (3) contest, protest or object to any
foreclosure proceeding or action brought by any of
the Agents or any Bank or any other exercise by any
of the Agents or any Bank of any rights and remedies
under any of the Credit Documents; and
10
<PAGE>
(B) the Administrative Agent and the requisite number of
Banks shall have the exclusive right to administer
the Credit Agreement and the other Credit Documents
and to enforce any and all rights and exercise any
and all remedies with respect thereto and the
Collateral.
(ii) In exercising rights and remedies with respect to the
Credit Agreement, the other Credit Documents and the Collateral, the
Administrative Agent and the requisite number of Banks may enforce the
provisions of the Credit Documents and exercise remedies thereunder, all in such
order and in such manner as they may determine in the exercise of their sole
business judgment. Such exercise and enforcement shall include, without
limitation, the rights to sell or otherwise dispose of Collateral, to incur
expenses in connection with such sale or disposition and to exercise all the
rights and remedies of a secured lender under the Uniform Commercial Code or any
other applicable law of any applicable jurisdiction.
(iii) Contemporaneously with and effective upon the occurrence
of the Bank Credit Termination Date, the Credit Documents and all remaining
obligations thereunder shall be deemed assigned to the Sponsors without
representation, warranty or recourse of any kind or nature whatsoever (other
than beneficial ownership) and without the necessity of any further action by
any party. From and after the Bank Credit Termination Date, if the Sponsors, or
any of them, shall receive any payment on account of the Sponsor Loans and if
the Selling Banks are required to return to any of the Credit Parties, or any of
their respective bankruptcy estates, any amounts received in respect of the Bank
Obligations, then the Sponsors hereby agree to reimburse the Selling Banks an
amount equal to the lesser of (a) the amounts returned by the Selling Banks to
any of the Credit Parties or their respective bankruptcy estates, and (b) the
amounts received by the Sponsors on account of the Sponsor Loans less any
amounts that the Sponsors have previously returned to any of the Credit Parties
or any of their respective bankruptcy estates (subclauses (a) and (b) above
being collectively referred to as the "Reimbursement Obligations"). The
Reimbursement Obligations shall be secured by a retained security interest in
favor of the Administrative Agent for the benefit of the Selling Banks in the
obligations due under the Credit Documents and all collateral and guaranties
securing such obligations. Following the effectiveness of the assignment
referenced above, the Administrative Agent may resign as Administrative Agent
and in such event, the Sponsors may appoint a successor Administrative Agent in
accordance with the terms of the Credit Agreement. The Sponsors agree to
promptly execute and deliver or cause to be executed and delivered all such
other and further instruments and documents, and promptly do or cause to be done
all such other and further things as may be necessary and reasonably required,
in order to perfect and protect the security interest granted hereunder and to
enable the Administrative Agent, on behalf of the Selling Banks, to enforce the
security granted hereunder.
(iv) Any payment collected under the Credit Agreement
(including, but not limited to, scheduled payments of principal and interest,
mandatory prepayments and optional prepayments thereunder) or under any other
Credit Document and money, property or securities realized upon the sale,
disposition or other realization by the Agents upon all or any part of the
Collateral, shall be applied by the Agents in the following order:
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(A) First, to the payment in full of all costs and
expenses (including, without limitation, attorneys'
fees and disbursements) paid or incurred by the
Agents or the Banks in connection with the collection
of any of the Bank Obligations, the realization on
the Collateral or the protection of their rights and
interests with respect thereto; and
(B) Second, to the payment in full of all Bank
Obligations in such order as provided in the Credit
Documents, giving effect to the subordination
provisions of this Participation Agreement; and
(C) Third, to the payment in full of all Sponsor
Obligations as provided for by this Participation
Agreement; and
(D) Fourth, as directed by a court of competent
jurisdiction or returned to the applicable Credit
Parties.
provided, that if the Sponsor Loan Repayment Date occurs prior to the Bank
Credit Termination Date, then the Sponsors may receive payment in accordance
with Section 5 hereof without prior application as provided in subclauses (A)
and (B) above.
(v) The Administrative Agent's and the Banks' rights with
respect to the Collateral include the right to release any or all of the
Collateral from the Lien of any Credit Document or in connection with the sale
of such Collateral, notwithstanding that the net proceeds of any such sale may
not be used to permanently prepay any Bank Obligations or Sponsor Obligations.
(4) Consents of Sponsors. Each Sponsor hereby agrees that, without the
necessity of any reservation of rights against any Sponsor, and without notice
to or further assent by any Sponsor:
(A) any demand for payment of any Bank Obligations or any Sponsor
Obligations made by any of the Agents or any Bank may be rescinded in whole
or in part by any such Agent or any such Bank, and any Bank Obligation or
Sponsor Obligation may be continued, and the Bank Obligations and the
Sponsor Obligations, or the liability of any Borrower, any Credit Party or
any other party upon or for any part thereof, or any collateral security or
guarantee therefor or right of offset with respect thereto, or any
obligation or liability of Holdings, any Borrower, any Credit Party or any
other party under the Credit Agreement or any other Credit Document, may,
from time to time, in whole or in part, be renewed, extended, modified,
accelerated, compromised, waived, surrendered, or released by the
Administrative Agent or any Bank; and
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(B) the Credit Agreement, any Note and any other Credit Document may
be amended, amended and restated, modified, supplemented or terminated, in
whole or in part, as the Administrative Agent or the requisite number of
Banks may deem advisable from time to time, and any Collateral at any time
held by the Administrative Agent or the Banks for the payment of any of the
Bank Obligations or any of the Sponsor Obligations may be sold, exchanged,
waived, surrendered or released,
in each case all without notice to or further assent by any Sponsor, which will
remain bound under this Participation Agreement, and all without impairing,
abridging, releasing or affecting the subordination provided for herein.
(5) Bank Obligations Unconditional. All rights and interests of the Agents
and the Banks hereunder, and all agreements and obligations of the Sponsors,
Holdings, the Borrowers and any other Credit Party hereunder, shall remain in
full force and effect irrespective of:
(1) any lack of validity or enforceability of any of the
Credit Documents, any Currency Protection Agreement,
any Interest Rate Agreement or this Participation
Agreement;
(2) any change in the time, manner or place of payment
of, or in any other term of, all or any of the Bank
Obligations or the Sponsor Obligations, or any
amendment or waiver or other modification, whether by
course of conduct or otherwise, of the terms of the
Credit Agreement, any other Credit Document, any
Interest Rate Agreement, any Currency Protection
Agreement or this Participation Agreement;
(3) any exchange, release or nonperfection of any
security interest in any Collateral, or any release,
amendment, waiver or other modification, whether in
writing or by course of conduct or otherwise, of all
or any of the Bank Obligations or the Sponsor
Obligations or any guarantee thereof; or
(4) any other circumstances which otherwise might
constitute a defense available to, or a discharge of,
Holdings, any of the Borrowers or any other Credit
Party in respect of the Bank Obligations or the
Sponsor Obligations, or of any Sponsor or Holdings,
Borrowers, or any other Credit Party in respect of
this Participation Agreement.
(6) Provisions Applicable After Bankruptcy; No Turnover.
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(1) The provisions of this Participation Agreement shall
continue in full force and effect notwithstanding the
occurrence of any event contemplated under clauses
(a) or (c) of the definition of "Insolvency Event."
(2) To the extent that any Sponsor has or acquires any
rights under Section 363 or Section 364 of the
Bankruptcy Code with respect to the Collateral, such
Sponsor hereby agrees not to assert such rights
without the prior written consent of the
Administrative Agent, provided, that, if requested by
the Administrative Agent, such Sponsor shall seek to
exercise such rights in the manner requested by the
Administrative Agent.
(3) No Sponsor or any Affiliate thereof (other than
Canadian Imperial Bank of Commerce, CIBC, Inc. and
Credit Agricole Indosuez) shall, prior to and upon
the occurrence and during the continuance of any
event or proceeding described in clause (a) or clause
(c) of the definition of "Insolvency Event" commenced
by or against any Credit Party, extend credit or make
other financial accommodations to any Credit Party
that is entitled to priority or loan status superior
or equal to that granted to the Agents and the Banks
pursuant to the Credit Documents.
8. Consent to Amendment No. 2. The Sponsors hereby consent to the terms and
provisions of Amendment No. 2. Each Sponsor waives any and all notice of the
creation, renewal, extension or accrual of any of the Bank Obligations or any of
the Sponsor Obligations, the notice of or proof of reliance by the Banks upon
this Participation Agreement and notice of protest, demand for payment and
notice of default. Amendment No. 2 shall be deemed conclusively to have been
entered into by the Banks in reliance upon this Participation Agreement.
9. Repayment of Certain Amounts by the Sponsors; Payment by Agent.
(a) If the Administrative Agent or any Bank shall pay any amount to a Sponsor
pursuant hereto in the belief or expectation that a related payment has been or
will be received or collected in connection with the Sponsor Loans or with any
of the Credit Documents and such related payment is not received or collected by
the Administrative Agent or the appropriate Bank, as the case may be, then such
Sponsor will promptly on demand return such amount to the Administrative Agent,
together with interest thereon at the Effective Federal Funds Rate (as defined
below). If the Administrative Agent or any Bank shall determine at any time that
any amount received or collected by it and subsequently paid to any of the
Sponsors must be returned to either of the U.S. Borrowers or paid to any other
Person pursuant to any insolvency law, any sharing clause in any document or
otherwise, then, notwithstanding any other provision of this Participation
Agreement to the contrary, neither the Administrative Agent nor any Bank shall
be required to distribute any portion thereof to any Sponsor, and the applicable
Sponsors will promptly on demand by the Administrative Agent repay (which
obligation shall survive the termination of this Participation Agreement) any
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<PAGE>
portion thereof that either the Administrative Agent or any Bank shall have
distributed to any Sponsor, together with interest thereon at such rate, if any,
as shall be paid to the U.S. Borrowers or such other Person with respect
thereto. As used herein, "Effective Federal Funds Rate" shall mean, for any day,
the weighted average of the per annum rates on overnight Federal funds
transactions, with members of the Federal Reserve System, only, arranged by
Federal funds brokers, as published as of such day by the Federal Reserve Bank
of New York.
(b) On or after the occurrence of the Sponsor Loan Repayment
Date, the Administrative Agent will cause to be distributed on the same day
received (if payment is actually received by the Administrative Agent in New
York prior to 2:00 P.M. (New York time) on such day) funds relating to the
payment of principal or interest on the Sponsor Loans ratably to the Sponsors
entitled to receive any such payment. If and to the extent that any such
distribution shall not be so made by the Administrative Agent in full on the
same day received (if payment is actually received by the Administrative Agent
prior to 2:00 P.M. (New York time) on such day), the Administrative Agent shall
pay to each Sponsor its ratable amount thereof and each such Sponsor shall be
entitled to receive from the Administrative Agent upon demand, interest on such
amount at the Federal Funds Rate (according to the U.S. Council on International
Banking Interbank Compensation Rules), until the date the Administrative Agent
pays such amount to such Sponsor. If payment is received by the Administrative
Agent in New York later than 2:00 P.M. (New York time), such payment shall be
deemed to have been made on the next succeeding Business Day.
10. No Responsibility of the Administrative Agent or the Banks.
(1) Each of the Sponsors acknowledges that as a direct or indirect equity
owner of Holdings, the direct or indirect (as applicable) corporate parent of
each of the U.S. Borrowers, it has had and will continue to have, complete
access to the Credit Documents and all other documents and information relating
to the Loans under the Credit Agreement. Neither the Administrative Agent nor
any of the Banks makes any representation, and shall have no responsibility,
with respect to (i) any financial information, certificates, receipts or other
documents furnished or to be furnished to the Sponsors in connection with the
Sponsor Loans or the Participations; (ii) the due execution, validity or
enforceability of the Loans or any of the Credit Documents; (iii) the
collectibility of the Loans or the sufficiency or transferability of any
Collateral or security therefor; (iv) the priority or perfection of any Lien in
respect of the Loans or any of the Credit Documents; (v) the financial or other
condition of the U.S. Borrowers, any of the other Credit Parties or any other
Person or (vi) the performance of the U.S. Borrowers or any of the Credit
Parties of their obligations under any of the Credit Documents. Each of the
Sponsors represents that it has made such independent investigation and
determination of the foregoing matters as it considers appropriate, and accepts
full responsibility therefor. Neither the Administrative Agent nor any Bank
shall be liable to a Sponsor for any error in judgment or for any action taken
or omitted to be taken by the Administrative Agent or such Bank or any of their
respective agents except for gross negligence or willful misconduct of the
Administrative Agent or any such Bank, as applicable, as determined by a final
order or judgment of a court of competent jurisdiction.
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<PAGE>
(2) None of the Administrative Agent or any Bank will have any obligation
whatsoever to furnish to the Sponsors copies of any document, certificate,
report and financial statement which the Administrative Agent or any Bank shall
receive or generate from time to time with respect to the Credit Documents. Each
of the Sponsors acknowledges and agrees that (i) it has no right to receive any
of the documents, certificates, reports or financial statements which the
Administrative Agent or any Bank shall receive or generate from time to time
with respect to the Credit Documents and (ii) it is not entitled to access to
confidential or privileged information or any information which the
Administrative Agent or any Bank is prohibited from disclosing by the Credit
Agreement or any other Credit Document. Failure of the Administrative Agent or
any Bank to provide any information to the Sponsors shall not result in any
liability of the Administrative Agent or any Bank.
11. Rights under the Credit Documents.
(1) The Administrative Agent and the Selling Banks shall retain all their
respective rights and powers under the Credit Documents other than the right to
retain for their own account amounts of principal and interest on the Sponsor
Loans allocable to the Participations and to be paid to the Sponsors in
accordance with this Participation Agreement.
(2) The Administrative Agent and the Banks shall continue to administer all
the Loans under the Credit Agreement and all the Credit Documents. Each of the
Sponsors hereby irrevocably designates the Administrative Agent and the
requisite number of Banks under the Credit Documents as its exclusive agents for
the administration of the Sponsor Loans and enforcement of the Credit Documents.
The Administrative Agent and the Banks accept such appointment on the
understanding that (i) they may use their sole discretion with respect to
exercising or refraining from exercising any rights, or taking or refraining
from taking any actions, which may be vested in any of them or which they may be
entitled to take or assert under or in respect of any of the Credit Documents,
including, without limitation, rights and actions, relating to any waiver or
amendment of any term thereof; (ii) they shall not be liable to any Sponsor with
respect to anything any of them may do or omit to do in relation to the Loans
other than to account in accordance with this Participation Agreement for moneys
actually received which are allocable to Participations in accordance with this
Participation Agreement above; and (iii) the Administrative Agent and the Banks
may accept deposits from, make loans or otherwise extend credit to, and
generally engage in any kind of banking, trust or other business with, the U.S.
Borrowers, any of the other Credit Parties or any other Person having
obligations relating to the Loans, or the Credit Documents and receive payment
on such loans or extensions of credit and otherwise act with respect thereto
freely and without accountability in the same manner as if the Participations
did not exist. Without limiting the generality of the foregoing, the
Administrative Agent and the Banks (x) may rely upon the advice of legal
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counsel, accountants and other experts (including those retained by the U.S.
Borrowers) and upon any written communication or any telephone conversation
believed to be genuine and correct or to have been signed, sent or made by the
proper person or entity; (y) shall not be required to make any inquiry
concerning the performance by the U.S. Borrowers, any of the other Credit
Parties or any other Person of any of its obligations and liabilities under or
relating to the Loans, the Credit Documents or the Collateral; and (z) shall
have no obligation to make any claim against, or to assert any Lien upon, any
property held by any of them or to assert any offset there against.
(3) The Credit Agreement provides for the election of the duration of
interest periods applicable to Loans thereunder. Neither the Administrative
Agent nor any of the Selling Banks will have any obligation to advise any
Sponsor of any notice the Administrative Agent or such Selling Bank receives of
any such election; provided, however, that upon the request of any Sponsor, the
Administrative Agent will advise such Sponsor of any such elections made by the
U.S. Borrowers with respect to the Sponsor Loans.
(4) Without limiting the generality of the foregoing, the Administrative
Agent and each Selling Bank reserves the right, in its sole discretion in each
instance, without prior notice to any Sponsor (a) to agree to the modification
or waiver of any of the terms of the Credit Agreement or any other Credit
Document, (b) to consent to any action or failure to act by the Borrowers or any
other Credit Party to the Credit Documents and (c) to exercise or refrain from
exercising any rights or remedies which the Administrative Agent or such Selling
Bank may have under the Credit Agreement or any other Credit Document,
including, without limitation, the right at any time, in its sole discretion, to
declare, or refrain from declaring, any Loan and/or any Note due and payable
when permitted to do so pursuant to the Credit Agreement and to foreclose and
sell and otherwise deal with, or refrain from foreclosing and selling or
otherwise dealing with, any Collateral or to enforce, or refrain from enforcing,
the Credit Documents.
12. Legal Action; Reimbursement of Expenses therefor. Until the Bank Credit
Termination Date, each of the Sponsors agrees not to assert any direct right of
legal redress against either of the U.S. Borrowers, any of the other Credit
Parties or any other Person having obligations relating to the Loans or the
Credit Documents, with respect to the Sponsor Loans or the Credit Documents.
Each of the Sponsors hereby authorizes the Administrative Agent and the
requisite number of Banks to take legal action to enforce or protect their
interests with respect to the Loans and the Credit Documents as they may from
time to time see fit. If the Administrative Agent incurs any liabilities, costs
or expenses (including without limitation those for legal services) in
connection with the Loans or the Credit Documents, with any actual or proposed
amendment or waiver of any term thereof or restructuring or refinancing thereof
or with any effort to enforce or protect any rights or interest with respect
thereto, then each of the Sponsors will reimburse the Administrative Agent on
demand for such Sponsor's pro rata share of any portion of such liabilities,
costs and expenses which is not reimbursed by or on behalf of the U.S.
Borrowers, which reimbursement obligation will survive the termination of this
Participation Agreement.
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13. Assignments and Participations.
(1) Any Bank may at any time or from time to time grant to others
assignments of, or participations in, its Commitments and the Loans under the
Credit Agreement, provided, that (i) no Bank shall grant participations in the
portion of the Acquisition Term Loan Commitment and the Loans allocated to the
Participations herein and (ii) each assignee under any such assignment shall
expressly assume the rights and obligations under this Participation Agreement.
Any such assignment or participation shall continue to be treated as a Retained
Interest and any holder of such an assignment or participation shall be entitled
to the benefits of the subordination set forth in Section 7 hereof.
(2) None of the Sponsors will sell, assign, transfer or otherwise dispose
of , or create, incur or suffer to exist any security interest, lien, charge or
other encumbrance whatsoever upon, the Sponsor Obligations, the Additional
Sponsor Participation or any of the Sponsor Loans or any portion of any thereof,
or grant any subparticipation therein, without the prior written consent of the
Administrative Agent and the Required Banks; provided, that any sale,
assignment, transfer or other disposition to (i) Harnischfeger Corporation which
is consummated within 45 days of the Effective Date (or such later date
established by court order; provided, that any motion or application seeking
such court order shall have been filed with the applicable court within 30 days
of the Effective Date) or (ii) to a Person who is a direct or indirect equity
owner of the Company on the Effective Date, shall not require the prior written
consent of the Administrative Agent and the Required Banks.
14. Performance by Agents or Employees. The Administrative Agent and the
Banks may perform any of their obligations under any Credit Documents and
hereunder by or through agents or employees and neither shall be liable for any
actions taken or omitted under the Credit Documents or hereunder.
15. Representations and Agreements by Sponsors.
(1) Each Sponsor represents and warrants to the Agents and the Banks
that:
(1) such Sponsor has the corporate power and authority and the legal
right to execute and deliver and to perform its obligations under this
Participation Agreement and has taken all necessary corporate action to
authorize its execution, delivery and performance of this Participation
Agreement;
(2) this Participation Agreement constitutes a legal, valid and
binding obligation of such Sponsor;
(3) the execution, delivery and performance of this Agreement will not
violate any provisions of any law, statute, rule, regulation, order, writ,
injunction or decree of any court or governmental instrumentality
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applicable to any Sponsor or any indenture, mortgage, deed of trust,
agreement or other instrument to which any Sponsor is a party and will not
result in the creation or imposition of any Lien on any of the properties
or revenues of such Sponsor pursuant to any law, statute, rule, regulation,
order, writ, injunction or decree of any court or governmental
instrumentality affecting any Sponsor or any indenture, mortgage, deed of
trust, agreement or other instrument to which any Sponsor is a party;
(4) no consent or authorization of, filing with, or other act by or in
respect of, any arbitrator or governmental authority and no consent of any
other Person (including, without limitation, any stockholder or creditor of
such Sponsor), is required in connection with the execution, delivery,
performance, validity or enforceability of this Participation Agreement;
(5) such Sponsor has not entered into any agreement or relationship
with any other Person that would prevent it from entering into this
Participation Agreement; and
(6) such Sponsor is a direct or indirect equity owner of the Company
and if such Sponsor is a limited liability company, each of its members is
a direct or indirect equity owner of the Company and if such Sponsor is a
partnership, each of its partners is a direct or indirect equity owner of
the Company.
(2) Each Sponsor confirms that (i) it has entered into this Participation
Agreement on the basis of its own credit evaluation of, or independent
commercial relationship with, the Credit Parties, based on such documents and
information as such Sponsor has deemed appropriate, independently and without
reliance upon the Administrative Agent or any of the Banks, (ii) the
Administrative Agent and the Banks have made no representations or warranties to
such Sponsor except for the representation and warranty expressly set forth in
the penultimate sentence of Section 2 hereof and (iii) no act hereafter taken by
the Administrative Agent or any of the Banks, including, without limitation, any
review of the affairs of the Credit Parties, shall be deemed to constitute any
representation or warranty by the Administrative Agent or the Banks to any
Sponsor.
(3) Each Sponsor will continue to make, independently and without reliance
upon the Administrative Agent or any of the Banks, and based on such documents
and information as it deems appropriate, its own appraisal of and investigation
into the financial condition, creditworthiness, affairs, status and nature of
the Credit Parties.
16. Entire Agreement.
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(1) This Participation Agreement supersedes any prior agreement, and sets
forth the entire agreement between the parties relating to the subject matter
hereof. None of the Agents or any Bank shall have any liability or obligation to
any Sponsor relating to the Participation or the Loans except as specifically
set forth in this Participation Agreement.
(2) In the event of any inconsistency between the terms of this
Participation Agreement and those of the Credit Agreement or any Acquisition
Term Note, the terms of this Participation Agreement shall control.
(3) All determinations made by the Administrative Agent or any Bank
relating to the Participations or the Loans shall be conclusive and binding on
the Sponsors, absent manifest error.
17. Invalidity; Severability. If any provision hereof would be invalid
under applicable law, then such provision shall be deemed modified to the extent
necessary to render it valid while most nearly preserving its original intent;
no provision hereof shall be affected by another provision of this Participation
Agreement being held invalid.
18. Notices. All notices, requests and demands under this Participation
Agreement to be effective shall be in writing (or by telex, facsimile or similar
electronic transfer confirmed in writing) and shall be deemed to have been duly
given or made (a) when delivered by hand or (b) if given by mail, five (5)
Business Days after deposit in the mails by certified mail, return receipt
requested, or (c) if by telex, facsimile or similar electronic transfer, when
sent and receipt has been confirmed, if addressed to the applicable party to
whom such notice, request or demand is given or made, at its address or
transmission number for notices provided on Schedule 2 hereto. The parties
hereto may change their addresses and transmission numbers for notices by giving
notice in the manner provided in this Section.
19. Waivers and Amendments; Successors and Assigns.
(1) None of the terms or provisions of this Participation Agreement may be
waived, amended, supplemented or otherwise modified except by a written
instrument executed by the Administrative Agent, the Required Selling Banks, the
Required Sponsors and, if rights or obligations of Credit Parties are adversely
affected, the Credit Parties.
(2) This Participation Agreement shall be binding upon and inure to the
benefit of the successors and assigns of the parties hereto.
20. Indemnity by the Sponsor. Each Sponsor agrees (a) to indemnify and hold
harmless the Administrative Agent, each Selling Bank and its directors,
officers, employees, attorneys and agents (each an "Indemnified Party") (to the
full extent permitted by applicable law) from and against any and all claims,
demands, losses, judgments, damages and liabilities (including liabilities for
penalties) of whatsoever nature, and (b) to pay to each Indemnified Party an
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amount equal to the amount of all costs and expenses, including legal fees and
disbursements, solely with regard to both (a) and (b), growing out of or
resulting from any misrepresentation or breach of this Participation Agreement
(including, without limitation, in respect of any breach of representation or
warranty set forth in Section 15 hereof) or the Credit Documents by the Sponsor,
but excluding therefrom, in each case, all claims, losses, damages and
liabilities of an Indemnified Party arising out of or resulting from the gross
negligence or willful misconduct of such Indemnified Party as determined by a
final order or judgment of a court of competent jurisdiction. The foregoing
indemnity agreement includes any costs incurred by an Indemnified Party in
connection with any action or proceeding which may be instituted in respect of
the foregoing by the Indemnified Party or by any other Person either against the
Indemnified Party or in connection with which any Indemnified Party is called as
a witness or deponent, including, but not limited to, any out-of-pocket costs
incurred by the Indemnified Party in appearing as a witness or in otherwise
complying with legal process served upon it. To the extent indemnification
payments made by a Sponsor pursuant to this Section 20 are subsequently
recovered by an Indemnified Party from any other Person (including, without
limitation, any Credit Party) such Indemnified Party will promptly refund such
payments to such Sponsor.
The indemnity contained in this Section 20 shall survive the expiration or
earlier termination of this Participation Agreement.
21. Payments under Chartwell Management Consulting Agreement. The parties
hereto hereby agree that, from and after the Effective Date, notwithstanding
anything to the contrary contained herein, in the Credit Agreement or in the
Chartwell Management Consulting Agreement, Chartwell shall be entitled to
receive payment for management services pursuant to the Chartwell Management
Consulting Agreement in an amount not to exceed $500,000 in cash on or about
each April 1 and October 1 of each year plus reasonable expenses; provided,
however, that (a) 50% of such fees due on each such date to Chartwell shall be
deferred until the Sponsor Loan Repayment Date and (b) 100% of such fees shall
accrue and not be paid by the Company at any time after the occurrence and
during the continuance of an Event of Default pursuant to Section 8.01 of the
Credit Agreement until such Event of Default is cured, whereupon (1) if it is
prior to the Sponsor Loan Repayment Date, 50% of such accrued and unpaid fees
may be paid to Chartwell and (2) if it is on or after the Sponsor Loan Repayment
Date, 100% of such accrued and unpaid fees may be paid to Chartwell.
22. CHOICE OF LAW. THIS PARTICIPATION AGREEMENT SHALL IN ALL RESPECTS BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED WHOLLY WITHIN SUCH STATE.
23. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, AND COVENANTS
THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE), ANY
RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE, CLAIM, DEMAND,
ACTION, OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS PARTICIPATION
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AGREEMENT OR THE SUBJECT MATTER HEREOF OR ANY CREDIT DOCUMENT, IN EACH CASE
WHETHER NOW EXISTING OR HEREAFTER ARISING OR WHETHER IN CONTRACT OR TORT OR
OTHERWISE. EACH PARTY ACKNOWLEDGES THAT IT HAS BEEN INFORMED BY THE OTHER
PARTIES HERETO THAT THE PROVISIONS OF THIS SECTION CONSTITUTE A MATERIAL
INDUCEMENT UPON WHICH SUCH OTHER PARTIES HAVE RELIED, ARE RELYING AND WILL RELY
IN ENTERING INTO THIS PARTICIPATION AGREEMENT. ANY PARTY MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE
CONSENT OF ANY OTHER PARTY TO THE WAIVER OF ITS RIGHTS TO TRIAL BY JURY.
24. SERVICE OF PROCESS. EACH SPONSOR AND EACH CREDIT PARTY HEREBY
IRREVOCABLY SUBMITS ITSELF TO THE JURISDICTION OF THE STATE COURTS OF THE STATE
OF NEW YORK IN NEW YORK COUNTY AND TO THE JURISDICTION OF THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK SITTING IN NEW YORK COUNTY,
FOR THE PURPOSES OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF OR BASED
UPON THIS PARTICIPATION AGREEMENT OR THE SUBJECT MATTER HEREOF BROUGHT BY THE
ADMINISTRATIVE AGENT, A BANK OR ANY OF THEIR RESPECTIVE SUCCESSORS OR ASSIGNS IN
EITHER OF THE ABOVE-REFERENCED FORUMS AT THE SOLE OPTION OF THE ADMINISTRATIVE
AGENT OR SUCH BANK (AS APPLICABLE). EACH SPONSOR AND EACH CREDIT PARTY TO THE
EXTENT PERMITTED BY APPLICABLE LAW (A) HEREBY WAIVES, AND AGREES NOT TO ASSERT,
BY WAY OF MOTION, AS A DEFENSE, OR OTHERWISE, IN ANY SUCH SUIT, ACTION OR
PROCEEDING BROUGHT IN SUCH COURTS, ANY CLAIM THAT IT IS NOT SUBJECT PERSONALLY
TO THE JURISDICTION OF THE ABOVE-NAMED COURTS, THAT ITS PROPERTY IS EXEMPT OR
IMMUNE FROM ATTACHMENT OR EXECUTION, THAT THE SUIT, ACTION OR PROCEEDING IS
BROUGHT IN AN INCONVENIENT FORUM, THAT THE VENUE OF THE SUIT, ACTION OR
PROCEEDING IS IMPROPER OR THAT THIS PARTICIPATION AGREEMENT OR THE SUBJECT
MATTER HEREOF MAY NOT BE ENFORCED IN OR BY SUCH COURT, (B) HEREBY WAIVES THE
RIGHT TO REMOVE ANY SUCH ACTION, SUIT OR PROCEEDING INSTITUTED BY THE
ADMINISTRATIVE AGENT OR A BANK IN STATE COURT TO FEDERAL COURT, AND (C) HEREBY
WAIVES THE RIGHT TO ASSERT IN ANY SUCH ACTION, SUIT OR PROCEEDING ANY OFFSETS OR
COUNTERCLAIMS EXCEPT COUNTERCLAIMS THAT ARE COMPULSORY OR OTHERWISE ARISE FROM
THE SAME SUBJECT MATTER. EACH SPONSOR AND EACH CREDIT PARTY HEREBY CONSENTS TO
SERVICE OF PROCESS BY MAIL AT THE ADDRESS TO WHICH NOTICES ARE TO BE GIVEN
PURSUANT TO SECTION 18 HEREOF. EACH SPONSOR AND EACH CREDIT PARTY AGREES THAT
22
<PAGE>
ITS SUBMISSION TO JURISDICTION AND CONSENT TO SERVICE OF PROCESS BY MAIL IS MADE
FOR THE EXPRESS BENEFIT OF THE ADMINISTRATIVE AGENT AND EACH BANK. FINAL
JUDGMENT AGAINST A SPONSOR OR A CREDIT PARTY IN ANY SUCH ACTION, SUIT OR
PROCEEDING SHALL BE CONCLUSIVE, AND MAY BE ENFORCED IN ANY OTHER JURISDICTION
(A) BY SUIT, ACTION OR PROCEEDING ON THE JUDGMENT, A CERTIFIED OR TRUE COPY OF
WHICH SHALL BE CONCLUSIVE EVIDENCE OF THE FACT AND OF THE AMOUNT OF
INDEBTEDNESS, LIABILITY OR OTHER OBLIGATION OF A SPONSOR OR A CREDIT PARTY
THEREIN DESCRIBED OR (B) IN ANY OTHER MANNER PROVIDED BY, OR PURSUANT TO, THE
LAWS OF SUCH OTHER JURISDICTION, PROVIDED, HOWEVER, THAT, THE ADMINISTRATIVE
AGENT, AND TO THE EXTENT PERMITTED BY THE CREDIT DOCUMENTS, ANY BANK MAY AT ITS
OPTION BRING SUIT, OR INSTITUTE OTHER JUDICIAL PROCEEDINGS AGAINST A SPONSOR OR
A CREDIT PARTY OR ANY OF THEIR RESPECTIVE ASSETS IN ANY STATE OR FEDERAL COURT
OF THE UNITED STATES OR OF ANY COUNTRY OR PLACE WHERE SUCH SPONSOR, SUCH CREDIT
PARTY OR SUCH ASSETS MAY BE FOUND.
25. Execution in Counterparts. This Participation Agreement may be executed
in counterparts, each of which shall be deemed to constitute an original, but
all of which, when taken together, shall constitute one and the same instrument.
Signature pages may be detached from counterpart documents and reassembled to
form duplicate executed originals. Delivery of an executed signature page to
this Participation Agreement by facsimile shall be effective as delivery of a
manually executed counterpart of this Participation Agreement.
26. Expenses. Whether or not this Participation Agreement becomes effective
or the transactions contemplated hereby are consummated, each of the Borrowers
agrees, on a joint and several basis, to pay all out-of-pocket expenses incurred
by the Administrative Agent in connection with the preparation, execution and
delivery of this Participation Agreement and any other documentation
contemplated hereby, including, but not limited to, the fees and disbursements
of counsel for the Administrative Agent.
27. Headings. The headings of this Participation Agreement are for the
purposes of reference only and shall not affect the construction of, or be taken
into consideration in interpreting, this Participation Agreement.
28. Provisions Relating to Collateral and Loan Documents.
(1) All Credit Documents shall be held by the Selling Banks or their
respective agents in their respective names; provided, however, that to the
extent of the Sponsor's undivided Participation, in accordance with this
Participation Agreement, the Credit Documents shall be held by the Selling Bank
or its agent for the benefit of the Sponsors.
(2) All Collateral shall be held by the Administrative Agent on behalf of
the Selling Banks. (1)
23
<PAGE>
(3) Notwithstanding the provisions of paragraphs (a) and (b) of this
Section 28, the Sponsors shall have no interest in (i) any property taken as
collateral security for any other loan or loans (other than in connection with
the Credit Agreement) made to a Borrower by a Selling Bank or (ii) any property
now or hereafter in the possession or control of the Administrative Agent or a
Selling Bank or its agent which may be or become collateral security for the
Loans by reason of (A) the general description contained in any general loan
agreement, note, security agreement or other collateral document (other than the
Credit Agreement or other Credit Document) held by the Administrative Agent or a
Selling Bank or (B) any right of set-off, counterclaim, banker's lien or
otherwise, provided, however, that if such property or the proceeds thereof
shall be applied in reduction of the Loans, then the Sponsors shall be entitled
to its share in such application to the extent provided herein.
29. Further Assurances. The Sponsor and each Credit Party, at their own
expense and at any time from time to time, upon the written request of the
Administrative Agent, will promptly and duly execute and deliver such further
instruments and documents and take such further actions as the Administrative
Agent reasonable may request for the purposes of obtaining or preserving the
full benefits of this Participation Agreement and of the rights and powers
herein granted.
30. Powers Coupled With An Interest. All powers, authorizations and
agencies contained in this Participation Agreement are coupled with an interest
and are irrevocable until the Bank Credit Termination Date.
[Signature Pages follow.]
24
<PAGE>
Subordination and Participation Agreement IN WITNESS WHEREOF, the parties
hereto have caused this Participation Agreement to be executed by their
respective duly authorized officers.
ADMINISTRATIVE AGENT:
CANADIAN IMPERIAL BANK
OF COMMERCE, as Administrative Agent
By:______________________________
Name:
Title:
SELLING BANKS:
CIBC INC.
By:______________________________
Name:
Title:
CREDIT AGRICOLE INDOSUEZ
By:______________________________
Name:
Title:
By:______________________________
Name:
Title:
BANKBOSTON, N.A.
By:______________________________
Name:
Title:
<PAGE>
ABN-AMRO BANK N.V.
By:______________________________
Name:
Title:
BANK AUSTRIA CREDITANSTALT
CORPORATE FINANCE, INC.
By:______________________________
Name:
Title:
By:______________________________
Name:
Title:
THE FIRST NATIONAL BANK OF CHICAGO
By:______________________________
Name:
Title:
FIRST UNION NATIONAL BANK
By:______________________________
Name:
Title:
<PAGE>
FLEET NATIONAL BANK
By:______________________________
Name:
Title:
RIGGS BANK N.A.
By:______________________________
Name:
Title:
FLEET BUSINESS CREDIT CORPORATION
By:______________________________
Name:
Title:
WELLS FARGO BANK, N.A.
By:______________________________
Name:
Title:
SPONSORS:
MARTIN CRANE L.L.C.
By:______________________________
Name:
Title:
<PAGE>
ACKNOWLEDGED AND AGREED TO BY:
CREDIT PARTIES:
MMH HOLDINGS, INC.
By: /s/ Martin L. Ditkof
Name: Martin L. Ditkof
Title: Secretary
MORRIS MATERIAL HANDLING, INC.
By: /s/ Martin L. Ditkof
Name: Martin L. Ditkof
Title: Secretary
MORRIS MATERIAL HANDLING, LLC
By: /s/ Martin L. Ditkof
Name: Martin L. Ditkof
Title: Manager
MORRIS MATERIAL HANDLING
EQUIPMENT LIMITED
By: /s/ Martin L. Ditkof
Name: Martin L. Ditkof
Title: Director
MONDEL ULC
By: /s/ Martin L. Ditkof
Name: Martin L. Ditkof
Title: Secretary
<PAGE>
KAVERIT STEEL AND CRANE ULC
By: /s/ Martin L. Ditkof
Name: Martin L. Ditkof
Title: Secretary
MHE TECHNOLOGIES, INC.
By: /s/ David W. Dupert
Name: David W. Dupert
Title: President
PHMH HOLDING COMPANY
By: /s/ David W. Dupert
Name: David W. Dupert
Title: President
MATERIAL HANDLING EQUIPMENT
NEVADA CORPORATION
By: /s/ Martin L. Ditkof
Name: Martin L. Ditkof
Title: Secretary
CMH MATERIAL HANDLING, LLC
By: /s/ Martin L. Ditkof
Name: Martin L. Ditkof
Title: Manager
<PAGE>
EPH MATERIAL HANDLING, LLC
By: /s/ Martin L. Ditkof
Name: Martin L. Ditkof
Title: Manager
HARNISCHFEGER DISTRIBUTION &
SERVICE, LLC
By: /s/ Martin L. Ditkof
Name: Martin L. Ditkof
Title: Manager
HPH MATERIAL HANDLING, LLC
By: /s/ Martin L. Ditkof
Name: Martin L. Ditkof
Title: Manager
MERWIN, LLC
By: /s/ Martin L. Ditkof
Name: Martin L. Ditkof
Title: Manager
MORRIS MECHANICAL HANDLING, INC.
By: /s/ Martin L. Ditkof
Name: Martin L. Ditkof
Title: Secretary
<PAGE>
MPH CRANE, INC.
By: /s/ Martin L. Ditkof
Name: Martin L. Ditkof
Title: Secretary
NPH MATERIAL HANDLING, INC.
By: /s/ Martin L. Ditkof
Name: Martin L. Ditkof
Title: Secretary
PHME SERVICE, INC.
By: /s/ Martin L. Ditkof
Name: Martin L. Ditkof
Title: Secretary
SPH CRANE & HOIST, INC.
By: /s/ Martin L. Ditkof
Name: Martin L. Ditkof
Title: Secretary
MHE CANADA ULC
By: /s/ Martin L. Ditkof
Name: Martin L. Ditkof
Title: Secretary
<PAGE>
3016117 NOVA SCOTIA ULC
By: /s/ Martin L. Ditkof
Name: Martin L. Ditkof
Title: Secretary
HYDRAMACH ULC
By: /s/ Martin L. Ditkof
Name: Martin L. Ditkof
Title: Secretary
BUTTERS ENGINEERING SERVICES LIMITED
By: /s/ Martin L. Ditkof
Name: Martin L. Ditkof
Title: Director
INVERCOE ENGINEERING LIMITED
By: /s/ Martin L. Ditkof
Name: Martin L. Ditkof
Title: Director
LOWFILE LIMITED
By: /s/ Martin L. Ditkof
Name: Martin L. Ditkof
Title: Director
<PAGE>
REDCROWN ULC
By: /s/ Martin L. Ditkof
Name: Martin L. Ditkof
Title: Director
MMH (HOLDINGS) LIMITED
By: /s/ Martin L. Ditkof
Name: Martin L. Ditkof
Title: Director
MORRIS MATERIAL HANDLING LIMITED
By: /s/ Martin L. Ditkof
Name: Martin L. Ditkof
Title: Director
M.M.H. INTERNATIONAL LIMITED
By: /s/ Martin L. Ditkof
Name: Martin L. Ditkof
Title: Director
MORRIS MATERIAL HANDLING MEXICO
S.A. DE C.V.
By: /s/ Peter A. Kerrick
Name: Peter A. Kerrick
Title: Director
<PAGE>
BIRMINGHAM CRANE & HOIST, INC.
By: /s/ Martin L. Ditkof
Name: Martin L. Ditkof
Title: Secretary
ARIZONA MOTOR AND CONTROL CORPORATION
By: /s/ Martin L. Ditkof
Name: Martin L. Ditkof
Title: Secretary
DAJU HOLDINGS LTD.
By: /s/ Martin L. Ditkof
Name: Martin L. Ditkof
Title: Secretary
OVERHEAD CRANE SERVICE & SUPPLY
COMPANY LIMITED
By: /s/ Martin L. Ditkof
Name: Martin L. Ditkof
Title: Secretary
OVERHEAD CRANE SERVICE AND SUPPLY
COMPANY (SUDBURY) LIMITED
By: /s/ Martin L. Ditkof
Name: Martin L. Ditkof
Title: Secretary
MORRIS MATERIAL HANDLING
AUSTRALIA PTY LIMITED
By: /s/ Michael John Maddock
Name: Michael John Maddock
Title: Director
MORRIS JDN PTY LIMITED
By: /s/ Michael John Maddock
Name: Michael John Maddock
Title: Director
MORRIS POWERLEC PTY LIMITED
By: /s/ Michael John Maddock
Name: Michael John Maddock
Title: Director
<PAGE>
Schedule 1
A. Percentage of the Additional Sponsor Participation purchased by each Sponsor:
Martin Crane L.L.C. 100%
B. Aggregate amount of unfunded Total Acquisition Term Loan Commitment purchased
by each Sponsor:
Martin Crane L.L.C. $20,501,008.11
C. Amount of the
unfunded Acquisition
Term Loan
Commitment
of each
Selling Bank
purchased by
each Sponsor:
Martin Crane L.L.C.
CIBC Inc. $2,821,239.67
Credit Agricole Indosuez $2,068,909.07
Bank Boston, N.A. $2,256,991.72
ABN-AMRO Bank N.V. $1,692,743.79
Bank Austria Creditanstalt Corporate Finance, Inc. $2,068,909.07
The First National Bank of Chicago $1,692,743.79
First Union National Bank $2,068,909.07
Fleet National Bank $2,068,909.07
Fleet Business Credit Corporation $1,692,743.79
Wells Fargo Bank, N.A. $2,068,909.07
---------------
Total $20,501,008.11
<PAGE>
Schedule 2
Addresses and Transmission Numbers
for Notices
Administrative Agent:
Canadian Imperial Bank of Commerce 425 Lexington Avenue
New York, NY 10017
F:212-856-3991
Contact: Lindsay Gordon
Selling Banks:
CIBC Inc. 425 Lexington Avenue
New York, NY 10017
F:212-856-3991
Contact: Lindsay Gordon
Credit Agricole Indosuez 1211 Avenue of the Americas
New York, NY 10036
F:212-278-2285
Contact: Matthew Linett
Bank Boston, N.A. 100 Federal Street
Boston, MA 02110
F:617-434-4929
Contact: Linda Alto
ABN-AMRO Bank N.V. North American Special Credits
10 East 53rd Street
New York, NY 10022
F:212-891-0650
Contact: William Fitzgerald
Bank Austria Creditanstalt 4 Embarcadero Center, Suite 630
Corporate Finance, Inc. San Francisco, CA 94111
F:415-781-0622
Contact: Patrick J. Rounds
<PAGE>
Page 2
Schedule 2
The First National Bank One First National Plaza
of Chicago Mail Suite 0088
Chicago, IL 60670
F:312-732-5161
Contact: Deborah Stevens
First Union National Bank One First Union Center
301 S. College, 5th Floor
Charlotte, NC 28288-7045
F:704-374-4793
Contact: Scott Santa Cruz
Fleet National Bank Mail Code: RIMOM20A
111 Westminster Street
Providence, RI 02903
F:401-278-6026
Contact: Alisa Cure
Fleet Business Credit 500 Greenpointe Center West
Corporation Teaneck, NJ 07666
F:201-836-4744
Contact: Alan Lyster
Wells Fargo Bank, N.A. 1445 Ross Avenue, Suite 400
Dallas, TX 75202
F:214-777-4044
Contact: Dana D. Cagle
Sponsors:
Martin Crane L.L.C. 717 Fifth Avenue, 23rd Floor
New York, NY 10022
F:212-521-5533
Contact: David Stonehill
Credit Parties: The address and transmission number for each of the Credit
Parties is:
4915 South Howell Avenue
Milwaukee, WI 53207
F: 414-486-6146
Contact: Martin Ditkof
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
financial information for MMH Holdings, Inc. and is qualifified in
its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0001060948
<NAME> MMH Holdings, Inc.
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> OCT-31-1999 OCT-31-1999
<PERIOD-START> MAY-01-1999 NOV-01-1998
<PERIOD-END> JUL-31-1999 JUL-31-1999
<CASH> 2,153 2,153
<SECURITIES> 0 0
<RECEIVABLES> 65,955 65,955
<ALLOWANCES> (2,394) (2,394)
<INVENTORY> 43,568 43,568
<CURRENT-ASSETS> 124,080 124,080
<PP&E> 70,116 70,116
<DEPRECIATION> (29,822) (29,822)
<TOTAL-ASSETS> 299,847 299,847
<CURRENT-LIABILITIES> 73,044 73,044
<BONDS> 277,715 277,715
104,911 104,911
0 0
<COMMON> 0 0
<OTHER-SE> (160,409) (106,409)
<TOTAL-LIABILITY-AND-EQUITY> 299,847 299,847
<SALES> 72,709 212,478
<TOTAL-REVENUES> 73,162 213,078
<CGS> 52,210 157,266
<TOTAL-COSTS> 18,298 53,585
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 7,521 21,952
<INCOME-PRETAX> (4,867) (19,725)
<INCOME-TAX> (576) (1,641)
<INCOME-CONTINUING> (5,430) (21,326)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (5,430) (21,326)
<EPS-BASIC> 0 0
<EPS-DILUTED> 0 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
financial information for Morris Material Handling, Inc. and is qualifified in
its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0001060951
<NAME> Morris Material Handling, Inc.
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> OCT-31-1999 OCT-31-1999
<PERIOD-START> MAY-01-1999 NOV-01-1998
<PERIOD-END> JUL-31-1999 JUL-31-1999
<CASH> 2,153 2,153
<SECURITIES> 0 0
<RECEIVABLES> 65,955 65,955
<ALLOWANCES> (2,394) (2,394)
<INVENTORY> 43,568 43,568
<CURRENT-ASSETS> 124,080 124,080
<PP&E> 70,116 70,116
<DEPRECIATION> (29,822) (29,822)
<TOTAL-ASSETS> 299,847 299,847
<CURRENT-LIABILITIES> 73,044 73,044
<BONDS> 277,715 277,715
0 0
0 0
<COMMON> 0 0
<OTHER-SE> (55,498) (55,498)
<TOTAL-LIABILITY-AND-EQUITY> 299,847 299,847
<SALES> 72,709 212,478
<TOTAL-REVENUES> 73,162 213,078
<CGS> 52,210 157,266
<TOTAL-COSTS> 18,298 53,585
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 7,521 21,952
<INCOME-PRETAX> (4,867) (19,725)
<INCOME-TAX> (576) (1,641)
<INCOME-CONTINUING> (5,430) (21,326)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (5,430) (21,326)
<EPS-BASIC> 0 0
<EPS-DILUTED> 0 0
</TABLE>
